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THE DEPARTMENT OF DEFENSE: CHALLENGES IN

FINANCIAL MANAGEMENT

HEARING

BEFORE THE

SUBCOMMITTEE ON GOVERNMENT ORGANIZATION,

EFFICIENCY AND FINANCIAL MANAGEMENT

OF THE

COMMITTEE ON OVERSIGHT

AND GOVERNMENT REFORM

HOUSE OF REPRESENTATIVES

ONE HUNDRED TWELFTH CONGRESS

FIRST SESSION

SEPTEMBER 23, 2011

Serial No. 112–110

Printed for the use of the Committee on Oversight and Government Reform

(

Available via the World Wide Web: http://www.fdsys.gov

http://www.house.gov/reform
(II)

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

DARRELL E. ISSA, California, Chairman

DAN BURTON, Indiana

JOHN L. MICA, Florida

TODD RUSSELL PLATTS, Pennsylvania

MICHAEL R. TURNER, Ohio

PATRICK T. MCHENRY, North Carolina

JIM JORDAN, Ohio

JASON CHAFFETZ, Utah

CONNIE MACK, Florida

TIM WALBERG, Michigan

JAMES LANKFORD, Oklahoma

JUSTIN AMASH, Michigan

ANN MARIE BUERKLE, New York

PAUL A. GOSAR, Arizona

RAU ́ L R. LABRADOR, Idaho

PATRICK MEEHAN, Pennsylvania

SCOTT DESJARLAIS, Tennessee

JOE WALSH, Illinois

TREY GOWDY, South Carolina

DENNIS A. ROSS, Florida

FRANK C. GUINTA, New Hampshire

BLAKE FARENTHOLD, Texas

MIKE KELLY, Pennsylvania

ELIJAH E. CUMMINGS, Maryland, Ranking

Minority Member

EDOLPHUS TOWNS, New York

CAROLYN B. MALONEY, New York

ELEANOR HOLMES NORTON, District of

Columbia

DENNIS J. KUCINICH, Ohio

JOHN F. TIERNEY, Massachusetts

WM. LACY CLAY, Missouri

STEPHEN F. LYNCH, Massachusetts

JIM COOPER, Tennessee

GERALD E. CONNOLLY, Virginia

MIKE QUIGLEY, Illinois

DANNY K. DAVIS, Illinois

BRUCE L. BRALEY, Iowa

PETER WELCH, Vermont

JOHN A. YARMUTH, Kentucky

CHRISTOPHER S. MURPHY, Connecticut

JACKIE SPEIER, California

LAWRENCE J. BRADY, Staff Director

JOHN D. CUADERES, Deputy Staff Director

ROBERT BORDEN, General Counsel

LINDA A. GOOD, Chief Clerk

DAVID RAPALLO, Minority Staff Director

SUBCOMMITTEE ON GOVERNMENT ORGANIZATION, EFFICIENCY AND FINANCIAL

MANAGEMENT

TODD RUSSELL PLATTS, Pennsylvania, Chairman

CONNIE MACK, Florida, Vice Chairman

JAMES LANKFORD, Oklahoma

JUSTIN AMASH, Michigan

PAUL A. GOSAR, Arizona

FRANK C. GUINTA, New Hampshire

BLAKE FARENTHOLD, Texas

EDOLPHUS TOWNS, New York, Ranking

Minority Member

JIM COOPER, Tennessee

GERALD E. CONNOLLY, Virginia

ELEANOR HOLMES NORTON, District of

Columbia
(III)

C O N T E N T S

Page

Hearing held on September 23, 2011 ..................................................................... 1

Statement of:

Easton, Mark, Deputy Chief Financial Officer, U.S. Department of Defense; Daniel Blair, Deputy Inspector General for Auditing, U.S. Department of Defense Office of Inspector General; and Asif Khan, Director of Financial Management and Assurance, Government Accountability Office .................................................................................................. 5

Blair, Daniel .............................................................................................. 19

Easton, Mark ............................................................................................. 5

Khan, Asif .................................................................................................. 40

Letters, statements, etc., submitted for the record by:

Blair, Daniel, Deputy Inspector General for Auditing, U.S. Department

of Defense Office of Inspector General, prepared statement of ................. 21

Connolly, Hon. Gerald E., a Representative in Congress from the State

of Virginia, followup questions and responses ............................................ 87

Easton, Mark, Deputy Chief Financial Officer, U.S. Department of Defense, prepared statement of ........................................................................ 8

Khan, Asif, Director of Financial Management and Assurance, Government Accountability Office, prepared statement of .................................... 42

(1)

THE DEPARTMENT OF DEFENSE:

CHALLENGES IN FINANCIAL MANAGEMENT

FRIDAY, SEPTEMBER 23, 2011

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON GOVERNMENT ORGANIZATION, EFFICIENCY AND FINANCIAL MANAGEMENT, COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM, Washington, DC.

The subcommittee met, pursuant to notice, at 10:05 a.m., in room

2154, Rayburn House Office Building, Hon. Todd Platts (chairman

of the subcommittee) presiding.

Present: Representatives Platts, Lankford, Towns, and Connolly.

Staff present: Molly Boyl, parliamentarian; Sharon Casey, senior

assistant clerk; Justin LoFranco, deputy director of digital strategy;

Mark D. Marin, director of oversight; Tegan Millspaw, research analyst; Jeff Wease, deputy CIO; Nadia A. Zahran, staff assistant;

Jaron Bourke, minority director of administration; Beverly Britton

Fraser, minority counsel; Jennifer Hoffman, minority press secretary; Carla Hultberg, minority chief clerk; and Adam Koshkin,

minority staff assistant.

Mr. PLATTS. The committee will come to order.

Today’s hearing will continue the focus on improving financial

management throughout the Federal Government. I certainly want

to welcome our witnesses and guests; and up front I want to say

I appreciate the rearranging of everyone’s schedule, as we were

originally planning to be with you last week. I am glad it worked

out to be with you today.

The Department of Defense is the largest department of the Fed- eral Government and spent $691 billion in 2010. Due to the size

of its budget and the importance of its mission, it is imperative

that DOD have proper financial management in place.

DOD, unfortunately, has never been able to produce auditable financial statements and has been on GAO’s high-risk list since 1995

due to pervasive and systemic deficiencies regarding its financial

management. In 2010, the Inspector General identified 13 areas of

significant weaknesses in DOD’s internal controls and financial

management.

Despite numerous financial reforms, DOD continues to be susceptible to waste, fraud, and abuse. It is particularly susceptible to

improper payments. The amount of improper payments issued by

DOD is not specifically known, but both GAO and the Inspector

General have raised concerns and identified areas where improper

payments are known to occur. In particular, the Inspector General’s office found that DOD was making significant overpayments
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in high-dollar programs and that, unless the Department improves

its oversight, it will continue to make significant improper payments.

In an attempt to improve financial management at DOD, Congress established a deadline to make all components of the Department ready to undergo a financial audit by 2017. This is a deadline

that DOD is taking very seriously, and its efforts to improve financial management are admirable and certainly very much appreciated. However, there are numerous issues that the Department

must address in order to be successful in meeting this deadline.

To meet the deadline, DOD developed the Financial Improvement and Audit Readiness plan. The plan is designed to improve

and strengthen DOD’s financial management through a series of

gradual phases in benchmark goals. If the Department follows this

plan successfully, it will be able to meet the deadline for audit

readiness and significantly improve key weaknesses in its financial

management.

Successful implementation of the plan remains in doubt, however. Already the Air Force has said it may have trouble meeting

the 2017 deadline due to the fact that its financial management

systems were created in the 1970’s and need to be updated significantly.

GAO and OIG have found that system modernization is a challenge to DOD. There are also concerns that, while the Department

may be able to devote enough resources to successfully produce a

one-time auditable financial statement in 2017, it will not be able

to develop systems sufficient to achieve auditable statements on a

continuing basis; and that is something I definitely will be looking

to touch on and the sustainability of the improvements in auditable

financial statements, not just a heroic effort to meet a one-time obligation.

Strong financial management is crucial in order for a government to operate effectively, prevent waste, fraud, and abuse. DOD’s

increased focus on improving its financial management is, again,

commendable and appreciated.

Today, we will hear from our witnesses about the challenges the

Department faces in improving its financial management and producing auditable financial statements. I certainly look forward to

your testimony, and this committee looks forward to continuing to

work with you to increase efficiency, accountability, and good financial management at the Department of Defense.

Ultimately, improvements to DOD’s financial management systems are critically important to protecting taxpayer dollars and,

most importantly, to ensuring that we maximize our Nation’s financial resources for many of the needs of our warfighters in

harm’s way who defend our freedoms with great courage and dedication.

And I, before yielding to the ranking member, would emphasize

that, while we will be discussing some of the challenges within the

Department on financial management and how we can partner

with you, I also want to recognize the heroic efforts of all the men

and women in uniform and all of our DOD civilian personnel who

throughout the history of this Nation and as we speak have been

heroic on the frontlines of democracy in defense of all of our free-
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doms and the great blessings we as Americans enjoy. And, you

know, if we are more successful in financial management, we can

even better support those men and women in uniform in their heroic work.

With that, I am honored to yield to our ranking member, Mr.

Towns from New York, for the purpose of an opening statement.

Mr. TOWNS. Thank you very much, Mr. Chairman, and also let

me thank our witnesses for being here.

These are tough times in America. People are losing their jobs,

and many others can’t find work. Programs that support those

most in need are being cut in order to save money. Every family

in America is tightening its belt and keeping a tight rein on the

checkbook because it gets more difficult every day to stay solvent.

These families have a right to expect that our government will do

the same.

For more than any other single government agency, it is the Department of Defense that justifies public skepticism about how they

are government stewards of public funds, and it is the Department

of Defense that this Congress should be holding accountable.

The Department has been required to produce auditable financial

statements since 1997. We are now 14 years past this deadline,

and the Department has still not met the requirement. This committee routinely examines the financial statements of other Federal

agencies. In fact, 22 out of 24 agencies subject to the Chief Financial Officer [CFO] Act have produced clean audits of their financial

statements, but not DOD.

I find it unacceptable that year after year a Federal agency that

spends between $2 and $3 billion every day cannot keep track of

the money that the American taxpayers has entrusted to it. What

is worse is that the problems exist even though the Department

has over 2,200 separate business systems in place to help account

for finances.

Financial statements and unqualified audit opinions are excellent indications that an organization is performing efficiently as

Congress intends. Unfortunately, due to pervasive deficiencies in

internal controls and financial management that would not be tolerated in any other Federal agency or the private sector as well,

we cannot be assured that funds entrusted to the Department are

spent prudently or even correctly.

I hope that our witnesses today can shed some light on the current drive to generate financial statements at the Department of

Defense that are auditable. I am especially interested in hearing

how the Department plans to keep the leadership engaged in the

financial management overhaul until you achieve success. I also

want to know how you are going to keep people on task, day in and

day out, until the Department has auditable financial statements.

And, most importantly, I would like to hear what the Department is doing to integrate its 2,200 separate business systems so

that we don’t have duplication and confusion that is currently

present in your financial management structure today.

The deadline for accomplishing this is exactly 6 years away, on

September 30, 2017. In the past, we have seen deadlines come and

deadlines go with little change.
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Today, we are joined by witnesses who are key players in helping

the Department of Defense improve its financial management processes. I would like to thank you for your testimony in advance, and

I am looking forward to hearing how the current initiatives will

bring permanent and successful change to the financial management process by the 2017 deadline.

And, Mr. Chairman, I want to thank you for staying with it to

try and make certain that we are able to get the information that

we need so people have confidence in what they are doing as well.

Thank you very much, and I yield back.

Mr. PLATTS. I thank the gentleman.

The ranking member and I have been partners on this effort for

almost a decade now. Because when I chaired from 2002—or 2003

to the end of 2006, Mr. Towns was my ranking member; and then

he chaired the subcommittee, and I was his ranking member. Now

we have switched places again, but we share the focus on good government and especially financial management and, in this case,

with the Department.

We will keep the record open for 7 days for any of the committee

members who want to submit their own opening statements and

for any extraneous material that we will receive here today or

thereafter.

We certainly welcome our witnesses: Mr. Mark Easton, who

serves as Deputy Chief Financial Officer for the Department of Defense; Mr. Daniel Blair, who is the Department of Defense Deputy

Inspector General for Auditing; and Mr. Asif Khan, Director of Financial Management and Assurance at GAO.

Pursuant to our committee rules, if I could ask all three of you

to stand and we will swear you in.

Would you please raise your right hands?

[Witnesses sworn.]

Mr. PLATTS. Thank you. You may be seated. Let the record reflect that the witnesses answered in the affirmative.

Our understanding is our floor schedule is we may have votes

around 11 o’clock; and, once we go over, we will be over there for

a long time. So what our goal is is to hear your statements and

then get to an exchange of Q and A so we can have as productive

an exchange here this morning and conclude when we have to go

over for votes so that you are not kept waiting.

And certainly with you and your staffs as well as with Members

and our staffs, this is kind of, I would say, the public front of an

ongoing effort to work with you previously and going forward, staff

to staff or Members and staff, on this important issue.

And while we are grateful for all three of you being here, Mr.

Blair and Mr. Easton, I want to especially thank you for your prior

service in uniform. I love what I do, proud of what I do, but what

I do pales in comparison to what you who and all who have and

are wearing the uniform of our Nation’s Armed Services. So, again,

thanks for your service.

So, with that, Mr. Easton, if you would like to begin.
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STATEMENTS OF MARK EASTON, DEPUTY CHIEF FINANCIAL

OFFICER, U.S. DEPARTMENT OF DEFENSE; DANIEL BLAIR,

DEPUTY INSPECTOR GENERAL FOR AUDITING, U.S. DEPARTMENT OF DEFENSE OFFICE OF INSPECTOR GENERAL; AND

ASIF KHAN, DIRECTOR OF FINANCIAL MANAGEMENT AND

ASSURANCE, GOVERNMENT ACCOUNTABILITY OFFICE

STATEMENT OF MARK EASTON

Mr. EASTON. Chairman Platts, Ranking Member Towns, Mr.

Lankford, members of the committee, thank you for the opportunity to speak with you today on the subject of financial management within the Department of Defense. I have submitted a statement for the record which I will summarize briefly this morning.

As Deputy Chief Financial Officer, I am responsible to our Chief

Financial Officer for financial policy, systems compliance, and internal controls governing financial and accounting aspects of our

business operations across the defense enterprise. I have dealt with

these matters in various capacities for more than 38 years, both in

uniform and as a civil servant. I am proud to be part of a financial

management work force that is operating around the world providing mission support to our warfighters. This team is also solving

today’s problems while being called upon to learn new skills and

lead change.

I also recognize that DOD financial management has remained

on the GAO high-risk list since 1995. In my experience, a reasonable level of control exists across our enterprise, particularly at the

local level, but in my current position I also see enterprise-wide

weaknesses that demand an enterprise-wide response. The lack of

auditable financial statements at DOD as a whole is a symptom of

those weaknesses.

To provide some amount of context for my comments, I want to

cover DOD’s financial management goals.

First, we have to, obviously, acquire the resources that we need

to meet national security requirements; and that is our budget role.

Second, we have to ensure that we are using those resources legally, effectively, and efficiently. The execution side of our business—and that is an immense challenge—that is where I spend my

time and energy and where many of the challenges lie.

And the third is to ensure that we have a world-class financial

management work force.

To meet current challenges and to improve financial information

and achieve audit readiness, we have adopted a new approach with

the team that we have in 2009. We feel that that approach unites

the enterprise around financial and asset information that we use

every day to manage, specifically, budgetary information and the

physical existence and completeness of property.

Previous DOD teams have tried but with limited success. So it

is fair to ask, why will this time be different? Simply put, we feel

we have the right strategy, we have dedicated resources, we have

absolute and solid leadership support and a governance process

that will assign accountability for actions. 2017 is a long time from

now, so we recognize that we have to show specific interim

progress; and that is what we are, in fact, doing.
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One test already under way is our audit of the Marine Corps

statement of budgetary resources which we believe will result in a

positive audit opinion. When successful, this will be the first military service ever to achieve an audit of a single financial statement.

But there are other events across the Department to include

independent validation on specific things. For example, last month

we completed an examination and validation by an independent

public accountant of our funds distribution and control process,

what we call appropriations received. That resulted—that segment

resulted in a clean opinion.

The Defense Information Systems Agency is in the process of auditing its fiscal year 2011 books. We expect a clean opinion in that

audit.

This year, our Defense Finance and Accounting Service, our primary service provider in that regard, conducted an audit of its civilian pay entitlement system and received a clean opinion. That

system is used not only for defense but for several non-defense

agencies.

And, finally, in July, we began—have not completed but began

an audit of the Air Force’s funds voucher Treasury reconciliation

process, an indication that we can reconcile at least at the transaction level our checking account statement.

These are just a few examples. They build on past achievements,

including auditable financial statements for the Army Corps of Engineers civil works projects and several defense agencies.

We also have a number of large trust funds that are currently

auditable, and we will improve as we apply lessons learned from

those recent experiences, as well as getting feedback from the Government Accountability Office and DOD IG. And I can assure you

this is not the first time that this panel has met to work on this

particular issue.

However, there is an enormous amount of work still to do to

achieve and sustain auditable financial statements. It will require

fundamental changes. The Government Accountability Office has

identified significant specific challenges, and I wanted to talk to

each of those.

The first is leadership or tone from the top. We’ve implemented

a government structure early in the current administration, and it

has kept the attention of senior leaders, and it will continue to do

so.

Second is work force competency. As I said, we have a dedicated

and professional work force who is on the job, doing the job, but

financial audit competency is one that we need to continue to emphasize.

Third is information technology. Many of our IT systems are old,

stove-piped, designed to conduct basic budgetary accounting but

not to do the things that we need to do for full auditability.

Improved systems alone, however, will not eliminate our weaknesses or guarantee auditable statements. Achieving auditability

requires a consistent—a fourth element—a consistent level of internal controls, and that may be the key foundational thing that we

put as a priority.
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Looking ahead, we are determined to meet the congressionally

mandated deadline of 2017. It is an ambitious but an achievable

goal. However, we think that this time will be different. We have

a Chief Financial Officer in Secretary Hale who has thoughtfully

assessed and applied the lessons learned of many of those false

starts that you alluded to, while also seeking the advice and counsel of external stakeholders and oversight activities.

We also have the strong support and commitment of Secretary

Panetta and anticipate an equivalent level of energy and interest

throughout the Department.

Finally, from my perspective, there is clear value and critical importance in the public confidence that auditability would demonstrate.

Beyond that, the benefits to the Department, its mission, and to

the taxpayers is very clear to me. This effort is consistent with the

administration’s overall campaign to reduce waste across the government. The American people have always supported our men and

women in uniform, but that does not relieve us from the obligation

to ensure that we are managing scarce resources carefully and effectively. We are committed to doing so. This commitment will be

especially helpful in reinforcing our current efforts to combat improper payments. We have a solid program, but our quarterly results are questioned because of the many weaknesses that have

been discussed.

In summary, we recognize the challenges associated with improving financial management in the Department. To meet those challenges we’ve developed promising partnerships across the enterprise to include our new chief management officers as well. We

have implemented a new, focused approach that includes near-term

goals in addition to the long-term goal of achieving auditable financial statements by 2017.

Mr. Chairman, this concludes my statement. I appreciate your

comments and support for our men and women in uniform, and I

look forward to your questions.

[The prepared statement of Mr. Easton follows:]
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Mr. PLATTS. Thank you, Mr. Easton.

Mr. Blair.

STATEMENT OF DANIEL BLAIR

Mr. BLAIR. Chairman Platts, Ranking Member Towns, and Mr.

Lankford, good morning and thank you for the opportunity to appear today before you on behalf of the DOD IG to discuss financial

management challenges facing the Department.

These challenges prevent DOD from collecting and reporting financial information that is accurate, reliable, and readily available

for decisionmakers. Over the past few years, the Department has

worked diligently to address its financial management challenges.

However, more progress is required to be good stewards of the taxpayers’ money.

Today, I will discuss three key challenges that must be addressed

before DOD will be able to demonstrate sound financial management through a financial statement audit: first, improving data reliability; second, improving internal controls; and, third, effectively

implementing new systems called Enterprise Resource Planning

systems [ERPs.]

Reliable data are essential to making sound business decisions.

However, we frequently identify financial data that are inaccurate

and unreliable. Since fiscal year 2007 we have issued 89 reports

that highlight data quality problems. Our audit of the controls over

the Army’s deployable disbursement system, which contains key information for $13 billion of commercial payments, found that the

system did not have reliable data for over 73 percent of the transactions that we reviewed.

Significant improvements must also be made in DOD’s internal

controls. As you know, these controls are the first line of defense

to safeguard assets against fraud, waste, and abuse. Currently,

longstanding internal control weaknesses are affecting the Department’s ability to obtain a clean audit opinion. In addition, without

strong internal controls, the Department is at high risk of making

improper payments.

In fiscal year 2010, the Department reported nearly $1 billion in

estimated improper payments. However, DOD’s estimation process

did not review more than half of the first quarter of fiscal year

2010 gross outlays; and, therefore, we question the reliability of

this estimate. Simply stated, the Department does not consistently

know that it is paying the right person the right amount at the

right time.

Our audit of the contracts supporting the Broad Area Maritime

Surveillance Program found that the DOD personnel did not validate that the contractor was entitled to receive over $329 million

because none of the invoices were reviewed. My written statement

for the record includes copies of two actual invoices that were paid

under this contract.

Effectively implementing the Department’s new ERP systems is

a key component of its auditability strategy. These new systems

are intended to eliminate many old legacy systems, provide useful,

timely, and complete financial management data. However, unless

the Department first improves its data quality and reengineers its

underlying business practices, many of the intended benefits of
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these new systems, estimated to cost over $9 billion between fiscal

years 2010 and 2017, will not be realized.

We’ve also noted that the milestones for 4 of the 11 ERP systems

has begun to slip.

Further, we are concerned that other milestones for completing

critical financial management improvement efforts are very close to

the fiscal year 2017 deadline. Full deployment of some ERPs, as

well as asserting audit readiness of the statement of budgetary resources, will not happen until fiscal year 2017, as some critical

components will also not be validated prior to this date. Any delay

in these milestones will likely prevent the Department from meeting its goal.

In closing, sound financial management is critical to providing effective stewardship over the billions of dollars that the Department

receives annually. DOD must continue to improve data quality and

its internal controls in order to reduce its vulnerability to improper

payments.

While I recognize the significant effort that DOD leadership has

put forth to resolve these longstanding financial management problems, frankly, much more remains to be done. Senior leaders in the

Department and the Congress need reliable, timely financial information in order to make accurate decisions and to ensure that

every dollar spent actually supports the warfighter and improves

military readiness.

This concludes my statement today. I’d be happy to take any

questions that you may have for me.

[The prepared statement of Mr. Blair follows:]
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Mr. PLATTS. Thank you, Mr. Blair.

Mr. Khan.

STATEMENT OF ASIF KHAN

Mr. KHAN. Chairman Platts, Ranking Member Towns, and Mr.

Lankford, good morning. Thank you for having me here. It is a

pleasure to be here to discuss DOD financial management and

some of the issues they are facing in terms of getting auditable.

At the outset, I would like to thank you for holding this hearing.

Focused attention is necessary to be able to solve these challenges.

In my testimony today, I will discuss the status of DOD financial

management weaknesses and its effort to resolve them, the challenges DOD continues to face improving its financial management

operations. My testimony is based on our prior work at DOD.

Regarding the status, for more than a decade, Congressman

Platts, you mentioned, DOD has dominated GAO’s list of programs

and operations at high-risk due to their vulnerability to waste,

fraud, and abuse and mismanagement. In the last 20 years, as a

result of significant financial management weaknesses, none of the

DOD military services—the Army, Navy, or the Air Force—have

been able to prepare auditable financial statements.

DOD’s past strategies for improving financial management have

generally been ineffective, but recent initiatives are encouraging.

Changes to DOD’s plan, the Financial Management Improvement

and Audit Readiness plan, the FIAR plan, if implemented effectively could result in improved financial management and progress

toward auditability.

DOD faces many difficult challenges in overcoming its longstanding financial management weaknesses. I will highlight five of

these significant challenges.

First, one of the toughest challenges is sustaining committed

leadership. DOD’s Comptroller has expressed commitment to the

FIAR goals and has established a focused approach to achieving

long-term goals that, if implemented correctly, will include interim

goals to provide the opportunity for near-term successes on the way

to long-term goals. However, within every administration—and, of

course, between administrations—there are changes in senior leadership. Therefore, it is paramount for the FIAR plan and other current initiatives to be institutionalized at all working levels within

DOD.

Second, weaknesses in DOD’s internal controls over financial

management are pervasive and a primary factor in the Department’s inability to become auditable. DOD has efforts under way

to address known internal control weaknesses. However, their effectiveness has not yet been seen. As discussed in our recent report, because of the lack of effective internal controls, the DOD Inspector General disclaimed the opinion of the Marine Corps’ fiscal

year 2010 Statement of Budgetary Resources, the SBR.

The third challenge I want to cover is a competent financial management work force. With the right skills and knowledge to implement the FIAR plan, analyzing the skills needed and building and

retaining such work force are important actions now to ensure continued progress in implementing the goals of the FIAR plan.
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The fourth challenge is to assure accountability and effective

oversight. To improve efforts, DOD and its components have established senior executive committees and designated officials at appropriate levels to oversee financial improvement. It will be critical

for senior leadership at each DOD component to ensure that responsible officials are held accountable to their component’s

progress. We recently reported that Navy and the Air Force oversight of their implementation plans was not effective, resulting in

their incorrectly asserting that they were ready for audit. Both the

DOD IG and the Comptroller made the final decision correctly to

determine the plans were not ready.

Fifth, Enterprise Resource Planning [ERP], systems are expected

to form a core of business information systems in DOD components.

According to DOD, their successful implementation is not only critical for addressing long-term weaknesses in financial management

but equally important for helping to resolve weaknesses in other

high-risk areas such as business transformation, business system

modernization, and supply chain management.

The components, however, have largely been unable to implement ERPs that deliver the needed capabilities on schedule and

within budget. In a preliminary result from a current review, we

identified issues related to ERPs deployed to DFAS, the Defense

Finance and Accounting Services, by the Army and the Air Force.

DFAS users of the ERP told me they needed to devise manual

workarounds and software applications to perform routine tasks.

To the degree that ERPs do not provide intended capabilities, the

goal of DOD-wide audit readiness by fiscal year 2017 could be in

jeopardy.

In closing, I am encouraged by the recent efforts and commitment DOD leaders have shown toward improving the Department’s

financial management. However, DOD continues to face significant

challenges; and success may depend on DOD’s ability to sustain

and increase its current efforts, commitments, and momentum.

Congressional oversight will play an indispensable role in assuming continued progress, and I commend you for holding this hearing.

Mr. Chairman, this concludes my statement. I’ll be happy to answer any questions that you or the other Members may have.

Thank you.

[The prepared statement of Mr. Kahn follows:]
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Mr. PLATTS. Thank you, Mr. Khan.

We will move into questions, and I yield myself 5 minutes to

begin.

Just a statement up front, Mr. Easton. Your written statement

and you said here today something that jumped out to me as a

quote: ‘‘Why will this time be different?’’ And I think that is something the ranking member and I, because of for almost 10 years

being involved in these issues, your acknowledgment that—you

know, we’ve heard some good, encouraging words in the past. I

have seen, as with DIMHRS, over $1 billion spent on the issue.

Yet, here we are still struggling to move forward—and I’ll get into

it if we have time a little later—have one branch already saying

6 years out they don’t think they can meet the deadline, which that

does concern me also from a leadership standpoint that they are

saying that, you know, hey, we saved the world in World War II

in 4 years; yet we can’t, you know, get our books straight in another 6 years.

But I want to start with, first, the importance of this issue and

why it is so important. You know, our hearings are not sexy, glamorous, exciting hearings, but they are so important because they

are about the American people’s money, how it is being handled

and, in this case, how we make sure those funds are available for

the warfighter.

Senator Coburn put out earlier this year a report on deficit reduction entitled, ‘‘Back in Black,’’ and he referenced in there that

the Marine Corps, through improved financial management, had

saved an estimate about $3 for every $1—$3 savings for every $1

they spent on those improvements. Across the government, it actually seems to be about $10 to $1 savings. So, if we extrapolate that,

we are talking probably at least $25 billion or more in annual savings in just the Department of Defense; and given that we are moving through cuts of over $400 billion to the Department in the coming 10 years and perhaps further cuts as part of the Budget Control Act, these type of savings are critically important.

I guess, Mr. Easton, I would ask you, do you think that Senator

Coburn’s number of at least $3 to $1 savings and perhaps as high

as $10 to $1 is a legitimate number when we talk about what we

may be able to save if we are successful in this effort?

Mr. EASTON. I’d be reluctant to specifically commit to a number.

I think that there is clearly value in the importance of doing this.

For example, the Marine Corps has already demonstrated out-ofpocket costs relative to reducing their bill for finance and accounting services. I think that there has been identified in their business

practices where they’ve become aware of how to use that information in a more timely manner to ensure that they can do that. So

I am absolutely confident that the value is there.

I would be reluctant—as I said before, I try to stay on the financial execution side of the house, but that value proposition I think

internally is one that we need to look very seriously at and act

upon.

Mr. PLATTS. And even if it is half of that estimate and it is $10

to $15 billion in today’s—in any economy, in any time, that is real

money. It is the people’s money and especially in a tight economy
69

and where we have, you know, trillion dollar plus deficits each and

every year now.

Mr. EASTON. Absolutely, yes, sir.

Mr. PLATTS. Mr. Blair, I want to, again, kind of start more of the

big picture. The FIAR, the Financial Improvement Audit Readiness, plan is so critical here and kind of the game plan of how do

we get to, you know, a clean audit 2017.

Given that, I was I guess discouraged by reports from GAO

that—and I think Mr. Khan just referenced Navy and Air Force—

in at least two of the financial improvement plans that they’ve

looked at were done not in compliance with the guidelines of FIAR;

and not only were they not done in compliance with the guidelines

which, again, are the critical game plan here, but the oversight

that was put in place to try and make sure the compliance occurred, the oversight didn’t occur from what GAO’s report finds. So

from your perspective as IG and then, Mr. Easton, yours as well,

that is not encouraging. Am I missing something here or are we off

to not a good step in this area, given the failure to comply with the

FIAR guidelines?

Mr. BLAIR. Mr. Platts, I think that the key point here is the oversight that we provided over those FIAR package—FIAR assertion

packages, it correctly concluded that the Department wasn’t ready.

We found in some situations that the Department’s initiatives to

review their business processes identified areas that need to be corrected. Those corrective actions hadn’t been implemented. Yet the

assertions continued to move forward, and the Department continues to say we are audit ready. And so I think we appropriately

stepped in and said, stop, we don’t think you are ready.

And I think what is happening now is that there is a learning

process going on. And the Department’s actually taking the results

of its own review processes, the feedback that we give them, they

are taking it very seriously, and they are now looking at what further improvements do we need to make before we come back and

say, yes, we are ready for an audit.

Mr. PLATTS. And, Mr. Easton, maybe that is—if you can touch

on what Mr. Blair just said, given that these are kind of early ones

that were identified as challenges or problems, how do we make

sure and are we taking proactive steps that the lessons of those

FIPS—not being compliant, not being properly handled, moving

forward anyway—that we don’t continue to repeat those errors? Because, if we do, 2017, 2027, we will be here and—I have already

got a lot of gray hair, but more gray hair—and still be talking the

same issues. So how do we learn from those mistakes and not repeat them?

Mr. EASTON. We spend a lot of time in terms of trying to crossfertilize, both at a senior level from a governance perspective as

well as a working level, to be able to learn from what we found

from the Marine Corps audit, learn from those packages. In both

of those packages, the GAO identified we had, in fact, as Dan said,

basically said you are not ready.

And so I think that what we are trying to do now, it goes back

to the—a little bit of a competency issue. And I say competent

meaning our people are some of the best people in government—

I can assure you of that—but, at the same time, from a financial
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audit perspective, we don’t have those skill-sets. We are not viewing it in the way that a financial audit needs to view it and that

management needs to view it.

So we are trying to be able to get in as early on in those things

to be able to sort of mortarboard this up front to make sure that

they are going to go into those process and apply the lessons up

front. So that is what we are doing in that regard.

Mr. PLATTS. I want to yield to the ranking member but a quick

follow up.

I know you’ve put in place in essence a certification program to

try to get your financial management personnel more up to speed,

I’ll say. Is this going to be part of that, you know, that they understand the role that the FIAR compliance, you know, the guidelines

play and that, as they move forward, they need to be looking to

make sure they are in line with it?

Mr. EASTON. That is absolutely one of the key components. I

guess the two things—the two real key things in the certification

program we want to emphasize, this is one of them, to ensure that

the quality of the information is good, and the second is analytical

skills so that we can get the most out of the program; and so we

will be including that.

Mr. PLATTS. Okay. Thank you.

I yield to the gentleman from New York.

Mr. TOWNS. Thank you very much, Mr. Chairman.

You know, I want you just to elaborate a little further, Mr. Easton, as to why this time is going to be different. I want to hear

more about that.

Mr. EASTON. I think that what we have done in the past, because

I have been involved—this is sort of a second career opportunity for

me. Having been in the Department of Defense for 38 years, I

spent most of my time in the logistics community, and so I was an

operator. And as I got into the financial management community,

one of the things that I found is that I had a much different perspective of what I thought financial—the quality of our financial information when I was in the logistics community, than when I was

working in the financial management community.

So the key issue that I would like to use, using that as an example, you know, we have been trying to tackle this too much in the

past as a financial management issue. It really reflects a weakness

in our business enterprise. And so every contracting officer, every

logistics officer, every personnel officer needs to understand how

they do their job affects money and financial information. And so

in focusing on the information that we all can agree upon, typically

budgetary information and logistics property, I think we are trying

to bring those communities together. And so I would characterize

that as our primary weakness in past attempts, and that is why

I think that this strategy will work.

Mr. TOWNS. Thank you very much.

Because I want you to know that this is not one of those ‘‘I got

you’’ committees. This is one of those ‘‘I want to help you’’ committees. So that is the reason why we keep staying with this and seeing in terms of what we might be able to do. However, it is encouraging that, you know, President Obama and Secretary Panetta
71

have singled out financial management improvement as a top priority at the Department of Defense.

To quote the Secretary: ‘‘It is unacceptable to me that the Department of Defense cannot produce a financial statement that

passes all financial audit standards.’’ That will change, he said: ‘‘I

have directed that this requirement be put in place as soon as possible. America deserves nothing less.’’

As long as leadership remains engaged, I can see this process

going forward. Unfortunately, however, within every administration there are changes in senior leadership—and I am happy to

hear that you’ve been around for 38 years, happy to hear that—

which interrupts their involvement in financial improvement initiatives. Sometimes the interruptions are severe enough to derail the

entire process.

GAO recommends that current initiatives be institutionalized

throughout the Department at all working levels. In order for success to be achieved—and I want to go to you, Mr. Khan. Since this

is your recommendation, please explain how you institutionalize financial management improvement so that it withstands changes at

the senior level, who comes or who goes, that, regardless, that this

will continue to move forward.

Mr. KHAN. Mr. Towns, that also touches upon oversight and accountability. That is going to go a long way to help institutionalize

the tenets of the FIAR plan and buttressing the financial management within DOD.

Like we had mentioned in our report, one of the issues with the

oversight of the two accessible units at the Navy civilian pay and

the Air Force existence and completeness was that the oversight

and responsibility at ground level, there was not really adequate

acknowledgment that they were not really following the FIAR guidance. Once the oversight and the responsibilities are firmly institutionalized, there will be much more of check and balances within

the government structure to make sure that things are not moving

forward unless they are actually being done.

Mr. TOWNS. Let me ask you this. Do you think that the staff that

is in place are really capable of carrying out this mission?

You know, sometimes we ask people to do things that they just

can’t do. And based on our own salary scale we watched that over

at the SEC, that when we had people who were making very little

money and competing with people that were making tons of money,

and, of course, the stability in terms of the work force was not good

because people would stay a little while and then leave. Do you see

this as being a part of this as well?

Mr. KHAN. Like I mentioned in my testimony, competency of the

financial management work force is very important for two reasons. DOD financial management is complex from a technical perspective. Working in those integrated systems is not easy. DOD is

a complicated environment. So, therefore, training, getting the

right skill-sets to be able to address the current challenges is critical.

I mean, we haven’t done specific work on the competency of the

skill-sets. However, there was a requirement from the National Defense Authorization Act of 2008 for DOD to go and do skill-set assessments under many different functions, financial management
72

being one of them, and that is an area which was not done. And

I think it is being repeated again in the National Defense Authorization Act of 2011, that they go back and address the financial

management skill-set issue. That is going to go a long way to answer the question that you have, sir.

Mr. TOWNS. Mr. Chairman, I know my time has expired, but let

me—I guess to you, Mr. Easton. You know, when we stopped the

draft, we had to create a bonus situation to be able to keep certain

folks in the military that we need for these essential kind of jobs.

Do you think that maybe we need to do something like that here

to hold people that we need and that can help us with some kind

of bonus program or something? Because, you know, this bothers

me, the fact that, you know, we don’t know how much money—and

I am looking at this voucher here. I mean, this is very disturbing.

I’d like you to answer that, but my time has expired.

Mr. EASTON. If I could redirect, I guess several of those things,

in my estimation, tie together. I think that the key to really institutionalizing this is people, as you mentioned. I think we absolutely have the capability in our people to be able to do this.

I think that we need to ensure that we are not just talking at

the senior level. We need to begin to institutionalize this by ensuring that, on the one hand, we are bringing people with the skillsets in from the private sector. That is one thing that we are doing.

I think that we need to factor this into the training programs.

There may be some opportunities to use bonus, things like that,

but, at the same time—you know, we were at another session, and

Congressman Conaway mentioned that he was in the field and a

soldier—I think had mentioned that he’s getting the word.

And so, you know, we need to, through training, we need through

communication, be able to get the word so we are not—this is not

just a Pentagon program. This is a program that has to be driven

into the field. I think the institutionalization, as well as the leadership perspective, but we really have to get the word out. It has to

become part of our DNA and culture in DOD.

Mr. PLATTS. Gentleman from Oklahoma, Mr. Lankford.

Mr. LANKFORD. Thank you, Mr. Chairman.

Thanks, y’all, for being here. I am sure this is your favorite part

of the week. You’ve been looking forward to it all week, thinking

I can’t wait until Friday, I am going to do a congressional committee. And I appreciate your work and your service and for staying on top of this. You’ve probably spent a lot of time in a quiet

office digging through financials and trying to track these things.

So I appreciate your work on it.

You men know, we have the finest military in the world. No one

does it better than us. No one’s ever done it as good as we do it.

We can park a satellite on the horizon and look through a tent and

tell you exactly what is in it, but we can’t track our finances. That

is a focus on leadership, and I have appreciated everyone mentioning. It is just this consistent focus of, if we are going to do get

this done, we’ve got to focus on this and get this done.

I do commend the President and I do commend Leon Panetta

coming in and saying this has to be a focused priority. You all are

saying exactly the same things. So I appreciate that. It is a focused

leadership to be able to get this thing accomplished.
73

I do want to get a chance to ask a couple of specific questions,

though.

Mr. Easton, you mentioned financial controls—in fact, all of you

at some point mentioned something about financial controls. Give

me some specific ideas that you are looking at at this point to saying we can improve financial controls by doing these things, so you

have specific things already on the radar for that.

Mr. EASTON. We are going at the key processes. I mean, civilian

pay—I mean something as simple as civilian pay where we look at

and identify key controls. We try to standardize the processes as

much as we can, but we identify key controls that, even if the time

and attendance systems may be different, we have people thinking

the same way to be able to implement key controls and be able to

use them as well. Having a control is one thing but actually being

able to do that. So civilian pay, military pay, and the procure-topay process, how we write contracts, and some of the issues that

Dan mentioned in terms of the contracting process.

This is really a team sport. It is not just a financial issue. It is

an issue of how we write contracts, how we administer contracts

and keeping the focus on those controls throughout the process.

Those are a couple of examples that I would offer, and so it really

is pretty basic, and it amounts to doing your job on a day-in-andday-out basis.

Mr. LANKFORD. It is training the people. It is knowing what is

the job, what is the task, and training people for that. And that is

why it is challenging for me to look at and say, 6 years out, there

is still some hesitancy to say can we get there in 6 years when it

is the basics of defining out what the job is and training people to

be able to do a job.

Mr. EASTON. And I think—and several people mentioned the Air

Force as a high risk—identified some concerns with risk. I think

that they link—and it is important to link the investment in our

systems to this process as well, but getting back to the basics I

think is something that we can do that will support this as well

as to increase the likelihood that we will successfully do that system. We have had a problem in the past where we tend to look for

a silver bullet, and when we look in the mirror, I think it is just

a question of doing the basics well.

Mr. LANKFORD. Okay. Other comments about dealing with financial controls, specific ideas on that, what has to be done?

Mr. BLAIR. Mr. Lankford, I just want to leverage a little bit more

on what Mr. Easton just said.

Really, financial management goes way beyond the traditional

bean counters. If you look at how the Department executes a lot

of its missions, it is done primarily through contracts; and one of

the things that is a consistent theme in my testimony is a lack of

effective contract oversight, effective contract administration. When

so much of your money is going out that way and you don’t have

a good process in place to review all the vouchers and you don’t

have good edit checks in your systems to make sure that everything is done efficiently, those are two areas that I think the Department could significantly benefit from.
74

Mr. LANKFORD. Is that the training of the contracting officer or

is that training of the person that is next after the contracting officer? Where is the gap there?

Mr. BLAIR. Sir, the gap is in both locations. It is the contract officer level when it comes to putting the contract in place, but it is

also the contracting officer’s representative who is the person on

the ground who is supposed to be doing that oversight.

Mr. LANKFORD. Because we’ve had, obviously, numerous issues

with a contracting officer writing out a contract, putting it out

there, and then, as we go along, then the definitions change and

the price skyrockets as the definitions of what we are really looking

for change. So we really didn’t get a good definition at the beginning.

And I am quite confident many of these systems are very complicated and it is hard to get it right the first time when things—

as we go along. But it is also difficult when everyone as you go

along says, oh, I’d like to also add this and we thought about this

and can we change this. So is that a matter of getting contracting

right at the beginning, I say again? Is that the bigger of the two

issues or is the bigger issue the person that is behind it?

Mr. BLAIR. I don’t think you can look at one as being bigger than

the other.

Mr. LANKFORD. Okay.

Mr. BLAIR. I think they are both equally important. The requirements have to be correct in the beginning, and the oversight

throughout the contract process has to be effective.

Mr. LANKFORD. Okay. Mr. Khan.

Mr. KHAN. Just to add to what Mr. Easton and Mr. Blair have

mentioned, I think it is very important to have a baseline of all the

internal control deficiencies currently to be able to build on; and,

second, just like Mr. Blair has just mentioned——

Mr. LANKFORD. I am sorry to interrupt. Is the baseline—does a

baseline like that exist?

Mr. KHAN. Not that we know of.

Mr. LANKFORD. Okay. So, at this point, part of the issue is just

writing out where do we have the problems?

Mr. KHAN. Absolutely, and that is part of the—one of the basic

FIAR plan tenets, that they have to do the discovery process. So

that——

Mr. LANKFORD. We are set to have that part of the process complete by when? Obviously, getting the full list of where we have

problems precedes solving problems.

Mr. EASTON. I think that we go through the discovery process.

But in each of the segments—I mean, I think in many cases each

of the components focusing on that have broken it up into segments

and so those processes may take place at various times.

I guess I would emphasize, too, it is a process of really looking

in the mirror and finding out how you are doing business today.

I would assert that we have more control than we are willing to

present, and it is a question of stepping back and looking at how

we do business. And I can give you some examples in that regard,

but we clearly have to do that.

Mr. LANKFORD. Okay. Thank you.

Mr. Khan, go ahead.
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Mr. KHAN. Just to add to that, just like Mr. Easton and Mr. Blair

have mentioned, I mean, many of these transactions originate in

nonfinancial areas. Therefore, it is critical—the systems are going

to be critical. The sooner they are implemented, this end-to-end

process off a particular transaction cycle is going to be put into

place. Controls are going to change along with the new system. So

the sooner these systems are implemented, the better it is going to

be, and it is going to go a long way to addressing the control weaknesses that we have right now.

Mr. LANKFORD. Okay. Thank you. Gentlemen, I appreciate that

very much.

Mr. Chairman, I appreciate your patience with me going a little

bit long.

Mr. PLATTS. No problem, and we are—because we still haven’t

had any vote bells go off, we are going to continue for my colleagues who—if your times allow, have a second round if you like.

I am going to kick it off.

Before a question on a specific issue of improper payments, Mr.

Easton, you mentioned in your testimony and Secretary Panetta

taking a very hands-on approach to this, the importance of financial management and improvement, and you referenced that you

are kind of preparing an update for him, where things stand and

what your plans are, maybe similar to what you are sharing here

today. But I guess, what is the timeframe for that to be provided?

And if it is possible for a copy or a summation of what those plans

are, if it is possible to have it shared with the committee as well,

I think it would help us as we try to partner with you so we are

all on the same page.

Mr. EASTON. Absolutely. We are in the process. Secretary Panetta and Mr. Hill are reviewing our current status and plans,

much of the same things that we’ve talked about today, and so we

would anticipate—I don’t want to get out too far in front of my boss

or his boss, but we would certainly want to share those with you

and the committee.

Mr. PLATTS. That would be great. Thank you.

I want to turn to the specific issue of improper payments. You

know, across the government, the official number, most recent, is

$125 billion of improper—when I share that number back home,

my fellow citizens think I misspoke, that every year we are making

improper payments of at least that. We think the real number is

probably at least $200 billion, because we don’t account for maybe

every improper payment made.

When it comes to DOD, I know, Mr. Easton, you I think reference a 1 to 2 percent rate, which, even in comparison, that would

be a good percent, but given we are talking $550 billion, that would

still be billions of dollars of improper payments within the one department. But I guess what I want to is—Mr. Easton, you highlight

that as a strength of where you are doing well.

Mr. Blair, Mr. Khan, IG GAO raise some specific concerns that

there is not a real ability to accurately assess if that is the right

amount, 1 to 2 percent, and specifically that there are hundreds of

billions in outlays that were not assessed at all. And so how do we

know what the real number is?
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So I guess, Mr. Easton, we can start with you. How you think

you come up with your number of that 1 to 2 percent; and then,

Mr. Blair and Mr. Khan, if you could reference your concerns and

where you differ here.

Mr. EASTON. We have about six major programs. DFAS, our finance and accounting operation, disburses about 90 percent of our

dollars. So there is five or six primary programs that they report

upon as well. Many of our payments—many of our payments are

recurring payroll-related payments, contract payments. Admittedly,

some of them are very, very complex.

The two areas of difference—I mean, I have to acknowledge the

fact that, lacking a clean audit opinion, lacking and acknowledging

comprehensive controls, there are weaknesses. I would say that we

try to compensate for those weaknesses to the maximum extent

possible and report accurately in each of those numbers, and that

is why I consider it a strength.

However, the two areas of difference, just to mention two, is in

the commercial pay area because of the difficulty—and, you know,

we put so much emphasis in prepayment audits. We had not moved

into a statistical sampling, and a lot of your $125 billion is driven

by legitimate statistical sampling. That was the point GAO has

brought up with us at the time. OMB was on board with our approach. We’ve since changed that. So we’ve closed that one particular gap.

The issue relative to the DOD IG report—and Mr. Blair will comment more on that—was there was about a hundred and—I want

to say $130 billion, I believe, that were not included. Much of that

number represented a transfer payment into a trust fund, and

their point was accurate. In other words, we should be able to reconcile all outlays, but some of the outlays that were considered

technically excluded then were not intended to be included. It was

a difference of opinion, admittedly, between us and the IG.

Mr. PLATTS. Mr. Blair.

Mr. BLAIR. Mr. Easton’s correct that we do differ on some of

these issues. There are some areas where the Department did not

do a very good analysis or did not do an analysis at all and really

focused a lot in the contract and commercial payments areas; and,

as I indicated before, that is where so much of the Department’s

dollars are going.

With regards to the transfer—was it a transfer, was it not a

transfer—what we said to the Comptroller staff is, you know, we’d

like to see a reconciliation so that you can show us what was a

transfer, what was a real disbursement or a payment of a bill that

was owed.

And one of the things that we wanted to do with our report was

to say here are some ideas that we think you can incorporate in

your next estimate methodology. The results of DCAA’s audit, the

results of our audits, those oftentimes point to areas where

vulnerabilities exist.

The other thing that the Department can do is expand its methodology to look at the instances where they offset a future contract

payment because of a prior improper payment or overpayment

amount to include the results of when EFTs, electronic fund trans-
77

fers, are rejected because it went to the wrong place. That is another indication that it is an improper payment.

Also, to look at where there are recalls. A recall is a situation

where the Department can go in and take the money back out of

the bank account.

All of those are specific areas that weren’t included, that if they

were included would help develop a more robust methodology; and,

as I indicated before, you don’t know unless you look. And so the

more introspections that the Department has, the better they are

going to be able to improve their controls.

Mr. PLATTS. Mr. Khan, before you answer, if you want to—what

you have to share, and specifically I know in 2009 GAO made I

think 13 specific recommendations on this issue that maybe overlap or complement what Mr. Blair just referenced. Where do you

think we are on those 13 specific recommendations and which, if

any, that have not been followed that are most important that

we’ve talked about?

Mr. KHAN. Congressman Platts, I will get you the specifics on the

13 recommendations for the record, though.

But just to add to what Mr. Easton and Mr. Blair have mentioned, our main concern is, again, that not all the transactions, especially about commercial pay, were included in the risk assessment calculation for internal—for improper payments.

Also, improper payments is an area which is self-reported; and,

given the control environment within DOD itself, it may not be a

complete number. Like we testified yesterday, that funds control

and payments control is an issue that GAO is concerned about the

completeness of the reporting of the anti-deficiency violations and

the improper payments. So the lack of controls may not provide a

complete picture to the officials within DOD from which they are

reporting.

Mr. PLATTS. The question—I mean, the fact that we have improper payments at all and especially billions of dollars goes to the

internal control issue. Years back when we created the Department

of Homeland Security, this subcommittee, Mr. Towns and I, worked

and we pushed through an actual audit on their internal controls

to try to get bedrock in that new department so then we could—

the feedback we’ve gotten from the Department is that was great

for them because it really got them a good place to then build on.

I know the challenge would be dramatically greater here with

the budget, you know, probably 13 times or so DHS’s. So is it unrealistic of that type of approach here or some variation to try to get

the bedrock on the internal control issue that relates to improper

payments and, you know, ultimately to that clean audit?

Mr. EASTON. One of the areas that I think that I can point to

in the past that have indicated why we haven’t made progress is

that we’ve looked at it from just a financial management perspective, and we’ve looked at it in narrow slices. What we’ve tried to

do is to integrate internal controls, particularly internal controls of

our financial reporting, into this plan. So we are trying to do, as

part of this plan, do this. So we are not going to go after—just after

improper payments or improper disbursements. We need to go after

a good foundation to be able to buildupon. So I think that we are

trying to do that.
78

Mr. PLATTS. I mean, because, if you get there, that addresses the

improper payments as well as giving you time-sensitive information, you know, as far as how you manage the resources, how you

shift them between priorities, and so there is a whole host of benefits, including improper payments.

Mr. EASTON. Absolutely, and we are trying to—there is a couple

of paradigms that I think that we are trying to shift and teach ourselves. You know, one is the difference between positive assurance

and negative assurance, and both of these gentlemen have taught

me well over the last several years is what we seek is positive assurance, to be able to say this is why management is confident.

And then because problems will happen in an enterprise as large

as the Department of Defense, but, at the same time, a sound basis

of internal controls increases the likelihood that we will find a

problem and deal with it quickly, but it also increases the credibility of those admittedly self-reported numbers.

Mr. PLATTS. Okay. Mr. Towns, I yield to you.

Mr. TOWNS. Thank you very much, Mr. Chairman.

Let me ask, is the problem that you have not been able to make

a decision whether you want to use more outside auditors and/or

to hire inside folks to be able to do—I mean, because when I look

at the fact that you have these 2,200 different systems, I mean, is

that part of the problem? I am trying to figure out how we get past

that or what precipitated it.

Mr. EASTON. I think that we—I like to think of this as Henry

Ford waking up. You know, he was managing Ford Motor Co. out

of his pocket as an individual proprietorship, with no requirement

to get a clean opinion, and then all of the sudden he’s a multinational corporation. We have evolved over many years, and so the

systems that have evolved, many of the systems—we don’t have

nearly that many financial systems, but we have that many systems feeding our financial numbers.

And so part of this process that will enable us is to increase—

reduce the number of systems, improve the level of standardization. It will make an audit not only doable but also affordable. And

so that is what we seek to do. I think that we got there just

through evolution more than anything else and organizationally

and growing without a thought process of this, you know, prior to

the CFO Act. But that would be my assessment, sir.

Mr. TOWNS. One of the most pressing issues with DOD’s financial management system has been that they are low tech. In your

testimony, you note that many of these systems exchange information slowly and inaccurately, lack controls, and are nonstandard. It

appears as if you have begun to remedy these problems by overhauling this system. I am especially encouraged by your recognition that these systems must be designed with a holistic rather

than a stovepipe approach. Can you describe what this holistic approach to IT system comprises? What does that constitute?

Mr. EASTON. I think that we would describe that as being able

to develop a framework for how we want to do business. That

framework is embodied in our enterprise architecture, and this is

a relatively new invention. We have begun on this around 2001.

We have an enterprise architecture that is essentially a set of

end-to-end processes of how we would want to do business. And so
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what we are trying to do is to take the systems that we are investing in, oftentimes an commercial off-the-shelf system, to ensure

that it is complying with that set of ground rules. That is how we

are trying to evolve and be able to deal with it on a holistic basis.

Mr. TOWNS. Let me ask this question. Then I am going to yield

back. Is there anything that we can do on this side that we are not

doing that would be helpful?

Mr. EASTON. I think——

Mr. TOWNS. I know you are not going to recommend more hearings. I understand that.

Mr. EASTON. If I did, I think my boss would shoot me.

But I think that sessions like this, your interest is very, very important; and I think that Mr. Blair and Mr. Khan mentioned that.

That kind of focus I think does, in fact, help keep us focused.

As I look back, and I mentioned being in the Pentagon in the

mid-’90’s, and these kinds of hearings occurred, but they did not

occur with the frequency, the knowledgeable intent, and focus that

we see them occurring now. And, from my perspective, that is very,

very helpful.

Mr. TOWNS. Mr. Blair.

Thank you, Mr. Easton.

Mr. BLAIR. I don’t want to say that I want to be up here on a

regular basis testifying, but I think the tone from the top is very

important to keeping the pressure on.

Other types of reporting sometimes become helpful tools to prod

the Department to do certain things by certain points in time, and

so you may want to look at some interim reporting mechanisms to

closely track the milestones and where they are slipping. And I

know that there is already some of those reporting requirements,

but I think, between the two of those, the continued pressure and

the tone from the top, as well as the reporting, along with the sustained leadership the Department has in place and a sustained

consistent direction of how we are going to fix this problem, I think

we are in a better situation now to see real improvement than we

have been in the past.

Mr. TOWNS. Mr. Khan.

Mr. KHAN. Just to add to what Mr. Blair and Mr. Easton have

said, GAO has highlighted that oversight and investment management in IT projects or ERP implementation is essential. By that I

mean that when the ERPs are being implemented and moving to

a next phase, there should be more questions asked that the ERP

is meeting the intended functionality.

Like I mentioned in my testimony, many of the ERPs have

slipped their timing or their timelines because they were not meeting their functionalities. So strengthening the oversight and investment management is critical.

Though we are seeing positive signs, and one of the ones, if I

may highlight, is the milestone decision authority recently precluded DEANS, which is the Air Force general ledger system, from

being deployed further from the Scotts Air Force Base until some

of their implementation problems were addressed. So we are seeing

some positive signs, but that is a critical area where they need to

strengthen.

Mr. TOWNS. Okay. Thank you.
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I yield back, Mr. Chairman.

Mr. PLATTS. I thank the gentleman.

Mr. Lankford.

Mr. LANKFORD. Thank you, Mr. Chairman.

Who is kind of living and breathing this all the time? Is there

an individual or a group of individuals? Obviously—y’all, obviously,

live with it a lot. But someone’s got to wake up every morning

thinking, how am I going to fix contracting? How am I going to fix

training contracting officers? How are we going to chase this down?

Somebody has to wake up thinking, when is the last time we went

down to the line and talked to civilian employees about waste?

When’s the last time I sat down with a warfighter and said how

do we really get receipts back? When is the last time that we actually sat down with a contractor and said did this work and getting

feedback and evaluation and gathering those ideas on the ground?

Who’s kind of living and breathing that all the time?

Mr. EASTON. It takes place at a lot of levels. I guess I feel like

I wake up thinking about it all the time.

Clearly, I have a leader for my FIAR team. I hired him with experience in financial audit to be able to do that. It really goes down

into the field, and when I visit the field I am, quite frankly, more

encouraged because those kinds of things are happening, but we

need to make sure that they happen within the context of these

kinds of outcomes.

Mr. LANKFORD. So is there—as far as comparing the education,

for instance, I have heard very high praise on Veterans Affairs and

how they are handling some of the training of their contracting officers. Is there that kind of conversation happening agency to agency? Or maybe y’all would look at it and say, I disagree, I don’t

think they are doing a good job either. But y’all may have a different opinion on that from what I am hearing. But is there that

kind of conversation agency to agency saying how are you training

people? It is something that we are trying to deal with as well the

training, the equipping of the contracting officer.

Mr. EASTON. There’s forums—I can speak to forums. OMB sponsors a CFO Council. There is an analogous group for the acquisition community and the HR community. Oftentimes, it is important to not only have those conversations across the functional

areas but then within the organizations. Because these things really do, you know, have to fit together from an enterprise perspective. But those are—at least that is an example I could point to.

Mr. LANKFORD. Okay. Any comments on that?

Mr. KHAN. Just to add to that. I mean, it is very important to

look at the financial management within the context of the business transformation or the enterprise transformation within DOD

itself. So, just like Mr. Blair and Mr. Easton have mentioned, it

has to be a multifunctional approach so that we avoid some of the

silo’d initiatives in the earlier days. So, consequently, acquisitions—procurement, acquisitions, supply chain management, infrastructure development all has to be looked at collectively to be able

to address these issues.

Mr. LANKFORD. Okay. While we are talking back and forth, too,

there were several comments that were made, and Mr. Easton has

a part of his testimony, a section about recovering improper pay-
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ments and such. Obviously, that is important when we discover

that is an improper payment to recover. As a part of this conversation as well how do we prevent those improper payments ever

being done, and how are we doing on the progress on that?

Mr. BLAIR. Mr. Lankford, I think that is the key: Don’t try to recover the money once it has gone out the door but try to prevent

it up front. And that is what all the discussion this morning has

been focusing on, internal controls. And when the Department has

a solid set of internal controls that provide the positive assurance

that Mr. Easton referred to earlier, when that is in place, then the

number of improper payments is going to significantly decline. So

it is very important for the Department to improve this internal

control structure first, rather than to emphasize trying to recover

the money after it has already gone out the door.

Mr. EASTON. But I might add that we have emphasized the prepayment checks. In fact, when GAO came in, that was our position,

is that we would prefer to invest in stopping before, and I think

the GAO position was, well, you should do both. And that is what

we are currently doing with the commercial payments, but we had

a business activity monitoring tool, an automated tool that was

particularly critical because we had multiple entitlement systems,

and so potentially a vendor could submit—as a weakness, could

submit an invoice to two different systems, and we had to make

sure that we were able to address that, address it before something

like that happens, and it has produced good results.

Mr. LANKFORD. That is great.

One final question and I’d be glad to be able to yield back.

We are obviously gearing up for a large-scale single audit happening 6 years from now, on time, ready to go, well checked, all

those wonderful things. What about 2017, 2018, 2019? Are the systems and the process and the conversation in place to say this is

not going to be gear up for 20 years to get the check and then we

will do this again 20 years from now? Or are these systems all

gearing up and saying we will be prepared for an annual check

from here on out?

Mr. EASTON. I think we certainly understand that this is an annual routine. This is not—again, from a Department of Defense cultural perspective, oftentimes you get into—in my experience in uniform, you get into where you, in one particular tour, you would experience inspection one time. I spoke to a group of marines, and as

we go through auditing the Marine Corps statement of budgetary

resources, a young marine raised his hand and said, sir, you mean

we have to do this every year? And the answer is absolutely.

But the key to being able to do it every year and as the chairman

mentioned the sustainability aspect is really based on the scale we

operate systems and strong internal controls. And so that is what

we have to be able to be building now.

Mr. LANKFORD. Culture change.

Mr. EASTON. Absolutely.

Mr. LANKFORD. Thank you. I yield back.

Mr. PLATTS. I thank the gentleman.

I yield to the gentleman from Virginia, Mr. Connolly.

Mr. CONNOLLY. Thank you, Mr. Chairman. Forgive me for being

late. I had an amendment on the floor.
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Mr. Easton, Congress first required DOD to audit its finances in

1997. How much has the DOD budget increased since 1997?

Mr. EASTON. I don’t have the specific numbers off the top of my

head, but significantly increased, particularly in the last 10 years

since 2001.

Mr. CONNOLLY. Probably doubled, right?

Mr. EASTON. Yes, sir.

Mr. CONNOLLY. Plus wars. So, presumably, it is more imperative

than ever, given the huge amounts of money we are talking about,

that, in fact, DOD meet that requirement. Now, we are talking

about extending it to 2017, which means we will have gone 20

years from the first congressional requirement to the actual deadline. From a confidence-building point of view, you think that is a

problem for the Department of Defense?

Mr. EASTON. I think we know why we are not financially

auditable. I wish that—and, as was mentioned earlier, Secretary

Panetta has publicly said he finds it unacceptable, as do we. We

have a plan, the complexity of what we need to do—and I venture

to say that in 1997 the Department of Defense did not fully understand what it meant to become financially auditable. We do now.

We have a plan, and I think we are committed to it. I wish we

could deliver it tomorrow, but it will take time. I think that we are

on the right track.

Mr. CONNOLLY. Good. Well, I just—I think on both sides of the

aisle we share the same view that it is imperative that that be accomplished sooner rather than later in order to make sure there is

public confidence in the vast amounts of money we are investing

in defense.

DOD has 2,200 noninteroperable business management systems,

and I know that Mr. Towns asked a question about this, but what

progress are we achieving on trying to get that number down to ensure more efficiency and more accountability?

Mr. EASTON. We are making significant progress. I think with

each of these—with each of these major systems, Enterprise Resource Planning systems, there is not just one or two, but there is

tens of—you know, the Navy ERP, for example, when it was implemented at the Naval Air Systems Command, eliminated 60 systems. And so we have a significant ways to go, but we are making

progress with each implementation at each individual activity.

Mr. CONNOLLY. I hope so.

DOD spends more than—given the fact that it has the largest

budget, it spends more than any other Federal agency on

outsourcing contracts. Contract management, especially given the

growth in the budget that we talked about since 1997, obviously becomes even more important. Can you talk a little bit about the role

of training contract managers and whether we’ve looked at ways to

create a professional path that is more attractive and longer lasting

so there is continuity built into large, long-run contracts?

Mr. EASTON. The acquisition community has developed—and I

think that under the acquisition work force—has developed a

framework to be able to develop a career pattern to be able to develop those capabilities.

Quite frankly, within the financial management community, we

are trying to model that under the same kind of thing. But training
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and awareness, not only of directly contract administration but

issues associated with the financial weaknesses associated with the

gaps, need to be included in that training. So I would absolutely

agree.

Mr. CONNOLLY. I just—and maybe Mr. Blair and Mr. Khan

wants to comment, but I have just got to tell you, as somebody who

came from the Federal contracting world until I came here, I can

remember one contract, not your agency, in which we had 14 managers in like a 3-year period, no continuity. Everyone had different

expectations of what the contract really meant. Everyone had the

wrong informal ways of changing scope. And, cumulatively, by the

end of the contract, it had radically changed the nature of the contract. And it is very difficult for a conscientious contractor to try

to provide quality service when the client, frankly, is so changeable.

Mr. Blair, Mr. Khan, if the chair would indulge, any comments

on the whole contracting piece.

Mr. BLAIR. Mr. Connolly, I think you’ve identified a key part of

the Department’s business processes that has to improve. So much

of what the Department does on a day-to-day basis it executes

through contracts. Those contracts have to be well-defined in the

beginning, the requirements have to be well-established in the beginning, and, equally important, throughout the life of the contract

there has to be effective contract oversight so that the Department

actually knows that it is getting what it pays for. The more improvement the Department can put in place in the requirements,

in the oversight, the better off we are going to be to know that we

are effectively spending our money.

Mr. KHAN. Just to add to what Mr. Blair said, like I had mentioned earlier on, that a lot of these financial management or

transactions they originate in contracting and procurement. Therefore, just stepping away a little bit from contractor training from

a contract execution perspective, but it is very important for the

contracting personnel to have the training so that they enter the

financial information correct in the systems. Because if it is not entered correctly, then correcting and rectifying it downstream, it is

a challenge without reworking it.

Mr. CONNOLLY. Thank you very much.

Mr. Chairman, I want to thank you for holding a substantive,

non-gotcha hearing which, of course, characterizes your leadership

in this subcommittee.

Mr. PLATTS. Thank you, Mr. Connolly.

And, as I said earlier, that the issues we deal with, because accounting and things is not the most exciting but very important,

and your participation, as well as Mr. Lankford and the ranking

member, is much appreciated.

My understanding, we are probably going to have the first vote

go up in 5 to 10 minutes, which means we have a chance to

squeeze in a few more questions and if we could and maybe have

one quick opportunity for each of my colleagues as well to wrap up,

and we will likely follow up with you in writing. A number of

issues, I know we are not going to get to, and that is a credit to

the written statements that you provided, which gave a lot of good
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detail, and your testimony here today that gave us a good ability

to have an exchange.

I want to make sure I get in about the issue that has been mentioned a number of times and the training and the sustainability

and that the systems we put in place—and it goes to Mr.

Lankford—that we don’t just have 2017 and, oh, we are good for

20 years and see what happens. But our goal is that when we get

to 2017 that we have a work force that is well-trained and fully up

to speed and moving forward with the FIAR guidelines, to have

that audit be a clean audit and thereafter be able to do so. But the

other is the systems we put in place in information technology.

When I first came along to this committee just as a ranking

member—I mean as a member and then became the chair in January 2003, we were in the initial years of DIMHRS, the Defense Integrated Military Human Resource System, and it was promised as

the savior of how it was going to help us get our hands around this,

you know, personnel human resource systems in particular and all

the expenditures related to it. Last year, after I think 12 years of expenditures, over $1 billion,

it was basically cast aside. Admiral Mullen, Chairman of the Joint

Chiefs, was quoted as saying it is a disaster.

I know there is a draft report that GAO has put out entitled Information Technology: OMB Needs to Improve Its Guidance on IT

Investments. In that draft report from GAO, it references that, in

the fiscal year 2011 expenditures, that governmentwide, it is just

shy of $79 billion in planned IT investments, of which almost half

of those, $37 billion, are Defense Department IT investments. And

I think if I do my numbers correctly, maybe two-thirds are operations and maintenance of existing systems and a third is new investments.

Given the history of DIMHRS and $1 billion of hard-earned taxpayer funds spent without a good return or perhaps any return in

the end, what are we doing to make sure that the $37 billion we

are spending this year, some on existing, some on new investments,

that we’ve learned the lessons of DIMHRS and that we are not getting far down the path and saying, you know what, this isn’t going

to do what we need to do and we start over again?

Mr. Easton, if you could take that.

Mr. EASTON. We are trying to apply the lessons, and I think that

we are very deliberate, and there is a balance between holding

these programs up and making sure that we are going to get our

money’s worth. But DIMHRS is a classic example of something

that we cannot afford to repeat.

And in many cases, we—number one, we are trying to leverage

something from the DIMHRS program. I certainly hope that we

can. I don’t know for sure if we will. But in at least one instance

one of the components is stopping to say we are not sure we need

a large system. We are not sure that we can make, you know, with

a smaller investment to be able to get the capabilities.

It starts with applying the lessons and also ensuring that the

specific problem that we are trying to solve and the specific functional advocate that is thinking about this all the time is involved

and we don’t just put this into a program and just expect things

to happen. And so, you know, we are trying to apply that in our
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investment review process to be able to make sure that that never

happens again.

Mr. PLATTS. In that review process to learn the lessons, not repeat them, there are issues. When I see a number $37 billion, perhaps maybe a third of which is new investment, are you also looking at making sure you are not being duplicative in those investments, that there is across-the-Department coordination of what

you are doing, both that you are not duplicating efforts and that

whatever different efforts are out there in the end will be able to

talk to each other and be coordinated for the overall assessment?

Mr. EASTON. I co-chair an investment review board that partners

with a weapons systems acquisition logistics, and I think that that

makes sense. Because, in many cases, we said that we spend a lot

of money in acquisition and logistics support functions.

We ask those specific questions. As systems come up to us for approval, whether it is a legacy system or a system that has to be

modernized, if there is this question of why does the Air Force have

this system and the Navy has the same system to do the same

thing—and we’ve been able to make some successes, but, admittedly, that is still—that mindset is that everyone’s special and we

are trying to be able to do that and minimize that investment.

I should say as we go through the current budget process we are

getting a lot of help in terms of reducing the amount of money that

is invested in the business systems, and so we are going to have

to make some hard decisions in that regard as well.

Mr. PLATTS. Mr. Blair, as we go forward and have the lessons of

DIMHRS—and I know your office plays a role in auditing and kind

of after the fact but also proactive—what role does the IG have in

looking at those investment decisions, you know, proactively and

prospectively so it is up front that you can help make sure the lessons learned are applied?

Mr. BLAIR. One of the things that we have ongoing right now are

several audits of the ERP systems, and we are going to be starting

in fiscal year 2012 doing audits of additional ERP systems. And it

is important to note that these audits are not tail-end, gotcha-type

things you should have done 10 years ago. What we are really

doing, as the systems are being developed and as they are being

rolled out in a staged manner, we are looking at the current scenario for the system and saying here’s some areas that we think

you need to correct before you roll it out any further.

GFEBS and LMP are two examples of systems where we’ve done

a lot of audit work, and what I think is encouraging is the dialog

that Mr. Easton and I have had over the past several weeks, especially on these systems, and how lessons learned can be taken from

those ERPs to the other ERPs that are being developed so that the

information that we are providing to them on one particular system

can then be used to leverage and improve the rollout of other systems.

Mr. PLATTS. And, Mr. Khan, GAO I know has done a lot of work

in this area of the investments. Have they done anything comprehensive that captures how much has been invested in IT in the

broad sense, but specifically DOD, that was not productive and

what the consequences of those failed investments were?
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Mr. KHAN. Mr. Platts, I mean, we haven’t gone down to that

granular level of whether it has been productive or not. We did do

a body of work last year which was focused on 10 business-related

ERPs, and it was of concern. There were cost overruns and time

slippages, and we had made several recommendations.

Like I mentioned early on to Mr. Towns’ question, we have seen

some positive signs and we hope to continue to see them in terms

of investment management and milestone decisions.

An example I gave you was the Air Force’s general ledger system

where the milestone decision authority had made a decision to not

give them permission to deploy that outside of Scotts Air Force

Base until the current functionality was addressed. But there

needs to be more oversight and hard questions to be asked before

additional funding is given.

Mr. PLATTS. I am going to wrap up there, because I know votes

are up. Mr. Towns, Mr. Connolly, do you have any other questions?

Mr. CONNOLLY. I just had one.

Mr. PLATTS. Just one.

Mr. CONNOLLY. Thank you.

As you know, we bifurcate Federal contracting training between

the Defense Acquisition University and the Federal Acquisition Institute. Unfortunately, the FAI has only six employees and nowhere near the capacity to train contracting staff as needed by

non-defense agencies. Do you believe if FAI could perhaps take

some object lessons from how DAU operates and other opportunities from your point of view perhaps to scale up FAI in coordination

with DAU?

Mr. EASTON. I am afraid I’d have to take that for the record and

look into that from an acquisition perspective, and I’d be glad to

do that.

Mr. CONNOLLY. I would welcome that. Thank you, Mr. Easton.

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Mr. CONNOLLY. Mr. Khan, GAO got a point of view about that?

Mr. KHAN. I do not. I don’t think we have looked at it. I will take

that for the record if there is any work that we have done.

Mr. CONNOLLY. I would just note for the record that we got a letter from Dan Gordon from OMB, very strange letter, given the fact

that I am the author of the legislation, try to scale up FAI, indicating that we really didn’t need to do much and we already were

doing a fine job.

That is not true. It is shocking to me that OMB would send such

a letter without at least first consulting with the author of the legislation. And I can just assure you this Member of Congress is

going to aggressively continue to pursue trying to scale up FAI so

that we have contracting—skilled contracting managers in place to

manage complex, large, often systems-integration-type contracts for

other Federal agencies besides DOD; and I’d appreciate you taking

that word back.

Thank you so much.

Mr. PLATTS. I thank the gentleman.

There are a whole host of issues that we didn’t get to, but we

are going to need to wrap up here, and my understanding from the

ranking member is we have 14 votes. So we will not be asking you

to stay. You would have lunch and dinner and still be waiting, I

think.

One issue in particular that I wanted to put out there is the Logistics Modernization Program with the Army. One of the things

that jumped out in, Mr. Blair, your testimony about this program

is that implemented I think over $1 billion again invested; and yet,

as you say in your testimony, the system also did not resolve any

of the 10 Army working capital fund internal control weaknesses.

That is where—while I want to believe you, Mr. Easton, that—

why should we, you know, this time think, hey, we are going to get

it right? When I look at that, it makes me think we are back at

DIMHRS 7 years ago and that we are spending a lot of money and

we are not actually achieving the success we need.

So I want that to be on the radar. You know, again, that is a

concern.

A final comment would be we are grateful for all three of you and

your colleagues that are working hand in hand with you on this

important issue. And, as Mr. Lankford said, we have the best military in the world, and it is tremendous in defending this country,

but if we can get these issues right, we will have an even greater

ability to provide the resources that that military needs to continue

its heroic efforts on behalf of our Nation.

And I know each of you share this perspective that we really are

about not that heroic effort to get a check but to put in place longterm solutions so that this is a systemic change in the mindset of

the personnel, in the systems in place, in every aspect, that 2017

will be the start of a long history of DOD being able to say we

know how much money we’ve got, we know where it is going, how

it was used, year in and year out, day in and day out. Because that

will better serve all the managers in DOD who are using those resources for the good of the military personnel.

We look forward to continuing to work with each of you and your

offices going forward. As I said, Mr. Towns and I have been
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partnering on this issue for almost a decade now, and hopefully

neither one of us is going anywhere anytime soon. We might keep

trading chairs sometimes. I don’t know. Hopefully not anytime

soon, changing our chairs here. But it is something that we very

much believe in the importance of and as good partners we do right

by the American people and our military personnel and their families.

So we will keep the record open for 2 weeks for additional information, and thank you, again, for your testimony.

This hearing stands adjourned.

[Whereupon, at 11:40 a.m., the subcommittee was adjourned.]

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