DOD Comptroller Robert F. Hale told the Senate Subcommittee on Readiness and Management Support this week, that while DoD still faces major challenges he is confident that the department is on the right track in its efforts to improve financial management operations.
Hale testified with Deputy Chief Management Officer (DCMO) Elizabeth McGrath and the military services principle management and financial management officers. He told Senators that “auditability is now a goal that every commander, every manager, and every functional specialist must understand and embrace.” Hale said this new commitment is due Secretary Panetta’s strong leadership, a revised strategy to refocus on financial information DoD financial managers actually need, and the implementation of a governance structure that spotlights monitoring progress and holding managers accountable.
Some have expressed concern that the significantly lower funding levels might put DoD’s financial management improvement efforts at risk. Hale told the subcommittee that even though defense budgets will be lean for some time to come, “the Department now plans to sustain the required level of resources each year over the next five years to improve business operations…that will allow us to achieve and sustain auditable financial statements.”
Hale and McGrath discussed the “new tools and training” DoD is providing defense managers and commanders. The Audit Readiness Checklist, they said, provides managers with a tool like the operational readiness checklists used by military commanders. The course-based certification program being implemented for DOD financial managers similar to that developed for DoD acquisition managers. DoD has also developed professional development training courses to enhance knowledge and understanding of audit goals and instructions to reinforce internal controls.
The witnesses also discussed DOD’s efforts to transition to a “more modern and disciplined business environment.” DCMO McGrath described the implementation of Enterprise Resource Planning Systems (ERPs) and the modernization of legacy systems when they are supported by a business case. ERPs will be the “business backbone” of DOD’s operations.
However, it is these ERP implementations that have subcommittee chair Senator Claire McCaskill (D-MO) concerned. She was highly critical of what she called the department’s dismal track record of fielding ERPs to achieve auditability. She charged that the 11 ERPs “cumulatively are $6 billion over budget and 31 years behind schedule.”
She cautioned the witnesses that DOD will not be able to achieve the accelerated deadline by continuing to “rely on ERPs to solve its management problems.” “New business systems alone will never solve the financial management problems without accompanying changes to business processes, internal controls, and culture,” she said. Rather, she advised, the department should refocus its attention on needed changes to underlying processes and internal controls.
McGrath acknowledged the challenges DoD faces with ERP implementations. However, she told the subcommittee that to improve business operations, DoD “must transition away from labor intensive, paper-based, siloed processes to more streamlined technology-enabled approaches.”
Sen. McCaskill also expressed concern about the cost and labor requirements of using manual workarounds to try to meet the audit deadlines. The military service witnesses told her that they could not avoid some manual workarounds, but do not expect them to be unreasonable or too costly. Hale said he expects there will be some “temporary” manual workarounds, but that DoD “will not hire an army of auditors” to do that manual work. In any case, Hale said that the most important point was to keep the pressure on to meet Secretary Panetta’s accelerated 2014 deadline. If meeting that goal requires manual workarounds, “so be it,” he said.