Hale Urges Stable Environment to Promote Fiscal Improvements

By Donna Miles
American Forces Press Service

WASHINGTON, Jan. 25, 2012 – The Pentagon comptroller thanked Congress yesterday for its role in helping the Defense Department improve its auditing processes, but urged a more stable fiscal environment to allow these efforts to move forward.

Defense Undersecretary and Comptroller Robert F. Hale noted in testimony before the House Armed Services Committee the uncertainty that has “drained valuable time and leadership attention for many initiatives,” including those to meet its congressional mandate to be audit-ready by 2017.

“In the past year, we’ve had no fewer than four threats of a government shutdown that required enormous planning efforts,” Hale told the committee. He noted a six-month continuing resolution that also demanded “a great deal of management attention.”

“Now, the prospect of sequester is hanging over us,” he said. “Congress could help us a great deal by returning to a more orderly budget process.”

A “sequestration” provision would double the cuts the Defense Department faces and apply them across the board unless Congress acts to identify equivalent savings in federal spending this year.

Hale called the Defense Department, particularly with regard to its business processes, “more like an aircraft carrier than a speedboat,” and unable to change quickly.

“But we’re building a foundation for auditability, and we have created considerable momentum,” he said. “And the aircraft carriers, once you get them started, also don’t stop quickly.”

Based on that momentum, Hale said, he feels “reasonably confident” that DOD will reach the goal of having all of its financial statements audit-ready by 2017.

The committee’s Defense Financial Management and Auditability Reform Panel reported yesterday that, despite work yet to be done, DOD is making headway toward that goal.

Hale commended the panel on its “balanced and constructive” report that “recognizes the progress we’re made in overcoming historic impediments to audit readiness.”

He noted that the report endorses DOD’s strategy for financial improvement and audit readiness. He described this strategy as one that focuses first on the information DOD most uses to management the department, especially budgetary information and the counts and locations of its assets. Among five areas in which “action is still needed,” Hale said, he agrees on the need for sustained leadership that will continue to give this issue the focus it now receives.

Defense Secretary Leon E. Panetta directed in October that DOD to reduce the time it spends preparing its budget resources statement and to make that statement audit ready by 2014. Panetta also directed other steps to increase the department’s audit readiness.

“Today, we have the support from the secretary himself, from the deputy secretary and from many other key leaders in this department,” Hale said. “But while we have strong senior leader support now, we know the support must be sustained as leaders change.”

DOD’s goal, he said, is to establish a clear governance structure with dedicated resources to build on and continue the current momentum.

Hale also shared the panel’s recognition of the need to improve the way DOD trains its financial management workforce. While lauding their capabilities as they support key missions around the world, he conceded, “the business environment is changing, and we need to change our training to match.”

In the short term, DOD is using independent public accountants with strong expertise in this area to achieve practical training, he reported. But for the longer term, it’s implementing a course-based certification program. This program, he explained, will ensure that financial managers have the skill and expertise in key areas such as financial statement audits.

With legal authority provided through the DOD fiscal 2012 budget authorization, DOD is working to get the certification program started and expects to have two pilot programs up and running by December, Hale reported.

Elizabeth A. McGrath, the Pentagon’s deputy chief management officer, shared the panel’s recognition that fielding enterprise resource planning systems is just part of the formula for achieving audit readiness.

These systems will help DOD achieve the modern business environment needed to meet and sustain our goal of audit readiness, McGrath noted.

But the goal, she said, is to reduce or eliminate the multiple interfaces needed to link them to legacy systems, and ultimately to retire those legacy systems altogether.

Hale said he also supports the panel’s call for better reporting controls. He cited efforts being made by the services through their internal audit agencies but said the support of field commander sis needed, too, to ensure management control improvements actually occur.

Meanwhile, DOD is working to institutionalize these improvements and raise awareness of audit reforms in areas outside the financial arena, Hale told the committee.

Hale reported progress being made, with Panetta approving an accelerated strategic management plan that incorporates this initiative last month.