The “great majority” of Defense Department financial records will be audit-ready by a Sept. 30 deadline, but the department will not audit records it knows won’t pass, DoD Comptroller Robert Hale told the Senate Homeland Security and Governmental Affairs Committee on Tuesday.

DoD set a series of goals for itself during the tenure of former secretary Leon Panetta: by the end of fiscal year 2014, the department would have all its Statements of Budgetary Resources audit-ready, and in FY ’15 the audit would be conducted. By the end of FY ’17, all financial statements in the department would be audit-ready, and in FY ’19 the audit would take place.DF-ST-87-06962

Asked by committee chairman Sen. Tom Carper (D-Del.) if the Pentagon could meet its FY ’14 goal, Hale said the services would be ready, the Pentagon’s trust funds were ready, and that most – but perhaps not all – of the defense agencies would be ready. He noted the agencies got off to a later start with preparing for the audit, and “I’m not going to put [statements of budgetary resources] into audit and waste taxpayer money if they aren’t audit-ready – and there may be a few that aren’t, principally probably in the defense agencies.”

For those that are not ready, Hale said “we will move immediately to fix those as soon as we can.” But he said little would be gained by failing an audit.

He said the services were in the process of remediation now, developing a punch list and fixing as many of those little problems as they can.

Among the services, the lengths of those to-do lists vary. The Marine Corps already had an independent public accounting firm award it a “clean” audit opinion on its FY ’12 budget activity documents – a one-year version of the required Statements of Budgetary Resources, since SBRs require some information that goes back a decade and the documents containing it have already been put in long-term storage, Hale said – and expects to soon receive the same certification for its FY ’13 records. The Air Force, on the other hand, is farther behind as it struggles to get its new Defense Enterprise Accounting Management System (DEAMS) up and running.

“Our IT systems remain our single biggest challenge,” Air Force Comptroller Jamie Morin said during the hearing. In addition to the normal IT acquisition struggles, the Air Force faced a seven-month delay when the contract award was protested. Last year’s government shutdown, furloughs, travel restrictions and budget uncertainty did not help either, he said.

Still, he said, “right now it looks like we will be ready to assert on that schedule,” Morin said of the Sept. 30 deadline. We have significant milestones to get through over the course of the summer,” he said but added he believes the service is “on track.”

Despite the optimism from Hale and the service representatives, the DoD inspector general’s office and the Government Accountability Office expressed some concerns.

DoD Inspector General Jon Rymer noted in his written testimony three key worries: delays and cost increases in two of the six needed Enterprise Resource Planning systems to perform many of the needed accounting and auditing tasks, “increase the risk that DoD will not achieve an auditable Statement of Budgetary Resources by FY 2014 or meet its deadline of full financial statement audit readiness by FY 2017.” DoD has weaknesses in its internal plans and procedures that could lead to discrepancies between the fund balance with the Treasury Department and accounts payable, for example. “Developing and implementing a reliable reconciliation process will help the Department identify and resolve unmatched disbursements at the detailed transaction level,” said his written testimony. And lastly, Rymer wrote that DoD and the services need more accurate and timely data to allow managers to make better decisions.

A GAO report released to coincide with the hearing notes that DoD has made good progress towards audit-readiness in recent years but questions the methods used. “DOD is monitoring its component agencies’ progress toward audit readiness. However, as dates for validating audit readiness approach, DOD has emphasized asserting audit readiness by a certain date instead of making sure that effective processes, systems, and controls are in place, without which it cannot ensure that its components have improved financial management information for day-to-day decision making. While time frames are important to measuring progress, DOD should not lose sight of the ultimate goal of implementing lasting financial management reform to ensure that it can routinely generate reliable financial management and other information critical to decision making and effective operations,” the report summary says.