By 2010 Defense authorization bill established a benchmark requiring all of DoD to be audit-ready by 2017, and unlike previous goals, that date is achievable, according to Mark Easton, the Pentagon’s deputy chief financial officer.
He said the department’s leadership now realizes that solving the problem doesn’t simply boil down to having its financial experts do a better job.
“The way we’re approached it before oftentimes gives you the impression that as a financial management community we can fix this ourselves,” Easton told attendees at an Association of Government Accountants conference in Washington. “We’ve learned over time, probably the hard way and while probably not putting resources to the best use, that you really have to change the way that the organization does business. That’s what we’re trying to do in DoD. And we’re talking about changing an economy–a very complex economy–that’s in many cases bigger than a country.” Easton said DoD’s current effort to get the documentation of its finances aligned with various federal financial management requirements will require an approach that attempts to make it clear to all the department’s dispersed pieces that each of them has a role in the process.
“Previous efforts have focused on things that don’t resonate with the enterprise,” he said. “People looked at the comptroller or the CFO or the resource manager and said, ‘financial is someone else’s job, audit is something you want to avoid.’ The combination of those two things is not the right message when you’re talking about financial auditability. Financial auditability says, ‘I know my business and I’m ready to present it to a financial auditor.'”
DoD, which is responsible for more than half of the government’s discretionary spending, has been on what Easton called a 20-year “journey” to achieve a clean audit.
On Thursday, Comptroller General Gene Dodaro told the House Committee on Oversight and Government Reform that the Pentagon’s “pervasive management practices and procedures” were one of the main reasons that the Government Accountability Office, which he leads, cannot provide an opinion on the government’s consolidated financial statements.
GAO told Congress in a report late last year that despite years of attempts, DoD had not managed to fundamentally reform its financial management, and that none of the military branches were yet able to produce statements that could withstand an audit. The same September 2010 report acknowledged that several of the Pentagon’s smaller agencies had achieved audit readiness, such as the Army Corps of Engineers, the DoD inspector general and the Defense Finance Accounting Service.
Easton said DoD would attempt to bring those successes to the rest of the Defense apparatus though a focus on transforming business practices and using enterprise resource planning (ERP), which GAO agrees is critical.
“We’re functionally-oriented, we’re organizationally-oriented, we’re not process-oriented,” he said. “An ERP forces us to think differently about the way we do business. It’s a key to sustainable audits, it’s a key to better quality information, it’s a key to financial auditability. That’s why they’re so important.”
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