Defense Department’s Mark Easton On Embracing Data to Drive Reform
The deputy chief financial officer is preparing for the department’s third-ever audit amid the pandemic.
Since 2009, Mark Easton has been a key player in tackling one of the thorniest management challenges in government: Bringing order to the chaos of the Pentagon’s finances. As the Defense Department’s deputy chief financial officer, he’s spearheaded reforms to improve financial accountability, enterprise cost management and utilization of data. He also oversees the department’s massive audit process, which involves more than 1,400 auditors and 600 site visits to unravel and validate nearly $6 trillion in assets and liabilities. Although Defense failed what was just its second-ever audit in November it demonstrated that it’s making progress.
“I view my role as ensuring that we’re getting the most value for our warfighters and the nation’s defense, on behalf of the taxpayer—not just more bang for the buck but the most bang for the buck, because we don’t have resources or time to waste these days,” he says.
“Our financial stewardship responsibility can be even more effective if we focus not just on budgetary accounting, but on enhancing our capability to perform financial accounting and linking financial information to results. Without a doubt, DoD’s financial statement audit has provided an increased impetus for this, and our current National Defense Strategy focus on reform and affordability has reinforced the audit’s importance. Fortunately, our CFO has played a game changing role in making this thought process a reality,” he said.
Before his current role, Easton was the deputy assistant secretary and financial operations director for the Navy after serving nearly three decades in the Navy Supply Corps.
Government Executive interviewed Easton via email in May about his management style, navigating the coronavirus pandemic and more. Excerpts from that interview follow:
How would you characterize your management style?
I’d say it’s generally participative and collaborative. Much of what I’ve been involved with in my current position has involved change management, working with teams, and building consensus across organizations and functional communities. I’ve been recently inclined to blend a bit more top-down direction into my personal style. We often need that to accelerate key outcomes.
In the 11 years you've been in your role, what are some of the financial reform efforts you've taken on?
I’d highlight three areas—two that you might characterize as financial reforms and a third relating to the use of financial data. Being able to more effectively use financial data is really the pay off, providing a much broader impact on business in general.
The first reform is financial auditability. Successfully completing an annual audit is a long term effort that essentially forces us to re-examine our business processes and systems, with generally accepted accounting principles in mind, so that they can be assessed annually by our [inspector general] and an army of auditors from public accounting firms. As we enter our third annual full financial statement audit, we are seeing benefits from the more disciplined controls and practices that these annual audits demand.
The second reform is enterprise cost management. We need to effectively manage enterprise wide costs in order to meet our missions, support the warfighter, and still be good stewards of taxpayer dollars. Enterprise cost management provides us with a fantastic tool to gain a broad range of insights on all elements of our business lines and meet those needs. We’ve traditionally been focused on budgetary accounting, viewing the world through a lens of obligations and expenditures. This tells us what we spent and how much remains in our checkbook, but it often doesn’t provide the full cost of operations. We have worked to shift to an ECM framework to give us a view of what our various business lines actually cost so that we can benchmark against ourselves and, where relevant, against the private sector.
The final reform is embracing data. Embracing data helped propel the first two reforms but, by itself, has had much more far reaching impact on the DoD enterprise. We started relatively recently, by using big data technology to deal with our disparate and non-standard data across many business lines and the multitude of systems used to support them. Our initial effort answered a fairly basic financial audit need to provide auditors with something they call a “universe of transactions.” They needed this “universe” to validate that our financial statements are comprehensive and complete, while giving them statistical confidence in the large balance sheet numbers they’re auditing. Spring boarding from this success, we continued to work on building senior leader understanding and buy-in for using a common operating picture to inform decision-making. This meant spending less time discussing whose data was right, wrong, or best, and more time evaluating alternative courses of action. Our approach has opened the door to sharing data and treating it as a strategic enterprise asset. As a resource, data has allowed us to be much more analytical, which is every manager’s dream.
How has the nature of your job changed during the coronavirus pandemic?
We quickly transitioned to nearly 100% telework, which is a terrific shift for an organization that has traditionally worked in person. I’ve been really pleased at how well we’ve been able to continue to support the CFO and the department’s mission. COVID-19 safety constraints have made progress on the audit more challenging, for both auditees and auditors, but we are moving forward using as many virtual means as possible, such as electronic counting, as well as urging audit flexibilities in planning, scheduling, and testing. It’s a very collaborative process. In some cases, such as our classified areas, much of the audit cannot be done remotely and have largely stopped. The bottom line for us is to not lose the technological proficiencies we’ve gained during the current telework environment. I intend to institutionalize the best of these new methods we are learning when we get back to normal operations.
Do you foresee any challenges in managing coronavirus relief funds while also overseeing the financial framework for other legislative priorities, such as border wall construction and Space Force?
The DoD CFO is actually dual hatted, and is both the comptroller, with program/budget responsibilities, and the CFO, with accounting responsibilities. She has two organizational elements to support these areas. We have a talented program/budget team (on the comptroller side) that manages coronavirus relief funds, as well as border wall and Space Force funding issues. For these issues, my team (on the CFO side) collaborates with program/budget colleagues by spearheading the data and data analytics capability to automate much of the reporting. We hope to do away with the historically labor intensive effort to capture and accurately report on how these funds are used. Most of the challenges we face in tracking special funding are the same as faced in a financial audit, i.e., accurate and timely capture of transactions in our systems and making sure we have source documents.
How are you preparing for the next Defense audit?
As we are just past the mid-way point in our third annual financial statement audit, we continue to build on lessons learned from past years. In year one, we developed a database that allows auditors to enter their notice of findings and recommendations (referred to as NFRs), providing us a DoD-wide view of issues found, along with the ability to rack and stack by organization or business process. This provides an auditor view of each of our audits, as well as the overarching consolidated audit. This database also allows management to develop and document how and when they can fix the problem and demonstrate that fix to their auditors. If the auditor is satisfied with the fix the next year, they will not reissue that NFR. As each year ends and the next audit begins, this information allows us to assess progress and establish priorities for the next year.
Based on the previous two years, what are some lessons learned that you'd share with your Defense colleagues or other agencies?
We constantly meet across our financial management community on audit matters, assessing how best to overcome impediments and correct auditor findings. Here are a few of the kinds of lessons that I frequently share:
- Audits are here to stay. We are too large and complex to “cram” for this test every year, so the right way to earn and sustain a clean audit opinion is to adapt our business to these rigorous reviews. While painful at first, it will result in more efficient and effective support for the mission.
- Financial statement audits are a team sport and we can’t be successful without robust engagement from all DoD business elements, not just the financial managers. Defense financial managers must lead and be the technical advisors for financial statement audits, but DoD logisticians, personalists, and IT specialists must own and be responsible for their audit outcomes.
- Capable, controlled, and well-integrated business systems that are fully auditable are the key to sustaining successful and cost effective financial statement audits. We know that we need to continue to retire legacy systems as a matter of [National Defense Strategy] reform and to sustain positive audit outcomes.
- The audit is not just a compliance exercise. While it is designed to increase stakeholder confidence in our stewardship, it involves much more. It provides a foundation for business reform, and its value proposition is increased visibility of our resources to make every dollar count.
Is there anything else you'd like to add?
I’d like to credit three initiatives with enabling more progress in the reforms previously discussed. The first is the 2018 National Defense Strategy that has provided the top-down impetus needed to push change in the Department. In addition to its focus on traditional tenets of warfighting lethality and coalition partnerships, it specifically called out the need for business reform, underpinning the importance of financial stewardship and affordability. This is so important, given finite resources and our need to be as efficient as possible in the back office so the warfighters get what they need on the front line. The reforms mentioned above are being pursued to those ends—making every dollar count.
Second, these efforts have set the stage for something that we call “the CFO of the future.” This role paradigm is patterned after private sector CFOs who are relied upon to provide a “single source of truth,” using timely and accurate data that is linked to programs and programmatic outcomes. While audits are most frequently associated with the 1990 CFO Act, improved quality financial information that enabled better decision-making and resource use was the real legislative intent.
Finally, none of this is possible in a large enterprise without proper tone from the top. During my tenure as deputy CFO, I’ve greatly benefitted from sustained leadership commitment that may have begun in the financial management community, but has expanded throughout the department. It is the key to sustaining progress across the inevitable changes in uniformed and civilian leadership that occur in DoD. We still have a long way to go, but the future is bright.