New Air Force Secretary Deborah James said Wednesday the service owes it to the American people to be able to audit its books.
The Defense Department is undergoing an initiative known as Financial Improvement and Audit Readiness (FIAR) as lawmakers have been demanding for years that DoD get its books ready for audit. The fiscal year 2013 National Defense Authorization Act (NDAA) requires DoD’s Statement of Budgetary Resources (SBR) to be audit-ready by the end of FY ’14. The FY ’10 NDAA also requires DoD’s consolidated financial statements to be audit-ready by Sept. 30, 2017.
The SBR provides information about budgetary resources made available to an agency, as well as the status of those resources, at the end of the fiscal year. It and related note disclosures serve as a tool to link budget execution data in an agency’s financial statements to information reported in the “actual” column in the program and financing (P&F) schedules in the appendix of the president’s budget, according to the Government Accountability Office (GAO).
Unfortunately, the Pentagon has both scaled back and delayed its goals to comply with lawmakers’ wishes. In its November FIAR plan status report, the office of Pentagon comptroller Robert Hale said the fourth quarter FY ’14 target for the Air Force’s SBR audit readiness validation goal was being delayed until third quarter FY ’15, or no later than June 30, 2015. DoD also reduced its goal of SBR audit readiness to a only a Schedule of Budgetary Activity (SBA), which is the current year of budgetary activity.
The FIAR status report said as of November, 19 percent of total budgetary resources have an opinion, or are under audit, and 53 percent of DoD assets are either under examination, have been validated as audit-ready, or have been asserted as audit-ready.
“It’s striking to many people, I think, out in America that we are not able to deliver a clean audit,” James told an Air Force Association (AIA) audience in Arlington, Va. “So we’re marching down that path, trying to get there, we need to stay on that path.”
When pressed for details following her presentation on what the Air Force is doing to successfully reach audit-readiness, James said she is taking these deadlines seriously.
“We are working in that direction…by a lot of persistent focus and putting the resources against it,” James said. “So we’re doing our very best to get there.”
Sens. Tom Coburn (R-Okla.) and Joe Manchin (D-W.Va.) in September introduced legislation that would provide teeth to lawmakers’ demands for audit-ready books. Coburn’s office said in a statement DoD is the only federal agency that has never fully complied with financial management laws.
The bill, known as the “Audit the Pentagon Act of 2013,” mandates that failure to obtain a clean audit opinion in 2018 would result in the services not being allowed to fund new major defense acquisition programs past Milestone B, meaning DoD would not be able to enter into engineering and manufacturing development (EMD) on a new weapon system until it passed a clean audit.
The bill would prevent procurement of any enterprise resource planning (ERP) business system that is independently estimated to take longer than three years to procure from initial obligation of funds to full deployment. The bill would also authorize termination of an ERP business system at no cost to the government if procurement takes longer than three years from initial obligation of funds to full deployment and sustainment. Congress is still smarting from the Air Force’s difficult deployment of the Defense Enterprise Accounting and Management System (DEAMS), which uses commercial-off-the-shelf (COTS) ERP software to provide accounting and management services. In its FY ’12 annual report to Congress, the DoD’s director, operational test and evaluation (DOT&E) office said DEAMS, in addition to its $2 billion overrun, was 7.5 years behind schedule at the time (Defense Daily, Oct. 11).
Defense Secretary Chuck Hagel said in a December statement the Marine Corps became the first service to successfully undergo an audit when the DoD inspector general (DoD IG) granted it an unqualified, favorable audit opinion for its current year budget statement. Hagel said he remains fully committed to making the Pentagon fully audit-ready by 2017.
James also predicted the Air Force would shrink in size going forward, but would also remain highly capable and on the cutting edge of technology to meet the nation’s needs. There was no doubt in her mind, James said, that the Air Force would become more reliant on its national guard and reserve forces. The National Commission on the Structure of the Air Force will present its report Thursday following a nine-month study of the service’s structure.
“Not only does this make good sense from a mission standpoint, it also makes sense from an economic standpoint,” James said.