- 4/29/2025
On Tuesday, the House Oversight Committee held a hearing on "Tracking Progress: Updates to DoD’s Financial Management Scorecard."
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00:00:00without objection the chair may declare recess at any time and i would recognize myself
00:00:05for the purpose of making an opening statement i'd like to welcome everybody to today's hearing
00:00:12regarding updates to the department of defense's progress towards achieving a clean audit opinion
00:00:20i would like to thank our witnesses for testifying today on this very important topic
00:00:25i would also like to thank subcommittee members on both sides for staying committed to shining a
00:00:31light on financial management issues that the department of defense faces and working towards
00:00:37a solution together to that future i've said this before but financial transparency of the military
00:00:46is critical it's critical for the military and it's critical for the american people to know that they
00:00:52have the confidence that it's being well managed so the question is how can we remain confident
00:01:00in the department of defense's ability to protect american assets and interest if they cannot
00:01:05properly manage their expenses or assets perhaps not even knowing where they are we're here today
00:01:13because the department of defense is still unable to achieve a clean audit of their financial statements
00:01:20in fiscal year 2024 the department of defense reported more than 909 billion dollars half the discretionary
00:01:29spending of the united states but still holds the distinction of being the only federal agency that
00:01:35has never passed a conference comprehensive audit the department of defense has more than 28 components
00:01:43and it's fair to say that some are doing better at financial management than others
00:01:49for this year's past financial audit components that could not be audited accounted for at least 48 percent
00:01:56of dod's total assets and at least 64 percent of dod's budget it's important to note that this is more than
00:02:07just a paper exercise it is understanding where your assets are and how much taxpayer funding is left
00:02:15it's important that the military gain a complete picture of military readiness as well as congress that counts
00:02:24on these reports even though roughly half of dod passed the services who receive the most amount of money and
00:02:32the most assets account for the areas where they are struggling to track their spending and assets
00:02:40balancing the checkbook is more than just military preparedness i believe it goes hand in hand both
00:02:48understanding where the checkbook is where the assets are in military preparedness financial security is national security
00:02:57the joint strike fighter program the joint strike fighter program is a multi-service multinational program
00:03:04that will cost more than two trillion dollars over the lifetime according its lifetime of service according to the gao
00:03:12for fiscal year 2024 auditors found that dod management did not account for manage or report joint strike fighter
00:03:25government property not fully reporting this information resulted in material misstatements across dod assets
00:03:34because dod could not provide reliable information to verify the existence completeness or value of the
00:03:44program's government properties auditors were unable to quantify the amount of these misstatements
00:03:53this means that there are monetary and operational gaps last september the subcommittee with the help of gao
00:04:02created a scorecard to track to track dod's progress towards achieving a clean audit opinion
00:04:10rather than continuing to say that dod isn't doing a good job making progress towards achieving a clean audit
00:04:18we wanted something that would show that they were in fact on the road and i think we were here today
00:04:26to fixing not only those things that are internally uh it uh imperative to this but good ideas from certain elements
00:04:34within dod that are taking the lead this is especially important because dod is mandated to achieve
00:04:43a clean audit by 2028 it is and should remain the goal of this subcommittee and of congress
00:04:52to hold dod accountable today we plan to discuss discuss the progress that dod has made and the
00:05:00challenges they face as this new administration is planning for the future it will be imperative to
00:05:07understand where the department has been where it needs to go and what is standing in the way today we are
00:05:15also unveiling a new section of the scorecard that focuses on fraud risk management we have talked about
00:05:24fraud prevention for many years so i am very excited to see a new method to track progress in preventing
00:05:30fraud in the areas of procurement and contracting strong financial management systems are important part of
00:05:39fraud prevention seeing inside that is essential what we've seen over the years is that dod has struggled
00:05:48in maintaining and updating systems and these systems are critical if we're going to get where we want
00:05:55to go with a clean audit last congress we were told that dod had to achieve a clean audit opinion by
00:06:03december 2028 we made that commitment and today i think we will show where there is strong significant
00:06:11progress by 2026 that's why we're here we're having this discussion but it also is a commitment by the
00:06:19gentleman the ranking member mr nfume and myself to make sure that we go beyond these hearings and to
00:06:26actually engage the department of defense unfortunately today the office of the secretary of defense will
00:06:33not be a part of the conversation they will be missed and both mr nfume and i plan to visit the
00:06:40pentagon to lead that discussion with the secretary of defense we hope that they will see this as an
00:06:48opportunity to listen and learn to take some of what we're hearing today but to move forward together
00:06:55and i would now yield for the gentleman's time for an opening statement mr nfume gentlemen's recognized
00:07:01thank you very much mr chairman good morning to you good morning to our witnesses and good morning to
00:07:09those of you in attendance i want to particularly thank uh chairman sessions for doggedly following
00:07:15up on this issue he and i feel very very strongly as some of you know that we just can't keep going down
00:07:21this street i want to thank mr khan mr mansfield good to see both of you again last september we held
00:07:28uh the second hearing to address financial accountability in the department of defense
00:07:34and so as fate would have it we are back here today to continue that conversation in light of
00:07:40the department of defense's continued inability to pass a department-wide audit uh it's not new for
00:07:48the dod and i share the chairman's commitment to holding that entire agency accountable for years the
00:07:56department of defense has tried but as we know failed to successfully complete a clean department-wide
00:08:03audit a clean audit is not judging the merits of dod spending which we do not do in this committee
00:08:11but it's asking what is that spending and how do you explain that spending and the accountability of
00:08:17it dod has failed uh to meet this basic standard to provide proper evidence to show that they
00:08:24accurately accounted for their finances now let me be redundant there have been seven if you're
00:08:32listening at home or watching seven straight audits that have been failed by the department of defense
00:08:39i want to be deliberately redundant about this because that number every time i say it continues to
00:08:46strike a great deal of horror at me that it happens and continues to happen
00:08:50and and and i want to underscore that um i'm not really into a lot of graphics mr chairman but this
00:08:56time uh i want to just repeat the fact that we have had seven audits and you can see going back to 2018
00:09:05raise it up would you failed failed failed failed failed failed that's embarrassing it's the greatest country on the face of the earth and we can't even get an audit completed
00:09:18so i hope that if the leadership of the department is watching that they understand how serious this is
00:09:26for those of us who personally are just offended that this continues to happen and i can't stress enough
00:09:33my thanks to the chairman for working on this issue together so um while the department of defense
00:09:39has still not produced the clean audit there was significant progress under the previous administration that
00:09:45progress was spurred by secretary lord austin's focus on modernizing financial systems which helped to
00:09:52lead the u.s marine corps to adopting a two-year audit approach and a clean achieving a clean audit opinion
00:10:01for fiscal year 2023 and 2024 god bless the united states marines that progress is critically important
00:10:09and so i think it's up to us to determine how to get other components at dod up to the standard that the
00:10:16marine corps is at chairman sessions and i are dedicated to ensuring accountability for the hundreds of
00:10:22billions of dollars in spending and the four trillion dollars in total assets that make up our defense
00:10:30budget in fiscal year 2024 u.s taxpayers entrusted 909 billion dollars to the department of defense
00:10:39one of the largest investments in our nation's history and while we continue to provide the dod with
00:10:46escalating sums of money only 11 out of the 24 total components at dod were able to achieve a clean audit
00:10:55the components that failed unfortunately include the army the navy and the air force those three along
00:11:02comprise 90 percent of dod's assets by dollar amount now standing in the way of a clean audit is the wide
00:11:10prevalence of material weaknesses which we even told over and over again that is a an accounting firm term
00:11:16excuse me for the areas in which the department of defense lacks internal controls over financial reporting
00:11:25material weaknesses year after year these material weaknesses caused the department of defense to be the
00:11:31only major federal agency unable to achieve a clean audit opinion this along with a number of other
00:11:39long-standing issues serves as a daily reminder of dod's history of pervasive deficiencies in financial
00:11:47management systems business processes internal controls and financial reporting so under these conditions it
00:11:56makes the administration's goal of raising the pentagon's budget to a trillion dollars particularly puzzling
00:12:05absolutely puzzling i should say under the department we have seen so many things take place and i'm convinced
00:12:13that until the department can restore full faith and accountability for these critical dollars i can't justify
00:12:21increasing their budget even further especially in light of the pressing need for funds and so many other areas of
00:12:27overall spending where we've taken a chainsaw and cut the hell out of it it's even harder for me to justify any
00:12:34increases in the pentagon's budget in the midst of its current leadership crisis during our last hearing on this
00:12:40topic our witnesses discussed the importance of leadership from quote the top down and they said that was
00:12:46important in creating a culture within the dod where accountability at long last really does matter
00:12:54right now we're seeing a distinct lack of leadership especially in the realm of accountability and i join
00:13:00the chairman in expressing the hope that either secretary hegseth will come before this committee
00:13:06and talk to us about that accountability and what's being done or that we will find ourselves at the
00:13:12pentagon trying to again get some real clear information about the struggles at dod it's our
00:13:20largest federal agency as i've said employing more than 3.4 million americans including 1.3 million active
00:13:26duty service members and in their efforts to keep our nation safe we must ensure our service members
00:13:33have the most sophisticated modernized technology and systems to eliminate financial errors just like we try to
00:13:41provide that to win wars we need the best sort of technology that we can provide to eliminate
00:13:47financial errors and to streamline data entry and obtain the most effective national security we can
00:13:55for the tax dollars we invest i think it's fair to say that congress can't allow another failed audit
00:14:01to go by don't want to be here next year talking about the eighth year in a row as we move toward this
00:14:072028 mandate it'd be good to see just a little bit of progress on that road and personally i've not
00:14:15seen it but i want to thank all of those who've worked on this important matter since our last hearing i
00:14:20thank you over and over again for your efforts to give us direction and understanding on some of this and
00:14:27to provide real transparency about where really where all of our military spending goes with that mr chairman
00:14:36i again want to thank you and i yield back gentleman yields back his time i would like to reinforce for
00:14:41our witnesses that are today and those of the staffs that are here to recognize that mr nfume and i
00:14:50are doing this across the entire government it is not just the department of defense it is areas where
00:14:58some 300 to 500 billion dollars in our immediate past uh was the guests from uh omb and cbo about the
00:15:10amount of money that went to misdirected payments and both both mr nfume and i are together on this
00:15:19him using not just a strong voice uh and working together but us sincerely wanting to make sure that the
00:15:27money goes to the intended purpose and not outside of that so mr nfume i want to thank you and as we
00:15:35said last year we would do this year as we're saying today we will be pleased to show up at the
00:15:41pentagon make those arrangements and make sure that at the highest levels of the department of defense
00:15:48they understand the work that has gone on today must be prepared and continued for 28.
00:15:55i'm pleased to welcome our witnesses for today representing the united states marine corps lieutenant
00:16:02general james adams the third the gentleman mr brett mansfield and mr asleep khan lieutenant general
00:16:12adams is deputy command and commandant for programs and resources in the united states marine corps
00:16:18mr manfield is the deputy inspector for the government for audit at the u.s department of defense
00:16:25office of the inspector general mr khan is the director of financial management assurance at the united
00:16:33states government account of accountability office gao and we look forward to hearing from you today
00:16:38and i would ask that each of you would stand pursuant to committee rule 9g the witnesses will raise
00:16:45their right hand to be sworn do you solemnly swear or affirm that the testimony that you're about to
00:16:52give is the truth the whole truth and nothing but the truth so help you god let the record reflect that
00:17:00each of the witness has answered in the affirmative we appreciate each of you being here today
00:17:05and appreciate also that um what the testimony that you may be seated thank you we appreciate
00:17:14that the what the testimony you give today would be along the line of making sure that this subcommittee
00:17:21hears you fully with that said we normally extend five minutes i've notified each of you
00:17:27that if it takes you six or seven minutes we're all ears we want you to make sure you're given the time
00:17:34so this subcommittee hears from each of you as a reminder the buttons that are in front of you
00:17:40you would push them and then we would be able to hear you i now recognize the distinguished
00:17:48gentleman lieutenant general adams for his opening statement gentlemen's recognized
00:17:53chairman sessions ranking member and fume and distinguished members of the subcommittee
00:18:00thank you very much today for the opportunity to appear before you it is an honor to represent the
00:18:06united states marine corps in my capacity as the services chief financial officer and to speak to
00:18:12our financial management progress and continued challenges i am very proud to report that the marine
00:18:18corps received an unmodified audit opinion on our fiscal year 2023 full financial statement audit
00:18:26and maintain that opinion for the fiscal year 2024 these are significant milestones
00:18:34not only for our service but for the department of defense they reflect many years of determined effort
00:18:41in an enterprise-wide commitment to accountability and stewardship
00:18:45i want to emphasize that while we're proud of our achievements we do not take them for granted
00:18:52while an unmodified audit opinion reinforces the marine corps's reputation of accountability
00:18:58discipline and leadership it also reflects the dedication and hard work of the entire organization
00:19:05including financial management professionals acquisitions and logistics teams
00:19:09these teams continue to work tirelessly to properly to ensure proper stewardship of resources
00:19:17and their commitment remains critical to achieving and sustaining a clean audit opinion
00:19:23but these achievements are not the end state they are critical milestones along a very important journey
00:19:31one that demands continued focus sustained investment and transformation across our financial and operational systems
00:19:40unmodified opinions are difficult to earn they require rigorous internal controls
00:19:47meticulous record keeping and transparent financial reporting we remain committed to continuous improvement
00:19:55in our financial management practices recognizing that an unmodified opinion is hard won but easily lost
00:20:02the defense department presents a complex audit environment characterized by numerous
00:20:15IT systems varying operational procedures and common deficiencies across components
00:20:21components to achieve and maintain DOD-wide auditability we must prioritize streamlining standardizing
00:20:30and harnessing technology to include emerging technologies like artificial intelligence to free up valuable
00:20:36resources simplify our business environment and ultimately strengthen our financial management posture
00:20:43one of our most persistent challenges remains the modernization of our business IT infrastructure
00:20:51much of our financial data continues to originate in legacy feeder systems that were never designed
00:20:57to meet audit or modern data data analytic standards these antiquated systems some of which are decades old require manual intervention
00:21:07reconciliation and workarounds that add complexity introduce risk and slow down decision making
00:21:15as the chief financial officer of the marine corps i see firsthand how better systems enable better outcomes
00:21:23not just for auditors but for commanders and war fighters
00:21:28these individuals rely on accurate timely information to make mission critical decisions
00:21:35the clean opinion is a clear sign of progress but system modernization is essential to sustain and build on that progress
00:21:42the achievement of audibility across the military services demands a shift in how we conduct business within DOD
00:21:50a key example is the current data systems environment which is not conducive to finalizing agency
00:21:56financial reports by the mid-november deadline the marine corps innovative approach to utilizing a two-year audit
00:22:04to attain its first opinion is related to the challenges with the financial reporting timeline
00:22:09our approach allowed us to bypass typical mid-november audit closeout activities and dedicate that time
00:22:17two full quarters of time to completing comprehensive audit procedures which would have otherwise been
00:22:23impossible to accomplish given the current constraints adhering to the mid-november deadline is unrealistic in the short term
00:22:30and sets us up for failure until data systems and financial reporting processes are streamlined
00:22:35we need a realistic time frame that allows for thorough and accurate financial reporting
00:22:42as the commandant of the marine corps has stated these efforts tell the american people that a dollar
00:22:47invested in the marine corps is a dollar well spent and it is part of how we distinguish ourselves as a professional
00:22:54warfighting organization passing an audit makes us more ready to fight when our nation calls
00:23:00readiness for the warfighter means being accountable for our assets
00:23:04knowing where they are and in what condition they are can be found at a moment's notice
00:23:09it also means having accurate timely and relevant information in the hands of decision makers so
00:23:14that the widest determinations can be made to successfully carry out every mission we remain committed to
00:23:20transparency to reform to delivering a more agile accountable financial enterprise that supports the
00:23:26readiness and lethality of the marine corps thank you again for the opportunity to speak with you
00:23:31and i look forward to your questions thank you very much the gentleman mr mansfield you're recognized
00:23:39chairman sessions ranking member mma and members of the subcommittee thank you for inviting me to
00:23:44discuss the inspector general's role in auditing the dod's financial statements in the dod's efforts to
00:23:49obtain a clean audit opinion it is my privilege to represent the dedicated oversight professionals who make
00:23:55up the dod office of inspector general the financial statement audits performed or overseen by the
00:24:01inspector general are critically important for maintaining the public's trust ensuring accountability
00:24:06and improving operations the 2025 financial statement audits are ongoing so i cannot speak to their
00:24:11results so i'll focus on 2024 in the previous seven years of audit as my prepared statement today i provided
00:24:19part one of our annual report on understanding the results of the dod's financial statement audits
00:24:24we plan to issue part two next month these reports explain the dod's responsibility to prepare audible
00:24:31financial statements establish and establish internal controls it also talks to the links between financial
00:24:37management and operational readiness these reports also explain the dod oig's responsibility to
00:24:43independently audit the dod's financial statements fiscal year 24 marked the seventh full-scale audit of the
00:24:50the dod's financial statements and for the seventh year it resulted in a disclaimer of opinion or as
00:24:56uh remember information referred to a failed opinion um but that does not tell the whole story the
00:25:04agency-wide financial statements are a consolidation of audit statements and information from across the dod in
00:25:11addition to the agency-wide financial statement opinion auditors issues opinions on individual reporting
00:25:16entities in fiscal year 24 11 received clean opinions one received a qualified opinion and 12 received
00:25:23disclaimers of opinion these disclaimers of opinion were issued because the dod entities continue to have
00:25:29unresolved accounting issues and material weaknesses when consolidated into the agency-wide financial
00:25:34statements the entity level deficiencies resulted in the oig identifying 28 agency-wide material weaknesses
00:25:41however individual reporting entities have made progress towards clean audit opinions in fact
00:25:48as as a fellow witness stated the marine corps maintained its clean opinion this year uh ditra and dla obtained clean
00:25:56opinions uh in addition 14 entities either closed or downgraded at least one material weakness in fiscal year 24
00:26:03while these entities uh some of them are not material but when it comes to their con their full contribution
00:26:11in addition to the agency-wide uh financial statement opinion it does mark progress and as individual
00:26:16reporting entities like the services or defense agencies as they become better and they reduce material
00:26:22weaknesses and they have more solid controls over financial reporting so will the dod overall
00:26:29today i want to highlight three themes the oig has identified during the past seven years of audit
00:26:34first the dod needs accountability at all levels for financial management
00:26:38senior leaders have set the right tone at the top however at the individual level personnel do not
00:26:44consistently understand how the work they do impacts financial statements for example a sergeant in a
00:26:50warehouse who is focused on the operational readiness may not grasp the financial impact of receiving
00:26:55inventory and recording inventory or tracking customer orders and maintaining supporting documentation and how
00:27:00that ultimately relates to operational readiness and knowing what you have where it is in the condition it's in
00:27:07second the dod has an extremely complex systems environment with over 4 700 systems across the dod
00:27:13more than 400 of those systems are relevant to financial management which have at least 2 000 interfaces between
00:27:20them some of these systems have been in use since the 1950s the systems are not always interoperable
00:27:25meaning they cannot talk to each other and many of the systems require manual processes and do not have effective
00:27:31controls third the dod's policies and procedures for accounting do not consistently match the
00:27:39capabilities of the systems they use when implementing new systems dod components do not change their
00:27:45policies or procedures to align with the system's capabilities rather they make modifications to the
00:27:51system to match their current procedures negating the value of the system investment addressing these
00:27:57weaknesses requires continued effort and sufficient coordination significant coordination within and
00:28:02between each dod entity the culture must continue to change so that all personnel realize that financial
00:28:07management has a direct impact on operational readiness and is everyone's business the dod office of
00:28:14inspector general will continue to ensure the dod receives full and fair audits of its financial statements
00:28:19to identify deficiencies and areas for improvement and to provide actionable information and recommendations to the dod
00:28:25our commitment to enhancing the dod's financial health through independent oversight remains steadfast
00:28:30thank you and i look forward to your questions thank you very much uh timely uh in conclusion also
00:28:38thank you very much mr manfield mr khan you're recognized good morning chairman sessions ranking member
00:28:46umfumi and members of the subcommittee thank you for the opportunity to once again testify on the department of
00:28:52defense financial statement audits as you heard there has been some progress since our last update the tone
00:28:59at the top continues to be supportive of the audit effort with the goal of achieving an opinion by 2028
00:29:05this is one of secretary heskett's three priorities the audit uncovers weaknesses and duty management systems
00:29:12improves coordination and guides better decision making and it has led to positive results both financial and
00:29:20operational it has also identified vulnerabilities which require heightened attention by dod management
00:29:27today i would like to highlight two key items the expansion of dod financial management high-risk area
00:29:35to include frost fraud risk management and then the next steps in dood's audit approach to reaching
00:29:41auditability first effective fraud risk management is essential to protecting the resources entrusted to the
00:29:48department the department the lack of an effective fraud risk management capacity combined with the
00:29:54identified material weaknesses compounds duties failures to establish a strong financial management
00:30:01internal control environment this condition increases opportunities for fraud against the department's vast
00:30:08resources dood spends over a trillion dollar annually it obligated over 450 billion for contracting in fiscal year
00:30:182023 making it the largest contracting agency in the federal government the scope and scale of dood's
00:30:26financial activity makes it inherently susceptible to fraud for fiscal year 2017 through 24
00:30:33dood themselves reported over 10 billion in confirmed fraud the actual fraud is likely much higher
00:30:40as the full scale of fraud is not known now to my second point
00:30:46the next steps in dood's approach to auditability sound financial management processes are critical to supporting
00:30:53dood's mission ensuring its financial resources resources are being spent wisely and that there are controls in
00:31:00place to minimize fraud waste and abuse it also helps ensure dood has reliable information
00:31:07on what supplies and assets it has where they are located so the department can achieve its mission effectively and efficiently
00:31:16as a first step to auditability dood will need to have reliable data for preparing its financial statements to
00:31:23successfully pass the audit the marine corps was able to achieve its first opinion through effective strategic
00:31:30planning and managing milestones they augmented the capabilities of the new general ledger system the dai with manual labor
00:31:40data for tracking transactions piecemeal and relying on manual workarounds for record keeping
00:31:53as the feeder systems and underlying controls are unreliable the goal of an effective financial
00:31:59management system is to provide reliable information on a timely basis for decision making
00:32:05it's yet unclear for other larger dood components if they may successfully employ the marine car approach
00:32:12but what is clear in order to succeed the department must be realistic of the resource needs to prepare
00:32:19auditable financial statements and coordinate detailed planning enforced timelines and manage complexity
00:32:26to reap long-term benefits and meet the intent of producing financial statements
00:32:31duty must also strengthen internal controls and modernize systems to cut fraud risk and eliminate inefficient workarounds
00:32:40duty must build a repeatable reliable financial management process
00:32:44that consistently generates timely accurate data to support operations and strengthen national defense
00:32:52and if congress were to monitor milestones ensure accountability and adapt where necessary
00:32:58without affecting the 2028 audit goal it would go a long way towards helping the department achieve auditability
00:33:06and build that repeatable financial management process
00:33:08my written statement provides much more detail on these matters
00:33:13i'm able to address your questions about them and on the broader subjects of doda financial management and the benefits of
00:33:21financial statement auditability
00:33:23thank you once again for the opportunity to testify i'll be happy to answer your questions
00:33:30mr khan thank you very much all three of you uh completed the task well within the time frame and that i appreciate
00:33:37we have a number of members who were spread out not only on the democratic side but the republican side and so
00:33:44today we will attempt to uh take those members uh as they appear i would first uh uh offer time to the
00:33:52distinguished gentleman from tennessee uh mr burchett gentleman's recognized when you said distinguished and
00:34:00gentleman i didn't look up but then you said tennessee yes sir i realized you were yes right mr chairman thank you mr
00:34:05chairman and um ranking member mafumi appreciate y'all being my friend um have a few questions uh mr
00:34:12mansfield um is dod's fiscal year 26 budget going to be higher than fiscal year 25's budget
00:34:22that is my understanding yes and how much of that is spending is mandatory and how much is discretionary
00:34:27uh the past majority is discretionary uh the spending has increased but i assume that dod still has not
00:34:36completed a clean audit is that correct correct why is the marine corps able to complete a clean audit but
00:34:43no one else at the pentagon is so i think it goes back to uh some of uh what my fellow witnesses were
00:34:53talking about uh it it was uh a deliberate and uh long-term effort uh to get to that point uh get to the
00:35:02point of not being able to pass an audit be able to pass an audit um so there was a about a three-year
00:35:07cycle it was a two-year audit but they capitalized on a lot of work that was performed in uh previous
00:35:14financial statement audits to look at accountability and how testing results were coming out uh they
00:35:20implemented a new system dai which has some inherent controls within it uh they and then they validated
00:35:27the information within that through a substantive testing effort so it's a very labor-intensive uh effort
00:35:33uh taking actually a little over two years it was actually extended past the november deadline into i
00:35:39think february uh in order to actually get the full uh financial statement uh audit testing completed
00:35:45uh so it was a deliberate and kind of i think very manual what i refer to as a brute force auditing
00:35:51approach uh it's not your standard approach of doing uh internal control testing i see part of our
00:35:56problem here is we're preaching to the choir you know eight years they have not passed an audit
00:36:02um they can't account for over a half a trillion dollars this is the pentagon not the marine corps
00:36:07i mean half a trillion dollars sir is an aircraft carrier somewhere in the pentagon we've lost an
00:36:12aircraft carrier and that that hurts me because i'm i come from this conservative area my daddy fought in
00:36:18the first marine division his colonel was chesty puller my mama lost her oldest brother fighting the nazis
00:36:24uh my my wife is a widow and the biological father of my child was a master chief on a navy sub
00:36:35so the military runs very deep in my family and patriotism does as well but when we continue to feed this
00:36:44insatiable diet of waste and abuse it continues to i think weaken us and weaken us from a fiscal
00:36:53standpoint and a military standpoint we continue down this path of an antiquated system where we vote
00:37:01for huge bloated budgets for powerful members of congress and we have programs apparatus machinery
00:37:12everything imaginable that gets mothballed the day we put it out mr chairman that has got to stop we have
00:37:19got to educate the public and they need to be as angry as i am about this because we cannot continue
00:37:26down this path i think we're in danger in our military we're in danger in our men and women daddy used to
00:37:32say he was quoting somebody else but um he said old men make decisions and young men die and when we're
00:37:39sitting here having half a billion dollar aircraft being proposed and we're putting out
00:37:48we're allowing the chinese to make the microchips for them that could possibly turn off some of those
00:37:52aircraft mid-flight we've been told it's not just some conspiracy theory that is talked about and
00:38:00we continue down this path of greed and when we have members of this body that profit from this
00:38:10and are allowed to do individual stock trades and continue down this the public does not trust us and
00:38:15dadgummit they ought not trust us we have not been good stewards of their money this is going
00:38:20to continue until we get off our high horse and realize what the heck is going on and what is
00:38:27going on right now is we're allowing people to steal from us because we're we're hogs at the trough
00:38:34congress is hogs at the trough and i'm convinced of that you want to follow the dadgum money trail it goes right
00:38:40back to congress and someday i hope some members of congress are let out of here in handcuffs because
00:38:46of that because these men they're the ones having to come out and defend the indefensible and i want
00:38:53to salute the marine corps and your all's great heritage and my mama said after daddy died if daddy
00:39:00hadn't been able to go fight in that war she probably couldn't have been able to live with him because he
00:39:04loved this country and he loved the corps he loved chesty puller as well but that goes a lot deeper
00:39:10so thank you all sorry mr chairman i went to preaching i didn't even have an we'll have a special love
00:39:15offering when this is all over with and we didn't even have an altar call but thank you for allowing me
00:39:20to indulge mr chairman the gentleman yields back his time thank you very much distinguished gentleman from
00:39:26maryland's recognized thank you mr chairman i i know there are the members i'm going to just wave my
00:39:36time right now so that you can start the process of uh acknowledging them i do want to thank uh the
00:39:43gentleman who just spoke uh for always uh speaking real and from the heart in a very basic way to
00:39:51underscore the work of this committee and the challenge the challenge to change the status quo i
00:39:58yield back gentleman yields back his time uh the distinguished gentleman woman from north carolina
00:40:04has recognized mrs fox thank you very much mr chairman and thanks to our witnesses for being here today
00:40:13mr mansfield in 2024 the dod office of inspector general reported that many of dod's financial
00:40:20management systems remain non-compliant with statutory standards for accurate reliable and timely
00:40:26information although dod aims to achieve compliance by fiscal year 2028 the oig found its plans
00:40:35insufficiently aggressive citing delays in retiring outdated systems the oig recommended expediting the
00:40:42retirement and replacement of 23 systems potentially saving nearly 728 million dollars in future funding
00:40:50mr mansfield in your opinion why is the department of defense not being more aggressive in
00:40:55retiring financial systems that are not cost effective and that are not compliant with statutory requirements
00:41:05it's a complex it's a complex storyline so if you think about the number of systems they have
00:41:10simplify it in our we have short time no so what i'm saying is there's a lot of systems in
00:41:15in order to replace if you have 400 systems that you're relying upon to replace all of those at one
00:41:19point in time is very difficult and so what the department hasn't done i don't think the best job of is
00:41:25prioritizing which systems to replace those systems that have the biggest impact on the department so if
00:41:30you think about the most material portions of the financial statements and the systems relied upon for that
00:41:36prioritizing those and making real decisions on which systems are going to be used in the long term
00:41:44so identifying those uh enterprise resource management systems they want to use across the board and
00:41:49requiring use of those and in the last stop letting individual entities make their own decisions on the
00:41:55systems they use there needs to be more of a strategic approach to that thank you very much mr khan
00:42:02according to gao the navy identified 14 legacy systems that it plans to retire which would save the
00:42:08department approximately 103 million are the other branches also running legacy systems that would be
00:42:15more cost effective to eliminate and how many legacy systems are there that are costing the branches
00:42:21and the dod money to use yes there are other components which are running legacy systems which are
00:42:28not producing reliable information um i don't have a number with me right now i will get that to you for
00:42:34the record okay and what prevents the military services from using the same financial systems
00:42:43in part they've got different requirements uh it's big complex uh they have to do this in stages
00:42:50first they have to do individual offices components but it's the scale and their different practices which
00:42:56keeps them using one system for the entire department another question mr khan a dod ig audit of
00:43:04financial improvements and audit remediation contracts for the military components found that from
00:43:10fiscal year 2018 to fiscal year 2022 the dod spent approximately four billion dollars on audit remediation
00:43:20and support with the goal of obtaining a clean audit but that the department made minimal progress to
00:43:26correct its financial management what specifically was the money spent on and how does four billion dollars
00:43:33yield only minimal progress for achieving a clean audit
00:43:40most of the money went for uh the project uh planning and putting in the basics of a system so they could be
00:43:49integrated with the existing uh feeder systems that go into the entire uh component uh results were
00:43:58achieved but it's primarily getting the data cleaned so they can be reliable to uh pass the test of an audit
00:44:06and that takes time did we get our money's worth yes or no uh it's difficult to say
00:44:12miss fox i'd like to submit that since we produced that report i would say i don't think we got our money's
00:44:17worth thank you thank you uh mr khan i'm very concerned about the lack of fiscal responsibility
00:44:24we've historically seen at the department of defense as you know congress has directed the department to
00:44:29have a clean audit option by 2028 to maintain public trust and accountability as the administration
00:44:36continues to cut costs the department must ensure the independence of its outside auditors whose mission
00:44:44is to objectively evaluate waste fraud and abuse mr khan what steps is the department taking to ensure its
00:44:51outside auditors are auditors are able to help the department achieve a credible clean audit
00:45:01the outside auditors have been vetted by the dodig there are the companies uh which go through a pretty
00:45:10lengthy procurement process uh the audit firms these are cpa firms who have been uh registered as such they
00:45:19also go through peer review uh so their reports whether it's in the federal sector state and local
00:45:25sector or private sector they've been peer viewed by other cpa firms to make sure they meet auditing
00:45:33standards and professional standards but they're not being compromised by the dot as the dod as they do the
00:45:41audits they're allowed to complete independence are they yes as far as we can tell they
00:45:48are independent they are not uh uh compromised by management or um anything uh i can see from where we
00:45:56are thank you very much mr chairman i yield back jim woman yields back the time i want to thank the
00:46:04gentleman gentleman gentleman for coming back i know she is busy and i know we have other members
00:46:09that are busy too now i would like to yield to distinguished gentleman from the state of washington
00:46:14ms randall gentlemen recognized thank you so much uh mr chair you know like the gentleman from tennessee
00:46:22i come from a family with straw a strong military tradition including a grandfather who survived pretty
00:46:30heavy combat in the korean war i also represent naval base kids app and the intermediate maintenance
00:46:37facility and my neighbors know how important it is that our department of defense is operating
00:46:45at the highest possible level that we are efficient with taxpayer dollars and that we are effective with
00:46:52our delivery of the mission um mr khan gao has made many recommendations uh for dod on financial
00:47:06management um so that we won't be in this position with this big graphic that mr enfume had um in the future
00:47:16which of these could have recommendations could have the greatest impact on dod's efforts to modernize
00:47:23its financial system um thank you for that question congressman randall the key that um that comes to mind
00:47:31is uh dood's planning and they're managing their milestones those are the key issues which
00:47:38keeps dod having to move their timelines uh they need to be more forceful in maintaining uh their
00:47:45timelines and the way they can do that is better planning to have more granular information with interim
00:47:51milestones so they're not reaching the end and the end of time and then realizing that all the steps have
00:47:57not been completed uh the other one if i may touch on very quickly is the tone at the top needs to be
00:48:04continue to be very very consistent to make sure that this remains a focus and just like mr manzi
00:48:11will just saying it has to go through all the levels not just the top but actually people who are
00:48:15delivering uh some of these accounting information they also have to embrace the similar mindset
00:48:21um thank you so much um and general adams you know i we're very grateful for um the marine corps's
00:48:35leadership and um you know leading leading the um the branch through a successful uh audit what lessons
00:48:46from the marine corps's work can we learn and apply to dod more broadly so that um we can help dod and
00:48:55the navy and other service lines achieve a clean audit by 2028 yes ma'am i want to echo my uh fellow
00:49:03witnesses comment there at the end about tone at the top i will tell you on the 8th of november 2019
00:49:08general berger who was the commandant at the time put a memo out to the force all commanding generals all
00:49:13commanding officers all the way down to the lowest level lowest echelon of command saying audit is
00:49:19important it's important because we need to know what we have in what condition it is how much uh money
00:49:27we have been given by the taxpayers to spend on war fighting capability and accountability for every
00:49:32single penny and so that tone from the top is actually what drove us to success and i think i see
00:49:38that happening in the department of the navy with the uh current uh acting cno starting the tone at
00:49:44the top with the navy and i'm very excited about their opportunity to be the next one out of the gate
00:49:49with regards to a clean on an unmodified opinion uh and i would say just to echo uh another part of uh
00:49:56what my fellow witness said was he said planning milestones i equate that to accountability and that's
00:50:03that was the marine corps critical way of getting to the clean opinion is it wasn't just the tone at the
00:50:09top it was holding people accountable at all levels of command on a monthly basis by the assistant
00:50:14comment of the marine corps in a public forum as to the achievement of the milestones that were on the
00:50:22plan and so we continue that to this day and again i see that reflected in uh the navy as they
00:50:29go on their audit uh journey and and track towards a clean opinion here in the future thank you so much
00:50:36general and um what i mean we talked we're talking about this audit and as an important uh way that
00:50:44we steward taxpayer dollars but what ways has the marine corps recent success in financial management
00:50:51translated into increased mission readiness so um first of all and foremost i'm i'm the the cfo right
00:51:01and so i uh work for the commandant to ensure that those valuable taxpayer dollars that are provided to
00:51:08the marine corps are spent in the most effective ways and so the audit in the financial lane allows me to
00:51:15identify where the next available dollar is spent on the most uh resultant readiness two i mean we
00:51:23talk about the audit as it's it's financial but it's also accountability of equipment and knowing uh as a war
00:51:31fighter assigned a mission and in the case of the marine corps always having to be ready uh the mission comes
00:51:38at the middle of the night like you need to go here and do that uh the audit framework the data that
00:51:44is the byproduct of the audit allows the commander to know what he has or she has where it is in what
00:51:52condition it is and will they be able to accomplish the mission so that combat capability that lethality
00:51:57that's delivered through audit readiness is is a critical important uh part it's also been able to
00:52:04allow us to identify very clearly how much equipment actually costs and in the past you maybe know
00:52:10what was programmed for the piece of equipment but in reality once the equipment is delivered and then
00:52:16it's enhanced and you put all the special systems on it it the actual true cost of uh of equipment is
00:52:22known um and then lastly and probably most importantly it it's a layer of accountability that we are
00:52:31accountable to the u.s taxpayer to make the best use of every dollar every penny that's provided to
00:52:37the marine corps and we feel strongly that that audit allows us to do that thank you thank you so much
00:52:44mr cherry yield back gentleman yields back your time thank you for the questions uh the distinguished
00:52:51gentleman from texas mr gill you're recognized thank you mr chairman for holding this hearing it's nice to be
00:52:58uh part of a bipartisan hearing where i think we can all agree on on what our goals are here um and
00:53:04thank you to the witnesses as well for for taking the time here uh mr mansfield can you can you remind
00:53:10us what the uh department of defense's budget was in 2017
00:53:15in in 2017 okay it was about 582 billion roughly do you know what what it was in 2024
00:53:34910 billion so it's a pretty pretty substantial increase is it not that's a lot of money sorry yes
00:53:40i don't have my mic i apologize and uh can you remind us if the the dod has ever passed an audit
00:53:47uh at the agency-wide level no got it and how many audits has it had recently about seven full full
00:53:54scale audits and how much do those cost um so this year the the cost of uh audit is right around 211 million
00:54:05dollars 211 million this year i think that's right yes so it's a lot of money that's a pretty
00:54:16substantial audit is it not it is got it and uh can can you sort of walk us through some of the the
00:54:23high level reasons why the dod hasn't been able to to pass an audit well it goes back to what we've
00:54:30been talking about here systems uh is one of the main things right uh and then more importantly you can
00:54:35have the best system in the world but if the data that's within that system isn't accurate reliable
00:54:39and supported the system doesn't matter so it gets to the fundamentals of accounting and in just um
00:54:45operationalizing uh good controls so when you're on when you receive a shipment you count how many
00:54:53things are in it you validate that the cost of your charge is what you expected you make sure you've
00:54:57got the right line of funding to pay for that and then you make sure it's in your books in the
00:55:01appropriate in the appropriate place so you know where it's at and what the condition is if if those
00:55:06pieces are missing uh the systems aren't going to matter and then as as mr khan indicated uh the other
00:55:12thing is the the planning process for the department in the way it makes decisions they're made piecemeal
00:55:16they're made uh throughout the department individually for the good of the individual entity
00:55:22not always with consideration for the overall dod approach and so i think that is one of the reasons i
00:55:28i have so many problems setting milestones and sticking with them is uh so many uh individuals
00:55:33making decisions for their own interest versus stepping back and saying what's the best system
00:55:38for multiple entities entities using at the same time so so you have a pretty good idea what what needs
00:55:43to be done in order to pass an audit at least at a high level um can you help us understand why we
00:55:48haven't passed an audit recently but lack of execution on the on the fundamentals is what i would say
00:55:57and who who's held accountable for that and what what are the consequences whenever the dod fails to
00:56:03to pass an audit well the the real the real consequence is lack of confidence for the taxpayer
00:56:10in the dod's ability to account for and and spend right money i i agree but within the dod for instance is
00:56:16there um somebody who who gets fired who gets demoted who sees their bonuses decreased is there any in any
00:56:24actual action taken against any individual um or group within the dod for failing to pass an audit i
00:56:31i can't speak to individual uh personnel actions but i i can say in in the recent recent years the dod has
00:56:37added at least at the executive level um an element in the performance uh plans for their executives
00:56:43related to financial readiness uh getting down to the ability to support individual transactions
00:56:49so there's an accountability measure they have now uh it's it's up to the department's management to
00:56:54use that effectively in order to spur change though right but but in other words we're talking about a
00:56:59budget of hundreds of billions of dollars every single year that and large portions of that are
00:57:04are unaccounted for we don't know where this money is going this is uh taxing my constituents all of
00:57:10our constituents here um hard-working americans to to keep our country safe which again is something we
00:57:16all agree with and we haven't seen anybody fired for the what seems to be appears to be a largely a
00:57:23total lack of accountability we haven't seen any any punitive measures against anybody in the dod
00:57:29is that right not that i'm aware of got it um you know i i think that as we're thinking about hundreds
00:57:37of billions of dollars that should be keeping the american people safe we the american people expect
00:57:42transparency they expect accountability they expect to know where their hard-earned tax dollars
00:57:48are going and we've got to see some progress here so thank you very much for your time
00:57:54gentleman yields back his time
00:57:59i've just talked to mr infume about i'd like for us to approach my time and his time together here
00:58:07uh he did not have an opportunity as i did yesterday to spend an extensive amount of time
00:58:15with each of you on an individual basis you came in either by yourself or with your team and we tried to
00:58:22what i think would be learn a little bit more and i'd like to go through some of this not in
00:58:28long discussions but just things that we learned uh and one of them was is that the marine corps
00:58:38counts on the navy to look at a huge part of their assets and the marine corps sent this message down
00:58:46within their uh their structure but the navy had to do a lot of the work too general
00:58:55uh mr chairman yeah that is accurate and in the army did as well eighty percent of the ammunition
00:59:03that the army that the marine corps owns is stored in army facilities and so that our audit involved
00:59:10coordination detailed coordination with uh multiple services as well as support from osd and so it was a
00:59:18complimentary uh exercise that these other uh departments of dod went through to provide you the
00:59:27information because it was important for the marine corps on their mission that they had put up and
00:59:34down their management lines uh general adams i also spoke with you yesterday about something that's
00:59:41been brought up today and that is how would a lieutenant general look at this how would a major general
00:59:47look at this how would a brigadier general look at this how would going up and down the line and you
00:59:52indicated to me that it could be looked at differently based upon uh a master sergeant who was there
01:00:00who was responsible for things would you mind going through if you remember that exercise from yesterday
01:00:05just very quickly so that we get a heads up on the thinking of the of people uh yes mr chairman um
01:00:14the the idea of how the audit connects to effects and impacts um individual marines at different levels
01:00:23is different if you're down at the master sergeant level maybe the captain or major level you're working
01:00:29the systems you're processing receipt of equipment you're entering into systems and you may not
01:00:36understand fully how that action ties in to the overall audit as you move up the echelon
01:00:43and you start to look at high levels of command where there's large bits of large portions of
01:00:49responsibility for formations that have missions assigned to them understanding accountability of
01:00:56resources and understanding status of equipment is critically important to knowing whether you can
01:01:01accept a mission or not and then at the highest levels the my level at the deputy commandant level or
01:01:06the commandant level understanding that we're responsible primarily to congress as we engage
01:01:12uh at our level with regards to our budget with regards to other activities to know that we can
01:01:19with full faith say we know exactly where every dollar that you have appropriated to us is spent
01:01:26and it's spent on the most important yes sir and and yet i think there's more to the story and that is
01:01:31the higher you get up i will call the organization if they were planning a mission they would have to
01:01:39look at the various components of the marine corps perhaps there would be aviation involved perhaps there
01:01:47would be uh ships involved they gained a foothold off knowing where things are as a result of the exercise
01:01:57they've done and with great consistency they were able to know where those assets are
01:02:02and we will go through this in just second mr mayfield uh mr mansfield tell us about how
01:02:12important it is for them to understand that what they've gained is now uh the opportunity
01:02:23at the end of the audit to to say this is where we are and it begins the process of knowing where all these assets
01:02:32are as opposed to just an audit but rather where they are what the shape they're in and to do the
01:02:38things that would be necessary that they'll move forward on because they now have a snapshot
01:02:45of that and then they can move forward knowing where they are and it will start there
01:02:49mr mansfield yeah so as lieutenant general adams had uh kind of talked to uh earlier
01:02:55the the next step after kind of where the marine corps is is developing those internal controls
01:03:01a financial statement audit validates the accuracy of information at a point in time to your point
01:03:08so at that one during that one date we know how many assets there are we know how much value they are
01:03:14we know what's left in terms of fund balance with treasury the amount of money that's available left
01:03:18for the department to spend the important part then is having the controls that throughout the year
01:03:24at any point in time throughout the year you have the controls and the processes in place
01:03:28that you can have that same level of confidence uh two months later that when you look down through
01:03:34those financial records you look into those systems supporting the financial statements you have that
01:03:39same level of fidelity as to what what you have where it is how much money you have left how much it costs
01:03:46that you have to have that throughout the year and so that's where that second part uh that that was
01:03:51talked about earlier really comes into play it's those internal controls it's those repeatable processes
01:03:56um so i'm not sure if i've caught but it's available for the entire organization then to see up and down
01:04:02the organization up and down the organization and so this is where then and mr khan it may have been in
01:04:08your conversation with me about some of the weaknesses inherent where there are organizations that provide
01:04:17support to the military have key data that we could not get like the f-35
01:04:23and so the military actually did not have as much visibility could you talk about or mr mansfield and
01:04:32mr khan your idea about things being managed outside of the department of defense within those agencies
01:04:41of knowing the assets resources and things they have thank you uh chairman sessions there are several
01:04:48examples and uh i think two of the ones you mentioned in your opening statement uh and they
01:04:54pertain to the joint strike uh program uh one is the uh global spare pool that's managed by contractors
01:05:02and it's uh duty has not been successful in getting the information that the data they need which they can
01:05:10feed into the financial system so that is still somewhat unknown as to what the accuracy of that information is
01:05:17uh the other one is uh government property held by contractors and it happens it's not just in the
01:05:24department of defense there are other federal agencies such as department of energy where
01:05:30the contractor has complex equipment they have procured on behalf of the government and they manage that
01:05:37similarly at dod there is a material amount which is held by contractors and the information about the
01:05:44location cost condition is not known uh for it to be reliable to be put into the financial statement so
01:05:51those those are two examples yeah i have great respect for our contractors not only that they manage this
01:05:58that they know what they've got but it is there a need general to make sure that inside you have that
01:06:08necessary information to make decisions for instance f-35s where they are how many we've got
01:06:16what was operational is that entirely held by a contractor or does the marine corps or the navy
01:06:25and perhaps in a circumstance have visibility into that is it different record keeping mr chairman this is
01:06:32an excellent question and i think to approach it generally that there are some specific issues
01:06:39with the f-35 in the way the accountability of the funds to the actual pieces creates complications that
01:06:46we're trying to solve as a department and break that thing apart so we understand when the marine corps puts
01:06:50money in as a pro share towards a let's say it's a spare pool or maybe even uh and i would say on the
01:06:59platform side knowledge and understanding of platform exist enc existence and completeness is very good
01:07:06it's the it's the spare part pool and it's the way it's funded with partners and so forth everyone puts
01:07:11money in and it's not a clean transaction that you have otherwise now with regards to equipment in the
01:07:17hands of contractors for both the marine corps audit and the navy audit i will give you a specific
01:07:22example if there's a weapon system that requires an interval of maintenance and we have to send it from
01:07:28our magazine to lockheed martin or to raytheon or to some contractor in order to maintain that device
01:07:35we know exactly when we send it to them and our independent auditors as a part of our site visits
01:07:40actually go to those contractors locations they can account for where all those things are and in
01:07:47what condition they are so i would say um there are some specific examples out there that we've highlighted
01:07:53that are adverse and negative and we're working on them but there are many that are very good
01:07:57and the accountability with regards to specific equipment in the hands of contractors uh is
01:08:04actually uh really well done and it was a part of our clean audit opinion very small part much bigger
01:08:09in the navies and they're working on that right now well i have nothing but great confidence in
01:08:14these uh contractors that have developed these systems understand the intricacies of them
01:08:21the placement of them what i'm specifically saying is does that come up the chain to where your leadership
01:08:28has an opportunity to know okay we we need to order more of these or we're planning an exercise perhaps
01:08:36where we will need twice the number or a quick uh reevaluation as we know in the uh ukraine war a good
01:08:46bit of our equipment uh was utilized there and was that well within the leadership of dod to know
01:08:56if they had to plan more what would be necessary for their needs so that we didn't put more out the
01:09:02door than our needs it's those kinds of things that i just want to make sure at the top forget the clean
01:09:09audit or not the visibility to see equipment and how it was managed is that a problem it it is not a
01:09:19problem in that there are specific accounting categories for those types of systems that are in
01:09:25the hands of contractors whether it's for maintenance or maybe it's uh construction in progress knowledge of
01:09:30that system is known it's in the systems reported and it's included as we let's say we're talking
01:09:38munitions we know how much munitions we have on how many munitions we have on hand and then how many
01:09:44are due to come out uh as if it's work in progress uh or uh those that are like not in our hands but
01:09:51maybe they need a few months of retrofit or upgrades that that whole enterprise of no is known so it kind of
01:10:00goes back to my questioning about we we talked about a lack of visibility into these contractors
01:10:09but really there's information that flows back and forth on a regular basis
01:10:14do you then capture that and and i really want to make sure here because i really think perhaps on the
01:10:23f-35 model there was information there that went back and forth that maybe someone was not capturing
01:10:29and then someone did not have visibility when they went to it help me understand that general and
01:10:35mr mansfield let me let me speak to the uh joint strike fighter a little bit because uh you know
01:10:40the marine corps experience may be a little different than the rest of the departments
01:10:43uh in that for the joint strike fighter there is information that's supposed to flow back and
01:10:47forth between the contractor uh and the dod it is not flowing back and forth so within the contract it does
01:10:54not it does not it does not it is good and it should and it should be reconcilable so when the
01:11:00dod provides um in the case of the joint strike fighter uh spare parts or the or the contractor
01:11:06buys spare parts for use on the joint strike fighter the contracts are written in such a way that requires
01:11:13the contractor to maintain full accountability of those value location um condition and and when those are
01:11:20then placed onto an aircraft the value of the aircraft you know changes because of that but in terms of
01:11:26managing that spare parts pool there's contract requirements that require the uh the contractor
01:11:30to provide information on the amount of property it has in its possession that is owned by the dod
01:11:37that information is not flowing back to the dod and making it onto its financial statements so how do you
01:11:42know whether a product was delivered or not and that goes to the point of our contracting updating that
01:11:51that mr khan is aware of that we're now saying we need more contracting information i have a vast interest
01:12:00in trusting our contractors i support them i believe in them but how are we going to fix this back and forth
01:12:11if you never really ever received it how do you know what you're paying for yeah i think it goes
01:12:17down to it comes down to clear contract requirements what is expected of the contractor uh clear and
01:12:23measurable deliverables right so and then there's you have oversight on the government side the government
01:12:28has to be able to validate that what they've gotten from the contractor is what they required
01:12:33and then finally the dod has to have the wherewithal to hold a contractor accountable when it does not
01:12:37deliver i i think in the case of uh the government property uh in the possession of contractors
01:12:44uh both joint strike fighter as well as other i have other opportunities where i can talk about
01:12:48that if you'd like um other entities having similar issues there's no accountability for the contractor
01:12:54um you know i'm not i'm not seeing them uh have significant is that deliberate
01:12:59on what might be the marine corps uh issues or how do we get at this i know we're going to put a scorecard
01:13:07on it but how do we then properly professionally acknowledging the contractor's role but put dod where they've got
01:13:19to be aware of what came in to update their systems if for their needs is that a black hole so to speak
01:13:32is that something we just haven't figured out i think the department's aware of it no i don't i'm
01:13:36going to state that the department's well aware of the issue they're working on solutions they have
01:13:41um working on plans to do counts of the uh especially for the joint strike fighters specifically
01:13:48they're working on doing counts uh of the joint strike fighters spare parts pool so that they can
01:13:53have a good starting point uh to then hopefully follow on with uh clear contract requirements
01:14:00and deliverables that they can hold the contractors accountable for going forward
01:14:05for our role here at the oig we actually have an ongoing audit looking at the broader issue of
01:14:10government property in possession of contractors uh when that's released i'd be more than happy to
01:14:13come up and talk to you about it let you know what we're looking at it from a broader
01:14:17perspective across the duty outside of just a joint strike fighter though general adams uh you
01:14:24were very proud of as we are of the initiative that the marine corps has taken
01:14:31you acknowledged i think respectfully the help that you received from the united states army
01:14:36united states navy uh did they learn a lesson in that process where they now have a baseline
01:14:45of what they have and did they extend that to more than just your assets
01:14:51mr chairman to answer this there are multiple lessons that were learned as a part of our audit
01:14:58by the army and the navy um one of those lessons had to do with a material weakness that all services had
01:15:07with regards to its fund balance with treasury and it was a i would call it a an uh um an issue that it
01:15:16was prevalent for for many decades that the fund balance of treasury beginning balance in the trial
01:15:24balance of the services it it could never balance balance and think of the fund balance of treasury as
01:15:30that's the checkbook that the bank has and can you write checks against that amount and through our
01:15:36audit process and quite frankly some of our really really sharp accountants that were assigned to the
01:15:43project uh figured out a way of of adjusting one con um accounting for the the previous balances that
01:15:52were just continuing to roll over year after year actually nailing them down figuring out where they were
01:15:57settling them and then changing the actual way that they accounted uh the fund balance with treasury
01:16:04um in a in a very technical accounting way uh that was shared with the air force shared with the army
01:16:11and shared with the navy and they were able to mitigate that material weakness across all the so it
01:16:16really was a game changer in terms of overall dod progress towards um a clean opinion and as you alluded to
01:16:23yesterday a lot of internal work that went on with that meticulous work that was very because the
01:16:33systems an antiquated system it took a lot of work around it it did yes sir but it's really important
01:16:43we took two years to get our initial opinion because we had to establish our baseline and go and account
01:16:49for you know the marine corps is this year 250 years old and we have some stuff out there that is almost
01:16:55that old that everything has to be accounted for in existence and in condition and so it took that long
01:17:04to get there but once you establish that position and you follow the processes procedures and controls that
01:17:11you do have we would like to have more advanced integrated systems that are connected and talking
01:17:17digitally but we don't but that doesn't stop us from continuing to maintain visibility very accurately
01:17:25on our position data uh access is a byproduct of the audit process that really helps me and other
01:17:32commanders make decisions every day because you have immediate access to whether it's financial data
01:17:37or it's uh data of about readiness or personnel all of that information is available as a byproduct of the
01:17:44audit and so i want to go back to mr khan and mr mansfield briefly gentlemen is it true that
01:17:54dod has no one in place to serve as the cfo
01:18:01uh there's uh an acting cfo at the moment and no one's been nominated is that correct
01:18:10i don't believe so so we're just flying around in limbo at dod with no real person to give direction
01:18:17that people are respecting one of the things that i listened to with lieutenant general adams was his
01:18:26comment about how the commandant looked at this gave a direct order through the ranks
01:18:33this is where we're going ladies and gentlemen and this is how we're going to get there
01:18:37and everybody understood that and they were able to stand up a model after establishing for two years
01:18:44a baseline and then follow through i think the difference here is that there was a clear dogged
01:18:51deliberate determined and designed order to get this done to not have the marine corps reflected
01:19:00like all these other agencies again and again and again that's the real difference it's leadership
01:19:07it is leadership so i find it absolutely stunning that the air force general cq brown jr was fired
01:19:16within the last 100 days that admiral linda fagan uh was fired the day after she was sworn in
01:19:27i i don't understand that and that navy admiral lisa franchetti the highest ranking uh officer in the navy
01:19:36was fired also so if we're firing these people and we may have somebody acting here or not acting there
01:19:44how in the hell are we going to expect that by 2028 not even to mention next year that we're going to
01:19:51have a audit uh that can be stood up and talked about like we talk about the marine corps model this
01:19:59is a damn shame this is the this is the united states we're better than that we just can't keep
01:20:05making these excuses which is why i want to see secretary hex and the chairman has also indicated we need
01:20:12answers we need to know what's going on we just can't keep doing this and it's amazing to me
01:20:19now and correct me if i'm wrong that no other leader of any other uh entity has said the same
01:20:26thing the same way as the commandant of the marine corps and by the way give him my appreciation if if
01:20:31you will um it's just sad it's sad maybe that's why they say send in the marines or the marines will
01:20:38lead the way and i'm not being funny here but i am being funny in some respects because this does not
01:20:43have to happen we don't have to hold up this sign again to see how many failed marks there are these
01:20:50are dollars that people pay every year in taxes taxpayers have a right whether they're black white
01:20:58jew gentile asian latino native american male or female it doesn't matter to believe that their tax
01:21:04dollar is going to be spent in a way that it can be accounted for we cannot account for what's been
01:21:10happening and this has been going on since 2018. this is really a shame it's an embarrassment quite
01:21:16frankly and i would hope that dod sees it that way uh i'd like to think that we're going to have a cfo
01:21:22over there but god knows since there's no nominee even out there to be the cfo how that's going to happen
01:21:29and um lieutenant general adams you were very kind in your remarks and yes there were some things that
01:21:36were learned by the other branches but i don't think they have taken them to heart and i would
01:21:42love to be proved wrong but something tells me that the chairman and i will be here next year if we're not
01:21:47careful talking about eight straight going on nine failed audits and it's just it gets to me so when
01:21:54the gentleman from tennessee says he hopes that some of us will be let out of here in handcuffs
01:21:59because we're part of this crazy notion that we just keep feeding this beast and feeding this beast
01:22:04it will take care of itself it will not it will not and there are too many games being played
01:22:10by members of congress by private contractors and to some extent by these divisions of armed services
01:22:18that allows this to go on i don't know how anybody can come here and say this
01:22:23this is the united states and this is why we are great and this is why we care about tax dollars
01:22:29you can take a buzzsaw and a chainsaw and go through agencies but you can't find a way to force
01:22:37dod to come up with an audit i don't understand that and so my my anger here is real life is too short to
01:22:45play these games and the american public deserves more we all deserve more than this so i'm done
01:22:53mr chairman which is probably why i didn't have a whole lot to say a minute ago because it just
01:22:59bubbles over in me over and over and over again and i just want to again as i said thank the marine corps
01:23:08for setting the model of how to get something done when it has to be done from the top straight down to
01:23:14the bottom and i would hope and pray that both the secretary of defense and the other uh branches of
01:23:21the armed services learn from this but also be prepared to talk to us about what's going on and
01:23:27why we can't seem to move this 800 pound gorilla i yield back gentleman yields back his time i i would like
01:23:34for those that are are our witnesses today to understand that mr infume and i still do work
01:23:42together we see a common goal we will be together engage in the department of defense at the highest
01:23:52level we also recognize that the changes that have been made in these areas
01:23:59right wrong or indifferent were made and it will be important for us to have a commitment from those
01:24:07who are replacing them and are a part of that moving forward team to be prepared for 2028
01:24:14i think you've given us a model you've showed us how a baseline is important and the attributes of
01:24:21success not just to the management of the organization but to where all the way up and down people have an
01:24:29idea about their preparedness with lethality uh as general alms general adam spoke about but perhaps more
01:24:38to the point and to make sure the confidence that the american people have in that
01:24:44both the gentleman and i mr infume represent a thinking that we are not going to give up i will
01:24:52say to the department of defense uh i encourage you to have a great attitude about us approaching you
01:25:00i would say to the leaders of each of these areas that we will be engaging you uh we do expect you to
01:25:08uh take the time and to listen and we do expect to hear back from you but we will not uh give up on
01:25:16this effort and we will do this together so to each of our witnesses i want to thank you for being here
01:25:21today today today you've seen what i consider to be a bipartisan subcommittee hearing uh that we
01:25:30believe we listen to you we believe that we appreciate and respect you but it is a task that is still
01:25:38left for us to to complete as we prepare for 2028. with that said i want to thank each of our witnesses
01:25:45and this now uh no we got to do the five days yeah so with that and without objection all members of
01:25:53this subcommittee have five legislative days within to which submit material and additional written
01:26:00questions for the witnesses which will be forwarded to the witnesses from the committee if there's no
01:26:07further business without objection subcommittee stands adjourned