1.This Act may be cited as
the Audit the Pentagon Act of
2012
.
2.Congress makes the following
findings:
(1)Section 9 of
Article 1 of the Constitution of the United States requires all agencies of the
Federal Government, including the Department of Defense, to publish a
regular statement and account of the receipts and expenditures of all public
money
.
(2)Section 3515 of
title 31, United States Code, requires the agencies of the Federal Government,
including the Department of Defense, to present auditable financial statements
beginning not later than March 1, 1997. The Department has not complied with
this law.
(3)The Federal
Financial Management Improvement Act of 1996 (31 U.S.C. 3512 note) requires
financial systems acquired by the Federal Government, including the Department
of Defense, to be able to provide information to leaders to manage and control
the cost of government. The Department has not complied with this law.
(4)The financial
management of the Department of Defense has been on the
High-Risk
list of Government Accountability Office, which means
that the Department is not consistently able to control costs; ensure
basic accountability; anticipate future costs and claims on the budget; measure
performance; maintain funds control; [and] prevent and detect fraud, waste, and
abuse
.
(5)The National
Defense Authorization Act for Fiscal Year 2002 (Public Law 107–107) requires
the Secretary of Defense to report to Congress annually on the reliability of
the financial statements of the Department of Defense, to minimize resources
spent on producing unreliable financial statements, and to use resources saved
to improve financial management policies, procedures, and internal
controls.
(6)In 2005, the
Department of Defense created a Financial Improvement and Audit Readiness
(FIAR) Plan, overseen by a directorate within the office of the Under Secretary
of Defense (Comptroller), to improve Department business processes with the
goal of producing timely, reliable, and accurate financial information that
could generate an audit-ready annual financial statement. In December 2005,
that directorate, known as the FIAR Directorate, issued the first of a series
of semiannual reports on the status of the Financial Improvement and Audit
Readiness Plan.
(7)The National
Defense Authorization Act for Fiscal Year 2010 (Public Law 111–84) requires
regular status reports on the Financial Improvement and Audit Readiness Plan
described in paragraph (6), and codified as a statutory requirement the goal of
the Plan in ensuring that Department of Defense financial statements are
validated as ready for audit not later than September 30, 2017.
(8)At a September
2010 hearing of the Senate, the Government Accountability Office stated that
past expenditures by the Department of Defense of $5,800,000,000 to improve
financial information, and billions of dollars more of anticipated expenditures
on new information technology systems for that purpose, may not suffice to
achieve full audit readiness of the financial statement of the Department. At
that hearing, the Government Accountability Office could not predict when the
Department would achieve full audit readiness of such statements.
3.Audit readiness
of the financial statements of the Department of Defense
(a)Inclusion of
statement of budget resources within FIAR PlanSubsection
(a)(2)(A) of section 1003 of the National Defense Authorization Act for Fiscal
Year 2010 (Public Law 111–84; 123 Stat. 2439; 10 U.S.C. 2222 note) is
amended—
(1)in clause (i), by
striking and
at the end;
(2)by redesignating
clause (ii) as clause (iv); and
(3)by inserting
after clause (i) the following new clauses:
(ii)ensuring that a
complete and validated statement of budgetary resources of the Department of
Defense is ready by not later than September 30, 2014;
(iii)ensuring that
the full set of consolidated financial statements of the Department for the
fiscal year ending September 30, 2017, and each fiscal year thereafter, are
ready in a timely manner and in preparation for an audit, including submitting
the reports not later than November 15, 2017, and each year thereafter, in
order to seek an audit opinion on its financial statements;
and
.
(b)Definition of
validated as ready for auditSuch section is further amended by
adding at the end the following new subsection:
(d)Validated as
ready for audit definedIn this section, the term validated
as ready for audit means the following:
(1)In the case of
the financial statements of a military department, that the audit agencies of
the military department have reviewed such statements and determined, in
writing, that such statements are ready for audit.
(2)In the case of the financial statements of
a Defense Agency, that the audit agencies of the Defense Agency have reviewed
such statements and determined, in writing, that such statements are ready for
audit.
.
4.Cessation of
applicability of reporting requirements regarding the financial statements of
the Department of Defense
(a)Cessation of
applicability
(1)The financial statements of a military department
shall cease to be covered by the reporting requirements specified in subsection
(b) upon the issuance of an unqualified audit opinion on such financial
statements.
(2)The reporting requirements specified in subsection (b)
shall cease to be effective when an unqualified audit opinion is issued on the
financial statements of the Department of Defense, including each of the
military departments and the Defense Agencies.
(b)The reporting requirements specified in this
subsection are the following:
(1)The requirement
for semi-annual reports in section 1003(b) of the National Defense
Authorization Act for Fiscal Year 2010 (Public Law 111–84; 123 Stat. 2440; 10
U.S.C. 2222 note).
(2)The requirement
for annual reports in section 1008(a) of the National Defense Authorization Act
for Fiscal Year 2002 (Public Law 107–107; 115 Stat. 1204; 10 U.S.C. 113
note).
5.Report on
Department of Defense reporting requirements made obsolete by or affecting
audits with unqualified opinionsNot later than 180 days after the date of
the enactment of this Act, the Under Secretary of Defense (Comptroller) shall
submit to Congress a report setting forth the following:
(1)A list of each
report of the Department of Defense required by law to be submitted to Congress
which, in the opinion of the Under Secretary, would no longer be necessary if
the financial statements of the Department of Defense were audited with an
unqualified opinion.
(2)A list of each
report of the Department required by law to be submitted to Congress which, in
the opinion of the Under Secretary, interferes with the capacity of the
Department to achieve an audit of the financial statements of the Department
with an unqualified opinion.
6.Enhanced
reprogramming authority following achievement by military departments of audit
with unqualified opinion of statement of budgetary resources for fiscal years
after fiscal year 2013
(a)Subject to section 9(a)(1), if a military department
obtains an audit with an unqualified opinion on its statement of budgetary
resources for any fiscal year after fiscal year 2013, the thresholds for
reprogramming of funds without prior notice to Congress for the succeeding
fiscal year shall be deemed to be the thresholds as follows:
(1)In the case of an
increase or decrease to the program base amount for a procurement program,
$60,000,000.
(2)In the case of an
increase or decrease to the program base amount for a research program,
$30,000,000.
(3)In the case of an
increase or decrease to the amount for a budget activity for operation and
maintenance, $45,000,000.
(4)In the case of an
increase or decrease to the amount for a budget activity for military
personnel, $30,000,000.
(b)Nothing
in this section shall be construed to alter or revise any requirement (other
than a threshold amount) for notice to Congress on reprogrammings covered by
subsection (a) under any other provision of law.
(c)In
this section, the terms program base amount, procurement
program, research program, and budget activity
have the meanings given such terms in chapter 6 of volume 3 of the Financial
Management Regulation of the Department of Defense (DoD 7000.14R), dated March
2011, or any successor document.
7.Availability of
expiring funds following achievement by military departments of audit with
unqualified opinion of statement of budgetary resources for fiscal years after
fiscal year 2013
(a)Subject to section 9(a)(1), if a military department
obtains an audit with an unqualified opinion on its statement of budgetary
resources for a fiscal year after fiscal year 2013 (in this section referred to
as a covered fiscal year
), the amount described in subsection
(b) shall be available for the purposes specified in subsection (c) at the end
of such covered fiscal year without fiscal year limitation.
(b)The amount described in this subsection is the amount
equal to five percent of the aggregate amount of unobligated appropriations
available to the military department concerned for a covered fiscal year that
would otherwise expire at the end of such covered fiscal year by law.
(c)
(1)Except as provided in paragraph (2) and subject to
paragraph (3), amounts available under subsection (a) shall, at the election of
the Secretary of the military department concerned, be available for purposes
as follows:
(A)Payment in
accordance with applicable law of bonuses authorized by law (including awards
authorized by subchapter I of chapter 45 of title 5, United States Code) for
civilian employees of the military department, including employees determined
to have made beneficial contributions to the achievement of the mission of the
military department.
(B)Procurement of
weapons and weapon systems.
(C)Military
education and training programs and activities of the military
department.
(2)Amounts
available under subsection (a) shall not be available for purposes as
follows:
(A)Research,
development, test, and evaluation.
(B)Military
construction.
(3)
(A)Limitation on
bonus amountThe amount of the bonus payable to a civilian
employee of a military department under paragraph (1)(A) in any year may not
exceed the amount equal to 25 percent of the base pay of the employee in such
year.
(B)Limitation on
aggregate amount of bonusesThe total amount of bonuses payable
to civilian employees of a military department under paragraph (1)(A) in any
year may not exceed $5,000,000.
(C)Nothing
in paragraph (1)(A) may be construed to authorize or provide for the payment of
a bonus to an officer or employee of a contractor of the Department of
Defense.
(d)
(1)Notwithstanding any other provision of law, the Secretary
of a military department may transfer amounts described in subsection (b) that
are available under subsection (a) among accounts of the military department
for purposes of exercising the authority in subsection (a) with respect to such
amounts. Amounts so transferred shall be merged with amounts in the account or
fund to which transferred and shall be available under the same terms and
conditions as the amounts with which merged for the purposes specified in
subsection (c).
(2)A transfer under paragraph (1) shall not be treated
as a new appropriation of the amount so transferred.
(e)
(1)The Secretary of Defense shall submit to Congress each
year (at the same time the budget of the President for a fiscal year is
submitted to Congress in such year pursuant to section 1105 of title 31, United
States Code) a report on the exercise of the authority under this section
during the previous fiscal year. Each report under this subsection shall
include, for the fiscal year covered by such report, the following:
(A)The amounts
transferred under subsection (d), including the total amount transferred and
the amounts transferred to each account to which transferred.
(B)The purposes, and
amounts, for which amounts transferred were used.
(2)Not later than 30 days before using amounts available
under subsection (a) for the procurement of weapons or a weapon system, the
Secretary of the military department concerned shall submit to Congress a
report, in writing, on the use of such amounts for that purpose. Each report
shall include a statement of the weapons or weapon system to be procured and
the amount to be used for such procurement.
8.Failure to
obtain audits with unqualified opinion of fiscal year 2014 statement of
budgetary resources of the Department of Defense
(a)If the Department of Defense fails to obtain an audit
with an unqualified opinion on its statement of budgetary resources for fiscal
year 2014, the following shall take effect, effective as of the date of the
issuance of the opinion on such audit:
(1)Additional
qualifications and duties of USD (Comptroller)
(A)Any
individual nominated for appointment to the position of Under Secretary of
Defense (Comptroller) under section 135 of title 10, United States Code, shall
be an individual who has served—
(i)as
the chief financial officer of a Federal or State agency that has received an
audit with an unqualified opinion on such agency's financial statements during
the time of such individual's service; or
(ii)as
the chief financial officer of a public company that has received an audit with
an unqualified opinion on such company's financial statements during the time
of such individual's service.
(B)The duties and powers of the individual serving as Under
Secretary of Defense (Comptroller) shall include, in addition to the duties and
powers specified in section 135(c) of title 10, United States Code, such duties
and powers with respect to the financial management of the Department of
Defense as the Deputy Secretary of Defense (acting in the capacity of Chief
Management Officer of the Department of Defense) or a successor official in the
Department of Defense (acting in such capacity) may prescribe.
(2)Additional
qualifications and responsibilities of ASA for Financial Management
(A)Any
individual nominated for appointment to the position of Assistant Secretary of
the Army for Financial Management under section 3016 of title 10, United States
Code, shall be an individual who has served—
(i)as
the chief financial officer of a Federal or State agency that has received an
audit with an unqualified opinion on such agency's financial statements during
the time of such individual's service; or
(ii)as
the chief financial officer of a public company that has received an audit with
an unqualified opinion on such company's financial statements during the time
of such individual's service.
(B)The
responsibilities of the individual serving as Assistant Secretary of the Army
for Financial Management shall include, in addition to the responsibilities
specified in section 3016(b)(4) of title 10, United States Code, such
responsibilities as the Deputy Secretary of Defense (acting in the capacity of
Chief Management Officer of the Department of Defense) or a successor official
in the Department of Defense (acting in such capacity) may prescribe.
(3)Additional
qualifications and responsibilities of ASN for Financial Management
(A)Any
individual nominated for appointment to the position of Assistant Secretary of
the Navy for Financial Management under section 5016 of title 10, United States
Code, shall be an individual who has served—
(i)as
the chief financial officer of a Federal or State agency that has received an
audit with an unqualified opinion on such agency's financial statements during
the time of such individual's service; or
(ii)as
the chief financial officer of a public company that has received an audit with
an unqualified opinion on such company's financial statements during the time
of such individual's service.
(B)The
responsibilities of the individual serving as Assistant Secretary of the Navy
for Financial Management shall include, in addition to the responsibilities
specified in section 5016(b)(4) of title 10, United States Code, such
responsibilities as the Deputy Secretary of Defense (acting in the capacity of
Chief Management Officer of the Department of Defense) or a successor official
in the Department of Defense (acting in such capacity) may prescribe.
(4)Additional
qualifications and responsibilities of ASAF for Financial Management
(A)Any
individual nominated for appointment to the position of Assistant Secretary of
the Air Force for Financial Management under section 8016 of title 10, United
States Code, shall be an individual who has served—
(i)as
the chief financial officer of a Federal or State agency that has received an
audit with an unqualified opinion on such agency's financial statements during
the time of such individual's service; or
(ii)as
the chief financial officer of a public company that has received an audit with
an unqualified opinion on such company's financial statements during the time
of such individual's service.
(B)The
responsibilities of the individual serving as Assistant Secretary of the Air
Force for Financial Management shall include, in addition to the
responsibilities specified in section 8016(b)(4) of title 10, United States
Code, such responsibilities as the Deputy Secretary of Defense (acting in the
capacity of Chief Management Officer of the Department of Defense) or a
successor official in the Department of Defense (acting in such capacity) may
prescribe.
(b)In this section, the term public company has
the meaning given the term issuer in section 2(a)(7) of the
Sarbanes-Oxley Act of 2002 (15 U.S.C. 7201(a)(7)).
9.Failure to
obtain audits with unqualified opinion of fiscal year 2017 financial statements
of the Department of Defense
(a)
(1)Cessation of
authorities on reprogramming and availability of fundsIf a
military department fails to obtain an audit with an unqualified opinion on its
financial statements for fiscal year 2017, effective as of the date of the
issuance of the opinion on such audit, the authorities in sections 6 and 7
shall cease to be available to the military department for fiscal year 2017 or
any fiscal year thereafter.
(2)Prohibition on
expenditure of funds for certain MDAPs past Milestone B
(A)If a military department fails to obtain an
audit with an unqualified opinion on its financial statements for fiscal year
2017, effective as of the date of the issuance of the opinion on such audit,
amounts may not be expended by the military department for a weapon or weapon
system or platform being acquired as a major defense acquisition program for
any activity beyond Milestone B approval unless such program has already
achieved Milestone B approval of the date of the issuance of the opinion on
such audit.
(B)In
this paragraph:
(i)The
term major defense acquisition program has the meaning given that
term in section 2430 of title 10, United States Code.
(ii)The term
Milestone B approval has the meaning given that term in section
2366(e)(7) of title 10, United States Code.
(b)If the Department of Defense fails to obtain an audit
with an unqualified opinion on its financial statements for fiscal year 2017,
the following shall take effect, effective as of the date of the issuance of
the opinion on such audit:
(1)Reorganization
of responsibilities of chief management officer
(A)Position of
Chief Management OfficerSection 132a of title 10, United States
Code, is amended to read as follows:
132a.
(a)(1)There is a Chief
Management Officer of the Department of Defense, appointed from civilian life
by the President, by and with the advice and consent of the Senate.
(2)Any individual nominated for
appointment as Chief Management Officer shall be an individual who has—
(A)extensive executive level leadership
and management experience in the public or private sector;
(B)strong leadership skills;
(C)a demonstrated ability to manage large
and complex organizations; and
(D)a proven record in achieving positive
operational results.
(b)The Chief Management Officer shall perform such duties and
exercise such powers as the Secretary of Defense may prescribe.
(c)Service as
Chief Management Officer(1)The Chief Management
Officer is the Chief Management Officer of the Department of Defense.
(2)In serving as the Chief Management
Officer of the Department of Defense, the Chief Management Officer shall be
responsible for the management and administration of the Department of Defense
with respect to the following:
(A)The expenditure of funds, accounting,
and finance.
(B)Procurement, including procurement of
any enterprise resource planning (ERP) system and any information technology
(IT) system that is a financial feeder system, human resources system, or
logistics system.
(C)Facilities, property, nonmilitary
equipment, and other resources.
(D)Strategic planning, and annual
performance planning, and identification and tracking of performance
measures.
(E)Internal audits and management
analyses of the programs and activities of the Department, including the
Defense Contract Audit Agency.
(F)Such other areas or matters as the
Secretary of Defense may designate.
(3)The head of the Defense Contract
Audit Agency shall be under the supervision of, and shall report directly to,
the Chief Management Officer.
(d)The
Chief Management Officer takes precedence in the Department of Defense after
the Secretary of Defense and the Deputy Secretary of
Defense.
.
(B)
(i)Section 131(b) of
title 10, United States Code, is amended—
(I)by striking
paragraph (3);
(II)by redesignating
paragraph (2) as paragraph (3); and
(III)by inserting
after paragraph (1) the following new paragraph (2):
(2)The Chief
Management Officer of the Department of
Defense.
.
(ii)Section 132 of
such title is amended—
(I)by striking
subsection (c); and
(II)by redesignating
subsections (d) and (e) as subsections (c) and (d), respectively.
(iii)Section
133(e)(1) of such title is amended by striking and the Deputy Secretary
of Defense
and inserting , the Deputy Secretary of Defense, and
the Chief Management Officer of the Department of Defense
.
(iv)Such title is
further amended by inserting the Chief Management Officer of the
Department of Defense,
after the Deputy Secretary of
Defense,
each place it appears in the provisions as follows:
(I)Section
133(e)(2).
(II)Section
134(c).
(v)Section 137a(d)
of such title is amended by striking the Secretaries of the military
departments,
and all that follows and inserting the Chief
Management Officer of the Department of Defense, the Secretaries of the
military departments, and the Under Secretaries of Defense.
.
(vi)Section 138(d)
of such title is amended by striking the Secretaries of the military
departments,
and all that follows through the period and inserting
the Chief Management Officer of the Department of Defense, the
Secretaries of the military departments, the Under Secretaries of Defense, and
the Director of Defense Research and Engineering.
.
(C)The table of sections at the beginning of chapter 4 of
such title is amended by striking the item relating to section 132a and
inserting the following new item:
132a. Chief Management
Officer.
.
(D)Section 5313 of title 5, United States Code, is amended
by adding at the end the following:
Chief Management Officer of the
Department of
Defense.
.
(E)Any reference in any provision of law to the Chief Management
Officer of the Department of Defense shall be deemed to refer to the Chief
Management Officer of the Department of Defense under section 132a of title 10,
United States Code (as amended by this paragraph).
(2)
(A)Transfer to
Department of the TreasuryJurisdiction of the Defense Finance
and Accounting Service (DFAS) is transferred from the Department of Defense to
the Department of the Treasury.
(B)The
Secretary of the Treasury shall administer the Defense Finance and Accounting
Service following transfer under this paragraph through the Financial
Management Service of the Department of the Treasury.
(C)Memorandum of
understandingThe Secretary of Defense and the Secretary of the
Treasury shall jointly enter into a memorandum of understanding regarding the
transfer of jurisdiction of the Defense Finance and Accounting Service under
this paragraph. The memorandum of understanding shall provide for the transfer
of the personnel and other resources of the Service to the Department of the
Treasury and for the assumption of responsibility for such personnel and
resources by the Department of the Treasury.
(D)Nothing
in this paragraph shall be construed as terminating, altering, or revising any
responsibilities or authorities of the Defense Finance and Accounting Service
(other than responsibilities and authorities in connection with the exercise of
jurisdiction of the Service following transfer under this paragraph).
10.Enterprise
resource planningThe
Secretary of Defense shall amend the acquisition guidance of the Department of
Defense to provide for the following:
(1)The Defense
Business System Management Committee may not approve procurement of any
Enterprise Resource Planning (ERP) business system that is independently
estimated to take longer than three years to procure from initial obligation of
funds to full deployment and sustainment.
(2)Any contract for
the acquisition of an Enterprise Resource Planning business system shall
include a provision authorizing termination of the contract at no cost to the
Government if procurement of the system takes longer than three years from
initial obligation of funds to full deployment and sustainment.
(3)The Deputy
Secretary of Defense (acting in the capacity of Chief Management Officer of the
Department of Defense) or a successor official in the Department of Defense
(acting in such capacity) shall have the authority to replace any program
manager (whether in a military department or a Defense Agency) for the
procurement of an Enterprise Resource Planning business system if procurement
of the system takes longer than three years from initial obligation of funds to
full deployment and sustainment.
(4)Any integrator
contract for the implementation of an Enterprise Resource Planning business
system shall only be awarded to companies that have a history of successful
implementation of other Enterprise Resource Planning business systems for the
Federal Government (whether with the Department of Defense or another
department or agency of the Federal Government), including meeting cost and
schedule goals.