II 

112TH CONGRESS 

2D SESSION S. 3487 

To provide for auditable financial statements for the Department of Defense, 

and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

AUGUST 2, 2012 

Mr. COBURN (for himself, Mr. MANCHIN, Ms. AYOTTE, Mrs. MCCASKILL, Mr. 

CORNYN, Mr. GRASSLEY, Mr. JOHNSON of Wisconsin, and Mr. PAUL) 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. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Audit the Pentagon 

5 Act of 2012’’. 

6 SEC. 2. FINDINGS. 

7 Congress makes the following findings: 

8 (1) Section 9 of Article 1 of the Constitution of 

9 the United States requires all agencies of the FedVerDate Mar 15 2010 22:21 Aug 09, 2012 Jkt 019200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S3487.IS S3487

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1 eral Government, including the Department of De2 fense, to publish ‘‘a regular statement and account 

3 of the receipts and expenditures of all public 

4 money’’. 

5 (2) Section 3515 of title 31, United States 

6 Code, requires the agencies of the Federal Govern7 ment, including the Department of Defense, to 

8 present auditable financial statements beginning not 

9 later than March 1, 1997. The Department has not 

10 complied with this law. 

11 (3) The Federal Financial Management Im12 provement Act of 1996 (31 U.S.C. 3512 note) re13 quires financial systems acquired by the Federal 

14 Government, including the Department of Defense, 

15 to be able to provide information to leaders to man16 age and control the cost of government. The Depart17 ment has not complied with this law. 

18 (4) The financial management of the Depart19 ment of Defense has been on the ‘‘High-Risk’’ list 

20 of Government Accountability Office, which means 

21 that the Department is not consistently able to ‘‘con22 trol costs; ensure basic accountability; anticipate fu23 ture costs and claims on the budget; measure per24 formance; maintain funds control; [and] prevent and 

25 detect fraud, waste, and abuse’’. 


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1 (5) The National Defense Authorization Act for 

2 Fiscal Year 2002 (Public Law 107–107) requires 

3 the Secretary of Defense to report to Congress an4 nually on the reliability of the financial statements 

5 of the Department of Defense, to minimize resources 

6 spent on producing unreliable financial statements, 

7 and to use resources saved to improve financial man8 agement policies, procedures, and internal controls. 

9 (6) In 2005, the Department of Defense cre10 ated a Financial Improvement and Audit Readiness 

11 (FIAR) Plan, overseen by a directorate within the 

12 office of the Under Secretary of Defense (Comp13 troller), to improve Department business processes 

14 with the goal of producing timely, reliable, and accu15 rate financial information that could generate an 

16 audit-ready annual financial statement. In December 

17 2005, that directorate, known as the FIAR Direc18 torate, issued the first of a series of semiannual re19 ports on the status of the Financial Improvement 

20 and Audit Readiness Plan. 

21 (7) The National Defense Authorization Act for 

22 Fiscal Year 2010 (Public Law 111–84) requires reg23 ular status reports on the Financial Improvement 

24 and Audit Readiness Plan described in paragraph 

25 (6), and codified as a statutory requirement the goal 


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1 of the Plan in ensuring that Department of Defense 

2 financial statements are validated as ready for audit 

3 not later than September 30, 2017. 

4 (8) At a September 2010 hearing of the Senate, 

5 the Government Accountability Office stated that 

6 past expenditures by the Department of Defense of 

7 $5,800,000,000 to improve financial information, 

8 and billions of dollars more of anticipated expendi9 tures on new information technology systems for 

10 that purpose, may not suffice to achieve full audit 

11 readiness of the financial statement of the Depart12 ment. At that hearing, the Government Account13 ability Office could not predict when the Department 

14 would achieve full audit readiness of such state15 ments. 

16 SEC. 3. AUDIT READINESS OF THE FINANCIAL STATEMENTS 

17 OF THE DEPARTMENT OF DEFENSE. 

18 (a) INCLUSION OF STATEMENT OF BUDGET RE19 SOURCES WITHIN FIAR PLAN.—Subsection (a)(2)(A) of 

20 section 1003 of the National Defense Authorization Act 

21 for Fiscal Year 2010 (Public Law 111–84; 123 Stat. 

22 2439; 10 U.S.C. 2222 note) is amended— 

23 (1) in clause (i), by striking ‘‘and’’ at the end; 

24 (2) by redesignating clause (ii) as clause (iv); 

25 and 


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1 (3) by inserting after clause (i) the following 

2 new clauses: 

3 ‘‘(ii) ensuring that a complete and 

4 validated statement of budgetary resources 

5 of the Department of Defense is ready by 

6 not later than September 30, 2014; 

7 ‘‘(iii) ensuring that the full set of con8 solidated financial statements of the De9 partment for the fiscal year ending Sep10 tember 30, 2017, and each fiscal year 

11 thereafter, are ready in a timely manner 

12 and in preparation for an audit, including 

13 submitting the reports not later than No14 vember 15, 2017, and each year thereafter, 

15 in order to seek an audit opinion on its fi16 nancial statements; and’’. 

17 (b) DEFINITION OF VALIDATED AS READY FOR

18 AUDIT.—Such section is further amended by adding at 

19 the end the following new subsection: 

20 ‘‘(d) VALIDATED AS READY FOR AUDIT DEFINED.— 

21 In this section, the term ‘validated as ready for audit’ 

22 means the following: 

23 ‘‘(1) In the case of the financial statements of 

24 a military department, that the audit agencies of the 

25 military department have reviewed such statements 


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1 and determined, in writing, that such statements are 

2 ready for audit. 

3 ‘‘(2) In the case of the financial statements of 

4 a Defense Agency, that the audit agencies of the De5 fense Agency have reviewed such statements and de6 termined, in writing, that such statements are ready 

7 for audit.’’. 

8 SEC. 4. CESSATION OF APPLICABILITY OF REPORTING RE9 QUIREMENTS REGARDING THE FINANCIAL 

10 STATEMENTS OF THE DEPARTMENT OF DE11 FENSE. 

12 (a) CESSATION OF APPLICABILITY.— 

13 (1) MILITARY DEPARTMENTS.—The financial 

14 statements of a military department shall cease to 

15 be covered by the reporting requirements specified in 

16 subsection (b) upon the issuance of an unqualified 

17 audit opinion on such financial statements. 

18 (2) DEPARTMENT OF DEFENSE.—The reporting 

19 requirements specified in subsection (b) shall cease 

20 to be effective when an unqualified audit opinion is 

21 issued on the financial statements of the Depart22 ment of Defense, including each of the military de23 partments and the Defense Agencies. 

24 (b) REPORTING REQUIREMENTS.—The reporting re25 quirements specified in this subsection are the following: 


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1 (1) The requirement for semi-annual reports in 

2 section 1003(b) of the National Defense Authoriza3 tion Act for Fiscal Year 2010 (Public Law 111–84; 

4 123 Stat. 2440; 10 U.S.C. 2222 note). 

5 (2) The requirement for annual reports in sec6 tion 1008(a) of the National Defense Authorization 

7 Act for Fiscal Year 2002 (Public Law 107–107; 115 

8 Stat. 1204; 10 U.S.C. 113 note). 

9 SEC. 5. REPORT ON DEPARTMENT OF DEFENSE REPORT10 ING REQUIREMENTS MADE OBSOLETE BY OR 

11 AFFECTING AUDITS WITH UNQUALIFIED 

12 OPINIONS. 

13 Not later than 180 days after the date of the enact14 ment of this Act, the Under Secretary of Defense (Comp15 troller) shall submit to Congress a report setting forth the 

16 following: 

17 (1) A list of each report of the Department of 

18 Defense required by law to be submitted to Congress 

19 which, in the opinion of the Under Secretary, would 

20 no longer be necessary if the financial statements of 

21 the Department of Defense were audited with an un22 qualified opinion. 

23 (2) A list of each report of the Department re24 quired by law to be submitted to Congress which, in 

25 the opinion of the Under Secretary, interferes with 


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1 the capacity of the Department to achieve an audit 

2 of the financial statements of the Department with 

3 an unqualified opinion. 

4 SEC. 6. ENHANCED REPROGRAMMING AUTHORITY FOL5 LOWING ACHIEVEMENT BY MILITARY DE6 PARTMENTS OF AUDIT WITH UNQUALIFIED 

7 OPINION OF STATEMENT OF BUDGETARY RE8 SOURCES FOR FISCAL YEARS AFTER FISCAL 

9 YEAR 2013. 

10 (a) IN GENERAL.—Subject to section 9(a)(1), if a 

11 military department obtains an audit with an unqualified 

12 opinion on its statement of budgetary resources for any 

13 fiscal year after fiscal year 2013, the thresholds for re14 programming of funds without prior notice to Congress 

15 for the succeeding fiscal year shall be deemed to be the 

16 thresholds as follows: 

17 (1) In the case of an increase or decrease to the 

18 program base amount for a procurement program, 

19 $60,000,000. 

20 (2) In the case of an increase or decrease to the 

21 program base amount for a research program, 

22 $30,000,000. 

23 (3) In the case of an increase or decrease to the 

24 amount for a budget activity for operation and 

25 maintenance, $45,000,000. 


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1 (4) In the case of an increase or decrease to the 

2 amount for a budget activity for military personnel, 

3 $30,000,000. 

4 (b) CONSTRUCTION.—Nothing in this section shall be 

5 construed to alter or revise any requirement (other than 

6 a threshold amount) for notice to Congress on 

7 reprogrammings covered by subsection (a) under any 

8 other provision of law. 

9 (c) DEFINITIONS.—In this section, the terms ‘‘pro10 gram base amount’’, ‘‘procurement program’’, ‘‘research 

11 program’’, and ‘‘budget activity’’ have the meanings given 

12 such terms in chapter 6 of volume 3 of the Financial Man13 agement Regulation of the Department of Defense (DoD 

14 7000.14R), dated March 2011, or any successor docu15 ment. 

16 SEC. 7. AVAILABILITY OF EXPIRING FUNDS FOLLOWING 

17 ACHIEVEMENT BY MILITARY DEPARTMENTS 

18 OF AUDIT WITH UNQUALIFIED OPINION OF 

19 STATEMENT OF BUDGETARY RESOURCES 

20 FOR FISCAL YEARS AFTER FISCAL YEAR 2013. 

21 (a) IN GENERAL.—Subject to section 9(a)(1), if a 

22 military department obtains an audit with an unqualified 

23 opinion on its statement of budgetary resources for a fiscal 

24 year after fiscal year 2013 (in this section referred to as 

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1 section (b) shall be available for the purposes specified in 

2 subsection (c) at the end of such covered fiscal year with3 out fiscal year limitation. 

4 (b) AVAILABLE AMOUNT.—The amount described in 

5 this subsection is the amount equal to five percent of the 

6 aggregate amount of unobligated appropriations available 

7 to the military department concerned for a covered fiscal 

8 year that would otherwise expire at the end of such cov9 ered fiscal year by law. 

10 (c) PURPOSES.— 

11 (1) IN GENERAL.—Except as provided in para12 graph (2) and subject to paragraph (3), amounts 

13 available under subsection (a) shall, at the election 

14 of the Secretary of the military department con15 cerned, be available for purposes as follows: 

16 (A) Payment in accordance with applicable 

17 law of bonuses authorized by law (including 

18 awards authorized by subchapter I of chapter 

19 45 of title 5, United States Code) for civilian 

20 employees of the military department, including 

21 employees determined to have made beneficial 

22 contributions to the achievement of the mission 

23 of the military department. 

24 (B) Procurement of weapons and weapon 

25 systems. 


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1 (C) Military education and training pro2 grams and activities of the military department. 

3 (2) EXCLUSION.—Amounts available under sub4 section (a) shall not be available for purposes as fol5 lows: 

6 (A) Research, development, test, and eval7 uation. 

8 (B) Military construction. 

9 (3) LIMITATIONS ON BONUSES.— 

10 (A) LIMITATION ON BONUS AMOUNT.—The 

11 amount of the bonus payable to a civilian em12 ployee of a military department under para13 graph (1)(A) in any year may not exceed the 

14 amount equal to 25 percent of the base pay of 

15 the employee in such year. 

16 (B) LIMITATION ON AGGREGATE AMOUNT

17 OF BONUSES.—The total amount of bonuses 

18 payable to civilian employees of a military de19 partment under paragraph (1)(A) in any year 

20 may not exceed $5,000,000. 

21 (C) CONSTRUCTION.—Nothing in para22 graph (1)(A) may be construed to authorize or 

23 provide for the payment of a bonus to an officer 

24 or employee of a contractor of the Department 

25 of Defense. 


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1 (d) TRANSFERS.— 

2 (1) IN GENERAL.—Notwithstanding any other 

3 provision of law, the Secretary of a military depart4 ment may transfer amounts described in subsection 

5 (b) that are available under subsection (a) among 

6 accounts of the military department for purposes of 

7 exercising the authority in subsection (a) with re8 spect to such amounts. Amounts so transferred shall 

9 be merged with amounts in the account or fund to 

10 which transferred and shall be available under the 

11 same terms and conditions as the amounts with 

12 which merged for the purposes specified in sub13 section (c). 

14 (2) NO NEW APPROPRIATION.—A transfer 

15 under paragraph (1) shall not be treated as a new 

16 appropriation of the amount so transferred. 

17 (e) REPORTS.— 

18 (1) ANNUAL REPORTS.—The Secretary of De19 fense shall submit to Congress each year (at the 

20 same time the budget of the President for a fiscal 

21 year is submitted to Congress in such year pursuant 

22 to section 1105 of title 31, United States Code) a 

23 report on the exercise of the authority under this 

24 section during the previous fiscal year. Each report 


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1 under this subsection shall include, for the fiscal 

2 year covered by such report, the following: 

3 (A) The amounts transferred under sub4 section (d), including the total amount trans5 ferred and the amounts transferred to each ac6 count to which transferred. 

7 (B) The purposes, and amounts, for which 

8 amounts transferred were used. 

9 (2) NOTICE ON PROCUREMENT.—Not later than 

10 30 days before using amounts available under sub11 section (a) for the procurement of weapons or a 

12 weapon system, the Secretary of the military depart13 ment concerned shall submit to Congress a report, 

14 in writing, on the use of such amounts for that pur15 pose. Each report shall include a statement of the 

16 weapons or weapon system to be procured and the 

17 amount to be used for such procurement. 

18 SEC. 8. FAILURE TO OBTAIN AUDITS WITH UNQUALIFIED 

19 OPINION OF FISCAL YEAR 2014 STATEMENT 

20 OF BUDGETARY RESOURCES OF THE DE21 PARTMENT OF DEFENSE. 

22 (a) IN GENERAL.—If the Department of Defense 

23 fails to obtain an audit with an unqualified opinion on its 

24 statement of budgetary resources for fiscal year 2014, the 


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1 following shall take effect, effective as of the date of the 

2 issuance of the opinion on such audit: 

3 (1) ADDITIONAL QUALIFICATIONS AND DUTIES

4 OF USD (COMPTROLLER).— 

5 (A) QUALIFICATIONS.—Any individual 

6 nominated for appointment to the position of 

7 Under Secretary of Defense (Comptroller) 

8 under section 135 of title 10, United States 

9 Code, shall be an individual who has served— 

10 (i) as the chief financial officer of a 

11 Federal or State agency that has received 

12 an audit with an unqualified opinion on 

13 such agency’s financial statements during 

14 the time of such individual’s service; or 

15 (ii) as the chief financial officer of a 

16 public company that has received an audit 

17 with an unqualified opinion on such com18 pany’s financial statements during the 

19 time of such individual’s service. 

20 (B) DUTIES AND POWERS.—The duties 

21 and powers of the individual serving as Under 

22 Secretary of Defense (Comptroller) shall in23 clude, in addition to the duties and powers 

24 specified in section 135(c) of title 10, United 

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1 spect to the financial management of the De2 partment of Defense as the Deputy Secretary of 

3 Defense (acting in the capacity of Chief Man4 agement Officer of the Department of Defense) 

5 or a successor official in the Department of De6 fense (acting in such capacity) may prescribe. 

7 (2) ADDITIONAL QUALIFICATIONS AND RESPON8 SIBILITIES OF ASA FOR FINANCIAL MANAGEMENT.— 

9 (A) QUALIFICATIONS.—Any individual 

10 nominated for appointment to the position of 

11 Assistant Secretary of the Army for Financial 

12 Management under section 3016 of title 10, 

13 United States Code, shall be an individual who 

14 has served— 

15 (i) as the chief financial officer of a 

16 Federal or State agency that has received 

17 an audit with an unqualified opinion on 

18 such agency’s financial statements during 

19 the time of such individual’s service; or 

20 (ii) as the chief financial officer of a 

21 public company that has received an audit 

22 with an unqualified opinion on such com23 pany’s financial statements during the 

24 time of such individual’s service. 


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1 (B) RESPONSIBILITIES.—The responsibil2 ities of the individual serving as Assistant Sec3 retary of the Army for Financial Management 

4 shall include, in addition to the responsibilities 

5 specified in section 3016(b)(4) of title 10, 

6 United States Code, such responsibilities as the 

7 Deputy Secretary of Defense (acting in the ca8 pacity of Chief Management Officer of the De9 partment of Defense) or a successor official in 

10 the Department of Defense (acting in such ca11 pacity) may prescribe. 

12 (3) ADDITIONAL QUALIFICATIONS AND RESPON13 SIBILITIES OF ASN FOR FINANCIAL MANAGEMENT.— 

14 (A) QUALIFICATIONS.—Any individual 

15 nominated for appointment to the position of 

16 Assistant Secretary of the Navy for Financial 

17 Management under section 5016 of title 10, 

18 United States Code, shall be an individual who 

19 has served— 

20 (i) as the chief financial officer of a 

21 Federal or State agency that has received 

22 an audit with an unqualified opinion on 

23 such agency’s financial statements during 

24 the time of such individual’s service; or 


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1 (ii) as the chief financial officer of a 

2 public company that has received an audit 

3 with an unqualified opinion on such com4 pany’s financial statements during the 

5 time of such individual’s service. 

6 (B) RESPONSIBILITIES.—The responsibil7 ities of the individual serving as Assistant Sec8 retary of the Navy for Financial Management 

9 shall include, in addition to the responsibilities 

10 specified in section 5016(b)(4) of title 10, 

11 United States Code, such responsibilities as the 

12 Deputy Secretary of Defense (acting in the ca13 pacity of Chief Management Officer of the De14 partment of Defense) or a successor official in 

15 the Department of Defense (acting in such ca16 pacity) may prescribe. 

17 (4) ADDITIONAL QUALIFICATIONS AND RESPON18 SIBILITIES OF ASAF FOR FINANCIAL MANAGE19 MENT.— 

20 (A) QUALIFICATIONS.—Any individual 

21 nominated for appointment to the position of 

22 Assistant Secretary of the Air Force for Finan23 cial Management under section 8016 of title 10, 

24 United States Code, shall be an individual who 

25 has served— 


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1 (i) as the chief financial officer of a 

2 Federal or State agency that has received 

3 an audit with an unqualified opinion on 

4 such agency’s financial statements during 

5 the time of such individual’s service; or 

6 (ii) as the chief financial officer of a 

7 public company that has received an audit 

8 with an unqualified opinion on such com9 pany’s financial statements during the 

10 time of such individual’s service. 

11 (B) RESPONSIBILITIES.—The responsibil12 ities of the individual serving as Assistant Sec13 retary of the Air Force for Financial Manage14 ment shall include, in addition to the respon15 sibilities specified in section 8016(b)(4) of title 

16 10, United States Code, such responsibilities as 

17 the Deputy Secretary of Defense (acting in the 

18 capacity of Chief Management Officer of the 

19 Department of Defense) or a successor official 

20 in the Department of Defense (acting in such 

21 capacity) may prescribe. 

22 (b) PUBLIC COMPANY DEFINED.—In this section, the 

23 term ‘‘public company’’ has the meaning given the term 

24 ‘‘issuer’’ in section 2(a)(7) of the Sarbanes-Oxley Act of 

25 2002 (15 U.S.C. 7201(a)(7)). 


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1 SEC. 9. FAILURE TO OBTAIN AUDITS WITH UNQUALIFIED 

2 OPINION OF FISCAL YEAR 2017 FINANCIAL 

3 STATEMENTS OF THE DEPARTMENT OF DE4 FENSE. 

5 (a) MILITARY DEPARTMENTS.— 

6 (1) CESSATION OF AUTHORITIES ON RE7 PROGRAMMING AND AVAILABILITY OF FUNDS.—If a 

8 military department fails to obtain an audit with an 

9 unqualified opinion on its financial statements for 

10 fiscal year 2017, effective as of the date of the 

11 issuance of the opinion on such audit, the authorities 

12 in sections 6 and 7 shall cease to be available to the 

13 military department for fiscal year 2017 or any fis14 cal year thereafter. 

15 (2) PROHIBITION ON EXPENDITURE OF FUNDS

16 FOR CERTAIN MDAPS PAST MILESTONE B.— 

17 (A) PROHIBITION.—If a military depart18 ment fails to obtain an audit with an unquali19 fied opinion on its financial statements for fis20 cal year 2017, effective as of the date of the 

21 issuance of the opinion on such audit, amounts 

22 may not be expended by the military depart23 ment for a weapon or weapon system or plat24 form being acquired as a major defense acquisi25 tion program for any activity beyond Milestone 

26 B approval unless such program has already 


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1 achieved Milestone B approval of the date of 

2 the issuance of the opinion on such audit. 

3 (B) DEFINITIONS.—In this paragraph: 

4 (i) The term ‘‘major defense acquisi5 tion program’’ has the meaning given that 

6 term in section 2430 of title 10, United 

7 States Code. 

8 (ii) The term ‘‘Milestone B approval’’ 

9 has the meaning given that term in section 

10 2366(e)(7) of title 10, United States Code. 

11 (b) DEPARTMENT OF DEFENSE.—If the Department 

12 of Defense fails to obtain an audit with an unqualified 

13 opinion on its financial statements for fiscal year 2017, 

14 the following shall take effect, effective as of the date of 

15 the issuance of the opinion on such audit: 

16 (1) REORGANIZATION OF RESPONSIBILITIES OF

17 CHIEF MANAGEMENT OFFICER.— 

18 (A) POSITION OF CHIEF MANAGEMENT OF19 FICER.—Section 132a of title 10, United States 

20 Code, is amended to read as follows: 

21 ‘‘§ 132a. Chief Management Officer 

22 ‘‘(a) IN GENERAL.—(1) There is a Chief Manage23 ment Officer of the Department of Defense, appointed 

24 from civilian life by the President, by and with the advice 

25 and consent of the Senate. 


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1 ‘‘(2) Any individual nominated for appointment as 

2 Chief Management Officer shall be an individual who 

3 has— 

4 ‘‘(A) extensive executive level leadership and 

5 management experience in the public or private sec6 tor; 

7 ‘‘(B) strong leadership skills; 

8 ‘‘(C) a demonstrated ability to manage large 

9 and complex organizations; and 

10 ‘‘(D) a proven record in achieving positive oper11 ational results. 

12 ‘‘(b) POWERS AND DUTIES.—The Chief Management 

13 Officer shall perform such duties and exercise such powers 

14 as the Secretary of Defense may prescribe. 

15 ‘‘(c) SERVICE AS CHIEF MANAGEMENT OFFICER.— 

16 (1) The Chief Management Officer is the Chief Manage17 ment Officer of the Department of Defense. 

18 ‘‘(2) In serving as the Chief Management Officer of 

19 the Department of Defense, the Chief Management Offi20 cer shall be responsible for the management and adminis21 tration of the Department of Defense with respect to the 

22 following: 

23 ‘‘(A) The expenditure of funds, accounting, and 

24 finance. 


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1 ‘‘(B) Procurement, including procurement of 

2 any enterprise resource planning (ERP) system and 

3 any information technology (IT) system that is a fi4 nancial feeder system, human resources system, or 

5 logistics system. 

6 ‘‘(C) Facilities, property, nonmilitary equip7 ment, and other resources. 

8 ‘‘(D) Strategic planning, and annual perform9 ance planning, and identification and tracking of 

10 performance measures. 

11 ‘‘(E) Internal audits and management analyses 

12 of the programs and activities of the Department, 

13 including the Defense Contract Audit Agency. 

14 ‘‘(F) Such other areas or matters as the Sec15 retary of Defense may designate. 

16 ‘‘(3) The head of the Defense Contract Audit Agency 

17 shall be under the supervision of, and shall report directly 

18 to, the Chief Management Officer. 

19 ‘‘(d) PRECEDENCE.—The Chief Management Officer 

20 takes precedence in the Department of Defense after the 

21 Secretary of Defense and the Deputy Secretary of De22 fense.’’. 

23 (B) CONFORMING AMENDMENTS.— 

24 (i) Section 131(b) of title 10, United 

25 States Code, is amended— 


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1 (I) by striking paragraph (3); 

2 (II) by redesignating paragraph 

3 (2) as paragraph (3); and 

4 (III) by inserting after paragraph 

5 (1) the following new paragraph (2): 

6 ‘‘(2) The Chief Management Officer of the De7 partment of Defense.’’. 

8 (ii) Section 132 of such title is 

9 amended— 

10 (I) by striking subsection (c); 

11 and 

12 (II) by redesignating subsections 

13 (d) and (e) as subsections (c) and (d), 

14 respectively. 

15 (iii) Section 133(e)(1) of such title is 

16 amended by striking ‘‘and the Deputy Sec17 retary of Defense’’ and inserting ‘‘, the 

18 Deputy Secretary of Defense, and the 

19 Chief Management Officer of the Depart20 ment of Defense’’. 

21 (iv) Such title is further amended by 

22 inserting ‘‘the Chief Management Officer 

23 of the Department of Defense,’’ after ‘‘the 

24 Deputy Secretary of Defense,’’ each place 

25 it appears in the provisions as follows: 


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1 (I) Section 133(e)(2). 

2 (II) Section 134(c). 

3 (v) Section 137a(d) of such title is 

4 amended by striking ‘‘the Secretaries of 

5 the military departments,’’ and all that fol6 lows and inserting ‘‘the Chief Management 

7 Officer of the Department of Defense, the 

8 Secretaries of the military departments, 

9 and the Under Secretaries of Defense.’’. 

10 (vi) Section 138(d) of such title is 

11 amended by striking ‘‘the Secretaries of 

12 the military departments,’’ and all that fol13 lows through the period and inserting ‘‘the 

14 Chief Management Officer of the Depart15 ment of Defense, the Secretaries of the 

16 military departments, the Under Secre17 taries of Defense, and the Director of De18 fense Research and Engineering.’’. 

19 (C) CLERICAL AMENDMENT.—The table of 

20 sections at the beginning of chapter 4 of such 

21 title is amended by striking the item relating to 

22 section 132a and inserting the following new 

23 item: 

‘‘132a. Chief Management Officer.’’. 


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1 (D) EXECUTIVE SCHEDULE.—Section 

2 5313 of title 5, United States Code, is amended 

3 by adding at the end the following: 

4 ‘‘Chief Management Officer of the Department 

5 of Defense.’’. 

6 (E) REFERENCE IN LAW.—Any reference 

7 in any provision of law to the Chief Manage8 ment Officer of the Department of Defense 

9 shall be deemed to refer to the Chief Manage10 ment Officer of the Department of Defense 

11 under section 132a of title 10, United States 

12 Code (as amended by this paragraph). 

13 (2) JURISDICTION OF DFAS.— 

14 (A) TRANSFER TO DEPARTMENT OF THE

15 TREASURY.—Jurisdiction of the Defense Fi16 nance and Accounting Service (DFAS) is trans17 ferred from the Department of Defense to the 

18 Department of the Treasury. 

19 (B) ADMINISTRATION.—The Secretary of 

20 the Treasury shall administer the Defense Fi21 nance and Accounting Service following transfer 

22 under this paragraph through the Financial 

23 Management Service of the Department of the 

24 Treasury. 


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1 (C) MEMORANDUM OF UNDERSTANDING.— 

2 The Secretary of Defense and the Secretary of 

3 the Treasury shall jointly enter into a memo4 randum of understanding regarding the trans5 fer of jurisdiction of the Defense Finance and 

6 Accounting Service under this paragraph. The 

7 memorandum of understanding shall provide for 

8 the transfer of the personnel and other re9 sources of the Service to the Department of the 

10 Treasury and for the assumption of responsi11 bility for such personnel and resources by the 

12 Department of the Treasury. 

13 (D) CONSTRUCTION.—Nothing in this 

14 paragraph shall be construed as terminating, al15 tering, or revising any responsibilities or au16 thorities of the Defense Finance and Account17 ing Service (other than responsibilities and au18 thorities in connection with the exercise of ju19 risdiction of the Service following transfer 

20 under this paragraph). 

21 SEC. 10. ENTERPRISE RESOURCE PLANNING. 

22 The Secretary of Defense shall amend the acquisition 

23 guidance of the Department of Defense to provide for the 

24 following: 


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1 (1) The Defense Business System Management 

2 Committee may not approve procurement of any En3 terprise Resource Planning (ERP) business system 

4 that is independently estimated to take longer than 

5 three years to procure from initial obligation of 

6 funds to full deployment and sustainment. 

7 (2) Any contract for the acquisition of an En8 terprise Resource Planning business system shall in9 clude a provision authorizing termination of the con10 tract at no cost to the Government if procurement 

11 of the system takes longer than three years from ini12 tial obligation of funds to full deployment and 

13 sustainment. 

14 (3) The Deputy Secretary of Defense (acting in 

15 the capacity of Chief Management Officer of the De16 partment of Defense) or a successor official in the 

17 Department of Defense (acting in such capacity) 

18 shall have the authority to replace any program 

19 manager (whether in a military department or a De20 fense Agency) for the procurement of an Enterprise 

21 Resource Planning business system if procurement 

22 of the system takes longer than three years from ini23 tial obligation of funds to full deployment and 

24 sustainment. 


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1 (4) Any integrator contract for the implementa2 tion of an Enterprise Resource Planning business 

3 system shall only be awarded to companies that have 

4 a history of successful implementation of other En5 terprise Resource Planning business systems for the 

6 Federal Government (whether with the Department 

7 of Defense or another department or agency of the 

8 Federal Government), including meeting cost and 

9 schedule goals. 

Æ 


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