Air Force's progress raises DoD's confidence toward audit readiness

Wednesday - 5/14/2014, 4:24am EDT

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Air Force officials say the service is making up the most ground of any of the military services as part of the push to finally get the Defense Department to successfully close its financial books.

But government auditors say this entire Pentagon effort is at risk because of shortcomings in the services' technology systems.

Jamie Morin, the assistant secretary of the Air Force for financial management and comptroller, said he is more optimistic than ever before because the service put money and people behind the problem.

Morin said during a hearing Tuesday before the Senate Homeland Security and Governmental Affairs Committee that there is an increased likelihood that the Air Force will meet the 2017 deadline to have its financial statements fully auditable and the September deadline of being able to assert audit readiness for its schedule of budgetary activity.

"Over the last several years, the Air Force has asserted audit readiness on a variety of processes — you've seen those — including civilian pay, budget authority and distribution, military equipment, spare engines and other components of our operating materials and supplies," Morin said. "In some cases, we have received clean bills of health from independent auditors, and in other cases, as with the other services, we've received a list of things that we need to fix, specific control weaknesses. And now we have well-developed plans to resolve those. Your Air Force is strongly committed to this effort. It's the law. We believe it enhances our readiness, and we believe it's an important sign of good financial stewardship."

New focus from leadership

He said Secretary Deborah Lee James mandated audit readiness as one of her top three priorities for the Air Force. She recently gave key leaders across the service specific directions about what they need to do to help.

"Our chief of staff, Gen. [Mark] Welsh, has also been a strong supporter and has engaged in many of our major command commanders," Morin said. "Our four-star leadership have integrated audit readiness into their own personal management control structures in a way that simply wasn't the case years ago."

This is a major change since last October when Morin told Senate Armed Services Committee members that the Air Force would struggle to meet the 2014 deadline, and 2017 wasn't going to be any easier.

But over the last six months, the Air Force has accomplished specific tasks one- by-one to meet the congressionally mandated deadlines.

Each of the services and DoD on the whole remain at different points in the process to achieve audit readiness. DoD is the only federal department that can't successfully account for its spending to meet third-party auditors requirements. The Marines Corps in fiscal 2012 received an unqualified opinion on its schedule of budgetary activity (SBA) — the first DoD service ever to receive that result.

Robert Hale, the out-going DoD comptroller, said he expects the Marines Corps to earn the same result for 2013.

While each of the services is at different points, the one common major challenge the Army, Navy, Air Force and the Office of the Secretary of Defense all face is updating and integrating their technology software, specifically the enterprise resources planning (ERP) systems, to meet the audit readiness requirements.

Take the Air Force as one example. It's still using a system from 1968.

Successful ERPs are key

Morin said the Defense Enterprise Accounting Management System (DEAMS), is under development to replace that 40-year-old system.

He said the service received a positive assessment from the Air Force Operational Test and Evaluation Center on DEAMS as currently deployed at more than six bases.

The Air Force plans to complete DEAMS deployment to all Air Mobility Command in the next couple of weeks and then more bases by Oct. 1. Morin said the Air Force also is on track to complete deployment Air Force-wide before the full financial statement audits begin.

The Army, on the other hand, is in better shape.

Robert Speer, the Army's acting assistant secretary for financial management and comptroller, said the general fund enterprise business system (GFEBs) is used by 53,000 service members and civilians at 200 locations worldwide.

"An independent public accounting firm recently examined and delivered a report on the general fund's statement of budgetary resources, focusing on 2013 transactions within the Army's Enterprise Resource Planning environment. Although not a clean opinion, the independent public accounting firm was able to complete the examination, was able to provide us and confirm confirmation of improvements, and throughout the examination identify areas we need corrective action," Speer said. "In response, the Army has been implementing a plan of action to remediate those findings prior to the 2015 audit of scheduled budgetary activities. In addition, during fiscal year 2014 the Army received a clean opinion from a public accounting firm on the examination of real property. That is, assets of 23 different Army installations, which accounted for over 50 percent of the book value of the Army's real property assets. This audit supports the second DoD audit readiness priority, verifying the existence and completeness of our assets."