Congressional Hearing — The Department of Defense's Financial Improvement and Audit Readiness Plan (2021)
Summary
House Armed Services Committee hearing record titled The Department of Defense's Financial Improvement and Audit Readiness Plan: Fiscal Year 2020 Audit Results and the Path Forward, on April 28, 2021. The committee met via Webex at 11:03 a.m., with Adam Smith presiding as chairman. Smith names the witnesses as Douglas Glenn, Deputy Chief Financial Officer for the Department of Defense, Wesley Miller, Alaleh Jenkins, and Stephen Herrera, and says Glenn is the only one offering testimony. Smith's opening statement calls the hearing an effort to audit the Pentagon, with the basic point of doing a better job of spending the money. The record lists witness responses to questions asked during the hearing and questions submitted by Members after it.
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“Congressional Hearing — The Department of Defense's Financial Improvement and Audit Readiness Plan (2021).”
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[H.A.S.C. No. 117–23]
THE DEPARTMENT OF DEFENSE’S
FINANCIAL IMPROVEMENT AND
AUDIT READINESS PLAN:
FISCAL YEAR 2020 AUDIT RESULTS
AND THE PATH FORWARD
COMMITTEE ON ARMED SERVICES
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTEENTH CONGRESS
FIRST SESSION
HEARING HELD
APRIL 28, 2021
U.S. GOVERNMENT PUBLISHING OFFICE
48–179 WASHINGTON : 2022
COMMITTEE ON ARMED SERVICES
ONE HUNDRED SEVENTEENTH CONGRESS
ADAM SMITH, Washington, Chairman
JAMES R. LANGEVIN, Rhode Island MIKE ROGERS, Alabama
RICK LARSEN, Washington JOE WILSON, South Carolina
JIM COOPER, Tennessee MICHAEL R. TURNER, Ohio
JOE COURTNEY, Connecticut DOUG LAMBORN, Colorado
JOHN GARAMENDI, California ROBERT J. WITTMAN, Virginia
JACKIE SPEIER, California VICKY HARTZLER, Missouri
DONALD NORCROSS, New Jersey AUSTIN SCOTT, Georgia
RUBEN GALLEGO, Arizona MO BROOKS, Alabama
SETH MOULTON, Massachusetts SAM GRAVES, Missouri
SALUD O. CARBAJAL, California ELISE M. STEFANIK, New York
ANTHONY G. BROWN, Maryland, SCOTT DES JARLAIS, Tennessee
RO KHANNA, California TRENT KELLY, Mississippi
WILLIAM R. KEATING, Massachusetts MIKE GALLAGHER, Wisconsin
FILEMON VELA, Texas MATT GAETZ, Florida
ANDY KIM, New Jersey DON BACON, Nebraska
CHRISSY HOULAHAN, Pennsylvania JIM BANKS, Indiana
JASON CROW, Colorado LIZ CHENEY, Wyoming
ELISSA SLOTKIN, Michigan JACK BERGMAN, Michigan
MIKIE SHERRILL, New Jersey MICHAEL WALTZ, Florida
VERONICA ESCOBAR, Texas MIKE JOHNSON, Louisiana
JARED F. GOLDEN, Maine MARK E. GREEN, Tennessee
ELAINE G. LURIA, Virginia, Vice Chair STEPHANIE I. BICE, Oklahoma
JOSEPH D. MORELLE, New York C. SCOTT FRANKLIN, Florida
SARA JACOBS, California LISA C. MCCLAIN, Michigan
KAIALI’I KAHELE, Hawaii RONNY JACKSON, Texas
MARILYN STRICKLAND, Washington JERRY L. CARL, Alabama
MARC A. VEASEY, Texas BLAKE D. MOORE, Utah
JIMMY PANETTA, California PAT FALLON, Texas
STEPHANIE N. MURPHY, Florida
Vacancy
PAUL ARCANGELI, Staff Director
MICHAEL HERMANN, Professional Staff Member
GEOFF GOSSELIN, Professional Staff Member
NATALIE DE BENEDETTI, Clerk
(II)
CONTENTS
Page
STATEMENTS PRESENTED BY MEMBERS OF CONGRESS
Rogers, Hon. Mike, a Representative from Alabama, Ranking Member, Com-
mittee on Armed Services .................................................................................... 2
Smith, Hon. Adam, a Representative from Washington, Chairman, Committee
on Armed Services ................................................................................................ 1
WITNESSES
Glenn, Douglas A., Deputy Chief Financial Officer, Department of Defense;
accompanied by Wesley C. Miller, Performing the Duties of Assistant Sec-
retary of the Army for Financial Management and Comptroller; Alaleh
Jenkins, Performing the Duties of Assistant Secretary of the Navy, Finan-
cial Management and Comptroller; and Stephen R. Herrera, Principal Dep-
uty Assistant of the Air Force for Financial Management and Comptroller .. 3
APPENDIX
PREPARED STATEMENTS:
Glenn, Douglas A., joint with Mr. Miller, Ms. Jenkins, and Mr. Herrera ... 37
DOCUMENTS SUBMITTED FOR THE RECORD:
[There were no Documents submitted.]
WITNESS RESPONSES TO QUESTIONS ASKED DURING THE HEARING:
Mr. Langevin ..................................................................................................... 53
Mr. Moore .......................................................................................................... 54
Mr. Norcross ..................................................................................................... 54
Ms. Speier ......................................................................................................... 54
Mr. Wittman ..................................................................................................... 55
QUESTIONS SUBMITTED BY MEMBERS POST HEARING:
Mrs. Bice ........................................................................................................... 59
Mr. Morelle ....................................................................................................... 61
Mr. Moulton ...................................................................................................... 59
(III)
THE DEPARTMENT OF DEFENSE’S FINANCIAL
IMPROVEMENT AND AUDIT READINESS PLAN:
FISCAL YEAR 2020 AUDIT RESULTS AND
THE PATH FORWARD
HOUSE OF REPRESENTATIVES,
COMMITTEE ON ARMED SERVICES,
Washington, DC, Wednesday, April 28, 2021.
The committee met, pursuant to call, at 11:03 a.m., via Webex,
Hon. Adam Smith (chairman of the committee) presiding.
OPENING STATEMENT OF HON. ADAM SMITH, A REPRESENTA-
TIVE FROM WASHINGTON, CHAIRMAN, COMMITTEE ON
ARMED SERVICES
The CHAIRMAN. Good morning, everybody. We are on a full re-
mote hearing. The first time we have done this in a little while,
so forgive me if there is a bug or two as we work our way through
it. But we have a full committee hearing this morning on ‘‘The De-
partment of Defense Financial Improvement Audit Readiness Plan:
Fiscal Year 2020 Audit Results and the Path Forward.’’
We have four witnesses before us. Douglas Glenn, who is the
Deputy Chief Financial Officer for the Department of Defense, he
will be the only one offering testimony. The other three will be here
and available to answer our questions as we get to them. And they
are: Wesley Miller, who is the senior official performing the duties
of the Assistant Secretary of the Army. Alaleh—sorry. I practiced
this, too. Alaleh Jenkins, who is performing the duties of the As-
sistant Secretary of the Navy, Financial Management and Comp-
troller. And Stephen Herrera, who is the Principal Deputy Assist-
ant of the Air Force for Financial Management and Comptroller for
the Department of the Defense.
So I think we are all very familiar with the subject this morning.
I will not give a long opening statement. This is an effort to audit
the Pentagon and the basic point of this is do a better job of spend-
ing the money that we spend. I know that we always have very big
debates about what the top-line numbers should be, how much
money we should spend and I understand that is important.
But it is equally important how we actually wind up spending
the money that we spend and there are a number of different ways
that we can be more efficient and more effective in doing that. The
ranking member and I are, you know, working on those. But one
of the biggest ones is to know where we are spending the money
and that is the purpose of the audit. To be able to go dollar for dol-
lar all across the 700 and whatever it is, 50 billion, roughly, dollars
that we spend in the Pentagon and be able to identify where it is
(1)
2
spent so we can figure out what areas we may be able to find sav-
ings and better track that money.
I do want to thank a number of folks at the Department of De-
fense both current, those who were there during the Trump admin-
istration, and those came before who have worked very hard over
the last decade to get us to the point where we can do an audit.
We are not quite there yet getting the full audit. Every year we are
making improvements.
But I just want to close with two points. One, that it is enor-
mously important that we get this done. That we get to the point
where we understand where the Pentagon is spending its money so
we can better track and do it in a more efficient manner than we
are currently doing it. And number two, we have a long way to go
to get there. So I am anxious to hear from our witnesses today on
how that process is going and how we are going to get there.
And with that, I will turn it over to the ranking member, Mr.
Rogers, for his opening statement.
Mike, do we have you there?
Mr. Rogers, are you hearing me? I see you, but you are not say-
ing anything.
Katy, do we know what is going on here?
STAFF. Sir, they are working through some technical difficulties
with the ranking member. He cannot hear.
The CHAIRMAN. Ah.
Mr. ROGERS. Can you hear me?
The CHAIRMAN. Yes.
STATEMENT OF HON. MIKE ROGERS, A REPRESENTATIVE
FROM ALABAMA, RANKING MEMBER, COMMITTEE ON
ARMED SERVICES
Mr. ROGERS. Good. Thank you, Mr. Chairman.
The DOD [Department of Defense] is the largest Federal agency
with nearly 3 million service members and civilian employees. It
has an annual budget of over $700 billion and more than $3 trillion
worth of assets under management. Maintaining financial control
over this behemoth is critical to ensure taxpayer accountability and
avoid waste, fraud, and abuse. Unfortunately, we don’t know if that
is the case because DOD has yet to pass an audit. Progress is being
made, but the Department still has a long way to go.
The 2020 audit continues to highlight obsolete financial manage-
ment systems, poor inventory controls, and cybersecurity weak-
nesses as major challenges. It likely won’t be until the end of this
decade before the Department has the proper systems, procedures,
and controls in place to pass an audit. I think that is unacceptable.
I look forward to hearing from our witnesses on what can be done
to expedite that timeline and how this committee can be helpful in
that effort. And with that, Mr. Chairman, I yield back.
The CHAIRMAN. Thank you very much.
So we will turn it over now to Mr. Glenn for his opening state-
ment to update us on how all of that is going.
Mr. Glenn, the floor is yours.
3
STATEMENT OF DOUGLAS A. GLENN, DEPUTY CHIEF FINAN-
CIAL OFFICER, DEPARTMENT OF DEFENSE; ACCOMPANIED
BY WESLEY C. MILLER, PERFORMING THE DUTIES OF AS-
SISTANT SECRETARY OF THE ARMY FOR FINANCIAL MAN-
AGEMENT AND COMPTROLLER; ALALEH JENKINS, PER-
FORMING THE DUTIES OF ASSISTANT SECRETARY OF THE
NAVY, FINANCIAL MANAGEMENT AND COMPTROLLER; AND
STEPHEN R. HERRERA, PRINCIPAL DEPUTY ASSISTANT OF
THE AIR FORCE FOR FINANCIAL MANAGEMENT AND COMP-
TROLLER
Mr. GLENN. Good morning and thank you. Chairman Smith,
Ranking Member Rogers, distinguished members of the committee,
I appreciate the opportunity to testify before you today on the De-
partment of Defense financial statement audit, a key priority for us
all. I am joined by my esteemed military department colleagues,
each serving the capacity of performing the duties of their respec-
tive Assistant Secretary for Financial Management and Comp-
troller: Mr. Wes Miller, representing the U.S. Army; Ms. Alaleh
Jenkins, representing both the U.S. Navy and Marine Corps; and
Mr. Stephen Herrera representing both the Space Force and the
U.S. Air Force.
Leaders and financial managers throughout the DOD are em-
bracing our audit responsibilities and as good stewards of taxpayer
dollars are working to increase transparency in how we manage
the resources entrusted to us. Additionally, we are keenly aware
that DOD is the primary obstacle to the U.S. Government achiev-
ing a clean audit and something we would all like to see. We are
working closely with other Federal agencies and oversight bodies
such as Department of Treasury, the Government Accountability
Office, the Office of Management and Budget, as well as the larger
financial communities such as the Federal Accounting Standards
Advisory Board, the American Society of Military Comptrollers,
and the Association of Government Accountants.
Having just completed our third annual consolidated audit, the
Department continues to make steady progress toward not just an
unmodified audit opinion but, perhaps more importantly, improved
financial management and data integrity for decision making. Our
audit transitioned more than 3,400 notices of findings and rec-
ommendations last year. They also looked to see whether we suc-
cessfully closed past findings. As of early April, our auditors vali-
dated that we have successfully closed 23 percent of our prior year
findings. Also I am happy to note that DOD increased our clean
opinion count to eight, and these entities represent 35 percent of
DOD’s $3.1 trillion assets. If you include the Medicare-Eligible [Re-
tiree] Health Care Fund, which received a modified opinion, the as-
sets under a clean opinion increased to 44 percent.
In 2020, the Department began using material weaknesses to
prioritize our corrective actions and to strategically move the De-
partment closer to an unmodified opinion. Material weaknesses are
issues that if left unaddressed have the potential to lead to signifi-
cant, erroneous reporting and are the specific issues cited in the
OIG’s [Office of Inspector General’s] report that are preventing the
DOD from achieving an unmodified opinion. The Department’s
2020 audit report noted 26 departmental material weaknesses. The
4
auditors found no new material weaknesses at the Department
level, but we were successfully able to downgrade two of those ma-
terial weaknesses. I believe that this allows me to say that last
year’s audit report is better than the prior years.
In addition to improved opinion accounts, material weaknesses,
and NFR [notices of findings and recommendations] closures, our
collective efforts resulted in an improved rating for DOD Financial
Management in GAO’s [U.S. Government Accountability Office’s]
2021 High Risk List. The audits are driving the cultural changes
needed for business reform goals. The audits demand information
technology system improvements and data consolidation. It is arm-
ing our decision makers with real-time, Department-wide views
and advanced data analytic capabilities. We are now able to use
dashboards, metrics, and analytics at a departmental level to sup-
port efficiencies, sustain improvements, and harness the power of
data for better decision making.
At the risk of sounding dramatic, the audit is also driving im-
proved national security. We already know DOD systems are pri-
mary targets for cyberattacks, both foreign and domestic. Auditors
annually test our processes and procedure controlling who can ac-
cess our systems, what levels of access they can have and what
procedures they can perform, and who can access the coding and
configuration capabilities. Even with this good news, it is reason-
able to ask how does this benefit the taxpayer and is it worth what
we are spending on audits? Annually, we pay our IPAs [inde-
pendent public accountants] roughly $185 million for audits and ex-
aminations. This is less than 1 percent of total annual budgetary
resources and well within industry standards, and return on in-
vestment is highly positive.
The audit is giving taxpayers improved accountability for the as-
sets entrusted to us, transparency in our use of those assets, and
is pushing DOD and the U.S. Government closer to a clean opinion.
We believe the return on investment will continue to grow as au-
dits mature, root causes to problems are addressed, and our data
is made more accurate and reliable and timely.
Now that we have highlighted our overall audit results, I would
like to spend a few minutes on the status of each military depart-
ment and their planned approach for audit over the next few years.
In 2020, the Army made significant progress, particularly in the
area of information technology, and reduced their NFR account
over the prior year by 30 percent. The Army used workflow tech-
nology to validate and improve the quality of 50,000 real property
asset records. Improved data analytics has helped to identify
‘‘ghost’’ general equipment assets such as tanks and helicopters
that should have been removed from the appropriate system, and
a machine logic they are using is helping Army to address and re-
duce unmatched transactions between their systems, resulting in
better and more efficient asset management.
The Army has developed an audit roadmap that identifies mile-
stones to remediate their material weaknesses. Over the next 2
years, Army will focus on remediating Fund Balance [with] Treas-
ury issues, the most material item on their financial statements.
Establishing beginning balances is also a near-term priority and
essential to achieving an Army clean audit opinion.
5
The Army’s third priority is a completeness of their property,
plant, and equipment as well as inventory populations, which en-
sures they have accountability and supporting documentation over
their assets and transactions.
The Department of the Navy is optimizing financial systems, en-
hancing processes, and investing in its workforce. Focusing on
these three components directly benefits the Department of Navy
mission, sailors, and Marines by strengthening readiness and le-
thality.
Optimizing the Department of Navy financial system require-
ments entails consolidating its accounting systems into one unclas-
sified system for each service—the Defense Agencies Initiative for
the Marine Corps and Navy ERP [Enterprise Resource Planning]
for the Navy. These are planned for October 2021 and October
2022, respectively. This reduces the complexity, increases the audi-
bility, shrinks operating costs, and minimizes cyber vulnerability.
In addition, just as data is a strategic asset so is the Department
of Navy [DON] workforce. The Department of Navy is investing in
its workforce through upskilling and employing best practices,
thereby ensuring the DON workforce has the skill sets necessary
to execute and improve its processes.
At the beginning of 2021, the Department of Air Force estab-
lished a multiyear audit roadmap, and an integrated master sched-
ule collects objective data inputs from across the Air Force to man-
age near- and long-term audit goals. Leveraging this matured,
data-driven approach, the Air Force is making a conscious decision
to prioritize reductions in most of its significant weaknesses over
the next 18 months. This includes the reported value of its military
equipment both in production and in use and the balance of Air
Force cash accounts within the Department of Treasury, which to-
gether represents 70 percent of the assets reported in the Air Force
financial statements.
The Fourth Estate—which comprises the other Defense organiza-
tions, Defense Agencies, and DOD Field Activities—is also making
steady progress. Auditors have thus far validated the closure of 30
percent of the Fourth Estate prior-year audit findings. The closure
rate for IT [information technology] findings alone rises to 78 per-
cent for Fourth Estate. Of the 25 DOD service provider examina-
tions, 12 have resulted in an unmodified opinion, which is an in-
crease of 1 over the prior year.
The Defense Finance and Accounting Service, one of our major
service providers, is championing financial excellence through
transparency of our financial data and helping lead efforts to rec-
oncile our Fund Balance with Treasury. A project to resolve our
aged or old statement of differences, which is similar to reconciling
hundreds of checking accounts each with billions of dollars in them
spanning decades of time, has resulted in 99 percent reduction in
total differences. Our aged or old balances in our suspense accounts
was similarly reduced by 98 percent over the prior year.
The annual audit regimen has set the Department on an irre-
versible course in support of business reform, reinforcing account-
ability to taxpayers, and directly contributing to enhanced military
readiness. By continuing to equip the workforce with the resources
and tools to respond to audit requests and remediate our audit
6
findings, the Department will achieve its audit goals of business
excellence and sustain an improved level of business proficiency for
the benefit of the warfighter and the American people.
I suspect we all look forward to the day when we hear on the
evening news or the drive home, ‘‘For the first time in history, the
U.S. Government has achieved a clean audit opinion.’’ We need
hearings like this. We need to be asked hard questions and asked
about the assets entrusted to us, and we welcome your continued
collaboration and oversight. You and your colleagues have contin-
ued to stress the importance of these audits which we need for con-
tinued progress. We appreciate the confirmation questions you
have posed to nominees that reinforce this message. The DOD IG
[Inspector General] and GAO both have recognized our strong tone-
at-the-top and that is due, in part, to you holding us accountable.
We look forward to your questions.
[The joint prepared statement of Mr. Glenn, Mr. Miller, Ms. Jen-
kins, and Mr. Herrera can be found in the Appendix on page 37.]
The CHAIRMAN. Thank you very much. I appreciate that. So we
will go through the members. They are being texted who is up for
the questions, so we will go through in order limiting you to 5 min-
utes. For our witnesses, we try to keep it to 5 minutes, so even if
the member does the old trick of asking you a 4-minute-and-50-sec-
ond question, that means you only have 10 seconds to answer said
4-minute-and-50-second question. I will try not to be rude, but we
do want to get to everyone who we want to get to here. And also,
members, so we have, you know, Ms. Jenkins, but the other three
we have Army and Navy and Air Force representative though they
haven’t shown up on the screen, if you have questions specific to
those service branches, those other three witnesses are available to
answer those.
Just a couple of areas, one in terms of, you know, the big picture
thing in understanding the audit issues, so two questions on that.
One, can you give us some idea of when you think that happy day
that you referenced at the end of your opening statement will be
achieved?
And just to sort of frame that, so we have the Department of De-
fense, but there are a lot of other agencies in the government. Let’s
take CMS [Centers for Medicare and Medicaid Services], for exam-
ple, you know, Medicare and Medicaid. Do they have a full audit?
Are they able to go through and say, here is everywhere that we
are spending our money and all of the assets? How does what DOD
is doing compare to what is going on at other agencies and how
could that potentially guide us to get to where they are assuming
they are in a better place, if that question makes sense?
Mr. GLENN. I don’t know if CMS is audited individual or specifi-
cally as a standalone entity. It is part of HHS [U.S. Department
of Health and Human Services] which I know as a whole does re-
ceive a clean audit opinion. We are, as I alluded to, working with
other organizations and have already on a couple of occasions
reached out. For example, we reached out to the Department of
Homeland Security to talk about how they recently litigated their
contingent legal liability which was successful. That was one of the
two material weaknesses we were able to mitigate this year.
7
We recently just chatted with the Department of Energy, and
thank you to the Association of Government Accountants for facili-
tating that conversation. But we sat down with the Department of
Energy to understand how they handle property in the hands of
contractors, which is one of our priority areas and material weak-
nesses.
The CHAIRMAN. So, but you don’t have any sort of estimate on
when you are going to get to the place that HHS is now?
Mr. GLENN. I can give you an estimate. I struggle with this ques-
tion because I know you are not going to let me off the hook with
anything other than a firm date. I struggle because you are asking
my opinion when somebody else will reach an opinion and——
The CHAIRMAN. Sure. And just so you are clear, I don’t want a
firm date because I know that it would be a ridiculous question.
What I am searching for is, ‘‘Yeah, we really don’t know. It is too
far out to really understand,’’ or, you know, ‘‘3 to 5 years is reason-
able, 1 to 2 isn’t,’’ or ‘‘talk to me in 2 years and we will see.’’ That
is kind of what we are looking at.
Mr. GLENN. I won’t shy away from the question. I will stick to
what is said before that if I was in Vegas betting, I couldn’t pick
a better year, but I would say 2028. We are looking very closely
at our corrective action plans and the final dates for remediation
are 2028, so——
The CHAIRMAN. Yes.
Mr. GLENN [continuing]. If everybody sticks to those plans, we
should be able to declare a victory that year.
The CHAIRMAN. And I think it is crucially important that we do.
As I know some people have speculated, look at all the money we
are spending just to try to get to here, is it really worth it? It abso-
lutely is.
Mr. GLENN. Absolutely. And I am happy to specify why I think
that.
The CHAIRMAN. Yes. No, I think you did a good job in your open-
ing statement. And the last thing I would ask is, I am particularly
interested right now in our software and technology; software in
particular as we are trying to make sure we have the strongest in-
formation systems we can have. How are we doing in terms of, you
know, estimating the software we own, how we buy it, how we can
do that in a more efficient and effective way?
Mr. GLENN. I think we need a lot of change there, sir, to be hon-
est. But we have a large number of systems that are collecting fi-
nancial information, and every time you have multiple systems,
they have to pass that along to some other system so it can be con-
solidated to produce consolidated statements. And every time you
have an interface point you need a reconciliation and you have an
opportunity for stuff to get lost or perhaps it has to be translated
and you lose stuff in the translation.
So we need to do a better job of consolidating the number of fi-
nancial systems within the Department and that is a challenge be-
cause a lot of times these systems, while they may not have been
designed for the audit, they were designed for something else and
they have a very real value-added purpose, but people are very
hesitant to let that go just for financial reasons.
The CHAIRMAN. Understood. Thank you.
8
Mr. Rogers is recognized.
Mr. ROGERS. Thank you, Mr. Chairman.
Mr. Glenn, what, if any, additional resources or authorities does
DOD need to expedite financial modernization and hopefully get a
clean audit sooner?
Mr. GLENN. Sir, could you repeat that question? I want to make
sure I heard it right.
Mr. ROGERS. Yes. I am interested in knowing what additional re-
sources or authorities Congress needs to give you that would expe-
dite your ability to create financial management modernization and
hopefully get a clean audit sooner.
Mr. GLENN. Thank you. I suspect in the years ahead you will be
seeing budget requests for system migrations and perhaps new en-
terprise resource planning systems. In June, we will be sending up
a report on audit incentives which will have, potentially have some
additional budgetary flexibilities we might be asking for. We are
working through those right now with our Budget Department.
Perhaps some flexibilities around expired funds that for entities
that have shown, demonstrated progress on the front. Perhaps also
an incentive like a working capital fund we could perhaps generate
to help incentivize progress and/or system implementations and
modernization efforts.
Mr. ROGERS. And what do you see is the biggest deficiency the
DOD has to getting a clean audit and what are you doing to ad-
dress that main deficiency?
Mr. GLENN. Tactically, it is probably Fund Balance with Treas-
ury, which is reconciling with Department of Treasury. Fortu-
nately, thanks to DFAS [Defense Finance and Accounting Service]
we made huge progress last year. That was the 99 and 98 percent
reductions. I think we will get there. We have a pretty good chance
this year; if not this year hopefully next. Strategically though it is
probably the systems issue that we talked about earlier. We really
need to reduce the number of systems. People are hesitant to do
that and it really takes a strong change management effort to do
that.
Mr. ROGERS. All right. Thank you very much.
Thank you, Mr. Chairman. I yield back.
The CHAIRMAN. Thank you.
Mr. Langevin is recognized for 5 minutes.
Mr. LANGEVIN. Thank you very much. I want to thank our wit-
nesses for being here today. Thank you for your testimony. Let’s
start with Mr. Glenn, if we could.
You mention a lot of progress in the cybersecurity processes and
procedures for Defense financial systems, but the inspector general
report on the audit stated that ‘‘DOD did not make significant
progress,’’ and you are nearly 50 percent away from reaching your
goal in all five IT priority areas. So despite prioritizing this effort,
why have you failed to make meaningful progress?
Mr. GLENN. I think it is the change management effort, sir. And
you are absolutely right, more is needed. Cyber vulnerability is an
area that DOD should be leaving and we are aggressively working
on that. One quarter of all NFRs relate to IT access controls, so
right now there is a number of efforts within the Department in-
cluding a centralized identity potential in access management im-
9
plementation that we anticipate having nine systems deployed onto
by the end of this fiscal year and which we plan to expand through-
out the Department.
Mr. LANGEVIN. Okay, so that is, I think, my second question. I
wanted to know your timeline. What is your timeline for securing
DOD financial systems?
Mr. GLENN. Sir, I would have to take that for the record. I would
have to go back and look at our corrective action plans and I would
prefer to give you a more detailed response, because the IT issues
have a number of categories and I can go back and look at the cor-
rective action plan dates and give you the more detailed response
on when that we anticipate them being remediated.
[The information referred to can be found in the Appendix on
page 53.]
Mr. LANGEVIN. And the Defense Information Systems Agency,
DISA, Working Capital Fund received a clean opinion in fiscal year
2020, but it had a previous clean opinion in 2016 before backsliding
in 2018 and 2019. Mr. Glenn, how do we know that the agencies
aren’t making temporary improvements that will fall apart after a
year or two?
Mr. GLENN. Probably because of hearings like this, sir, and the
annual audit. Getting it audited every year and getting that status
check from the auditors and knowing that the Secretary and Dep-
uty Secretary are paying very close attention to the number of
clean opinions on the Department and that we are being held ac-
countable for making sure that that number increases each year,
I can guarantee you there would be a significant backlash on any
entity that lost its opinion.
Mr. LANGEVIN. Okay. Any other thoughts on how we sustain suc-
cesses that we have made in addition to oversight?
Mr. GLENN. Sir, I think it is keeping up the audit. It is just keep-
ing that annual feedback, getting those NFRs, getting corrective ac-
tion plans against those NFRs, and holding ourselves accountable
for continued progress.
Mr. LANGEVIN. Thank you.
I have a question for Ms. Jenkins. So I am disturbed by the in-
spector general’s findings that the Navy lacks oversight of Trident
missile system assets because contractor assets were not recorded
in a government-owned system. Can you elaborate on this finding
and the timeline towards fixing it?
Ms. JENKINS. Sir, the finding pertained to equipment and parts
that make up the Trident missiles, so we do have full account-
ability of our Trident missiles, their location, and it had to do with
some of the parts and pieces at the assembly. We have been work-
ing really hard with our contractor over the past 2 years to put the
same rigor and discipline over the accountability of these parts and
pieces and we are confident that we are going to have that resolved
this year.
Mr. LANGEVIN. Well, I hope so, because this is something that is
very troubling when I heard this and we need to pay much closer
attention to this and nothing can slip through the cracks on that
contractor asset portion, especially.
So I have heard personal stories from service members at lower
level units that the audit and corrective action plans are incredibly
10
disruptive events. Mr. Miller, Ms. Jenkins, and Mr. Herrera, can
you talk about the audit’s impact in readiness at the tactical level?
Mr. MILLER. Sir, this is Wes Miller with Army. I will jump there
first. As far as the tactical level in being able to get to the issues
as far as inventory and supply management, there is where know-
ing what we have in the way of preparedness is so critical. Not
only as far as with inventory items, but also as far as the assets
themselves as far as our tactical equipment, and knowing that we
can, in fact, report those the correct way. So that is where I would
see a benefit as far as to those individuals at the tactical level as
far as having the assurance that the accounting system is keeping
up with what they are actually doing and what they have on hand.
The CHAIRMAN. And I do believe the gentleman’s time has ex-
pired. I say that because I can’t find the clock on my computer. The
staff is trying to help me.
Mr. LANGEVIN. It did expire, Mr. Chairman.
The CHAIRMAN. Okay, sorry about that. So while I am trying to
figure that out, I will get to it, and Mr. Lamborn is recognized for
5 minutes. If for some reason I disappear, Katy, you are just going
to have to call on the next person. I am going to try to figure out
this clock thing. We have Mr. Lamborn for 5 minutes and then Mr.
Courtney, and I will be working on the clock. If it doesn’t work out,
somebody else is going to have to jump in.
Go ahead, Doug.
Mr. LAMBORN. Mr. Chairman, can you hear me okay?
The CHAIRMAN. Got you loud and clear, yes.
Mr. LAMBORN. Okay. Actually, I am on two web Zoom commit-
tees at the same time. I have a markup going simultaneously here
so I am a little bit distracted, so for that reason, Mr. Chairman,
I am going to pass on questions and let you go to the next ques-
tioner.
The CHAIRMAN. Certainly. I think if we are keeping the R/D
[Republican/Democratic] thing then I will go to Mr. Wittman. And
I did find the clock so, you know, small victories.
Mr. Wittman is recognized for 5 minutes.
And we don’t hear you, Rob. You may be muted there.
Mr. WITTMAN. I am sorry, Mr. Chairman. I didn’t click the right
button, but thanks again.
And, Mr. Glenn, I appreciate you talking about the critical na-
ture of audits and I think it is incredibly important. You know, it
is a very complex system we see within the Pentagon, a large num-
ber of unknowns, and what we want to do is to be able to take
those down to zero on those. But, you know, that is a long process.
We want to make sure too that we are keeping in mind the areas
where we need to take action.
In your written statement you appeared to implicitly refer to au-
dits of material weaknesses, and listen, we understand that those
things are there and that is why I believe there is some action that
needs to be taken. And my colleague, Mr. Garamendi, and I intro-
duced the bipartisan Naval Readiness Act and it was aimed at
really helping define variables and material deficiencies in an ac-
tionable way. In other words, how do we identify that and how do
we take actions?
11
So I wanted to get you to elaborate on the importance of routine
inspections on DOD readiness in making sure that is part of this
system of audits. So it is not just what is on the balance sheet, it
is also, you know, what are we doing to define material readiness
and to clearly define where those deficiencies are?
Mr. GLENN. Well, apart from the financial statement—and you
mentioned the naval audit readiness. I will probably turn to Alaleh
here in a second—one of the neat cultural changes that the audit
has driven is you heard me talk about data. It is driving a culture
of data and the Department is realizing the power of data.
It started with just a database of audit findings and, obviously,
we are at the just over 3,400 now, but also putting corrective ac-
tions plans against those findings and having a central database
that we can go into, see the issues and status for corrective action,
really has unlocked the power of centralized data. So now we have
departmental dashboards. And I’m getting to the readiness ques-
tion, because at the Deputy Secretary and Secretary level there
now are dashboards on readiness with various metrics measuring
how we are doing.
In terms of capturing the full population of readiness issues, that
is probably a little outside the swim lane of the financial statement
audit; but within the financial swim lane we have a management’s
internal control program where we go out and do various assess-
ments. I am very thrilled to say that the audit, last year’s audit
introduced no new issues. Of course, that takes a little bit of an
explanation.
If you are counting material weakness it goes up by one over in
the last, over the prior year, but the only reason it went up was
because our IG friends expanded one prior year IT material weak-
ness into four categories which had already existed. So I am hop-
ing, very much hoping and believing that we have all the financial
issues on the table.
Alaleh, can you speak to the naval readiness aspect of this?
Ms. JENKINS. Yes, sir. As for financial statement audit, one of the
areas that the auditors are looking at at the Department is ensur-
ing that we follow our own policies and procedures, because specifi-
cally inside the Department of the Navy we focus a lot of time and
effort to ensure that we have proper accountability over our assets,
material, our gears, people, their condition, their location, so that
we have the enterprise visibility. We know what we have, what is
available for use, can it sit up, you know, and ensuring that the
resources are not going to buy material that we already have on
hand.
So I see that as direct support to our overall readiness of the
parts and pieces that we have for maintenance of our ships and
aircrafts. One of the examples that I like to use is that our logistics
community started this naval material accountability campaign
since 2018, where we go base to base and count every item that we
have on that base. And today, we have identified about $3 billion
worth of equipment and property that we were able to put back
into the system and make it available for use.
Mr. WITTMAN. Very good.
I want to jump in and follow, Mr. Glenn, with a point that you
started with and that is the use of IT in using automation within
12
our systems. I think there is a tremendous amount of potential
there. Instead of doing audits line by line the old-fashioned way,
what we are doing with supply chain management systems, what
we are doing with digitizing much of what we manage and transact
in Department of Defense, seems like to me the digital means is
really the way of the future.
So if you would just give us a brief overview of what DOD has
done to ensure that our audits, auditors, I should say, are prepared
for the digital age.
Mr. GLENN. You are asking me to talk about what our IG friends
have done. I am at a bit of a loss. I am anxiously waiting to see
that. I know before I came to DOD there was a lot of talk about
how the audit community would be using some of the IT resources.
I can share that there is two areas where we put in place some
emerging technology. Optical character recognition——
Mr. WITTMAN. Thanks. If you will do that—my time has expired.
If you can just get that to me aside.
Mr. Chairman, I yield back.
[The information referred to can be found in the Appendix on
page 55.]
The CHAIRMAN. Thanks, Rob. I was giving you a few extra sec-
onds just because of the microphone problem up-front, but the time
was up.
Mr. WITTMAN. Thanks.
The CHAIRMAN. Mr. Courtney is recognized for 5 minutes.
Mr. COURTNEY. Thank you, Mr. Chairman. And, you know, actu-
ally, I just wanted to begin by sort of making sure that all the
members know that the forensics of this audit process actually
began in the House Armed Services Committee. Adam and Mac
Thornberry set up special committee on auditability, which I drew
the short straw and was a member of that, which met at 8 o’clock
in the morning with gallons of coffee to sort of as a layperson try
to understand accounting terminology. But that actually produced
language in NDAAs [National Defense Authorization Acts] which
responds to this point.
I just think that is important to sort of put on the record, that
this is an example where Congress really drove this process and
the benefits that we are hearing about this morning. You know, it
was a good bipartisan vision by Armed Services.
You know, there is a slide deck on page 50, which actually has
a document that is called Ranking Results, which lists the parts of
the Department that are unmodified audit opinions versus those
with modified opinions, and then there is a numerical ranking of
the different agencies. And, Mr. Glenn, I was just wondering, num-
ber one, just for the benefit of everyone, what is a modified opinion
versus an unmodified opinion and what do those ranking numbers
mean in terms of, you know, do people at the bottom have the most
work to do to get their audits clean? I mean, is that how a layper-
son should interpret that chart?
Mr. GLENN. That is an extremely [inaudible] that I would say the
people on the bottom just—they may not have as far to go, but they
also may not have demonstrated as much progress in addressing
the issues they have. The unmodified opinion is clean. It basically
13
says, yes, we have looked at it, our financial statements are materi-
ally accurate.
A modified opinion is your statements are accurate except for 1,
2, 3 issues that they will specifically cite. We are, unfortunately,
under a disclaimed audit opinion which basically says there are so
many issues that are so pervasive, we cannot give you——
Mr. COURTNEY. Great. Well, thank you. Again, I think it is, you
know, particularly, you know, I think these hearings are great to
keep the, you know, momentum moving forward, which again origi-
nated in the House. But also I think it is good to make sure that
we all are on the same baseline in terms of terminology, so.
Mr. GLENN. If I could, I would like to expand on that ranking
report and I just want you to say that was a good idea. People on
the bottom quartile hate it because there is an extra reporting bur-
den that goes with it, but I promise you we have some very tough
conversations with the folks on the bottom of that list who don’t
want to be there. So it is driving positive impacts.
Mr. COURTNEY. That is great.
Thank you. I yield back.
The CHAIRMAN. Thanks, Joe. And thanks for serving on that
committee way back when. We appreciate the work.
Ms. Hartzler is recognized for 5 minutes.
Mrs. HARTZLER. Thank you, Mr. Chairman. Very, very important
hearing.
Mr. Glenn, I understand that IT and cybersecurity weaknesses
make up a large proportion of the notices of finding recommenda-
tions highlighted by the auditors, so what corrective action is the
Department implementing to address these cybersecurity concerns?
Mr. GLENN. A number of them. They are about half. Overall,
they are about half of our NFRs. Probably the biggest effort is the
Identity, Credential, and Access Management [ICAM] system that
DISA, Defense Information Security Agency, is implementing. That
is what I was talking about earlier that we are piloting nine sys-
tems onto that, that should be deployed at the end of this fiscal
year.
Also, this Friday, we have a periodic IT functional council meet-
ing where it used to be CMO [chief marketing officer], CIO [chief
information officer], and CFO [chief financial officer] partnered up
to talk about IT issues, but as you probably know CMO has been
dissolved so now it is CIO and CFO linking arms to drive system
reductions and drive improvements in IT controls. And, in fact, the
top five issues that are not dependent on ICAM, we are specifically
focusing on this Friday with senior management and the services
to ask ourselves why are there shared accounts? Why is there priv-
ileged access that is not necessary? Why do developers have access
to the production environment and not just the test environment?
Mrs. HARTZLER. Okay, great. Now I understand that you found
that the DOD lacked policies, procedures, controls, and documenta-
tion necessary to accurately record and monitor government prop-
erty in the possession of contractors, and DOD has acknowledged
this weakness and formulated a corrective plan or action plan. So
can you describe the corrective action plan to the committee and
the challenges that you face with contractor property, government
property?
14
Mr. GLENN. Sure. Yes, probably the best example is the strike
fighter. Right now we have a material weakness at the depart-
mental level in the strike fighter because while the planes are all
accounted for and on the service books and under audit, the parts
and equipment—and we are talking about tens of billions of dol-
lars—unfortunately, are not on the Department statements and
therefore they are not subject to audit and the audit scrutiny, at
least their financial statement audit scrutiny.
The IG and GAO are still free to go in there for—and the Con-
tract Audit Agency are still free to go in there. But what we are
doing about it is we are counting all the stuff that is out there that
is about three-quarters complete last time I checked. We are mov-
ing it to an accountable property system that is in DOD, and not
just at our contractors’, and we will get it subject to audit proce-
dures. We are going to get the findings, we are going to put correc-
tive action plans against those findings, and we are going to hold
ourselves accountable for progress.
Mrs. HARTZLER. Very good. So to the service witnesses, could you
expand on what Mr. Glenn has just shared and tell about what you
specifically are doing with contractor hold material through the
audit effort?
Mr. MILLER. Yes, this is Wes Miller with Army. We have ex-
panded our particular review analysis of the problem. One of the
first key items with that we went through initially looking at the
number of contracts which we felt were involved there. We ex-
panded those as far as using the character reader as far as con-
tracts and we have expanded that to where now we are looking at
contracts that are in the area of 70,000 rather than 7,000.
So we have created that workgroup as far as to understand the
magnitude of the problem and how we can get these items that are
with the contractors under control, ma’am.
Mrs. HARTZLER. Good.
Ms. JENKINS. Ma’am, this is Alaleh from the Department of the
Navy. I will just address that quickly as well, because we have a
large amount of property and supplies in the hands of the contrac-
tors. We are working with our [inaudible] community to make sure
that all of our contracts have the appropriate clauses for property
accountability, for one; ensuring that we put in the same work with
our contractor community, that they have the same type of dis-
cipline imposed as procedures to do proper count; and also report-
ing to the government a list of the property that they hold for us
and make sure that they maintain the property record and subject
to audit on an annual basis.
Mrs. HARTZLER. Very good.
Air Force.
Mr. HERRERA. Yes, ma’am. This is Steve Herrera. Hopefully you
can hear me?
Mrs. HARTZLER. Yes, I can.
Mr. HERRERA. Thank you. So we are doing a lot of the same
things the Army and the Navy are doing. Effectively, we are also
working very closely with our contracts to see what kind of systems
and processes they have and where possible we are going to lever-
age those capabilities. Now most of the inventory is also on their
15
financial statements and they have to report and account for it, so
we don’t want to reinvent the wheel.
The CHAIRMAN. Thank you. I apologize, but the gentlelady’s time
has expired.
Ms. Speier is recognized for 5 minutes.
Ms. SPEIER. Mr. Chairman, thank you.
This question is for Ms. Jenkins. The Navy is proposing to cut
staff in the Naval Audit Service by two-thirds, which is an aston-
ishing turn of events when you have 26 material weaknesses. Why
is that happening and how is that going to improve your ability to
do your job?
Ms. JENKINS. Ma’am, the decision on the cut to the Audit Service
by no means meant that it was not value, the power of oversight
and audit. As a matter of fact, since 2018, when the financial state-
ment audit started, we have expanded the level of resources and
effort that has gone into this remediation activities through build-
ing our management internal control program, supporting the fi-
nancial statement audit, and then we have other oversight bodies
such as our now IT——
Ms. SPEIER. Excuse me. Ms. Jenkins, are you reducing the Audit
Service by two-thirds or not?
Ms. JENKINS. At this point, ma’am, I will take the question for
the record to get you the exact number. There is a reduction in our
audit, but is based on—that reduction is based on rightsizing the
organization to continue to meet their function based on their plan
audit and based on the number of audits that they complete on an
annual basis. By no means this means that we are taking the func-
tions away from them.
[The information referred to can be found in the Appendix on
page 54.]
Ms. SPEIER. Mr. Chairman, I would like for us to look into that
further.
Mr. Glenn, there is a lot of old IT systems. Maybe for the record
if you could provide us your plans to upgrade or replace them, and
I am going to yield the rest of my time to Ms. Slotkin.
[The information referred to can be found in the Appendix on
page 54.]
Ms. SLOTKIN. Thanks, Representative Speier.
Mr. Glenn, I guess my question is this. We are all having this
debate about the top line of the DOD budget, but we also know
that Members of Congress, you know, we don’t like when facilities
are closed, when locations are closed, when legacy weapons systems
are closed. Are you able through the audit process to put a mone-
tary figure on what we traditionally think of pork?
Mr. GLENN. No. It would be a subjective estimate and how would
you define pork, and I am not sure how I would be able to answer
that with any——
Ms. SLOTKIN. So, for instance, if we had a tank facility in a cer-
tain State that was slotted by the Army and recommended by the
Army to be shut down, but then, through passionate engagement
by my peers, was pushed and urged to stay open, you could cer-
tainly put a monetary value on the cost of that facility, correct?
Mr. GLENN. I could put a cost figure on it. Value, I am not sure.
I mean, what do you include in the value proposition?
16
Ms. SLOTKIN. Mm-hmm.
Mr. GLENN. It would be such a nebulous scope of benefit that I
would struggle to give you a reliable figure. And some of that
would be non-monetary.
Ms. SLOTKIN. Mm-hmm. And tell me a little bit about your proc-
ess. I am sorry. Just so we understand of getting to this, you said
20-, by the end of the decade, or 2028, you think we will have the
clean audit; is that right? Was that your figure?
Mr. GLENN. Yes.
Ms. SLOTKIN. Okay. And I know you have been asked this, but
is there anything else we could do to speed that up? Because it is
very hard for us to explain to our constituents why the largest
chunk of the national budget is unable to be audited. Is there any
other things that we could do to speed that up?
Mr. GLENN. Well, we will be sending out the paperwork for in-
centives here in June. But to answer you directly, not really, not
that I haven’t mentioned because there is only so much money you
can throw at it and there are only so much people you can throw
at it and we start to get diminishing marginal returns. And at the
heart of this, we really want to make sure that we are using the
resources entrusted to us efficiently.
We will be sending up a report also on unfunded priorities with
the audit, but there is not going to be anything in there. We are
resourced to do this. Unfortunately, it is just going to take time.
There are—you are talking about decades of processes and proce-
dures and cultures that have developed that we need to change.
And I understand it is hard to sell, ‘‘Why does it take 10 years for
the Department of Defense to do this,’’ but, all right, you have
probably heard us use DHS as the benchmark; it took them 10
years. Our assets are 17 times those of the Department of Home-
land Security.
If you look at us on the Global 100 List, Walmart is number one
at 500-, I think it is $524 billion. We spent $817 billion last year
and we are far more complex than Walmart. We got all the inven-
tory. We have hospitals, police forces we also have to account for—
plus we have a whole separate set of——
The CHAIRMAN. Again, I apologize, but the gentlelady’s time has
expired.
I do just want to follow up on one point that Ms. Slotkin made
as we are trying to figure out, as she points out, a lot of, you know,
congressional efforts to stop the DOD from stopping spending
money, if you will. Okay, you can’t get rid of this program, you
can’t move that asset. And this is I think why the audit is so im-
portant.
When we get into those arguments and we get excited, but say,
look, if you are insisting on continuing to keep this thing in your
district, this is what it is going to cost, typically what members—
they get all kind of creative about, ‘‘Well, no, actually, it will save
money because we will move this over there.’’ And it is all non-
sense, but it is nonsense that is hard to contradict because we don’t
have the audit numbers.
So any progress you can make on that. And the example that oc-
curs to me is, you know, getting rid of old systems, like when we
wanted to shut down a B–1 squadron, okay, and then the argument
17
went into that. If you can give us more concrete figures on, here
is what it is going to cost, then we can make a more informed deci-
sion and have a clearer argument as we are pushing forward on
that.
Because that is the part that always frustrates me, is we get into
this big argument about, you know, we are going to save all this
money and you think that is the fight, you know, that the member
is going to say, no, we need to spend this money, then, like I said,
they get creative and come up with some nonsense argument about
how it will actually save money to keep spending it. So if we could
get the audit it would really help us make the right decisions on
that.
Mr. DesJarlais is recognized for 5 minutes. Dr. DesJarlais, I
apologize. Go ahead.
Dr. DESJARLAIS. Yes, sir. Caught me a little off guard.
Mr. Glenn, what has the reception been like within the Depart-
ment for your audit efforts? And I understand that your team has
visited over a hundred locations just this year as part of the under-
taking and that their audit of inventory and other assets is likely
something that is still pretty foreign to a lot of the individuals that
you are interacting with in the DOD, so have you encountered any
resistance or pushback to your efforts?
Mr. GLENN. The short answer is no. And I know Navy and the
Army have had some great results surrounding inventories, so I
will let them talk here in a sec. But the short answer is we are
finding stuff that we didn’t know was in the system. We are finding
stuff in the system that we didn’t know it was there. And I heard
the question earlier about, you know, burdens to the folks at the
front lines, but when you are saving more money than you are
spending it is a positive return on investment. And it allows you
to redirect that funding to higher, other priorities.
So, yeah, just alone, and I will give you one number out of our
financial statements. In 2017, we looked [at] our unobligated ex-
pired funding. This is money we can no longer use because it is ex-
pired and it is unobligated. And I need to be careful here because
there is always some amount, and I can’t give you a specific num-
ber, but you always [have] some level of expired unobligated. But
it was 33.6 in 2017 and it is down to 21.2 at the end of last year.
And that says to me we are using our funding more efficiently. We
are giving it to higher priorities and making sure it actually gets
used and spend it on value-added efforts. So that alone clearly
makes it worthwhile to me in quantifiable benefits.
I know I am a little bit off the inventory topic, so, Alaleh, can
you bring us back with benefits you guys have realized with your
inventory efforts?
Ms. JENKINS. Yes, of course. I would say that inside the Depart-
ment of the Navy we have embraced the audit. One might ask why
Navy has so many audit findings and I always say it is a sign of
progress because auditors have been to every site. They have been
onboard of our ships. And even during the COVID [coronavirus dis-
ease] last year, we put in place virtual procedures so they can still
continue on testing our inventory.
One of the areas that I say I am always very proud of what we
were able to accomplish just year two of the audit, we essentially
18
did a hundred percent count of all of our real property assets,
fence-to-fence, and we were able to establish the baseline. And I al-
ways use an example of every year we go after and continue that
inventory count what we are identifying in assets that have been
demolished, removed, and clean up the records and bringing up
dollars, sustainment dollars, that we can put towards other
projects that we have and that can sustain that.
In the case of the inventory, we are identifying materials that at
the local level we had visibility but it was not in a property system.
So we made it available. We were able to fill our open requisitions.
We had examples, this goes back a couple years ago, where we had
planes at Lemoore waiting on parts and pieces, and by identifying
warehouses that have, say, F–18 landing gears that we can know
we are able to put that in place and get these planes repaired and
up and flying direct alignment to the readiness and real fighting
machine.
Dr. DESJARLAIS. Okay.
I wanted to get in one more question. I see I am down to just
a minute here. But one frustration from constituents is always the
cost overage on bids whether it is an F–35, other weapons systems.
And I realize when something is being developed every 10, 15
years, things change, but is there anything that can be done about
accountability? In the private sector if you bid a contract, you have
some obligation to honor it. It seems like in defense that that is
not so much the case.
Is there going to be anything that you can tell us where people
will be held a little more accountable of what they say they can do
something for and then it ends up costing the taxpayer a lot more?
Mr. GLENN. I think so, sir. That is one of the byproducts of hav-
ing centralized data and dashboards. You can do analyses on it and
you can expose things just from an analytical method that perhaps
you couldn’t have done before without sending out a specific audi-
tor. I should note that financial statement audits are not specifi-
cally designed to detect fraud, but they certainly report it if they
find it. And they also don’t necessarily ask are we getting the best
value for an expenditure. We are really looking to make sure we
captured, recorded, and reported that information accurately so
that we can do analysis or ask questions and look at things differ-
ently in——
The CHAIRMAN. Again, I apologize. The gentleman’s time has ex-
pired.
Mr. Norcross is recognized for 5 minutes.
Mr. NORCROSS. Thank you, Mr. Chairman. Actually, pick up ex-
actly what we were discussing.
Mr. Glenn, can you define what a clean audit is? Because that
doesn’t mean money is being spent correctly or the highest priority,
it just means that the statements are being fairly presented. Is
that your understanding of what a clean audit is?
Mr. GLENN. Yes. There is a lot more to it, but fundamentally,
yes.
Mr. NORCROSS. Right, to different phases or particularly the
other, you know, other findings. And right now you said where you
can’t give an opinion it is a disclaimer of an opinion, correct?
Mr. GLENN. Yes.
19
Mr. NORCROSS. Okay. And that is when we say clean audit, peo-
ple are going to make the assumption that somehow you are doing
it the right way. It just means that the statements accurately re-
flect what is going on. They can be horrible priorities not spent the
right way, like you hear clean audit, don’t confuse those two. Be-
cause that brings me to the F–35. You were speaking that the
parts were not part of the scope, or were you not allowed to go in
the Lockheed Martin system and do the count? Because there is a
big difference here.
Mr. GLENN. No, we are going in and counting it now. We were
running on their controls and systems previously. That will never
pass muster for the audit, so we are going in to do accounting for
it and putting it in our systems now.
Mr. NORCROSS. And when you say now, this year or next year?
Mr. GLENN. Yes. We hope to have strike fighter equipment bal-
ances in the 2021 financials.
Mr. NORCROSS. Are you experiencing any resistance from any of
the contractors in turning this over?
Mr. GLENN. I would rather talk to some folks who are closer to
the effort, so let me take that back for the record. I will share that
progress is a lot slower than I would have hoped.
[The information referred to can be found in the Appendix on
page 54.]
Mr. NORCROSS. Thank you. I just want to switch gears here for
a moment. Mr. Miller, it states here that the Army has made sub-
stantial improvement year over year. Love the Army. Why were
you able to do it and we weren’t making substantial improvement
on the other services? Anything that you can share that the Army
is doing that can lead us to the direction of the other services, what
they can do to make this go faster?
Mr. MILLER. Yes, sir. Sir, I believe that all services are making
the improvements each year. As far as substantial improvement,
there have been some areas that we have had some large suc-
cesses. Within the area of Fund Balance with Treasury, we have
made some big improvements over what we previously had so we
have a little further to go, but we see that as one particular area
that we are receiving a better indication that we are in a go-for-
ward position.
And so I would say another area that we are having is we are
having success with education of individuals knowing what the re-
quirements are as far as to perform audits. The systems owners,
the process owners are the individuals that really need to know
what is expected, what is required for an audit, sir.
Mr. NORCROSS. So there is still question out there on how to even
collect the information for the audit; is that what you are sug-
gesting or is this more by a program or particular area? Because,
yes, we are into this many years now, and certainly people asking
what do I need for an audit seems a little bit——
Mr. MILLER. Yes, sir. The need for the process owners to know
what is expected by the auditors is there is still an education factor
there, sir.
Mr. NORCROSS. Wow. I yield back. Thank you.
The CHAIRMAN. Thank you. Mr. Johnson is recognized for 5 min-
utes.
20
Mr. JOHNSON. Sorry about that, Mr. Chairman. I wasn’t expect-
ing that.
Let me ask a question, Mr. Glenn. You are undoubtedly aware
of the Department’s outsized share of our nation’s tangible assets.
Obviously, we have all talked about this. We are all concerned
about it, watching it closely; 2.1 million service members, 770,000
civilian employees in 4,600 locations. It’s a lot to say grace over.
And we get it is going to take time. Although it has been said by
many of my colleagues already this morning, this is a difficult
thing to explain to our constituents, that it takes a decade to do
it for this whole audit process.
But our fundamental need to maintain peace through strength is
necessary, we all know that, but also very considerably expensive,
we know that as well. So it is our duty as lawmakers to make sure
these precious limited resources are spent as wisely and effectively
as possible and that is why we are applying the pressure that we
are. We have to. It is our obligation.
I understand the routine DOD audits like the one we are dis-
cussing today aren’t necessarily meant to identify waste, fraud, and
abuse, necessarily, I guess, but I am curious if you can comment
on how the work that is done through these audits leads to better
financial management and accountability. In other words, how do
I explain to my constituents what the real value is? We are going
to wait 10 years for it; what do we get in the end?
Mr. GLENN. All right. I would say there are seven different value
propositions. The job of accountants, when I was in college, was to
write timely, useful information. We talked about the clean opinion
audit earlier and it just says the statements are materially accu-
rate. Which is true, but having a clean opinion on your financial
statement says you have processes and procedures to capture,
record, and report financial information accurately, and when you
do that you get information for decision making.
So the information to get there requires a lot of efficiency in how
you capture, record, and report. So I can’t tell you how much we
are going to save because we are not reconciling and adjusting
more than necessary, but I am comfortable with more than a $185
million a year that we are paying our IPA friends. Better data for
decision making. What is that going to be worth to you guys when
you give us inquiries and we are sitting on a clean opinion and we
come back with a financial response, what is that going to be
worth, you knowing that that information has undergone an audit
or it has come from a process that has been audited and passed?
Or what is the value of transparency and accountability to what we
are doing with the $3.1 trillion in assets that we have or the $817
billion that we are spending every year? The cybersecurity, when
we get rid of that IT material weakness, what is the value of a pre-
vented hack or a prevented system intrusion by a potential adver-
sary?
And the real reason I get so passionate, it is about public trust
in government which I think we all know is, unfortunately, very
low. And our industry has failed to deliver a clean opinion to the
American people, so I don’t blame them for at least on the financial
front doubting what we tell them financially.
21
So if we can get—when we get DOD to a clean opinion and we
get the U.S. Government to a clean opinion, at least we can feel,
or I can feel, we can feel that our industry has done what it can
to help boost that percentage. I don’t know what the value is, but
I am very comfortable it is more than $185 million.
Mr. JOHNSON. Can you provide any examples of recommenda-
tions incorporated from previous audits that have led to better fi-
nancial management in the Department?
Mr. GLENN. Yes. You know, I will just share an email I saw a
few months ago. It was from an accountant, a Defense, DFAS, De-
fense Finance and Accounting Service accountant, and we were
talking about our schedule of differences. So every month we have
to report our collection of the disbursements to Treasury, and
Treasury compares what we report to what they have actually done
and they send us a report back, like here is all the stuff that we
did that you didn’t report or here is the stuff that you reported that
we didn’t do, and we reconcile it.
And that report, that schedule of differences, and I mentioned it
is 99 percent reduced over the prior year. The email said, from this
accountant: ‘‘Wow, I have never seen this balance so low.’’ And I
forget the date, but the days required to reconcile now is signifi-
cantly less. It is a fraction of what it used to be because we don’t
have to weed through all that extraneous data.
Mr. JOHNSON. Well, that is good.
I don’t know how much time I have left, Mr. Chairman. I would
just make one comment and say that we appreciate the complexity
of the audit. You know, our frustration, I think, is understandable
that it takes a decade. Somebody referenced Walmart earlier and
that is a big operation. Not as complex as DOD, but if Walmart or
Amazon or one of the other private sector companies needed an
audit, I am pretty sure they could get that done in a year or less
because their bottom line would be riding on it, and so much more
is riding on this.
The CHAIRMAN. The gentleman’s time has expired. I apologize
the clock is not out in front of you.
But Mr. Carbajal is recognized.
Mr. CARBAJAL. Thank you very much, Mr. Chairman. Let me
start off by thanking you for holding this important hearing.
We certainly owe the American taxpayers a transparent discus-
sion about financial accountability within the Department. I was
shocked when I first came to Congress to learn that the DOD, the
Department had never had a completed clean audit. I was flabber-
gasted. I was shocked. And I hope that the American people that
are watching this hearing know that I and many of my colleagues
share great concern about this. This is kind of ridiculous that the
United States Government cannot complete a clean audit of the De-
partment of Defense, when you consider all the money we spend
for our national security.
So, Mr. Glenn, your testimony highlights the success of the audit,
but I would like to ask you about the less positive outcomes so far.
What Department-wide material weaknesses has the audit identi-
fied that will be the most difficult to remediate in order to achieve
a sustainable clean audit opinion?
22
Mr. GLENN. Well, to answer you directly, sir, the hardest will
probably be the material weaknesses that are more accounting
issues as opposed to direct warfighter support. It is one thing to
say, hey, we need to count all of our inventory because we need to
make sure we know what is available to support the warfighters.
Everybody gets that. And we have to count our tanks and planes
and buildings so we need to know exactly what we have. People get
that.
But when it comes to what is the value you put on a tank, how
much should you record toward a plane, that is where people—it
is more than an accounting issue. We have to find a solution to
that if we are going to see that clean opinion and get that seal of
approval and those are going to be the tougher ones.
And just that—I am going to, unfortunately, extenuate your
point earlier, there are 24 agencies in the executive branch. DOD
is the only one who has never had a clean opinion. The other 23
have; 22 of them are clean right now. One of them took a backslide
because of the CARES Act and corona, but they made it back. So
yes, we are the only executive branch agency without a clean opin-
ion.
Mr. CARBAJAL. Well, thank you. Unfortunate.
Can the rest of the witnesses, the Department witnesses, address
that as well?
Mr. MILLER. Sir, one of the particular challenges I see is that of
the internal controls behind our systems. There is that particular
item as far as making sure that the controls are in place and it re-
duces the amount of risk that you have throughout the entire com-
munity to make sure people are performing the particular functions
just as they are supposed to. So internal controls would be where
I see the greatest benefit that we will receive as far as when we
get the audit opinion.
Mr. HERRERA. Sir, for the Department of the Air Force, our IPA
has confirmed throughout they feel like we have done a very good
job demonstrating that we have positive control over the inventory
entrusted to us, so I think that is very positive.
But to Mr. Glenn’s point, of all the systems that we have that
are our accounting property systems of record are very, very old
and weren’t necessarily built from an audit-compliant standpoint.
So we continue to do the work that we need to do to value the sys-
tems but, for example, a lot of our infrastructure, our real property,
is extremely old; selecting the documentation associated with that
and making sure that that is properly booked in our APSRs [Ac-
countable Property System of Record] and then feeding it to a fi-
nancial statement is difficult. It doesn’t mean we don’t have a good
assessment of where the inventory is, where the buildings are, and
how much is being maintained. Thank you.
Mr. CARBAJAL. Thank you. I am going to go ahead and reclaim
my time back because I have one more question and limited time.
Mr. Glenn, I understand that the estimated time can take up to
10 years to receive an unmodified audit opinion. Is that your expec-
tation?
Mr. GLENN. My best guess, sir.
Mr. CARBAJAL. Help me understand what the next steps are over
the next decade to get to that point. I mean, what are the concrete
23
steps? I know you touched on it a little bit earlier, but what are
they?
Mr. GLENN. There is a lot of little ones. We have the Fund Bal-
ance with Treasury solved. That is a priority material weakness be-
cause if we had a problem there, we have got a problem somewhere
else in our financials as well. We have got to get that IT stuff
under control just from a national security standpoint, let alone a
financial standpoint.
The CHAIRMAN. And I apologize, sir. That was not a 15-second
question but that is all you have. So the gentleman’s time has ex-
pired and Ms. Bice is recognized for 5 minutes.
Mrs. BICE. Thank you, Mr. Chairman. And I want to sort of echo
what my colleague from California said. I was surprised to learn
that prior to the 2014 NDAA there was no statutory requirement
for a DOD full audit and I think the American people would prob-
ably be surprised to know that. I am glad that the audit is hap-
pening. I am concerned about the timeline, taking another 6 to 8
years for the full and complete audit and I certainly agree with my
colleagues on the committee that we need to try to speed that up.
A couple things. First, I want to go back to Chairwoman Speier’s
comments about the Navy cutting audit staff. Ms. Jenkins, how in
the world could the Department of Navy expect to get a clean audit
in a timely and efficient manner when you are looking at cutting
two-thirds of your audit staff?
Ms. JENKINS. Ma’am, the scope of the naval audit is essentially
doing investigation or inspection or audit at the discretion of the
Secretary on certain programs. What we are doing, we have a
whole new workforce that is really looking at whatever remediation
that comes out of that financial statement audit result. So, two sep-
arate, complete kind of scope of work.
We are heads-down focused on addressing all the issues that are
coming out of the financial statement audit. We have been able to
show a steady progress year after year on material weaknesses:
three last year, two the year before. We are actually leveraging
Nav Audit as a support in sustaining the areas that we have cor-
rected and fixed. So reduction of the Nav Audit, it was to reshape,
refocus their staffs, their resources towards some of the high-pri-
ority programs at the discretion of the Secretary and that is what
their focus is of an internal audit on the Department of the Navy.
Mrs. BICE. Are you suggesting that you don’t need those two-
thirds staff to be able to speed up the timeline of getting to a clean
audit?
Ms. JENKINS. Ma’am, no. They are not serving to organize for the
remediation. The Nav Audit does internal audits. What we are get-
ting at a financial statement audit and we have a whole workforce
that works on the correcting of those fixes, so complete, separate
scope of work. Yes, ma’am.
Mrs. BICE. Thank you for clarifying.
Mr. Glenn, I noticed in the joint testimony that there are hun-
dreds and separate IT systems within the DOD, many of which are
dated or obsolete. Seems to me that having an outdated software
system is both impractical and it is dangerous from a cybersecurity
perspective. As we make investments to modernize the Department
of Defense, what steps should we be taking to move away from the
24
older, outdated software platforms that are currently still in exist-
ence?
Mr. GLENN. The steps are we need to look at all the systems that
are out there—and it was 294 the last time I checked, so you are
right, it is hundreds—look at the functionality they perform and
ask ourselves what other systems do this functionality? Do we real-
ly need multiple systems doing the same thing? Is there other
functionality that is going in there that a particular system cap-
tures? And then collectively say, no, you need System A, you need
to go to System B, or you need to modernize or you need to get a
new system and have a—and get a decommission date. And that
is really a struggle getting people to commit, when are you going
to let go of your system? When are you going to change your com-
fort zone and go somewhere else? That really is a challenge. It has
been a struggle with every agency I have been at and every part
of my career. People hate systems when they are coming in and
they love them when you try to take them away.
Mrs. BICE. Yes, and I think my concern is as a member of the
new cyber committee recognizing that we have so many outdated
or obsolete platforms that are the vulnerabilities within the DOD,
we need to be looking at doing that sooner rather than later. Any-
one else want to comment on that particular topic?
Mr. Herrera or someone?
Mr. MILLER. Yes. Wes Miller with Army. We are looking at the
need to converge our ERPs [enterprise resource planning]. Rather
than having three ERPs, we are looking to collapse that to one
ERP so that the information will exchange easier between our
working capital fund, our supply chain management, as well as the
base accounting system.
Mrs. BICE. And if I could just ask one last quick question, do you
need additional resources to do that?
Mr. MILLER. Yes, there is going to be an investment for that. We
are going through——
The CHAIRMAN. And that answer will have to cover it. The gen-
tlelady’s time has expired.
Mrs. BICE. Thank you, Mr. Chairman.
The CHAIRMAN. Ms. Sherrill is recognized for 5 minutes.
Ms. SHERRILL. Thank you, Mr. Chairman. And I think that the
chair went over some of the benefits, but to all of the witnesses,
can you give me an overview of just the broad benefits of an audit
of the DOD?
Mr. GLENN. Well, it is going to drive more efficient processes. It
is going to drive better data, better transparency, and what we are
doing with the assets and resources entrusted us better account-
ability for what we have, hopefully better public trust once we de-
liver the clean opinion, better cybersecurity which should translate
into prevented intrusions into our systems, and better inventory
management knowing what we have, what we need, and only or-
dering what we——
Ms. SHERRILL. I was glad to see over this audit that serious
progress had been made since fiscal year 2019’s audit was con-
cluded, particularly in things like the Defense Information System
Agency’s Working Capital Fund going from a disclaimer to a clean
result. As you were doing that, what are the best practices that you
25
gleaned from that progress and how do you plan to implement
them in the upcoming fiscal year?
Mr. GLENN. I believe a short answer is getting the dirty laundry
on the table. Open up with your auditors. Tell them up-front where
you know you have got issues. Don’t make them test it to tell you
what you already know. That will give you some credibility so
when you go back to your auditors and say, look, I think this area
is clean now, we have put in new procedures that allow us to be
confident that we are capturing and recording and reporting infor-
mation accurately, and then using auditor recommendations for
issues that still exist to really drive change.
And I think that has been part of the challenge, letting people
know it is okay to put the issues on the table because then you can
work them together. Either between OSD [Office of the Secretary
of Defense] and the components or with the auditors. And not to
impair their independence in any way, and know we’ll never help
you clean up something, but saving them the time and effort to test
stuff that you know is already broken and being honest about your
issues goes a long way in moving the process forward.
Ms. SHERRILL. And then I think, you know, this is the—we had
a brief in the last Congress about the audit and were told, you
know, were given about a 10-year timeframe, and now it seems like
2 years later we are given another 10-year timeframe.
Mr. GLENN. Ten years. It is still at 2018. We started in 2018 and
we are predicting 2028, so it is still 10 years.
Ms. SHERRILL. It is still 10 years. Okay, that is better to hear.
Am I correct in understanding that it took Homeland Security
about 10 years to pass the audit?
Mr. GLENN. You are correct.
Ms. SHERRILL. And then this past fiscal year presented chal-
lenges that we hadn’t expected so we are willing to mitigate the
damage from COVID, but it did increase some expenses, new lines
of effort, new needs, so what impact do you anticipate the pan-
demic having on the fiscal year 2021 audit results?
Mr. GLENN. About the same as we had last year. Basically, the
travel. Auditors need to inspect and observe certain controls in op-
eration, but they use this example of inventory taking. So we have
warehouses full of parts and equipment and supplies. We need to
demonstrate to the auditors that our system shows exactly what is
on the shelves out in the warehouse and that means counting what
is on those shelves and comparing it to the system, make sure the
system shows exactly what is out there—and the auditors just
weren’t always able to do that.
And I have got to be fair and give our IPA and OIG friends—
and I say friends because at the end of the day I believe we want
the same thing: good internal controls and strong financial man-
agement. They really did a great job of finding alternative proce-
dures that they could rely on. It still had an impact, but it really
was minimized by their flexibility in scratching their heads and
finding ways to make it work.
Ms. SHERRILL. Thank you, and I yield back.
The CHAIRMAN. Thank you.
Mr. Franklin is recognized for 5 minutes.
26
Mr. FRANKLIN. Thank you, Mr. Chairman. And many of my ques-
tions have been answered, but I do want to echo what many others
have. I am stunned that a Department that consumes more of our
discretionary resources than any other department in the govern-
ment didn’t see fit to just a handful of years ago to decide it was
worth auditing where all that money was going, but I am encour-
aged by the progress.
I did have a couple of, well, specific questions diving into some
of the data that was presented to us and this will be for Ms. Jen-
kins again.
With respect to the Navy, the NFRs, you know, notice of findings
and recommendations, I did notice that the Navy has more of those
from fiscal year 2019 than all of the other services combined. Is
that just a difference in the way that the Navy was conducting its
audits or are there just more problems?
And then just kind of half facetiously and then maybe not, is the
success of all those findings, was that having anything to do with
the decision that it is no longer as high of a priority program and
your personnel numbers are being cut?
Ms. JENKINS. Sir, I would say that the number of NFRs, it is a
sign of progress for us. As I said, you know, we open up doors and
we ask, and embrace audit and we ask the auditors to dig in deep,
look at every [inaudible] and every element and, quite frankly, we
ask them to give us detailed findings so that we can address them
at the lower level of detail.
So the more and more that we are getting insight from them, the
more—you know, of course, [inaudible] and the more we get after
it. I would say that it is kind of [inaudible] as far as [inaudible]
the amount of [inaudible] have been able to accomplish. From the
number of just the findings that were resolved, every year over 20
percent of our findings were resolved. But, most importantly, the
benefit that we got and the progress that we’re showing is with [in-
audible]. We got [inaudible] in 2019. We were able to demonstrate
100% accountability of our real property.
The past 3 years—or 2 years, rather, we have closed [inaudible]
across all three audits that we have, because we have two for the
Navy and then one for the Marine Corps.
And then just that as we were talking about the systems, so one
of the large number of our findings are around the business system
environment and how complex it is. And we have been able to shut
down systems, five of them so far. And we are on target to get on
one accounting system for the Navy—or two accounting systems for
the Navy, [inaudible] and one for the Marine Corps.
So as I stated previously on the Nav Audit personnel, it is—
again, we strive in the organization to match the number of audits
with the planned audits that we have. I am not a personnel expert,
but my understanding is that those personnel are going to be put
in other positions that matches their skill sets. So we are going to
be retaining those skill sets. And while we have Nav Audit as an
arm of the internal audit function within the Department of the
Navy, we have a complete separate workforce that we have ex-
panded over the years the number of our skill sets and expertise
that is focused on building the internal controls and all the work
27
that comes in as a result of the financial statement audit [inaudi-
ble].
Mr. FRANKLIN. Okay, thank you.
And this question will be for Mr. Glenn. It appears, you know,
the services are doing their respective audits, and I am just won-
dering as these results are being looked at is there any way to, or
are you looking at these from a holistic perspective to see if there
are some trends that are being picked up in one service that may
not have been picked up on audits in others but would have appli-
cation to them? Because, obviously, despite the best audits, you are
not going to catch everything.
Mr. GLENN. True. You know, the communication across the De-
partment is good. So where one of these is making progress, we are
quick to highlight it so others can learn. That has been one of the
cultural changes that the audit has brought. It is really more of a
collaborative front. A lot of times the services are confronting simi-
lar issues, and we hold weekly meetings on Mondays called Finan-
cial FinOps, Financial Operations, where we talk about the issues,
talk about best practices or ways to solve so that—yes is the short
answer, sir.
Mr. FRANKLIN. Okay, thanks. And just one final comment as far
as the sense of urgency. You know, we put our minds to it. We de-
cided we wanted to put astronauts on the moon and by the end of
the decade, and we did it in less time than what we are talking
about getting a clean audit here. So it seems to me that if we really
were serious about this, we could focus the energy and resources
to get it done sooner. But with that, Mr. Chairman, I yield back.
The CHAIRMAN. Thank you. Before I move on, I had one question
I wanted to get and I have to leave in a minute. I will recognize
Mr. Kim in just a minute.
You mentioned earlier a reduction in the amount of unobligated
balances; basically, money that we had obligated for a particular
purpose, that purpose expired and the money is just sort of hang-
ing around. There is also money in the Pentagon that has been ob-
ligated for a particular purpose, that purpose hasn’t yet expired but
they haven’t spent it. That is sort of the uncosted balance portion,
and that seems like a pretty bizarre concept in general that there
is all this money sort of sloshing around the Pentagon that at the
moment doesn’t have a specific purpose.
So we have got that and that sort of ties into an issue that we
deal with all the time and that is the unfunded requirements list
combined with the fact that frequently we in Congress will add
back in programs that the Pentagon has not funded. As it has been
explained to me, the Pentagon knows that we are going to do that
so part of the reason that they don’t ask for that is they don’t want
to box themselves in. They know we will do it and they are trying
to sort of—they are trying to preserve—and slush fund is an ugly
phrase, but—this pot of money that is just sort of hanging out
there that they could potentially reprogram.
Is that as big of a problem as it appears to be? I have been work-
ing with the NNSA [National Nuclear Security Administration] in
particular and I know that they have got about $8 billion in
uncosted balances. Meantime, you know, they are crying bloody
murder and their budget gets cut by about a billion. You know,
28
what has the audit found out about all this money, this unobligated
money that is sloshing around? Because it seems to me that if you
have a bunch of unobligated money, therein, how are you also com-
ing in and saying, oh, but our budget needs to be bigger?
Mr. GLENN. Well, I don’t think it’s fair to say sloshing around.
And thank you for caveating slush fund. There are no slush funds
that are hanging out there.
I should note that the obligations that are out there, they are for
specific purposes and are supported by specific reasons and needs.
The funding that I mentioned earlier, the unobligated expired, like
I said, there is always going to be some amount of that. If I obli-
gate a hundred dollars to do something and the contracted bill is
at for $98, I have a residual of two dollars.
I can’t—I should not leave it there as obligated because the prod-
uct has been delivered and the financial statement auditors will
say that two dollars is not an obligation, de-obligate it, which is the
right thing to do. And so if the fund is expired, that two dollars
becomes unobligated expired. And that is good financial manage-
ment. That is good—that is value——
The CHAIRMAN. Where does the two dollars go?
Mr. GLENN. It sits there and eventually goes back to Treasury.
It is available for increases to existing obligations, but it is not
available for new obligations. So, I hesitate to say sloshing around.
It sits there for 5 years just in case it is needed for existing obliga-
tions, and then after 5 years it goes back to Treasury.
The CHAIRMAN. Okay. I could pursue that more but I will do that
at another time. I think that is a crucial question. In a budget as
large as the Pentagon, there is a lot of that money and we ought
to figure out how better able to handle it.
Mr. Kim is recognized for 5 minutes.
Mr. KIM. Thank you. Thank you, Mr. Chairman. Thank you, ev-
eryone, for joining us here. And, Mr. Glenn, I wanted to just ask
you a couple of questions here. I was reading here with interest the
testimony that you had and I want to kind of zoom in on the part
that you talk about when it comes to use of artificial technology,
robotic process, automation, bots, things like that. And it sounded
like this was potentially an area of not only efficiency but also po-
tential growth in terms of our ability to understand how we can be
better stewards of the taxpayer dollars.
And so I guess I just wanted to get a little bit more of a sense
from that from you, you know, I am interested in understanding
the strides that the services are making to use artificial intel-
ligence to find, you know, ‘‘ghost equipment’’ or duplicates for ac-
countability purposes or other challenges that you have identified
that might be able to be solved through this problem.
And I am also just trying to get a sense of, you know, what scale
can this be utilized too within the purposes of what you are doing
and DOD as a whole to help with that efficiency? Is this something
more on the margins to kind of get to some areas that we have
been struggling with and combine some efficiencies, or is there a
place where this could potentially be a very central core element
to how we not only conduct audits but think about efficiencies
within the DOD process?
29
Mr. GLENN. Okay, thank you. Tell you what, I will give an exam-
ple of where we are using optical character recognition. And, Wes,
I will probably turn to you for robotics because you have got a good
story there. There’s new accounting standards on leases that if the
leases meet certain criteria, they get a special accounting treat-
ment. Well, we have got thousands of leases and probably hun-
dreds of thousands of pages documenting those lease terms. And
that is one of those things that is harder to sell to the people at
the front lines: ‘‘Hey, we need to read these thousands of pages to
look for specific criteria to know how to treat these leases in the
financial statements.’’ That is just—it is a tough value proposition.
But we have, I mentioned the centralized data, something called
advanced analytics, or Advana is the short term. It has something
called optical character recognition. And one of the things we’re
planning to do is we’re going to feed these hundreds of thousands
of pages of leases through Advana and the optical character rec-
ognition capability to look for specific terms. And it will be able to,
should be able to, spit out results in minutes about what leases are
probably good candidates for the specific accounting treatment.
We are looking for all sorts of opportunities for that. Trust me,
we don’t want this to be any harder than it needs to be, and bots
have saved tens of thousands of hours, people-hours, across the De-
partment, in support the audit and other avenues.
Wes, do you want to add to that?
Mr. MILLER. Yes. Mr. Kim, we have on our staff a data scientist
to assist and to advise as far as different types of initiatives that
can help as far as to identify inconsistencies within our data. We
have used as far as the optical character reading as far as to look
at contracts. We are working in the area as far as with bots to
identify as far as documentation to be used to support our facility
structures and we make sure that we can document those for our
auditors so that it speeds up and improves the audit concept.
We have done data comparisons as far as for inventory manage-
ment where items may be misidentified within the system. We can
look for the particular items where we can see that there is a
match and where the item is, in fact, accounted for within the sys-
tem. So these are some of the things that we are doing. We find
that it is necessary to have that data scientist with us and to help
educate our people as far as the tools that are available.
Mr. KIM. No, look, I appreciate that. That is very helpful. And
look, my time is running down and I never like to put the chair-
man in a position where I ask a question at the very last second
and expect an answer.
So what I will just say here is that I have done—I have been con-
necting with a lot of small tech companies that are doing some very
interesting, you know, AI [artificial intelligence] type efforts, you
know, along these lines, so this is something I would love to see
a conversation on, see if there is any potential ways that we can
draw upon, you know, some of these, you know, really interesting
firms that are doing this type of work to just try to make sure we
are staying more efficient.
So I will make sure we reach on out offline, but just thanks for
what you do. Appreciate it. Chairman, back to you.
The CHAIRMAN. Thank you.
30
Mr. Moore, I believe, has rejoined us. I saw him and then he
moved on. Mr. Moore, are you with us?
I swear I saw him and then he disappeared.
I am hesitating here because Mr. Moore is the last questioner
that we have here. I see his name. I do not see his picture and he
is muted. So rather than having all of us all just sit around here,
that is all we have got. If Mr. Moore comes back on while I am
doing my concluding comments here then we will take him, but
those are the only questions that we have.
I just want to thank our witnesses and thank the members. This
is very, very difficult and I know that, you know, as a number of
members have indicated and I had the same reaction, basically,
what it means is we don’t know where we are spending all of our
money but there is a lot of it. This is difficult but important. I ap-
preciate you doing that. And now my closing remarks are not going
to be closing remarks because Mr. Moore has, in fact, returned to
us.
So, Mr. Moore, you will take us to the close here. You are recog-
nized for 5 minutes.
Mr. MOORE. I apologize. We jumped a few. Thank you. So thank
you, Chairman. I will bring us to close, then. I want to recognize
the witnesses and thank you all for your service carrying out the
thankless job and herculean duty of auditing a budget in the hun-
dreds of billions of dollars.
I have two questions that should carry us on to—first one is for
Mr. Glenn. My primary concern lies with the recent DOD report
stating that nearly 400 separate IT systems are being used to proc-
ess accounting data, many of which are dated or obsolete. Moderni-
zation is a recurrent theme on this committee. I am curious why
the DOD has not leveraged the remarkable talent and innovation
this country has to offer to improve the way DOD does business.
Can you give some context or explain the DOD efforts to mod-
ernize IT systems as they relate to financial management?
Mr. GLENN. Yes. CIO and CFO are linking arms because we very
much get that less IT systems equals less IT cost, less cyber vul-
nerability. We are all kind of talking about change management
here. Look, it is not like it is 400 IT systems that only capture fi-
nancial information. They have financial information and other
reasons and value propositions. So it is not as easy as you think
to say, ‘‘Why don’t you just put them all in one financial system,’’
plus there is the comfort zone. I mentioned earlier that people hate
new systems and they love the systems that we try to take them
away.
And people get comfortable with them and you really have to
hold them—you have to tell them exactly where they need to go or
how to replace that functionality and you have to hold them ac-
countable for a decommission. And we are doing that. We have
quarterly meetings, joining the CIO and CFO and the services and
saying, ‘‘All right, what systems are out there, where is it people
get functionality, where are you going to migrate to and when are
you going to do it?’’
Mr. MOORE. Excellent. No, you know, in my opening I mentioned
herculean effort, so I do understand the difficulty and the nature
of this. Can you just briefly address Congress’s—what timeline can
31
we expect on moving data to the cloud that could ultimately help
the auditing efforts? If you have any context on that, that would
be great to hear.
Mr. GLENN. I will have to take that for the record, sir. It kind
of depends on scope. There are a number of cloud efforts across the
way and if you would like, I would be happy to let the services talk.
But I would have to take that for the record to give you a detailed
and quantitative response.
[The information referred to can be found in the Appendix on
page 54.]
Mr. MOORE. Okay, understand.
Mr. Herrera, the annual audit highlights the numerous chal-
lenges facing DOD’s financial management, business systems, and
cybersecurity. How does the Department overcome the impact of
rapid turnover to maintain focus on auditory challenges?
Mr. HERRERA. Sir, do you mean rapid personnel turnover?
Mr. MOORE. Yes.
Mr. HERRERA. You know, sir, that is an interesting question and
then certainly one that I think the entire Department faces. I
would say as we went through the pandemic last year, I think we
are all incredibly enlightened in what is in the art of possible in
terms of how we manage our workflow. So we probably, prior to the
pandemic, did very limited telework except for when we had snow
days and whatnot in the NCR [National Capital Region].
But we are recognizing that there are opportunities to do sub-
stantially more teleworking and whether that is full-time, part-
time, or just situational. And frankly, sir, it enables us to have a
happier workforce and makes us more competitive in the market-
place for the talent we are all vying for.
Mr. MOORE. Yes, that’ll be a consistent theme, at least on my
end, of retention efforts and of cost savings that that ultimately
does to us, so I do appreciate the concept, you know, the private
sector has seen an incredible flexibility over the last year with the
disruption of the pandemic. The more we can embrace that in cer-
tain ways and just be thoughtful of it is important, so I appreciate
those comments.
Mr. HERRERA. No, I am certainly questioning it as a senior finan-
cial manager for the Department of the Air Force.
Mr. MOORE. Yes, retention will be a cost savings across the board
and definitely worth highlighting and keeping at the forefront. So
thank you all for your participation. And, Chairman, I yield back.
The CHAIRMAN. Thank you. And I think those are very important
questions. I think software is a big, big part of our problem be-
cause, you know, we have such old systems that, you know, they
are very difficult decisions. I know within DOD that is a huge prob-
lem. So, you know, you have got the old system, you know how to
use it, it is not working very well but, you know, it is very expen-
sive to move in a new one and you have got to make sure you move
in the right new one. But that is why, in addition, as Mr. Moore
pointed out, the cloud is so important.
I am really rather distressed by the delay in the JEDI [Joint En-
terprise Defense Infrastructure] program and, yes, I am abun-
dantly aware of the reason for that delay, and it is reasonably close
to home here. But I think getting, you know, getting that moving
32
forward—if DOD could snap their fingers and have better updated
software systems tomorrow, I think that would solve about half of
this problem. Now I know they can’t, but we need to work harder,
I think, to get better updated software systems, get rid of the old
ones, consolidate, take advantage of new technology.
So we will be very interested and that is going to be a major
focus of the committee when we are looking at our funding options.
In fact, I would love to find ways to save money on these, you
know, what we call legacy programs, which is really not an accu-
rate description. It is more programs that are no longer helping us;
you know, whether they were created like 6 months ago or 60 years
ago, if they are not helping us achieve our current goals then we
have got to move off of them and move on to the others.
And as Ms. Slotkin made clear, one of the biggest impediments
in doing that is members wanting to take care of the programs in
their district. But I would love to find a patch of those that aren’t
helping us, get rid of them, and use that money to give us the in-
formation systems that we need. That to me is the key transition
to getting DOD to where it needs to be. So that is all the comments
I have. Mr. Rogers had to leave, so we don’t have a ranking mem-
ber. But I would just say, does anyone else have anything for the
good of the order before we adjourn?
Terrific. Well, thank you very much. I appreciate the help. This
is not an easy task. And I will say that with each passing year I
become, I guess I would say, less bored by this hearing, because I
am learning more and more about it so I can follow it enough to
be focused. And I certainly understand the importance of it.
So the dedication of members, staff, and DOD are pushing for-
ward on a crucially important and not easy issue, I appreciate ev-
eryone involved with that. And with that, we are adjourned.
[Whereupon, at 12:43 p.m., the committee was adjourned.]
A P P E N D I X
APRIL 28, 2021
PREPARED STATEMENTS SUBMITTED FOR THE RECORD
APRIL 28, 2021
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WITNESS RESPONSES TO QUESTIONS ASKED DURING
THE HEARING
APRIL 28, 2021
RESPONSE TO QUESTION SUBMITTED BY MR. LANGEVIN
Mr. GLENN. Fiscal year (FY) 2027 (for full remediation). Threats to DOD informa-
tion systems and their data can arise from external threats, such as foreign adver-
saries, and internal or insider threats, such as employees and service providers. To
address these threats, the Department has established security measures that in-
clude the following:
— A Layered Defense that leverages technology-based protection mechanisms
such as cloud-based internet isolation, perimeter defense in the form of DOD
Internet Access Points security suites, joint regional security stacks, and end
point security solutions, to safeguard its networks against external threats;
— An insider threat program designed to deter, detect, and mitigate risks to
high-value data and systems posed by trusted individuals authorized to access
them;
— Requiring Federal Risk and Authorization Management Program and/or DOD
certification for commercial hosting service organizations; and
— Long-standing collaborative partnerships with other federal agencies and
standards organizations to build/enhance cybersecurity tools, incident response
services, and assessment capabilities.
While the above measures are not examined during financial statement audits,
they do present evidence of their effectiveness, including insider threat controls, as
demonstrated by the following:
— Twenty-five DOD-owned systems received favorable opinions from their Serv-
ice Auditors in FY 2020 (Statement on Standards for Attestation Engagements
(SSAE) No. 18), including controls related to access.
— DISA received two unmodified opinions from its Service Auditors (SSAE No.
18), including access controls, for conventional hosting services and MilCloud,
covering the infrastructure used to host 101 DOD applications.
— Commercial cloud service providers currently hosting 20 DOD-owned applica-
tions relevant to financial reporting have all received unmodified opinions from
their Service Auditors (SSAE No. 18), including controls related to access.
However, the DOD financial statement audits conducted over the last three years
(FY 2018–FY 2020) resulted in a quarter of all Notices of Findings and Recommen-
dations (NFRs) related to access controls over DOD systems that lead to elevated
risk. The Department takes these findings very seriously. The DOD Chief Informa-
tion Officer (CIO) and the Under Secretary of Defense (Comptroller)/Chief Financial
Officer (USD(C)/CFO) are actively engaged to address these audit findings. Some
are fixable in the short term, while others require a longer term, entity-wide, stra-
tegic solution.
Short Term—Status of Corrective Actions to Address High-Priority Access Control
NFRs
— Based on a joint analysis of access control-related NFRs, the DOD CIO and
USD(C)/CFO issued a policy memo directing corrective actions on specific con-
ditions that present potential for elevated cyber and audit risk. In FY 2020,
the Department’s auditors closed 27 percent of the high risk conditions that
were reported during the FY 2019 audit year. The closure and recurrence sta-
tus of these specific conditions is captured and reported to executive leadership
during regularly scheduled meetings of the Information Technology (IT) Func-
tional Council.
— The DOD CIO is currently reviewing the corrective action plans associated
with known high-risk, access-related conditions to assess interim milestone
dates and is identifying opportunities to accelerate their remediation.
Long Term—Strategic Measure to Improve Management of End-user Access
Rights
— A provisional project plan from the CIO and CFO, extending through FY 2027,
was delivered to the Deputy Secretary of Defense. The plan lays out a timeline
for implementing Identity, Credential, and Access Management technology so-
lutions for 260 systems relevant to internal controls over financial reporting.
According to the CIO and CFO, nine of these systems are currently on-board-
ing under a pilot, and the plan will be updated with lessons learned from this
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54
effort. Given the complex nature of the DOD operating environment, including
the number of users and organizations, this technology is required to manage
user access rights and secure these systems. [See page 9.]
RESPONSES TO QUESTIONS SUBMITTED BY MS. SPEIER
Mr. GLENN. Over the last year, the Department continued to rationalize and sim-
plify the defense business system environment by developing and improving meth-
ods to track progress, along with providing direction and guidance to the Military
Departments and the Fourth Estate. Currently, the Department is tracking 257
audit-relevant systems and is working to consolidate and/or modernize systems to
meet audit requirements. In FY 2020, four systems retired as planned; in FY 2021,
six audit-relevant systems are on track to be retired. Currently, the consolidated mi-
gration plan is tracking 37 target systems to retire in FY 2022 and beyond. Addi-
tional details regarding the Department’s efforts to rationalize and simplify the De-
fense business system environments will be reported in the annual Defense Busi-
ness Systems Audit Remediation Plan, due to Congress in June 2021. [See page
15.]
Ms. JENKINS. The Naval Audit Service organization will be reshaped from a re-
quirement of ∼284 to ∼120. Our intent is to shape the DON audit workforce to ap-
propriately meet the assigned workload at the Naval Audit Service while aligning
and investing in oversight authorities across the DON, to include our Inspector Gen-
eral, law enforcement entities, and management internal control oversight func-
tions. The NAS will be staffed to continue to meet its important and necessary func-
tion based on its planned audits and in consideration of the number of audits com-
pleted on an annual basis. All functions assigned to the NAS today will remain with
the NAS throughout this workforce reshaping. It is important to note the Naval
Audit Service has never participated in financial statement audits nor been a part
of the workforce that helps to track financial statement audit findings or support
financial statement audit remediation. [See page 15.]
RESPONSE TO QUESTION SUBMITTED BY MR. NORCROSS
Mr. GLENN. Currently, we are not experiencing any resistance from the contrac-
tors in providing physical assets and inventory. There were contracting delays be-
tween the F–35 joint program office (JPO) and Pratt & Whitney which have now
been resolved, and the metrics related to Pratt & Whitney inventory status are ex-
pected to improve starting in June 2021. The contractors have provided reports for
the F–35 contracted inventory team to validate existence of the assets and give the
F–35 JPO their independent baseline property record. The inventory team occasion-
ally works on a non-intrusive basis, such as overnight or third shift, so as to not
impede any production operations. Working under these agreed-upon constraints
has extended the initial planned timeline for inventory efforts. Additionally, there
was a travel hold of approximately six months from March through August 2020
due to the COVID–19 pandemic. The inventory team continues to adjust travel and
site planning due to localized restrictions and COVID–19 spikes in several supplier
site locations, further delaying the inventory timeline. The JPO reports biweekly
metrics on prime contractors’ progress to the Office of the Under Secretary of De-
fense (Comptroller) (OUSD(C)). The metrics as of May 14, 2021, are attached. [See
page 19.]
RESPONSE TO QUESTION SUBMITTED BY MR. MOORE
Mr. GLENN. Relative to audit, the DOD is realizing the benefits of data in the
cloud today. While the process to fully migrate its Enterprise Resource Planning
(ERP) databases and applications to the cloud is still ongoing (through FY 2028),
the benefits from an audit point of view are already prevalent. Components’ General
Ledger (GL) systems are migrating their data to cloud-based platforms, improving
auditability and accountability through data standardization and visibility. To date,
2 of 26 GL systems across DOD are either fully operating (or partially operating)
on the cloud. In 2017, the DOD began building its cloud-based analytics tool,
Advana, to consolidate all its information into a single source of truth. Advana
translates and standardizes data from disparate systems and converts it into a usa-
ble format for managers, decision makers, and auditors ease of access. OUSD-Comp-
troller built tools within Advana to:
—Aggregate and reconcile audit populations;
55
—Enable entities to drill from the financial statements down to GL details;
—Better track and resolve auditor findings;
—Improve funds management; and
—Reduce cash reconciliation differences between the DOD’s accounting systems
and the funds holder, the Department of the Treasury.
ERP migrations result in instant, large-scale audit improvement from legacy sys-
tems by allowing timely data visibility to fully assess audit assertions (existence,
completeness, accuracy, valuation, etc.). Enhanced cybersecurity and financial regu-
latory compliance results in reliable data for the auditors. Concurrent efforts to aug-
ment the ERP databases and applications at the component level to the cloud is
planned to be completed by FY 2028.
Additional details on Military Department plans on transitioning to the cloud are
as follows:
Army Army has three ERPs: General Fund Enterprise Business System
(GFEBS), Global Combat Support System–Army (GCSS–A), and Logistics Mod-
ernization Program (LMP). GFEBS was migrated to a cloud environment last year.
Migration is currently underway for GCSS–A (estimated completion date (ECD)
Quarter 1, FY 2022) and LMP (ECD—Quarter 4, FY 2021).
Department of the Navy The Navy ERP database layer was lifted and shifted
from the old legacy database by fully migrating to a partially cloud-based solution
with over 72,000 users, driving timelier and more informed operational, financial,
and budgetary decisions. The DON is actively consolidating the various financial
and GL-related systems and processes used within the Navy into that single cloud-
based ERP SAP system by FY 2023. These system efforts have resulted in many
audit benefits, including but not limited to an improved audit response. This is evi-
denced by steady year-over-year increases in auditor Prepared by Client timeliness
(96 percent, 6 percent improved over FY 2020) and completeness (96 percent, 3%
improved over FY 2020). The U.S. Marine Corps is migrating its financial systems
and GL capability to Defense Agencies Initiative, which is planned to migrate to a
cloud-based Oracle platform by FY 2023.
Air Force The Air Force is targeting a Defense Enterprise Accounting and Man-
agement System (DEAMS) migration to cloud hosting by the end of FY 2024. The
DEAMS production application is not hosted in a cloud environment. The DEAMS
program does leverage cloud hosting for development and support applications. The
DEAMS program office plans to begin laying the foundation for a cloud migration
under the next contract award in FY 2022, beginning with feasibility studies and
risk reduction. Our best estimate of the migration date is the FY 2024 target. [See
page 31.]
RESPONSE TO QUESTION SUBMITTED BY MR. WITTMAN
Mr. GLENN. The DOD has initiated multiple initiatives to assure its auditors are
prepared for the digital age. These initiatives have gained traction in areas such as
audit response, audit reporting, and video communications. Taken together, not only
are our auditors prepared for the digital age, but also these efforts have translated
into more efficient and cost-effective audits. Here are a few areas in which the De-
partment has excelled in this regard.
Audit Response The DOD has developed a SharePoint-based platform to digitize
the majority of its responses to audit requests for the consolidated DOD financial
statement audit. The Financial Improvement and Audit Remediation (FIAR) Audit
Response Center (ARC) tool is used by OUSD(C) to manage the workflow of audit
requests between external auditors and reporting entities. The FIAR ARC tool en-
ables auditors to submit audit requests digitally and OUSD(C) audit liaisons to
route the requests to appropriate assignees. The tool serves as a centralized reposi-
tory for supporting documentation in electronic format that has been submitted to
auditors. Automatic email notifications alert reporting entities when a new audit re-
quest has been received and alert auditors when a corresponding response has been
delivered. OUSD(C) provides recurring training on use of this platform for its audi-
tors, financial management personnel, and audit support teams.
Audit Reporting In recent years, the Department has developed a Notice of Find-
ings and Recommendation (NFR) database. The platform serves as a central reposi-
tory for all NFRs issued by financial statement auditors. It also requires auditors
to map NFRs to material weaknesses. The database includes Qlik dashboards that
provide leadership with real-time visibility into the progress that Components are
making in developing and implementing corrective action plans (CAPs) in response
to identified NFRs and material weaknesses.
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Data Analysis Software The DOD Office of Inspector General (OIG) utilizes an
IDEA analytics tool to perform common audit procedures, such as searching for du-
plicate transactions. The DOD OIG data analytics team uses more powerful com-
puters and has staff more familiar with reviewing large data sets and writing code
to perform complex algorithms. For example, in 2021 the DOD OIG data analytics
team helped DOD OIG auditors standardize $55 billion of disbursement data and
compare that data to an $8 billion asset account. This allowed auditors to identify
unexpected relationships and better focus the sample.
Video Communications The COVID–19 pandemic required the Department and
its auditors to make significant modifications in their approach to the FY 2020 and
FY 2021 financial statement audits. The DOD and its auditors have adapted by in-
creasing the usage of virtual tools such as Defense Collaboration Services and
Microsoft Teams to perform business process and information systems walkthroughs
remotely. Testing for IT, Fund Balance with Treasury, spare engines, military
equipment, and other areas have been successfully performed virtually by the De-
partment. Thus far, the pandemic has not resulted in any Components having their
audit opinions adversely impacted. This is due in large part to the DOD and its
auditors making a successful transition to increased reliance on video and other vir-
tual technologies. [See page 12.]
QUESTIONS SUBMITTED BY MEMBERS POST HEARING
APRIL 28, 2021
QUESTION SUBMITTED BY MR. MOULTON
Mr. MOULTON. Mr. Glenn, automation and artificial intelligence are becoming in-
creasingly integral to all DOD processes, and accountability is no different. I appre-
ciated your testimony on how automation and AI are serving the auditing process.
Have you been able to leverage a workforce already trained in these areas, or are
you providing additional data science training? If so, what does that training look
like?
Mr. GLENN. The Department of Defense (DOD) realizes how important Artificial
Intelligence (AI), automation, and data science are to remain competitive and agile
while protecting our Nation’s defense. We have leveraged special hiring authorities
from the DOD Cyber Excepted Service (CES) to increase our access to AI talent.
CES is an enterprise-wide approach for managing civilian cyber professionals and
has expanded to include AI and other digital professionals. It offers flexibilities for
the recruitment, retention, and development of professionals with specialized experi-
ence across the Department. To develop the skills of our current workforce, the
Joint Artificial Intelligence Community (JAIC) is leading a series of DOD AI Train-
ing Pilot Programs to assess the appropriateness and feasibility of readily available
training solutions. In June 2021, the JAIC is launching a 3-month pilot program for
DOD Product Managers, and in July 2021, a 5-month pilot program for data sci-
entists will be launched. In turn, the JAIC will leverage outcomes from these pilot
programs to inform the development of future DOD AI Education and Training Ini-
tiatives. We have also established a baseline for training, consistent training stand-
ards, and learning competencies for the data science community. By 2022, we plan
to create widely accessible training on various data science topics using online open
courses. The Department intends to make these data training and education courses
accessible through a program called Advanced Distributed Learning, which enables
interoperability and easier access to shared advanced technology training across the
Department.
QUESTIONS SUBMITTED BY MRS. BICE
Mrs. BICE. Reports in the press have noted that the Department of the Navy in-
tends to move forward with reducing the size of the Naval Audit Service from its
current 290 employees down to 120 employees by the beginning of Fiscal Year 2022.
At a time when the Department of Defense is still years away from obtaining a
clean audit, this action seems misguided. As you know, the role of the Naval Audit
System is also critical to ensuring taxpayer dollars are properly spent and accounted
for.
1. In the joint testimony, you state on page 6 that ‘‘The audit of the Department
of the Navy (DON) is premised on . . . investing in its workforce.’’ How do you ex-
plain the incongruence between the testimony which notes the importance of work-
force investments and the proposed action to reduce staffing within the Naval Audit
System?
2. How will a reduction in staffing within the Naval Audit System impact the
timeline for the Department of Defense to achieve a clean audit? If the Navy were
to reverse its decision and maintain its current staffing levels, what would be the
impact on the timeline to achieving a clean audit for the Department of Defense?
Mr. GLENN. 1. The Department of the Navy (DON) continuously assesses its
workforce’s skillset, to ensure capabilities keep up with requirements while inform-
ing its recruiting and training programs, as it modernizes and transforms its oper-
ations. The DON believes investing in its workforce takes many forms, including as-
signing employees to meet workload demands. I am told that, in light of the many
ongoing audit and oversight functions across the DON and to ensure proper per-
sonnel resources are allocated to meet workload, the DON determined it could effec-
tively carry out the work assigned to NAS and redeploy personnel to other impor-
tant work. The DON has held several ‘‘Town Halls’’ with NAS employees to keep
them informed and share information on the Civilian Placement Process. According
to the DON, this will afford NAS employees the opportunity to broaden their work
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experience and enhance their skillset that may be helpful in remediating the finan-
cial statement audit findings.
2. I do not see an impact to the timeline for a Departmental clean financial state-
ment audit opinion. While Naval Audit System (NAS) auditors and financial state-
ment auditors have similar capabilities, they more often than not have different
roles/functions. NAS auditors have never been used to conduct any part of the
DON’s annual financial statement audit. Given that we have independent financial
statements auditors identifying our internal control deficiencies now, deploying NAS
auditors to test the same controls only expends additional effort to tell us what we
already know.
Mrs. BICE. Reports in the press have noted that the Department of the Navy in-
tends to move forward with reducing the size of the Naval Audit Service from its
current 290 employees down to 120 employees by the beginning of Fiscal Year 2022.
At a time when the Department of Defense is still years away from obtaining a
clean audit, this action seems misguided. As you know, the role of the Naval Audit
System is also critical to ensuring taxpayer dollars are properly spent and accounted
for.
1. What impact will a reduction in staffing within the Naval Audit System have
on ensuring accountability for taxpayer dollars in carrying out Navy and Marine
Corps programs and procurement?
2. What are the roles of the 170 employees that will be laid off? How do those
roles support the current audit process that is being done?
3. With a reduction of staff in the Naval Audit Service, would there be an in-
creased need for external private contractors to fulfil the Service’s mission? What
are the projected costs of relying on private contractors to fulfil the Naval Audit
System’s missions?
4. In the joint testimony, you state on page 6 that ‘‘The audit of the Department
of the Navy (DON) is premised on . . . investing in its workforce.’’ How do you ex-
plain the incongruence between the testimony which notes the importance of work-
force investments and the proposed action to reduce staffing within the Naval Audit
System?
Ms. JENKINS. 1. The Department of the Navy (DON) values the importance of
independent assessments and audits, especially those that regularly check for pro-
gram performance or annually review our financial statements. In fact, multiple en-
tities conduct audits across the DON enterprise, including the Naval Audit Service
(NAS), the Office of the Naval Inspector General, the Naval Criminal Investigative
Service (NCIS), the DON Managers’ Internal Control Program, the DON Acquisition
Integrity Office, the Department of Defense Office of Inspector General (DOD OIG),
DOD OIG-contracted Independent Public Accountant (IPA) firms performing finan-
cial statement audits, and the Government Accountability Office. Of note are the an-
nual full financial statement audits, performed by the IPAs, who are hired and over-
seen by the DOD OIG. The financial statement audit entails reviewing the entire
DON operation. Auditors review and assess our enterprise for accountability, com-
pliance of our business and financial operations, processes, internal controls, poli-
cies, management oversight programs, systems compliance, cybersecurity, and fraud
susceptibility. The rigor of annual financial statement audits is intentional and em-
braced by the Department, not just because they indicate whether the DON has con-
trol over how it is spending taxpayer dollars, but because they serve as a catalyst
for our reform efforts, and facilitate improvements and innovation across the DON
enterprise. The Department, as required by National Defense Authorization Acts,
reports often to Congress on our financial statement audit progress. It is important
to note the Naval Audit Service has never participated in these financial statement
audits nor been a part of the workforce that helps to track financial statement audit
findings or support financial statement audit remediation. The NAS right sizing was
based on its planned audits, historical trend looking at past workloads of audits it
completed, and assessing and realigning resources to meet DON oversight require-
ments across the enterprise. Reductions to the NAS budget in no way take away
from its assigned work or its oversight responsibility. It is still focused on con-
ducting program performance audits, as directed by the Secretary of the Navy. As
a result, we do not anticipate any impact to audits that review Navy and Marine
Corps programs and procurement.
2. We do not intend to conduct a reduction in force at the Naval Audit Service;
therefore, no personnel are expected to be laid off as a result of this workforce shap-
ing effort. As a preliminary matter, DON intends to retain and realign NAS employ-
ees to meet enterprise needs. The NAS conducts program performance audits and
attestations of DON activities and provides forensic audit support to NCIS and the
Inspector General. This necessary and important work will continue. Our intent is
to shape the DON audit workforce to appropriately meet the assigned workload at
61
the Naval Audit Service while aligning and investing in oversight authorities across
the DON, to include our Inspector General, law enforcement entities, and manage-
ment internal control oversight functions. Using a Civilian Placement Process, we
will realign personnel to critical positions within the Department of the Navy for
which they are eligible and qualified, retaining our talented audit workforce. This
will also afford our employees the opportunity to broaden their work experience and
enhance their skills, which may assist with driving necessary remediation efforts to
address audit findings, getting the Department closer to achieving a clean audit
opinion. With respect to the role of NAS employees supporting our current financial
statement audit, it is important to note the Naval Audit Service has never partici-
pated in these financial statement audits and the NAS is not assigned responsibility
to track financial audit findings or support financial audit remediation. Annual fi-
nancial statement audits are accomplished by auditors from an independent public
accounting firm, hired and overseen by the DOD OIG.
3. The workforce reshaping effort at the Naval Audit Service was done to both
carry out the work assigned to the NAS and to balance resources across a multitude
of work and functions across the DON. We do not anticipate increasing contractor
support to fulfil the NAS mission. The Department of the Navy will continuously
review the resource allocations of all DON organizations performing any kind of
audit. Should there be a change in the need for additional resources for NAS, we
will make those adjustments in the outyears, as part of our regular organizational
oversight process.
4. The Department of Navy continuously assesses its workforce’s skillset, to en-
sure capabilities keep up with requirements while informing our recruiting and
training programs, as we modernize and transform our operations. Investing in our
workforce takes many forms, including assigning employees to meet workload de-
mands. In light of the many ongoing audit and oversight functions across the DON
and to ensure proper personnel resources are allocated to meet workload, the DON
determined we could effectively carry out the work assigned to NAS and redeploy
personnel to other important work. We have held several ‘‘Town Halls’’ with NAS
employees to keep them informed as we move through this effort and to share infor-
mation on the Civilian Placement Process. This will afford NAS employees the op-
portunity to broaden their work experience and enhance their skillset that may be
helpful in remediating the financial statement audit findings.
QUESTION SUBMITTED BY MR. MORELLE
Mr. MORELLE. The Deputy Secretary of Defense in her private capacity last year
wrote in a March 2020 ‘‘Foreign Affairs’’ article entitled, ‘‘Getting to Less: The Truth
About Defense Spending,’’ the following: ‘‘Predictably, for example, even though
Congress directed the Defense Department to cut $10 billion through administrative
efficiencies between 2015 and 2019, the Pentagon failed to substantiate that it had
achieved those savings. The reason those efforts rarely succeed is that they merely
shift the work being done by civilian employees to others, such as military personnel
or defense contractors.’’ How can we avoid encouraging such a situation in the fu-
ture?
Ms. JENKINS. Transferring duties currently performed by government personnel
to contractor personnel must comply with established law and regulations per-
taining to outsourcing. NAS staffing adjustments were based on its planned audits,
historical trend looking at past workloads of audits it completed, and assessing and
realigning resources to meet DON oversight responsibilities across the enterprise.
The DON does not anticipate any new outsourcing efforts as a result of these
changes.
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