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Posted on InsideDefense.com: May 13, 2014
The Pentagon expects to be more than 80 percent "audit ready" when an upcoming deadline arrives, Defense Department Comptroller Robert Hale told lawmakers Tuesday, though senators have expressed concern that the department is tackling the issue wrong.
Testifying before the Senate Homeland Security and Governmental Affairs Committee, Hale said he believes defense components will "meet the great majority" of their requirements to have their statements of budgetary resources audit ready by Sept. 30. Full department audit readiness is required by Sept. 30, 2017.
This upcoming milestone will most likely include the military departments, although perhaps not all the defense agencies, Hale said.
"I want to get to the top of the hill badly -- and that's audit-readiness for all of the statement of budgetary resources -- but I also don't want to waste money by putting in to audit a statement that we know is not ready," Hale said. "So bottom line, I think we'll get there for most, but there may be a few that aren't ready by Sept. 30. And we'll move as quickly as we can to fix those."
Hale pointed to the Marine Corps' clean audit opinion in fiscal year 2012, and noted that a similar result is expected for the service's FY-13 audit. These audits focus only on current-year finances. That is because the Pentagon realized it was unproductive to spend so much time and money looking for older documents to examine prior years, Hale said.
But some senators on the committee called for the department to change its focus. Sen. Tom Coburn (R-OK), the committee's ranking member, said, "audit readiness to me is a misnomer." Instead of focusing on the department's efforts to achieve the "buzzword" of audit-ready, Coburn said the department should focus on the ability to make proper decisions based on financial information and controls.
"You don't do an audit to do an audit," Coburn said. "You do an audit so that it enhances and hones your ability to make financial judgments based on the data to know that your data is accurate."
Coburn's colleague, Sen. Ron Johnson (R-WI), repeatedly asked why the department is working toward audit readiness, instead of just bringing in auditors to conduct an audit. He said if the department just started bringing in auditors in the mid-90s, it would have achieved an audit by now.
Hale disagreed, noting that if the department just conducted an audit, they would have wasted money over what would most likely be a failed opinion.However, Hale stressed that even though the department is not auditable, defense officials do know where the money is located. He noted that if the department did not, there would be issues with the nearly 150 million accounting transactions its conducts a year.
"If 1 percent was wrong, we'd have a million and a half wrong transactions," Hale said. "We'd have massive mispayments. We'd have massive Anti-Deficiency Act violations. None of that's occurring. But we need the audit both to verify it and especially for the outlay data."
During the hearing, Coburn also expressed concern over Mike McCord, who has been nominated to replace Hale when he steps down this year. McCord is awaiting confirmation.
"I'm concerned that who replaces you should have the management experience, the educational experience, the financial auditing experience to actually lead this organization," Coburn said. "We have a good nominee but he doesn't have any of those qualifications."
When asked by Coburn what qualifications Hale wants his replacement to have, the comptroller threw his support behind McCord.
"First and foremost, I would want somebody who's a leader. I think Mike McCord will do that," Hale said. "I'd want somebody who knows the defense financial management and federal financial management. And it's not just audit. We've got to worry about budget too. I mean, that is part of the job of the under secretary of defense comptroller. I think Mike knows that well."
Posted on InsideDefense.com: May 13, 2014
The Pentagon expects to be more than 80 percent "audit ready" when an upcoming deadline arrives, Defense Department Comptroller Robert Hale told lawmakers Tuesday, though senators have expressed concern that the department is tackling the issue wrong.
Testifying before the Senate Homeland Security and Governmental Affairs Committee, Hale said he believes defense components will "meet the great majority" of their requirements to have their statements of budgetary resources audit ready by Sept. 30. Full department audit readiness is required by Sept. 30, 2017.
This upcoming milestone will most likely include the military departments, although perhaps not all the defense agencies, Hale said.
"I want to get to the top of the hill badly -- and that's audit-readiness for all of the statement of budgetary resources -- but I also don't want to waste money by putting in to audit a statement that we know is not ready," Hale said. "So bottom line, I think we'll get there for most, but there may be a few that aren't ready by Sept. 30. And we'll move as quickly as we can to fix those."
Hale pointed to the Marine Corps' clean audit opinion in fiscal year 2012, and noted that a similar result is expected for the service's FY-13 audit. These audits focus only on current-year finances. That is because the Pentagon realized it was unproductive to spend so much time and money looking for older documents to examine prior years, Hale said.
But some senators on the committee called for the department to change its focus. Sen. Tom Coburn (R-OK), the committee's ranking member, said, "audit readiness to me is a misnomer." Instead of focusing on the department's efforts to achieve the "buzzword" of audit-ready, Coburn said the department should focus on the ability to make proper decisions based on financial information and controls.
"You don't do an audit to do an audit," Coburn said. "You do an audit so that it enhances and hones your ability to make financial judgments based on the data to know that your data is accurate."
Coburn's colleague, Sen. Ron Johnson (R-WI), repeatedly asked why the department is working toward audit readiness, instead of just bringing in auditors to conduct an audit. He said if the department just started bringing in auditors in the mid-90s, it would have achieved an audit by now.
Hale disagreed, noting that if the department just conducted an audit, they would have wasted money over what would most likely be a failed opinion.However, Hale stressed that even though the department is not auditable, defense officials do know where the money is located. He noted that if the department did not, there would be issues with the nearly 150 million accounting transactions its conducts a year.
"If 1 percent was wrong, we'd have a million and a half wrong transactions," Hale said. "We'd have massive mispayments. We'd have massive Anti-Deficiency Act violations. None of that's occurring. But we need the audit both to verify it and especially for the outlay data."
During the hearing, Coburn also expressed concern over Mike McCord, who has been nominated to replace Hale when he steps down this year. McCord is awaiting confirmation.
"I'm concerned that who replaces you should have the management experience, the educational experience, the financial auditing experience to actually lead this organization," Coburn said. "We have a good nominee but he doesn't have any of those qualifications."
When asked by Coburn what qualifications Hale wants his replacement to have, the comptroller threw his support behind McCord.
"First and foremost, I would want somebody who's a leader. I think Mike McCord will do that," Hale said. "I'd want somebody who knows the defense financial management and federal financial management. And it's not just audit. We've got to worry about budget too. I mean, that is part of the job of the under secretary of defense comptroller. I think Mike knows that well."
