Better oversight of contracts called key to repairing Pentagon ledgers

Improving oversight and administration of defense contracts is the key to victory in Pentagon financial managers' struggle to meet a 2017 deadline for auditable books, a Defense Department deputy inspector general official said Friday.

"From the contract officer level to the contract officer on the ground, the more improvement in regulation and oversight of contracts, the more we will know about how we are spending the taxpayers' money," Daniel Blair, deputy inspector general for auditing at Defense, told lawmakers.

Members of the House Oversight and Government Reform Subcommittee on Government Organization, Efficiency and Financial Management heard testimony from three financial management specialists discussing the 14-year-plus effort to integrate some 2,200 separate Pentagon business systems -- handling $2 billion to $3 billion in transactions daily -- to achieve auditability and to get Defense accounting systems off the Government Accountability Office's high-risk list.

In the military, "we say we saved the world in two or four years, but we can't get our books straight in six years," said Rep. Todd Platts, R-Pa., chairman of the subcommittee. "These are not sexy, glamorous or exciting hearings, but it's important to find out how the American people's money is being handled."

Defense Secretary Leon Panetta on Thursday reiterated his position that book-keeping problems must be solved quickly.

Of the 14 Defense entities that are required to prepare annual financial statements, only two have achieved an unqualified opinion, said Blair, the two being the Military Retirement Fund and the Army Corps of Engineers Civil Works. In the push to meet the 2017 deadline, which involves standing up new systems that cost $9 billion, some milestones have already begun to slip, he said.

Mark Easton, the Pentagon's deputy chief financial officer, said the right resources and leaders are in place, particularly at the local levels, to "ensure a world-class management system." But, he said, "enormous fundamental changes" are still needed.

In information technology, for example, "many of our business IT systems are old, functionally stovepiped, and were originally designed to capture financial transactions to conduct basic budgetary accounting," Easton said. To address these problems, "we are reorienting the DoD around end-to-end business processes that support audit goals, implement enterprise resource planning systems, leverage those investments to the maximum extent practicable, modernize legacy systems when necessary and supported by a business case, and also aggressively sunset legacy systems that are obsolete, redundant, or not aligned with our business objectives."

The enterprise resource planning systems, which are part of a broader two-year-old effort known as the Financial Improvement and Audit Readiness plan, are encouraging, but "weaknesses are pervasive," said Asif Khan, director of financial management and assurance at GAO. "Compliance by 2017 could be in jeopardy if the ERPs don't work," he said, stressing the need for training of employees in technically complex audit practices.

The witnesses agreed on the need to improve data reliability and internal controls to reduce improper payments to contractors, ideally preventing them in advance rather than seeking to recover funds already paid out. "There's a learning process," Blair said.

Easton cited a need to reduce the number of systems that have evolved over the years and increase standardization to create an enterprisewide "holistic framework." He likened the Pentagon's experience to that of Henry Ford, "who at first managed his company all out of his own pocket, but then had to become a multinational corporation."

Stay up-to-date with federal news alerts and analysis — Sign up for GovExec's email newsletters.
Close [ x ] More from GovExec

Thank you for subscribing to newsletters from
We think these reports might interest you:

  • Sponsored by Brocade

    Best of 2016 Federal Forum eBook

    Earlier this summer, Federal and tech industry leaders convened to talk security, machine learning, network modernization, DevOps, and much more at the 2016 Federal Forum. This eBook includes a useful summary highlighting the best content shared at the 2016 Federal Forum to help agencies modernize their network infrastructure.

  • Sponsored by CDW-G

    GBC Flash Poll Series: Merger & Acquisitions

    Download this GBC Flash Poll to learn more about federal perspectives on the impact of industry consolidation.

  • Sponsored by One Identity

    One Nation Under Guard: Securing User Identities Across State and Local Government

    In 2016, the government can expect even more sophisticated threats on the horizon, making it all the more imperative that agencies enforce proper identity and access management (IAM) practices. In order to better measure the current state of IAM at the state and local level, Government Business Council (GBC) conducted an in-depth research study of state and local employees.

  • Sponsored by Aquilent

    The Next Federal Evolution of Cloud

    This GBC report explains the evolution of cloud computing in federal government, and provides an outlook for the future of the cloud in government IT.

  • Sponsored by Aquilent

    A DevOps Roadmap for the Federal Government

    This GBC Report discusses how DevOps is steadily gaining traction among some of government's leading IT developers and agencies.

  • Sponsored by LTC Partners, administrators of the Federal Long Term Care Insurance Program

    Approaching the Brink of Federal Retirement

    Approximately 10,000 baby boomers are reaching retirement age per day, and a growing number of federal employees are preparing themselves for the next chapter of their lives. Learn how to tackle the challenges that today's workforce faces in laying the groundwork for a smooth and secure retirement.

  • Sponsored by Hewlett Packard Enterprise

    Cyber Defense 101: Arming the Next Generation of Government Employees

    Read this issue brief to learn about the sector's most potent challenges in the new cyber landscape and how government organizations are building a robust, threat-aware infrastructure

  • Sponsored by Aquilent

    GBC Issue Brief: Cultivating Digital Services in the Federal Landscape

    Read this GBC issue brief to learn more about the current state of digital services in the government, and how key players are pushing enhancements towards a user-centric approach.

  • Sponsored by CDW-G

    Joint Enterprise Licensing Agreements

    Read this eBook to learn how defense agencies can achieve savings and efficiencies with an Enterprise Software Agreement.

  • Sponsored by Cloudera

    Government Forum Content Library

    Get all the essential resources needed for effective technology strategies in the federal landscape.


When you download a report, your information may be shared with the underwriters of that document.