Inside the Air Force’s Audit and Financial Management Transformation Journey
Achieving a clean financial statement audit opinion for an organization similar in size to a Fortune 50 company is extremely complex. Ms. Tina Pierce, Associate Deputy Assistant Secretary for Financial Operations, Office of the Assistant Secretary of the Air Force for Financial Management and Comptroller, knows these challenges well, which is why she and her team embarked on a financial management transformation journey. Here, she shares some takeaways from the experience.
For many, the term “Air Force” conjures up images of fighter jets and airmen in combat. But there’s a lot more that happens behind the scenes. Budgeting, funding and accounting, for example, are critical to ensure the Air Force’s warfighters are supported to complete the mission.
These back-office initiatives gained increased attention in the last thirty years with the emergence of several laws passed by Congress. For instance, in an effort to drive transparency and stewardship of taxpayer dollars, the Chief Financial Officers Act of 1990 mandated that the Department of Defense (DOD), among other agencies, produce annual financial statements; while the Government Management Reform Act of 1994 required those financial statements to be audited. The Air Force is entering its fifth full year under financial statement audit, and Pierce is helping lead the organization’s audit and financial management transformation journey. Such a large task requires an all-hands-on-deck approach. Pierce tapped Air Force financial management and functional leaders, as well as Big 4 Independent Public Accounting Firm Deloitte & Touche LLP, to achieve this mission.
Here, she shares what she’s learned serving in her role at the Air Force and offers advice for those looking to embark on their own audit and financial management transformation journey.
How did you come to lead the Air Force's audited financial management initiative?
Pierce: It’s been a journey. I learned about governmental accounting and budgeting as an active-duty Marine financial management officer, including a stint as the Marine Expeditionary Force’s budget officer and forward-deployed comptroller in Kuwait. As a military spouse, I’ve moved a lot, which has given me the opportunity to see many different applications of accounting. My first private sector stop was in the Netherlands, where I was the manager of a financial planning, reporting, and analysis division for a well-known international computer storage manufacturer and distributor. Going from the military into the private sector in a foreign country was a pretty big jump, but it taught me an enormous amount about the basics of accounting and how to apply it to managerial decision-making. Another unique job was deputy controller for a county in California, where one of my main duties was providing analysis to support negotiations with public sector unions. My last private sector position was as the Lead Operations & Maintenance (O&M) Senior Financial Analyst at Southern California Edison’s San Onofre Nuclear Generating Station. That was a great job, because the information I provided was a highly valued key input to several critical big engineering and management decisions. Upon moving to the D.C. area, I assisted the Army with military pay remediation efforts as a contractor. Eventually, I had an opportunity to work as a consultant with the Air Force Medical Service, which I really enjoyed. From there, I joined the Defense Health Agency as the Chief of Financial Reporting and Compliance. In that role, I oversaw remediation efforts for numerous systems and business processes. I have to say I missed working with the Air Force, and was excited to return to be part of this team when the opportunity presented itself.
When I came back to the public sector, I had this outside perspective of what does and doesn’t work in the private sector. It’s not just government that has audit challenges — there were a couple of audit issues I experienced working in the commercial space, as well. But private companies just think a little bit differently about these things. In the government, everybody is thinking about building and executing 100% of the budget and being perfect bookkeepers. The private sector wants to maximize profits and is very accustomed to using estimates to meet accounting principle standards, so the financial management and accounting approaches are quite different. I try to bring that perspective and experience to my work and mission today.
To what do you attribute your success at the Air Force?
Pierce: My people. I say that because in order to do my job I have to be able to trust, to develop a vision and a strategy that I communicate to every stakeholder — above, across and outside the organization. A big part of developing and executing our strategy requires listening to my team and understanding their “pain points.” It is my job to try to remove these pain points so that my team can do their jobs. I think being able to bring people in who are willing to take risks, who are willing to try new things — to think differently — has really made our strategy a success. I tell everyone, it's not me, it's really everybody who works with me. That’s not hyperbole; that’s the truth. This is why our audit has moved as quickly as it has since I joined Air Force.
What are some audit and financial management successes you’ve witnessed during your time at the Air Force?
Pierce: In accordance with the Office of Management and Budget’s Circular A-123, the Air Force is required to have an internal control program. That means we’re supposed to be able to assess all controls for financials and operations across an entity and tell the American people whether or not they can rely on these controls. It’s difficult to do this at the DOD because there are so many controls to consider across the enterprise. To meet this requirement, my team partnered with the Air Force Audit Agency. By partnering across the whole Air Force, we were able to get positive results a full year ahead of schedule. Being able to identify issues internally before someone outside the Air Force identifies it, helps us recognize what we still need to improve. It also adds much-needed credibility to our financial reporting and budget results.
What is the Air Force's biggest barrier to obtaining a clean audit opinion?
Pierce: Systems, systems, systems! Remember what I said about pain points? We have 150-plus systems that directly impact financial statements. We have systems that feed into other systems that eventually reach a general ledger, and that creates our financial statements. Take civilian payroll, for example: We have one system that tracks an employee’s pay plan and pay rate. Then, that system connects to a timesheet, which ties into another system. All these disparate steps and systems must work together to ensure the employee is paid correctly, to the penny. But when we audit this process, we need to prove that these systems actually push out the correct data. That's where the auditor comes in and asks us to back up these transactions. The more systems you have, the harder that becomes.
Unfortunately, a lot of our systems are very old, which introduces a number of cybersecurity and accounting compliance issues. We're making some progress in this area, but honestly, we must get rid of some of our older systems and streamline the overall process to be successful on our audit journey.
What are your priorities for Fiscal Year 2022?
Pierce: The Air Force’s number one audit priority, which is also the Secretary of Defense’s priority, is to get our Fund Balance with Treasury material weakness downgraded this year. It’s going to be challenging, but it’s something we are already tackling. Though we must match our records to Treasury, it is critical to know exactly why we don’t match, to understand the differences, before we make the required adjusting entries – just as we all do with our personal bank reconciliations.
We also want to make progress in the realm of military equipment. I always like to put this in operational terms because it helps us understand asset values, construction costs and inventory balances so we don’t lose valuable assets in the process and so we can produce reliable asset financial data to support those tough budget decisions. We've done a lot of work to evaluate and measure how much our assets are worth and we've done what we need to do in accordance with accounting principles to match that. It is now up to us to prove it with data and documentation that withstands audit scrutiny.
What advice would you offer to other people working in government financial management?
Pierce: Here at the Air Force, it’s challenging to change things quickly. And that's a common challenge across the DOD and the government in general. You have to be really committed to making things better. Don’t get frustrated by the red tape; don’t sit back and say, “What’s the point? We’ll never get this done.” Just start small. If you see something in your process that adds no value, then suggest a different way. Or if you see an opportunity for a process improvement, make that suggestion. For inspiration, take a page from other government agencies or even the private sector. Good ideas are everywhere, and they are free. Never stop looking for these small wins — the smallest change can sometimes have the largest impact.
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