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[Congressional Bills 113th Congress]
[From the U.S. Government Publishing Office]
[S. 1510 Introduced in Senate (IS)]

113th CONGRESS
  1st Session
                                S. 1510

  To provide for auditable financial statements for the Department of 
                    Defense, and for other purposes.

_______________________________________________________________________

                   IN THE SENATE OF THE UNITED STATES

                           September 17, 2013

  Mr. Coburn (for himself, Mr. Manchin, Mr. Grassley, Mr. Johnson of 
Wisconsin, Mr. Paul, Ms. Ayotte, Mr. Cornyn, Mr. Chambliss, Mr. Heller, 
Mrs. McCaskill, and Mr. Wyden) introduced the following bill; which was 
       read twice and referred to the Committee on Armed Services

_______________________________________________________________________

                                 A BILL

 
  To provide for auditable financial statements for the Department of 
                    Defense, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Audit the Pentagon Act of 2013''.

SEC. 2. FINDINGS.

    Congress makes the following findings:
            (1) Section 9 of Article I of the Constitution of the 
        United States requires all agencies of the Federal Government, 
        including the Department of Defense, to publish ``a regular 
        statement and account of the receipts and expenditures of all 
        public money''.
            (2) Section 3515 of title 31, United States Code, requires 
        the agencies of the Federal Government, including the 
        Department of Defense, to present auditable financial 
        statements beginning not later than March 1, 1997. The 
        Department has not complied with this law.
            (3) The Federal Financial Management Improvement Act of 
        1996 (31 U.S.C. 3512 note) requires financial systems acquired 
        by the Federal Government, including the Department of Defense, 
        to be able to provide information to leaders to manage and 
        control the cost of Government. The Department has not complied 
        with this law.
            (4) The financial management of the Department of Defense 
        has been on the ``High-Risk'' list of the Government 
        Accountability Office, which means that the Department is not 
        consistently able to ``control costs; ensure basic 
        accountability; anticipate future costs and claims on the 
        budget; measure performance; maintain funds control; [and] 
        prevent and detect fraud, waste, and abuse''.
            (5) The National Defense Authorization Act for Fiscal Year 
        2002 (Public Law 107-107) requires the Secretary of Defense to 
        report to Congress annually on the reliability of the financial 
        statements of the Department of Defense, to minimize resources 
        spent on producing unreliable financial statements, and to use 
        resources saved to improve financial management policies, 
        procedures, and internal controls.
            (6) In 2005, the Department of Defense created a Financial 
        Improvement and Audit Readiness (FIAR) Plan, overseen by a 
        directorate within the office of the Under Secretary of Defense 
        (Comptroller), to improve Department business processes with 
        the goal of producing timely, reliable, and accurate financial 
        information that could generate an audit-ready annual financial 
        statement. In December 2005, that directorate, known as the 
        FIAR Directorate, issued the first of a series of semiannual 
        reports on the status of the Financial Improvement and Audit 
        Readiness Plan.
            (7) The National Defense Authorization Act for Fiscal Year 
        2010 (Public Law 111-84) requires regular status reports on the 
        Financial Improvement and Audit Readiness Plan described in 
        paragraph (6), and codified as a statutory requirement the goal 
        of the Plan in ensuring that Department of Defense financial 
        statements are validated as ready for audit not later than 
        September 30, 2017. In addition, the National Defense 
        Authorization Act for Fiscal Year 2013 (Public Law 112-239) 
        requires that the statement of budgetary resources of the 
        Department of Defense be validated as ready for audit by not 
        later than September 30, 2014.
            (8) At a September 2010 hearing of the Senate, the 
        Government Accountability Office stated that past expenditures 
        by the Department of Defense of $5,800,000,000 to improve 
        financial information, and billions of dollars more of 
        anticipated expenditures on new information technology systems 
        for that purpose, may not suffice to achieve full audit 
        readiness of the financial statement of the Department. At that 
        hearing, the Government Accountability Office could not predict 
        when the Department would achieve full audit readiness of such 
        statements.
            (9) At a 2013 hearing of the Senate, Secretary of Defense 
        Chuck Hagel affirmed his commitment to audit-ready budget 
        statements for the Department of Defense by the end of 2014, 
        and stated that he ``will do everything he can to fulfill this 
        commitment''. At that hearing, Secretary Hagel noted that 
        auditable financial statements were essential to the Department 
        not only for improving the quality of its financial 
        information, but also for reassuring the public and Congress 
        that it is a good steward of public funds.

SEC. 3. CESSATION OF APPLICABILITY OF REPORTING REQUIREMENTS REGARDING 
              THE FINANCIAL STATEMENTS OF THE DEPARTMENT OF DEFENSE.

    (a) Cessation of Applicability.--
            (1) Military departments.--The financial statements of a 
        military department shall cease to be covered by the reporting 
        requirements specified in subsection (b) upon the issuance of 
        an unqualified audit opinion on such financial statements.
            (2) Department of defense.--The reporting requirements 
        specified in subsection (b) shall cease to be effective when an 
        unqualified audit opinion is issued on the financial statements 
        of the Department of Defense, including each of the military 
        departments and the other reporting entities defined by the 
        Office of Management and Budget.
    (b) Reporting Requirements.--The reporting requirements specified 
in this subsection are the following:
            (1) The requirement for annual reports in section 892(b) of 
        the Ike Skelton National Defense Authorization Act for Fiscal 
        Year 2011 (Public Law 111-383; 124 Stat. 4311; 10 U.S.C. 2306a 
        note).
            (2) The requirement for semi-annual reports in section 
        1003(b) of the National Defense Authorization Act for Fiscal 
        Year 2010 (Public Law 111-84; 123 Stat. 2440; 10 U.S.C. 2222 
        note).
            (3) The requirement for annual reports in section 817(d) of 
        the Bob Stump National Defense Authorization Act for Fiscal 
        Year 2003 (10 U.S.C. 2306a note).
            (4) The requirement for annual reports in section 1008(a) 
        of the National Defense Authorization Act for Fiscal Year 2002 
        (Public Law 107-107; 115 Stat. 1204; 10 U.S.C. 113 note).
            (5) The requirement for periodic reports in section 908(b) 
        of the Defense Acquisition Improvement Act of 1986 (Public Law 
        99-500; 100 Stat. 1783-140; 10 U.S.C. 2326 note) and duplicate 
        requirements as provided for in section 6 of the Defense 
        Technical Corrections Act of 1987 (Public Law 100-26; 101 Stat. 
        274; 10 U.S.C. 2302 note).

SEC. 4. ENHANCED REPROGRAMMING AUTHORITY FOLLOWING ACHIEVEMENT BY 
              DEPARTMENT OF DEFENSE AND MILITARY DEPARTMENTS OF AUDIT 
              WITH UNQUALIFIED OPINION OF STATEMENT OF BUDGETARY 
              RESOURCES FOR FISCAL YEARS AFTER FISCAL YEAR 2014.

    (a) Department of Defense Generally.--Subject to section 6(1), if 
the Department of Defense obtains an audit with an unqualified opinion 
on its statement of budgetary resources for any fiscal year after 
fiscal year 2014, the limitation on the total amount of authorizations 
that the Secretary of Defense may transfer pursuant to general transfer 
authority available to the Secretary in the national interest in the 
succeeding fiscal year shall be $8,000,000,000.
    (b) Military Departments, Defense Agencies, and Defense Field 
Activities.--Subject to section 7(a), if a military department, Defense 
Agency, or defense field activity obtains an audit with an unqualified 
opinion on its statement of budgetary resources for any fiscal year 
after fiscal year 2014, the thresholds for reprogramming of funds of 
such military department, Defense Agency, or defense field activity, as 
the case may be, without prior notice to Congress for the succeeding 
fiscal year shall be deemed to be the thresholds as follows:
            (1) In the case of an increase or decrease to the program 
        base amount for a procurement program, $60,000,000.
            (2) In the case of an increase or decrease to the program 
        base amount for a research program, $30,000,000.
            (3) In the case of an increase or decrease to the amount 
        for a budget activity for operation and maintenance, 
        $45,000,000.
            (4) In the case of an increase or decrease to the amount 
        for a budget activity for military personnel, $30,000,000.
    (c) Construction.--Nothing in this section shall be construed to 
alter or revise any requirement (other than a threshold amount) for 
notice to Congress on transfers covered by subsection (a) or 
reprogrammings covered by subsection (b) under any other provision of 
law.
    (d) Definitions.--In this section, the terms ``program base 
amount'', ``procurement program'', ``research program'', and ``budget 
activity'' have the meanings given such terms in chapter 6 of volume 3 
of the Financial Management Regulation of the Department of Defense 
(DoD 7000.14R), dated March 2011, or any successor document.

SEC. 5. FAILURE TO OBTAIN AUDITS WITH UNQUALIFIED OPINION OF FISCAL 
              YEAR 2015 GENERAL FUND STATEMENT OF BUDGETARY RESOURCES 
              OF THE DEPARTMENT OF DEFENSE.

    (a) In General.--If the Department of Defense fails to obtain an 
audit with an unqualified opinion on its general fund statement of 
budgetary resources for fiscal year 2015 by December 31, 2015, the 
following shall take effect on January 1, 2016:
            (1) Additional qualifications and duties of usd 
        (comptroller).--
                    (A) Qualifications.--Any individual nominated for 
                appointment to the position of Under Secretary of 
                Defense (Comptroller) under section 135 of title 10, 
                United States Code, shall be an individual who has 
                served--
                            (i) as the chief financial officer or 
                        equivalent position of a Federal or State 
                        agency that has received an audit with an 
                        unqualified opinion on such agency's financial 
                        statements during the time of such individual's 
                        service; or
                            (ii) as the chief financial officer or 
                        equivalent position of a public company that 
                        has received an audit with an unqualified 
                        opinion on such company's financial statements 
                        during the time of such individual's service.
                    (B) Duties and powers.--The duties and powers of 
                the individual serving as Under Secretary of Defense 
                (Comptroller) shall include, in addition to the duties 
                and powers specified in section 135(c) of title 10, 
                United States Code, such duties and powers with respect 
                to the financial management of the Department of 
                Defense as the Deputy Secretary of Defense (acting in 
                the capacity of Chief Management Officer of the 
                Department of Defense) or a successor official in the 
                Department of Defense (acting in such capacity) may 
                prescribe.
            (2) Additional qualifications and responsibilities of asa 
        for financial management.--
                    (A) Qualifications.--Any individual nominated for 
                appointment to the position of Assistant Secretary of 
                the Army for Financial Management under section 3016 of 
                title 10, United States Code, shall be an individual 
                who has served--
                            (i) as the chief financial officer or 
                        equivalent position of a Federal or State 
                        agency that has received an audit with an 
                        unqualified opinion on such agency's financial 
                        statements during the time of such individual's 
                        service; or
                            (ii) as the chief financial officer or 
                        equivalent position of a public company that 
                        has received an audit with an unqualified 
                        opinion on such company's financial statements 
                        during the time of such individual's service.
                    (B) Responsibilities.--The responsibilities of the 
                individual serving as Assistant Secretary of the Army 
                for Financial Management shall include, in addition to 
                the responsibilities specified in section 3016(b)(4) of 
                title 10, United States Code, such responsibilities as 
                the Deputy Secretary of Defense (acting in the capacity 
                of Chief Management Officer of the Department of 
                Defense) or a successor official in the Department of 
                Defense (acting in such capacity) may prescribe.
            (3) Additional qualifications and responsibilities of asn 
        for financial management.--
                    (A) Qualifications.--Any individual nominated for 
                appointment to the position of Assistant Secretary of 
                the Navy for Financial Management under section 5016 of 
                title 10, United States Code, shall be an individual 
                who has served--
                            (i) as the chief financial officer or 
                        equivalent position of a Federal or State 
                        agency that has received an audit with an 
                        unqualified opinion on such agency's financial 
                        statements during the time of such individual's 
                        service; or
                            (ii) as the chief financial officer or 
                        equivalent position of a public company that 
                        has received an audit with an unqualified 
                        opinion on such company's financial statements 
                        during the time of such individual's service.
                    (B) Responsibilities.--The responsibilities of the 
                individual serving as Assistant Secretary of the Navy 
                for Financial Management shall include, in addition to 
                the responsibilities specified in section 5016(b)(4) of 
                title 10, United States Code, such responsibilities as 
                the Deputy Secretary of Defense (acting in the capacity 
                of Chief Management Officer of the Department of 
                Defense) or a successor official in the Department of 
                Defense (acting in such capacity) may prescribe.
            (4) Additional qualifications and responsibilities of asaf 
        for financial management.--
                    (A) Qualifications.--Any individual nominated for 
                appointment to the position of Assistant Secretary of 
                the Air Force for Financial Management under section 
                8016 of title 10, United States Code, shall be an 
                individual who has served--
                            (i) as the chief financial officer or 
                        equivalent position of a Federal or State 
                        agency that has received an audit with an 
                        unqualified opinion on such agency's financial 
                        statements during the time of such individual's 
                        service; or
                            (ii) as the chief financial officer or 
                        equivalent position of a public company that 
                        has received an audit with an unqualified 
                        opinion on such company's financial statements 
                        during the time of such individual's service.
                    (B) Responsibilities.--The responsibilities of the 
                individual serving as Assistant Secretary of the Air 
                Force for Financial Management shall include, in 
                addition to the responsibilities specified in section 
                8016(b)(4) of title 10, United States Code, such 
                responsibilities as the Deputy Secretary of Defense 
                (acting in the capacity of Chief Management Officer of 
                the Department of Defense) or a successor official in 
                the Department of Defense (acting in such capacity) may 
                prescribe.
    (b) Public Company Defined.--In this section, the term ``public 
company'' has the meaning given the term ``issuer'' in section 2(a)(7) 
of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7201(a)(7)).

SEC. 6. FAILURE OF THE DEPARTMENT OF DEFENSE TO OBTAIN AUDITS WITH 
              UNQUALIFIED OPINION OF FISCAL YEAR 2018 FINANCIAL 
              STATEMENTS.

    If the Department of Defense fails to obtain an audit with an 
unqualified opinion on its general fund statement of budgetary 
resources for fiscal year 2018 by December 31, 2018:
            (1) Permanent cessation of enhanced general transfer 
        authority.--Effective as of January 1, 2019, the authority in 
        section 4(a) shall cease to be available to the Department of 
        Defense for fiscal year 2018 and any fiscal year thereafter.
            (2) Reorganization of responsibilities of chief management 
        officer.--Effective as of April 1, 2019:
                    (A) Position of chief management officer.--Section 
                132a of title 10, United States Code, is amended to 
                read as follows:
``Sec. 132a. Chief Management Officer
    ``(a) In General.--(1) There is a Chief Management Officer of the 
Department of Defense, appointed from civilian life by the President, 
by and with the advice and consent of the Senate.
    ``(2) Any individual nominated for appointment as Chief Management 
Officer shall be an individual who has--
            ``(A) extensive executive level leadership and management 
        experience in the public or private sector;
            ``(B) strong leadership skills;
            ``(C) a demonstrated ability to manage large and complex 
        organizations; and
            ``(D) a proven record in achieving positive operational 
        results.
    ``(b) Powers and Duties.--The Chief Management Officer shall 
perform such duties and exercise such powers as the Secretary of 
Defense may prescribe.
    ``(c) Service as Chief Management Officer.--(1) The Chief 
Management Officer is the Chief Management Officer of the Department of 
Defense.
    ``(2) In serving as the Chief Management Officer of the Department 
of Defense, the Chief Management Officer shall be responsible for the 
management and administration of the Department of Defense with respect 
to the following:
            ``(A) The expenditure of funds, accounting, and finance.
            ``(B) Procurement, including procurement of any enterprise 
        resource planning (ERP) system and any information technology 
        (IT) system that is a financial feeder system, human resources 
        system, or logistics system.
            ``(C) Facilities, property, nonmilitary equipment, and 
        other resources.
            ``(D) Strategic planning, annual performance planning, and 
        identification and tracking of performance measures.
            ``(E) Internal audits and management analyses of the 
        programs and activities of the Department, including the 
        Defense Contract Audit Agency.
            ``(F) Such other areas or matters as the Secretary of 
        Defense may designate.
    ``(3) The head of the Defense Contract Audit Agency shall be under 
the supervision of, and shall report directly to, the Chief Management 
Officer.
    ``(d) Precedence.--The Chief Management Officer takes precedence in 
the Department of Defense after the Secretary of Defense and the Deputy 
Secretary of Defense.''.
                    (B) Conforming amendments.--
                            (i) Section 131(b) of title 10, United 
                        States Code, is amended--
                                    (I) by striking paragraph (3);
                                    (II) by redesignating paragraph (2) 
                                as paragraph (3); and
                                    (III) by inserting after paragraph 
                                (1) the following new paragraph (2):
            ``(2) The Chief Management Officer of the Department of 
        Defense.''.
                            (ii) Section 132 of such title is amended--
                                    (I) by striking subsection (c); and
                                    (II) by redesignating subsections 
                                (d) and (e) as subsections (c) and (d), 
                                respectively.
                            (iii) Section 133(e)(1) of such title is 
                        amended by striking ``and the Deputy Secretary 
                        of Defense'' and inserting ``, the Deputy 
                        Secretary of Defense, and the Chief Management 
                        Officer of the Department of Defense''.
                            (iv) Such title is further amended by 
                        inserting ``the Chief Management Officer of the 
                        Department of Defense,'' after ``the Deputy 
                        Secretary of Defense,'' each place it appears 
                        in the provisions as follows:
                                    (I) Section 133(e)(2).
                                    (II) Section 134(c).
                            (v) Section 137a(d) of such title is 
                        amended by striking ``the Secretaries of the 
                        military departments,'' and all that follows 
                        and inserting ``the Chief Management Officer of 
                        the Department of Defense, the Secretaries of 
                        the military departments, and the Under 
                        Secretaries of Defense.''.
                            (vi) Section 138(d) of such title is 
                        amended by striking ``the Secretaries of the 
                        military departments,'' and all that follows 
                        through the period and inserting ``the Chief 
                        Management Officer of the Department of 
                        Defense, the Secretaries of the military 
                        departments, the Under Secretaries of Defense, 
                        and the Director of Defense Research and 
                        Engineering.''.
                    (C) Clerical amendment.--The table of sections at 
                the beginning of chapter 4 of such title is amended by 
                striking the item relating to section 132a and 
                inserting the following new item:

``132a. Chief Management Officer.''.
                    (D) Executive schedule.--Section 5313 of title 5, 
                United States Code, is amended by adding at the end the 
                following:
            ``Chief Management Officer of the Department of Defense.''.
                    (E) Reference in law.--Any reference in any 
                provision of law to the Chief Management Officer of the 
                Department of Defense shall be deemed to refer to the 
                Chief Management Officer of the Department of Defense 
                under section 132a of title 10, United States Code (as 
                amended by this paragraph).
            (3) Jurisdiction of dfas.--Effective as of April 1, 2019:
                    (A) Transfer to department of the treasury.--
                Jurisdiction of the Defense Finance and Accounting 
                Service (DFAS) is transferred from the Department of 
                Defense to the Department of the Treasury.
                    (B) Administration.--The Secretary of the Treasury 
                shall administer the Defense Finance and Accounting 
                Service following transfer under this paragraph through 
                the Financial Management Service of the Department of 
                the Treasury.
                    (C) Memorandum of understanding.--The Secretary of 
                Defense and the Secretary of the Treasury shall jointly 
                enter into a memorandum of understanding regarding the 
                transfer of jurisdiction of the Defense Finance and 
                Accounting Service under this paragraph. The memorandum 
                of understanding shall provide for the transfer of the 
                personnel and other resources of the Service to the 
                Department of the Treasury and for the assumption of 
                responsibility for such personnel and resources by the 
                Department of the Treasury.
                    (D) Construction.--Nothing in this paragraph shall 
                be construed as terminating, altering, or revising any 
                responsibilities or authorities of the Defense Finance 
                and Accounting Service (other than responsibilities and 
                authorities in connection with the exercise of 
                jurisdiction of the Service following transfer under 
                this paragraph).

SEC. 7. FAILURE OF THE MILITARY DEPARTMENTS TO OBTAIN AUDITS WITH 
              UNQUALIFIED OPINION OF FINANCIAL STATEMENTS FOR FISCAL 
              YEARS AFTER FISCAL YEAR 2017.

    (a) Permanent Cessation of Authorities on Reprogramming of Funds.--
If a military department fails to obtain an audit with an unqualified 
opinion on its financial statements for fiscal year 2018 by December 
31, 2018, effective as of January 1, 2019, the authorities in section 
4(b) shall cease to be available to the military department for fiscal 
year 2018 and any fiscal year thereafter.
    (b) Annual Prohibition on Expenditure of Funds for Certain MDAPs 
Past Milestone B in Connection With Failure.--
            (1) Prohibition.--Effective for fiscal years after fiscal 
        year 2017, if a military department fails to obtain an audit 
        with an unqualified opinion on its financial statements for any 
        fiscal year, effective as of the date of the issuance of the 
        opinion on such audit, amounts available to the military 
        department for the following fiscal year may not be obligated 
        by the military department for a weapon or weapon system or 
        platform being acquired as a major defense acquisition program 
        for any activity beyond Milestone B approval unless such 
        program has already achieved Milestone B approval of the date 
        of the issuance of the opinion on such audit.
            (2) Definitions.--In this subsection:
                    (A) The term ``major defense acquisition program'' 
                has the meaning given that term in section 2430 of 
                title 10, United States Code.
                    (B) The term ``Milestone B approval'' has the 
                meaning given that term in section 2366(e)(7) of title 
                10, United States Code.

SEC. 8. ENTERPRISE RESOURCE PLANNING.

    The Secretary of Defense shall amend the acquisition guidance of 
the Department of Defense to provide for the following:
            (1) The Defense Business System Management Committee may 
        not approve procurement of any Enterprise Resource Planning 
        (ERP) business system that is independently estimated to take 
        longer than three years to procure from initial obligation of 
        funds to full deployment and sustainment.
            (2) Any contract for the acquisition of an Enterprise 
        Resource Planning business system shall include a provision 
        authorizing termination of the contract at no cost to the 
        Government if procurement of the system takes longer than three 
        years from initial obligation of funds to full deployment and 
        sustainment.
            (3) Any implementation of an Enterprise Resource Planning 
        system shall comply with each of the following:
                    (A) The current Business Enterprise Architecture 
                established by the Chief Management Officer of the 
                Department of Defense.
                    (B) The provisions of section 2222 of title 10, 
                United States Code.
            (4) The Deputy Secretary of Defense (acting in the capacity 
        of Chief Management Officer of the Department of Defense) or a 
        successor official in the Department of Defense (acting in such 
        capacity) shall have the authority to replace any program 
        manager (whether in a military department or a Defense Agency) 
        for the procurement of an Enterprise Resource Planning business 
        system if procurement of the system takes longer than three 
        years from initial obligation of funds to full deployment and 
        sustainment.
            (5) Any integrator contract for the implementation of an 
        Enterprise Resource Planning business system shall only be 
        awarded to companies that have a history of successful 
        implementation of other Enterprise Resource Planning business 
        systems for the Federal Government (whether with the Department 
        of Defense or another department or agency of the Federal 
        Government), including meeting cost and schedule goals.
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