Morin paints challenging way ahead for Air Force’s audit readiness

The Air Force is facing an ever increasing likelihood that it will not get its financial house in order by the first congressionally-mandated 2014 deadline.

By the end of this fiscal year, all of the Defense Department must be able to develop an auditable statement of budgetary resources.

But Jamie Morin, the Air Force’s outgoing comptroller and President Barack Obama’s nominee to be DoD’s second director of the Cost Assessment and Program Evaluation (CAPE) office, told lawmakers Thursday the service would struggle to meet the 2014 deadline.

“[T]he Air Force is continuing to press forward aggressively on the 2014 and 2017 audit readiness timelines. Candidly, we lost progress last year due to a six-month contract protest that took our independent public accountant advisers out of work. So that was unfortunately timed and we’ve resolved it now. We have a contract awarded and IPAs, public accountants, on site helping us with certain tasks,” Morin said during the Senate Armed Services Committee hearing on his nomination to lead CAPE and two others. “We’ve made some continued progress in identifying the actions we need to take in the near term with our existing legacy IT systems, our legacy financial systems, in order to give ourselves the best chance at meeting that 2014 deadline.”

The Air Force awarded a $76 million deal to PricewaterhouseCoopers in August 2012. Kearney and Co. protested the award to the Government Accountability Office. GAO eventually decided in favor of the Air Force and PWC began work on the contract.


IT fixes not sustainable

But Morin said the changes to the Air Force’s IT systems are not a sustainable long- term approach.

“[W]e will not have our objective future financial systems fully fielded by the 2014 deadline,” he said. “So there is some risk in the 2014 deadline. Pressing aggressively on the 2014 deadline for the budgetary resources, though, has helped us significantly reduce the risk on that 2017 deadline for full financial readiness — audit readiness.”

Morin said meeting the financial auditability deadlines remains an important priority for DoD and there has been real progress made over the last few years.

The Air Force’s struggles are not new. Morin told lawmakers in 2011 that the Air Force’s systems were among the biggest roadblocks it faces.

Lawmakers also pressed Jo Ann Rooney, the President’s nominee to be the undersecretary of the Navy, on the service’s ability to meet the congressional financial mandates.

Rooney said she didn’t have details about the Navy’s status in part because of the fiscal uncertainty that hasn’t let the service hire skilled workers and plan accordingly.

Sen. John McCain (R-Ariz.) told Rooney to go back and figure out where the Navy stands on meeting the legal deadlines. He said if she doesn’t know the answer, she isn’t qualified to hold the undersecretary job.

Acquisition reform working

With the first deadline now less than a year away, lawmakers will pay close attention to DoD’s progress, and want consequences should they miss the 2017 deadline to have an auditable financial statement.

Several members of the Armed Services Committee co-sponsor the Audit the Pentagon Act of 2013, introduced by Sens. Tom Coburn (R-Okla.) and Joe Manchin (D-W.Va.). The bill states that if DoD fails to obtain a clean audit opinion by 2018, the military services would be barred from spending money to fund new major acquisition programs beyond what’s known as “milestone B” — in essence, the actual engineering and manufacturing of new systems.

On the House side, Reps. Barbara Lee (D-Calif.) and Mike Coffman (R-Colo.) introduced different companion bills.

The nomination hearing addressed a host of topics that Morin, Rooney and Michael Lumpkin, who would be the new assistant secretary of defense for special operations and low intensity conflict, would face in their new roles.

Lawmakers wanted assurances that DoD’s acquisition process is improving.

In his new role as the director of CAPE, Morin will be responsible for developing cost estimates and overseeing programs to make sure they meet their cost goals. CAPE plays a big role in acquisition decisions so Congress is keen to know how DoD is buying better.

Sen. Carl Levin (D-Mich.) asked Morin whether DoD is changing how it buys and manages weapons programs after the passage of the Weapons Acquisition Reform Act in 2009.

“I’ve seen enormous progress inside the Department of Defense over the last four years,” Morin said. “I was struck when I arrived in the Department of Defense by the degree to which the unification of the cost assessment and the program evaluation shops into CAPE had made a difference. Sen. McCain spoke at the outset about the degree to which we need the military services to be rigorous about cost estimates. And I’ve tracked that data, in fact, with regard to the Air Force and have found that over the last four years the range between independent cost estimates out of CAPE and the Air Force service cost positions coming out of the Air Force Cost Analysis Agency have narrowed significantly. It’s a limited number of observations, so you can’t do a lot of great statistics.”

If the full Senate confirms him, Morin promised to provide the committee with the data on the improved cost analysis by the Air Force.

GAO found in April that CAPE has brought consistency to the idea of “should-cost” and affordability targets.

Beyond weapons systems, Morin said DoD senior leadership has put a lot of focus on reducing contract risk, including moving to incentive based contracts and holding vendors more accountable.

But he said between sequestration and now the shutdown, numerous programs now face additional delays and challenges.

Current, future planning stymied

Rooney discussed acquisition as part of the broader conversation about overall Navy readiness.

She reiterated the great impact sequestration and the shutdown has had on training and ship building and repairs.

Lawmakers also wanted the nominees to address how sequestration and the shutdown have impacted planning across the Pentagon.

Morin said the military is known worldwide for its strong planning, programming, budgeting and execution process. But that is now at risk.

“The cost assessment program evaluation organization is the keeper of what’s called the FYDP, the future years defense plan, the database of the programmatic decisions that the department is making for that five-year time horizon,” he said. “And I can tell you very directly that the rigor and intelligence that needs to be put into making those choices sensibly is enormously demanding. The process of simultaneously doing that sort of planning at multiple budget levels, while you don’t know what your previous year’s jumping off point is. So right now we’re in the midst of a 2015 to 2019 planning horizon with absolutely no idea what we’re going to be doing in 2014, if and when we end the shutdown and get to start executing 2014. That is enormously difficult.”

He added the institutional planning process is facing enormous and untold damage.

From Rooney’s perspective, the impact is around people. She said if the staff that does the planning can’t have the certainty of a stable time horizon, then the process will suffer.

Foundational HR work needed

Rooney, who previously was the acting undersecretary for personnel and readiness for DoD for about eight months before leaving in June 2012, said the impact of the shutdown and furloughs is especially being felt in the research and development, science, technology, engineering and math skill sets.

“The problem comes in that we are in a competitive environment and frankly, the uncertainty of the last few years, the budgets, the lack of being able to have raises or have some of the tools that are available in private industry, are only making this challenge even greater,” she said. “It’s very difficult to recruit. And as I mentioned, over half of the Department of the Navy civilians fit in many of the categories you’ve described. And it’s very difficult not only attracting newer and our younger and maybe our very creative different thinkers, but retaining when we’re putting people on furloughs. And we’ve got, you know, challenges with hiring. And we’ve had little or no raises through the years. We cannot compete with private industry.”

Rooney said DoD has some basic foundational work to do to be a long-term attractive place for these workers with skill sets.

If she is confirmed, Rooney said she will look at what’s been working and what hasn’t, review the data on what types of skills have left DoD and haven’t been replaced. She then would tailor her approach to recruit and retain those specific capabilities.

All three nominees seemed to have widespread support from Democrats and Republicans on the panel, as long as Rooney provides McCain with details on the Navy’s effort to close its fiscal books.

But as with Beth Cobert, the nominee to be the deputy director for management at the Office of Management and Budget, the Senate is not debating or voting on executive branch candidates until after the shutdown.


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