The Marine Corps is “cautiously optimistic” about getting its first-ever passing grade on a key audit, a senior official told a federal advisory panel last week.
If successful, the Corps would also be the first of the military services to get a passing grade on the audit as the Defense Department presses ahead to meet congressionally mandated “audit-readiness” deadlines looming next year and in 2017.
“We’ve made some good progress,” said Ann-Cecile McDermott, the Marine Corps’ fiscal director, at a meeting of the Defense Audit Advisory Committee. The DoD inspector general and contractor Grant Thornton are wrapping up their analysis, she said, with a decision expected this month.
That progress was promising news to committee member Relmond Van Daniker.
“There’s been so many complaints that DoD couldn’t get anything done,” said Van Daniker, who is also executive director of the Association of Government Accountants. “To get a clean opinion here, it would pump everybody up.”
The Pentagon has named the Marine Corps as the lead among the four military services to pursue a clean audit opinion on the “statement of budgetary resources,” which shows the flow of money in and out of the agency. The Corps failed to meet that mark on its fiscal 2010 and 2011 statements because it couldn’t get the audits done on time. For this go-around, it has set a more limited goal of getting a clean opinion just on its 2012 appropriations, without including data from previous years. If successful, the Corps will move to audits of the full statement of budgetary resources, a spokeswoman said.
The Defense Department is under the gun from Congress to have an auditable statement of budgetary resources by September 2014, with the remainder of its books audit-ready by September 2017. The department, which is investing several hundred million dollars annually into cleaning up its books, has plans “that we think are reasonable, realistic and achievable” for meeting both deadlines, said Joseph Quinn, who oversees the Pentagon’s audit-readiness effort.
But Quinn also noted potential risk factors, including lack of funding, poorly defined objectives and information technology weaknesses. The Air Force, for example, is reworking its plans after canceling a next-generation logistics management system late last year. The Expeditionary Combat Support System was supposed to replace 240 older systems; now, the Air Force must find a way to meet audit-readiness targets with those aging systems.
Another worry for some lawmakers is the imminent departure of Defense Secretary Leon Panetta, who made audit readiness a high priority. In a letter last week, a bipartisan group of seven House members urged the Senate Armed Services Committee to ask Chuck Hagel, whom President Obama has nominated to replace Panetta, whether he would stress financial management improvement if confirmed for the job. Of the seven members, six sit on the House Armed Services Committee; the lead signer was Rep. Michael Conaway, R-Texas, who headed an ad hoc panel that held hearings on DoD financial management in 2011.
“The department’s advances toward audit readiness have reached a decisive point, and continued progress will require leadership from the top,” the seven wrote. At his confirmation hearing last week, Hagel, a former Republican senator from Nebraska, said he is committed to meeting the 2017 deadline.
The Defense Audit Advisory Committee is a three-member federal advisory committee that provides the Pentagon with advice and recommendations on financial reporting and related issues. Beside Van Daniker, its members are Ernie Almonte, CEO of the Almonte Group, and Jeff Steinhoff, of the accounting firm KPMG.
During last week’s meeting, the three appeared satisfied with the status of the Pentagon’s efforts. Even if DoD misses next year’s deadline for an audit-ready budget statement, Van Daniker said, “you’ve made monumental progress.”