Building off its first-ever audit, the Defense Department is already into its second examination of its accounts with a focus on “inventory, information technology, and real property,” David Norquist, the Pentagon’s acting deputy secretary and chief financial officer, said on Thursday.
The second audit will also be “testing” findings from the first audit, which was completed last November, Norquist told the Senate Armed Services Committee during a hearing on defense posture. The second audit will be completed and delivered on Nov. 15, he said, adding that the department will provide committee staff two updates this year as the audit progresses.
The first audit, which reviewed $2.7 trillion in assets, was used to find efficiencies, cyber vulnerabilities and non-compliance, Acting Secretary of Defense Patrick Shanahan told the panel.
“The best part of the audit is we’ve identified those items and now we’re incorporating all the corrective actions, we’re building the muscle movement and the habits to continuously address those findings and make ourselves better,” Shanahan said.
There are more than 2,300 findings from the first audit that are being addressed by the services, Norquist added.
Of the first audit, which was mandated by Congress in 1990, Norquist said he expected field commanders to be skeptical and to “push back,” thinking it would be just a paperwork exercise, but “they saw the tangible value and I think as we move forward, the accuracy of the data, adopting more business like practices will be tremendously helpful for the department.”
The audit was conducted by the DoD Inspector General and was failed as only five of 21 areas examined passed (Defense Daily, Nov. 16, 2019).
Norquist gave two examples of the benefits the department gained from the audit. One was the importance of accurate inventories, he said, noting that some facilities thought they had accurate accountings only to discover actual inventories didn’t match expectations.
He said at Hill Air Force Base in Utah, inventories of uninstalled missile motors were seen as “unserviceable,” yet on closer inspection turned out to be “usable,” meaning more weren’t needed, resulting in a $53 million savings.
At Osan Air Base in Korea and Kadena Air Base in Japan, 14,000 munitions valued at $2.2 billion were “100 percent accounted for,” he said. “And so what we learned, there’s some places that are doing this quite well and there are others where we need to help them fix their process or give them better attention.”
Norquist said he expects either the Army’s or Marine Corp’s working capital fund to get clean audit opinions in the next two years. At that point, the department will have better insight on who is making progress and who needs more focus, he said. The DoD be last, he said.
Committee Chairman James Inhofe (R-Okla.) during his questions repeated his concerns in the fiscal year 2020 budget request over the department’s decision to cancel a planned refueling of the Nimitz-class aircraft carrier, the USS Harry S. Truman (CVN-75), which Shanahan said will save the Navy $3.4 billion over the Future Years Defense Plan.
Inhofe is concerned the Navy won’t be able to maintain the legal obligation to have 11 aircraft carriers without the several-year mid-life refueling and overhaul of the Truman.
“I think the Truman decision represents some of the choices we made in this year’s budget,” Shanahan replied, acknowledging it was “difficult decision” given that aircraft carriers are critical to current and future force structure. He said the decision on the Truman was “integrated” with the decision to fund the purchase of two Ford-class carriers, adding that there are potential “off-ramps” if the situation demands it.
The two-carrier buy, coupled with the plan to retire the Truman sooner, increases “lethality,” Shanahan said. The Navy will still have 11 carriers until the mid-2020s, he added.
Another factor in the two-carrier buy coupled with not refueling the Truman is growth in employment at the shipyard and the supply chain, Shanahan said. Later, Sen. Mazie Hirono (D-Hawaii) noted that a lot of her colleagues are troubled by the decision on the Truman and said that in her conversations with the shipyards “I’m not so sure that is the case.”
Hirono also pointed out that DoD is requesting $3.6 billion toward helping the Department of Homeland Security construct portions of a wall on America’s southern border, saying this money should go toward refueling of the Truman, given that the aircraft carrier fits within the Trump administration’s National Defense Strategy while physical barriers don’t.
Chairman of the Joint Chiefs of Staff Marine Gen. Joseph Dunford told Hirono that if he only had to consider the military dimension to national security going forward with the Truman refueling instead of using DoD funds on a border wall makes more sense but said “the secretary and the president have broader responsibilities than I do.”
Hirono finished the colloquy saying, “Yes, by building a vanity wall.”
Shanahan also said savings generated from the carrier plans will be invested in “the future force,” noting the two-carrier buy saves $4 billion.
Inhofe replied that “I’m still not happy with the results of that,” saying “my mental numbers don’t agree.”