[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]



                         [H.A.S.C. No. 112-73]
 
                      IS THE FINANCIAL MANAGEMENT

                    WORKFORCE POSITIONED TO ACHIEVE

                   DOD'S FINANCIAL IMPROVEMENT GOALS?

                               __________

                                HEARING

                               BEFORE THE

                 PANEL ON DEFENSE FINANCIAL MANAGEMENT

                        AND AUDITABILITY REFORM

                                 OF THE

                      COMMITTEE ON ARMED SERVICES

                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                              HEARING HELD

                            OCTOBER 6, 2011

                                     
[GRAPHIC] [TIFF OMITTED] CONGRESS.#13 




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                 PANEL ON DEFENSE FINANCIAL MANAGEMENT 

                        AND AUDITABILITY REFORM

                  K. MICHAEL CONAWAY, Texas, Chairman
SCOTT RIGELL, Virginia               ROBERT ANDREWS, New Jersey
STEVEN PALAZZO, Mississippi          JOE COURTNEY, Connecticut
TODD YOUNG, Indiana                  TIM RYAN, Ohio
                Paul Foderaro, Professional Staff Member
               William Johnson, Professional Staff Member
                    Lauren Hauhn, Research Assistant


                            C O N T E N T S

                              ----------                              

                     CHRONOLOGICAL LIST OF HEARINGS
                                  2011

                                                                   Page

Hearing:

Thursday, October 6, 2011, Is the Financial Management Workforce 
  Positioned To Achieve DOD's Financial Improvement Goals?.......     1

Appendix:

Thursday, October 6, 2011........................................    23
                              ----------                              

                       THURSDAY, OCTOBER 6, 2011
   IS THE FINANCIAL MANAGEMENT WORKFORCE POSITIONED TO ACHIEVE DOD'S 
                      FINANCIAL IMPROVEMENT GOALS?
              STATEMENTS PRESENTED BY MEMBERS OF CONGRESS

Andrews, Hon. Robert, a Representative from New Jersey, Ranking 
  Member, Panel on Defense Financial Management and Auditability 
  Reform.........................................................     2
Conaway, Hon. K. Michael, a Representative from Texas, Chairman, 
  Panel on Defense Financial Management and Auditability Reform..     1

                               WITNESSES

Commons, Hon. Gladys J., Assistant Secretary of the Navy 
  (Financial Management and Comptroller), Department of the Navy.     6
Gregory, Sandra A., Special Assistant to the Under Secretary of 
  Defense (Comptroller), Office of Financial Workforce 
  Management, U.S. Department of Defense.........................     3
Matiella, Hon. Mary Sally, Assistant Secretary of the Army 
  (Financial Management and Comptroller), Department of the Army.     5
Morin, Hon. Jamie M., Assistant Secretary of the Air Force 
  (Financial Management and Comptroller), Department of the Air 
  Force..........................................................     8

                                APPENDIX

Prepared Statements:

    Commons, Hon. Gladys J.......................................    46
    Conaway, Hon. K. Michael.....................................    27
    Gregory, Sandra A............................................    31
    Matiella, Hon. Mary Sally....................................    40
    Morin, Hon. Jamie M..........................................    51

Documents Submitted for the Record:

    [There were no Documents submitted.]

Witness Responses to Questions Asked During the Hearing:

    Mr. Andrews..................................................    62
    Mr. Palazzo..................................................    61

Questions Submitted by Members Post Hearing:

    [There were no Questions submitted post hearing.]
   IS THE FINANCIAL MANAGEMENT WORKFORCE POSITIONED TO ACHIEVE DOD'S 
                      FINANCIAL IMPROVEMENT GOALS?

                              ----------                              

                  House of Representatives,
                       Committee on Armed Services,
    Panel on Defense Financial Management and Auditability 
                                                    Reform,
                         Washington, DC, Thursday, October 6, 2011.
    The panel met, pursuant to call, at 8:00 a.m. in room 2212, 
Rayburn House Office Building, Hon. K. Michael Conaway 
(chairman of the panel) presiding.

OPENING STATEMENT OF HON. K. MICHAEL CONAWAY, A REPRESENTATIVE 
FROM TEXAS, CHAIRMAN, PANEL ON DEFENSE FINANCIAL MANAGEMENT AND 
                      AUDITABILITY REFORM

    Mr. Conaway. Welcome, everyone, to our hearing this morning 
on DOD's [Department of Defense] workforce efforts and 
management. I would like to welcome everybody to today's 
hearing, entitled ``Is the Financial Management Workforce 
Positioned To Achieve DOD's Financial Improvement Goals?''
    The panel's past hearings have included examining the 
implementation of financial improvement and audit readiness 
strategy and methodology, the organizations that play a key 
role in DOD's ability to improve financial management such as 
the Defense Finance and Accounting Service, and DOD's payment 
and funds control process.
    One thing that has been readily apparent from these 
hearings is the importance of a well-qualified, well-trained 
financial management workforce. For example, at our last 
hearing the Department of Defense Office of IG [Inspector 
General] noted that inadequate training was one of the factors 
that contributed to potential Antideficiency Act violations.
    The financial management workforce ranges from accountants 
to auditors to financial analysts, and is made up of both 
civilian employees and military personnel. All of these groups 
are critical to DOD's financial improvement efforts. The 
financial management workforce needs to effectively perform 
financial and budgetary accounting, and follow proper internal 
control procedures as they execute their work. If there are 
gaps between the competencies required to perform these 
functions and current capabilities, they should be, and must 
be, identified and corrective actions taken.
    In addition, due to the constrained fiscal environment, it 
is imperative that the Department of Defense effectively manage 
its workforce, including ensuring the right skills mix in order 
to achieve improved financial management.
    I think a workforce with the adequate and appropriate 
skills is especially important as DOD moves to enterprise 
resource planning systems. It is essential that the users of 
these systems understand the capabilities of the systems and 
receive the proper training on how to use them in performing 
their day-to-day operations.
    One thing is clear. You can develop plans to improve 
financial management, implement new financial systems, and 
refine business processes. But without a well-staffed, well-
trained and skilled workforce you will not achieve success.
    I want to thank our witnesses in advance for their 
testimony and agreeing to be with us again, three of them. We 
have today Ms. Sandra Gregory, special assistant to the Under 
Secretary of Defense, Comptroller, Office of Financial 
Management; the Honorable Mary Sally Matiella, Assistant 
Secretary of the Army, Financial Management Comptroller; the 
Honorable Gladys J. Commons, also Assistant Secretary to the 
Navy, Financial Management Comptroller; and the Honorable Jamie 
M. Morin, Assistant Secretary of the Air Force, Financial 
Management Comptroller.
    Welcome all four of you this morning. And now Rob, if you 
have got some remarks before we turn to the witnesses?
    [The prepared statement of Mr. Conaway can be found in the 
Appendix on page 27.]

  STATEMENT OF HON. ROBERT ANDREWS, A REPRESENTATIVE FROM NEW 
 JERSEY, RANKING MEMBER, PANEL ON DEFENSE FINANCIAL MANAGEMENT 
                    AND AUDITABILITY REFORM

    Mr. Andrews. Good morning, Mr. Chairman. Good morning 
ladies, and gentleman. It is nice to see all of you here this 
morning, many returnees. That is very brave of you.
    [Laughter.]
    Chairman McKeon, I think, is performing a significant 
national service at the full committee level by conducting a 
very rigorous discussion of the consequences of the fiscal 
choices in front of the Department of Defense.
    It appears that, under any circumstances, we would be 
looking at reductions in the neighborhood of $360 billion over 
10 years at a minimum, and perhaps reductions of far in excess 
of that, as many as $950 billion or a trillion dollars over 10 
years.
    There are strongly held opinions about whether that is 
right or wrong. There are strongly held opinions about whether 
to do that or not. And I think the chairman deserves credit, a 
lot of credit, for focusing the committee, and the country 
hopefully, on that discussion.
    Our panel's work, which our chairman has done so well, is 
integral to having an intelligent discussion about those policy 
choices. You can't decide where to allocate your resources if 
you don't know where they are going already and where there 
might be ways to reallocate existing resources to achieve the 
mission of the organization.
    So that the production of financial statements is central 
to this entire discussion taking place on a rational basis, and 
our panel chairman is pretty much solely responsible for 
putting us in a position where we are going to have those. His 
work, and the statute that we wrote last year, is the reason 
why these statements are going to happen by 2017.
    Having said that, he and I are both--and other members of 
the panel are very impatient. We understand 2017 is the outside 
date. We would like progress well before that. And this morning 
we are going to talk about the thread that, if it is pulled out 
of that tapestry, makes the whole thing fall apart.
    As the chairman said, we can have all the enterprise 
management systems--I always get that term wrong, excuse me--
yes, we can have all the systems that we want, all the software 
we want, all the plans that we want. If we don't have the right 
people, if we can't recruit and retain the right people, this 
is not going to work. So I am very interested this morning in 
hearing what the panelists think, not only about recruitment of 
the best and the brightest but, in some cases more importantly, 
retention.
    A recurring problem throughout the Department of Defense, 
both in the uniform and non-uniform sector, has been that we do 
a very good job attracting bright people to come to the uniform 
service and the civilian service, and then we don't keep them 
as well as we should.
    We invest a lot in their education, their training, their 
development, and we don't keep them as well as we should. So I 
am interested in hearing, you know, how we can get the best 
graduates of the Wharton School, to name one, to come to the 
Department and stay there so that they can do this kind of work 
as part of their national mission.
    So I am glad to be here this morning. I look forward to 
hearing from you ladies and gentleman. I thank the chairman for 
having the hearing.
    Mr. Conaway. Thank the gentleman for his kind words.
    Ms. Gregory, for your opening statement.

STATEMENT OF SANDRA A. GREGORY, SPECIAL ASSISTANT TO THE UNDER 
    SECRETARY OF DEFENSE (COMPTROLLER), OFFICE OF FINANCIAL 
        WORKFORCE MANAGEMENT, U.S. DEPARTMENT OF DEFENSE

    Ms. Gregory. Chairman Conaway, Ranking Member Andrews, 
members of the panel, thank you for the opportunity to testify 
today concerning the Department of Defense financial management 
workforce. I submitted a statement for the record, which I will 
summarize briefly.
    With more than 33 years of DOD financial management 
experience, I continue to serve with a dedicated, skilled 
financial workforce that is seriously mindful of its 
stewardship role. As the functional committee manager for the 
DOD financial management community, I am responsible for 
compliance with overarching DOD civilian human capital strategy 
plan that is lead by the Under Secretary of Defense for 
personnel and readiness.
    Our goal is to make a good workforce better, and to get the 
right people trained at the right job, for today and for the 
future. In concert with the Department's human capital plans, 
we recently took steps to establish a course-based 
certification program designed to provide a framework and as a 
way to promote certain types of education, including a focus on 
auditability for defense financial managers.
    This program will focus on critical areas to include 
achieving department-wide auditability, sharpening analytics, 
and increasing overall accountability. The proposed DOD 
Financial Management Certification Program, will be similar to 
the program for the Defense Acquisition Workforce.
    The House and Senate Armed Services Committees have 
provided legal authority for the new program in their fiscal 
year 2012 authorization bills. And as Congress works through 
the legislative process, we are laying the groundwork now so we 
will be ready to implement the program once the Authorization 
Act is finalized.
    Our effort is currently focused on five areas. First, to 
map existing Department of Defense courses to competencies. The 
DOD Financial Management Certification Program is based on 
financial management enterprise-wide competencies. The DOD 
portfolio of financial management training and professional 
development courses will be aligned to these competencies.
    This alignment will aid in building a standard body of DOD 
financial management knowledge and in elevating shared 
competencies, with a renewed emphasis in analytics, decision 
support and audit readiness.
    Second, we are focusing on test-based certification. The 
Department has identified 20 professional test-based 
certifications for areas such as accounting, auditing, cost and 
financial management.
    Third, we are concerned with the range of experience in our 
financial management professionals. The certification program 
will require not only specific DOD financial management 
experience at different levels, but it will also require 
experience in different types of assignments.
    Fourth, considering that our personnel are scattered 
throughout DOD and its many locations, we are sensitive to the 
need for communications and marketing. An aggressive and 
comprehensive communications and marketing campaign in terms of 
briefings, Web-based articles, and educational material is 
crucial to inform and educate the workforce prior and during 
implementation.
    And fifth, we are aware of the need for a certification 
program support, and oversight will be required at various 
levels throughout DOD to administer the program. DOD's efforts 
are focused on deliberate, professional workforce development, 
ensuring that the financial management community has a broad, 
enterprise-wide perspective and a standard body of knowledge 
throughout the Department.
    We are focused on making a good DOD financial workforce 
even better as we march toward that 2017 goal of obtaining a 
clean audit opinion. In summary, the Department recognizes the 
importance of maintaining a capable workforce to improve 
financial management in DOD, and especially with respect to 
better analysis, audit readiness, and increased accountability 
for all who are entrusted with the taxpayers' money.
    We appreciate the support of both the House and Senate 
Armed Services Committees, and they have provided needed legal 
authority in their authorization bills for the Financial 
Management Certification Program. And we will work with the 
House and the Senate on final language for the fiscal year 2012 
NDAA [National Defense Authorization Act].
    So I appreciate the time you and your distinguished panel 
have devoted to financial management workforce issues. I look 
forward to your questions.
    And, Mr. Chairman, this concludes my statement.
    [The prepared statement of Ms. Gregory can be found in the 
Appendix on page 31.]
    Mr. Conaway. Thank you, Ms. Gregory.
    Ms. Matiella.

 STATEMENT OF HON. MARY SALLY MATIELLA, ASSISTANT SECRETARY OF 
THE ARMY (FINANCIAL MANAGEMENT AND COMPTROLLER), DEPARTMENT OF 
                            THE ARMY

    Secretary Matiella. Chairman Conaway, Representative 
Andrews, and members of the panel, thank you for the 
opportunity to testify today regarding the Army's financial 
management workforce. Secretary McHugh, Chief of Staff Odierno 
and Under Secretary Westphal, our Chief Management Officer, and 
all of our senior leaders appreciate the criticality of 
establishing and retaining a qualified workforce--a workforce 
which will enable the Army to be audit-ready by September 30, 
2017.
    The Army employs hardworking soldiers and civilian 
personnel across all functional areas who are committed to 
improving our business processes and supporting our 
warfighters. However, the systems and processes that we are 
improving require the implementation and execution of different 
processes and different practices.
    By requiring our workforce to adjust to different systems, 
practices, and controls, my peers and I must fulfill our 
obligation to train them and to provide sufficient resources to 
train them successfully. The Army has a well-deserved 
reputation for training our soldiers as the best warfighters in 
the world. We are working toward supporting our warfighters 
with the best financial management workforce in the world.
    In fact, the Chief of Staff of the Army and the CMO [Chief 
Management Officer] of the Army recently initiated an Army-wide 
workforce capability assessment to obtain a better 
understanding of the Army's functional capabilities to identify 
potential workforce redundancies and gaps, and to establish an 
actionable plan to improve the workforce. We are connecting the 
outcomes of that workforce review to the deployment of our new 
business systems, thus creating a more efficient and effective 
tail that supports the tooth of the Army.
    In addition to these critical workforce assessments, we are 
undergoing annual audit examinations by an independent public 
accounting firm each year from fiscal year 2011 to 2014. These 
audit examinations will serve to condition the Army on how to 
support financial statement audits and to ensure that our audit 
readiness strategy is sound and remains on schedule.
    By repeating this cycle of assessing, testing, identifying 
deficiencies, and implementing corrective action, we are 
providing our workforce with hands-on, real-life audit 
readiness experience and training. We believe that this 
experience with audit examinations will supplement our 
instructor-led training courses on systems, internal controls, 
and corrective action implementation.
    While my office is guiding the Army's audit readiness 
efforts, it is important to note that establishing and 
maintaining an auditable business environment depends heavily 
on business process owners outside of financial management or 
the comptroller field. Fortunately Secretary McHugh appreciates 
the fact, and is holding senior executives across all 
businesses accountable for supporting the Army's audit 
readiness goals.
    I am working with my counterparts in logistics, manpower, 
and others to ensure that they understand our requirements and 
provide us appropriate support to meet this shared mission. It 
is extremely important that our business partners interface 
auditable data into our accounting system. That is, that their 
systems, processes, data, and controls also pass audit 
scrutiny.
    I am confident that we will be audit-ready by September 30, 
2017, because we have a sound and resource financial 
improvement plan that relies heavily on providing the 
appropriate training and resources for the Army soldiers and 
civilians, and also holds them accountable for enabling an 
auditable environment.
    Secretary McHugh, Chief of Staff Odierno, and Secretary 
Westphal are all committed, as I am, to improving our financial 
processes, conducting workforce analysis, and restructuring and 
training our financial workforce to meet audit standards. 
Developing the most capable workforce is the right thing to do 
for the Army, our Federal Government, and the men and women 
defending our Nation.
    I look forward to continued collaboration with the members 
of the panel, our counterparts in the Senate, GAO [Government 
Accountability Office], and Secretary Hale to ensure the Army's 
workforce obtains and retains the appropriate skills, 
certifications, and experience to meet our stewardship 
responsibilities.
    I look forward to your questions.
    [The prepared statement of Secretary Matiella can be found 
in the Appendix on page 40.]
    Mr. Conaway. Thank you, ma'am. Ms. Commons.

STATEMENT OF HON. GLADYS J. COMMONS, ASSISTANT SECRETARY OF THE 
NAVY (FINANCIAL MANAGEMENT AND COMPTROLLER), DEPARTMENT OF THE 
                              NAVY

    Secretary Commons. Good morning, Chairman Conaway, 
Congressman Andrews, members of the panel. Thank you for the 
opportunity to discuss the Department's financial management 
workforce.
    The financial management workforce is a professional and 
well-trained team of 9,000-plus civilian and military 
personnel. Today, I specifically focus on personnel classified 
in the general schedule 500 series--our financial managers, 
accountants, auditors, financial technicians, and our military 
financial managers.
    Our first responsibility is to the warfighter. We need to 
effectively obtain the financial resources to meet the 
warfighters' needs by developing supportable budgets, budget 
strategies, and justification. We want to ensure that we get 
the most capability for every dollar we spend and can 
accurately account for those expenditures. Achieving auditable 
financial statements will assure you, the warfighter, and the 
taxpayers that we take this responsibility seriously.
    For many years, we have had a very strong budget 
formulation and execution team. With the establishment of the 
Defense Finance and Accounting Service in the 1990s, most of 
our accounting expertise was transferred to that organization. 
While we divested the day-to-day accounting operation, we 
retained fiduciary responsibility.
    As we tried to improve financial management and move toward 
auditability, we recognize that we could no longer afford 
stovepipe positions or narrow skill sets. To be effective and 
efficient, our workforce needed a broad level of understanding 
of the full range of the Department's financial management and 
fiduciary responsibilities.
    In 2006, we took steps to broaden the scope and 
responsibilities of our professional and technician workforce. 
As a follow-on, we provided career road maps to guide the 
education, training, and experience required by our workforce 
at all levels--entry, journeyman and expert. Today, we provide 
a range of opportunities from online training courses, 
classroom training to an Executive Master's of Business 
Administration taught by the Naval Postgraduate School. We also 
have a fellowship program allowing full-time attendance at a 
graduate school or a career-broadening job assignment.
    However, we know that we have some skills and knowledge 
gaps, particularly in the area of audit readiness. To 
specifically address those gaps, we asked the Naval 
Postgraduate School to develop an audit readiness course. 
Starting this year, they will conduct a 3-day course to be 
taught 10 to 12 times during the year at our major geographic 
hubs. This will dovetail with the financial improvement and 
audit readiness short course taught by the office of the 
secretary of defense comptroller.
    Of equal importance is having the right number and mix of 
people to perform our financial management functions. Two years 
ago, we took steps to beef up my own financial operation staff 
to provide better oversight and guidance to our major commands, 
and to ensure we were taking proper steps and priorities to 
achieve financial audit readiness.
    Currently, I believe the financial management workforce is 
structured; civilians, military personnel, and contractor is 
properly sized to achieve our goals. While I have addressed the 
professionalism and training of our financial management 
workforce, I recognize that there are many others who influence 
the ability to achieve auditable financial statements.
    As I noted in my last testimony before you, we are reaching 
out to our general and flag officers, our senior executives, 
and business process owners so that they understand the roles 
and responsibilities that they play. We believe this will 
cascade down throughout the workforce and support the 
Department's efforts to achieve audit readiness.
    Thank you for your interest in our workforce, and I look 
forward to answering any questions you might have.
    [The prepared statement of Secretary Commons can be found 
in the Appendix on page 46.]
    Mr. Conaway. Thank you, Ms. Commons.
    Dr. Morin.

 STATEMENT OF HON. JAMIE M. MORIN, ASSISTANT SECRETARY OF THE 
AIR FORCE (FINANCIAL MANAGEMENT AND COMPTROLLER), DEPARTMENT OF 
                         THE AIR FORCE

    Secretary Morin. Mr. Chairman, members of the committee, 
thank you again for an opportunity to testify here and to talk 
about the Air Force financial management workforce--our 
enlisted, our officers, our civilians. As the Air Force 
comptroller, I view it as my responsibility to make sure that 
the Air Force has the right workforce with the right skills and 
the right training in order to help our secretary and our chief 
of staff produce an Air Force that can fly, fight, and win for 
the Nation. That is our ultimate goal.
    At a time when our resources are very tight, it is all the 
more important that we get the most out of our people. For the 
Air Force, that means over 8,000 civilians in financial 
management, over 900 officers, and almost 3,800 enlisted 
members. Those are our Air Force financial managers, and it is 
really only through their full contributions that we can get 
the maximum combat capability out of each dollar that Congress 
appropriates and entrusts to us. Strengthening that workforce 
is a vital part of our effort.
    I will say while this panel is obviously created to focus 
on helping the Department of Defense get to audit readiness, as 
my colleagues have mentioned, not every financial manager in 
the Air Force is an accountant, not every financial manager in 
the Air Force is a budget officer, and a clean audit is a means 
to the end of better management of taxpayer resources. So I 
think it is important to understand the depth and the breadth 
of the Air Force financial management workforce.
    We cover a wide range of activities. Cost analysts, as I 
mentioned in previous testimony to this committee, are a key 
part of the Air Force financial management workforce, as are 
people doing program control and acquisition programs, as are 
the budget team, and down to the folks working at a technical 
level, processing military pay transactions. It is a broad 
workforce that includes auditors, transaction processors, 
planners, accountants, a whole range of activities.
    The Air Force needs that diversified financial management 
workforce in order to handle that full range of 
responsibilities that really extend throughout the life of 
appropriated funds, from initial development of a budget--a 
program objective memorandum when our cost analysts have to 
help us understand what we need in order to carry out our 
mission in terms of dollars--through to financial systems 
management and, ultimately, financial reporting.
    I also, of course, want to mention that many of these 
responsibilities have to occur in a deployed environment. Right 
now, we have over 260 Air Force financial managers deployed 
into harms way; again, doing a wide range of activities, from 
taking care of pay and benefits issues for other deployed folks 
all the way through budget building and cost analysis.
    The workforce that we bring to bear on these challenges is 
quite well-educated and skilled. Over 60 percent of the Air 
Force financial management workforce holds a degree of some 
sort, and 2,700 of those folks have master's degrees or above. 
Now, that includes more than 100 of our enlisted troops who 
have a master's. It is a well-educated workforce, and it is a 
workforce that is committed to professional development.
    We see a heavy focus on certifications, although there is 
always room for improvement there. Looking just at my primary 
headquarters-type audit readiness workforce and those directly 
associated with them out in the field, that is a workforce of 
about 80 people. And we have got 12 CPAs [certified public 
accountants] in that group. We have got 15 certified defense 
financial managers in that group, eight certified government 
financial managers in that group.
    It is a group that is well credentialed in terms of 
education, training, and certification. But it is critical that 
we continue to focus on getting that workforce the appropriate 
skills, education, and training as we work towards audit 
readiness. And some of the skills that they need to bring to 
bear will change as we move to new systems, again as my 
colleagues have alluded.
    Our financial managers are learning how to use, and some of 
the basic theory behind, the new enterprise resource planning 
systems. It demands a different set of skills and a different 
sort of attention to particular details than the prior systems 
did. There is no question about that. Moving from what is 
really a bookkeeping system to a true financial system that can 
produce auditable financial statements requires changes at 
every level.
    And it will require us to more broadly focus our training 
resources. We cannot identify just a tenth or a quarter of our 
workforce and lavish training on them. We have got to reach, 
really, 100 percent because weak links in the chain can break 
the audit readiness effort.
    We have had a particular focus on the pilot users of our 
Defense Enterprise Accounting Management System, DEAMS, at 
Scott Air Force Base, where we have had close relationships 
with the program office and our functional management office to 
ensure that the line-level users on that system get the 
training they need, get the focused attention that they need, 
as they really relearn their jobs. And it is not without 
challenges, but it has been a productive handholding 
relationship, with the users teaching the developers and the 
developers and support teams teaching the users.
    We are also working to restructure our enlisted curriculum 
at our financial management schoolhouse, where we have moved 
more commercial accounting standards into that training, 
focusing less on teaching people how to use the legacy systems 
and more on preparing for the future that they will operate in 
for most of their careers.
    Again, as we move from a traditional focus on manual 
transaction processing towards more commercial accounting, more 
cost analysis, more issues like that, we have got to prepare 
the community. And we are leaning forward, and doing that.
    Bottom line, we are keeping our focus on auditability while 
we also work aggressively, strongly to support the warfighter 
by providing that sort of world-class decision support through 
a well-trained, well-educated financial management workforce.
    As I have said before, I very much appreciate the 
committee's engagement on this issue and in the broader issue 
of financial management and DOD. It is helping us to be better, 
and I thank you all for your focus on it.
    [The prepared statement of Secretary Morin can be found in 
the Appendix on page 51.]
    Mr. Conaway. All right. Thank you very much. Appreciate 
that.
    This is probably the most straightforward area of the 
entire process that we have been investigating as a panel. 
Everybody understands a little bit about how this thing should 
go forward, normally, as opposed to some of the more esoteric 
things that are going on.
    Ms. Matiella, you mentioned--and I think I heard in the 
others--that your agencies have done, or your teams have done, 
for lack of a better phrase, an inventory of what you have and 
try to know where you want to get to.
    Ms. Gregory, there are broader areas a lot of the folks out 
there have. Can you talk to us about how you determine what you 
have, what kind of skill sets you already have in place? Is it 
a formal process to evaluate that?
    What kind of attrition plan do you have in place for all of 
that team? Because, you know, if everybody retires at the same 
time that is not going to work, either. Can you visit with us, 
each of you, about just how have you decided what you have in 
place and where you are headed from there?
    Ms. Gregory.
    Ms. Gregory. Thank you, Mr. Chairman.
    First of all, there are 48,000 civilians and approximately 
10,000 military doing financial management across the 
Department of Defense. And when we assess what we have in 
conjunction with--I want to step back for a minute--the 
required Strategic Human Capital Plan that we are working 
with--because now, for the first time ever, the Department of 
Defense at the department level has worked with all the 
Services and components, defense agencies, to come up with 
enterprise-wide competencies.
    So when we issued the first report of the Strategic Human 
Capital Plan, we did not have enterprise-wide competencies. The 
Services in some of the large defense agencies had their own 
separate competencies. So we will use it as a benchmark, now 
that we have common competencies that we have been working on.
    So then we will measure. As part of the Strategic Human 
Capital Plan, we will be using those competencies to measure 
and find out what specific gaps we have. So right now we have 
identified broad gaps, for instance such as analytics and in 
the area of audit readiness.
    And so as we continue to have more specifics we will be 
able to use those competencies that we have developed at five 
different levels. We use the OPM [Office of Personnel and 
Management] methodology of developing five different levels 
within each competencies. We have over 23 competencies 
throughout that are applied to all the different occupational 
series in the 500 financial management civilian series.
    So when you say how we look at the workforce, once a 
quarter, Mr. Hale, the Under Secretary of Defense, looks at 
specific metrics throughout financial management. And there is 
a section there on the financial workforce, to include the 
aging of the workforce, how many years that we have been in the 
workforce, how close we are to retirement.
    And right now, our attrition rate is very low. The Federal 
average, I believe, is around 8 percent. Ours is under 4 
percent, and last year it was even a little bit lower than 
that. So our retirements are down, our attrition is down. And, 
of course, the economy is driving a lot of that.
    Now having said that, I will talk for one of the large 
defense agencies, Defense Contract Audit Agency. Because they 
have been one of the areas that have brought on around 500 new 
auditors in their specific area. And I just met with some of 
them at our new Defense Civilian Emerging Leadership program, 
which you authorized back in fiscal year 2010 NDAA to work also 
on the leadership aspect of it.
    So what is interesting is, I met folks who, just to your 
earlier point, we are attracting at this point in time. We are 
attracting accountants and auditors who have graduate degrees 
from Yale and Columbia. And also I met some from here in George 
Washington. So those are a small sample size, but we are able 
to attract that. We will have to continue to work at what tools 
we have available; that when the economy picks up that they 
will be tempted, perhaps some of the folks, to leave and go the 
other way.
    We are also very much aware that the younger workforce may 
not have the same ideals as some of the earlier folks who came 
in, that they will probably weave back and forth throughout 
Federal Government and go to the private sector and come back. 
So we are very much attuned to that. Like I said, we look at 
the statistics, we look at what tools we have available, and 
are using them.
    Secretary Morin. Yes, sir. On the Air Force side, I would 
say that we do have, as do, I think, pretty much all areas of 
the Federal Government, medium-to long-term concerns about the 
health of the workforce as we go through a wave of retirements. 
A very substantial share of the Air Force financial management 
workforce is at or approaching retirement age, with really 
about a third in the, you know, age 55-plus category.
    That provides us a wealth of experience and it is a 
tremendous asset but, obviously, people will not remain in the 
workforce forever. And so we have to keep looking forward. As 
General Gregory said, the retention right now is very good for 
a variety of reasons, but we have to look aggressively forward.
    I will say one interesting nuance in the workforce that 
makes a real difference in the Air Force, and probably for the 
other Services. As you know, several years ago Congress changed 
the law and allowed dual compensation so that retired military 
personnel could also collect a Federal civilian salary without 
an offset.
    And since then, there has been a substantial increase in 
the number of retired military, as well as other prior service 
military, in our civilian workforce. It is for the Air Force, 
over 1,500 of our financial management workforce is retired 
military.
    So they may have a lower number of years of Federal service 
as a civilian, yet a little bit older. There are huge 
advantages with keeping those people on and taking advantage of 
the skills they bring. It also means you get maybe fewer years 
of civilian service out of them, and it requires more 
transition planning, as well. But we do have those issues in 
front of us, certainly.
    Secretary Commons. I believe that our workforce is properly 
sized and that we have the right people, we have the right 
skill mix. So I will focus my attention on how we replenish 
that workforce. And we allow our local commands to hire, 
basically. But we have two centrally managed programs that we 
do at my level--the financial management intern program, where 
we bring college students in that have a 3.5 or better grade 
point average. We do that recruiting every single year. We go 
out to universities.
    We actively recruit people to come in at the 5/7 [GS-5/7] 
level, and that has been very effective over the years. We also 
have an associate program that we centrally manage, where we 
bring in midlevel employees that have experience either in the 
private sector. They must have a degree. We try to recruit 
those with advanced degrees.
    So we feel that we are taking action so that if we should 
have retirements, as has been stated, the economy allows us to 
retain people right now. But we actively recruit to replace our 
personnel specifically in those two programs.
    Secretary Matiella. We are looking forward. The Army is 
going to have a fully-deployed, compliant accounting system by 
next year. And so this new system is much more integrated, has 
a lot more edits involved in it. So because of the edits, 
because of its integration, because of its complexity and 
sophistication we are going to need more analysts versus 
accounting technicians.
    Right now there are a substantial amount of accounting 
technicians and budget technicians that are working in our 
legacy systems. Looking forward, our recruitment strategy is to 
get more accountants, more budget analysts, folks who know how 
to apply analytics to the data.
    There is going to be less input required by the system 
because that is going to be coming in from our feeder systems, 
and there is going to be more of a requirement to look at 
anomalies, should they exist. And so looking forward, we are 
looking at our skill set and the requirement to recruit those 
college graduates who are able to do the analytics that are 
going to be required by a new system.
    Mr. Conaway. Thank you.
    Mr. Andrews.
    Mr. Andrews. Thank you Mr. Chairman. I again thank the 
witnesses for their preparation.
    Ms. Gregory, you talked about the 20 professional test-
based certifications for personnel that you are working on.
    I note that it was the fiscal year 2002 NDAA that gave the 
Department the legal authority to pay for and support 
certification and credential standards. Where are we, in terms 
of how many of those 20 are ready to be fielded and start 
giving tests to people?
    Ms. Gregory. Thank you, Mr. Andrews. First of all, since 
you gave us that authority we have been reimbursing civilians 
and military for the exams they that take for certifications. 
The 20 test-based certifications are those that are already out 
there, like CPA's, certified management accountants, certified 
defense financial managers, et cetera. And they are also in the 
cost area, and in audit and finance.
    But we last year, for instance, reimbursed about $700,000 
and the year before about $800,000 for the reimbursements. So 
the 20 that I mentioned are part of the entire--we are calling 
it the certification program, similar to the Defense 
Acquisition Workforce Certification program. There will be 
levels one, two and three so that getting a test-based 
certification will be a part of that.
    Mr. Andrews. Are these tests that the Department is going 
to generate itself and give to employees, or some outside 
organization?
    Ms. Gregory. No. All the 20 are all outside organizations. 
So our certification will have that as a part of it to give 
it----
    Mr. Andrews. When we reimburse the employee to prepare for 
that certification, is there any contractual obligation for the 
employee to stay for a certain number of years after they pass 
it?
    Ms. Gregory. I can check, but right now I believe not.
    Mr. Andrews. Do you think there should be, or should not 
be?
    Ms. Gregory. It would be dependent on--for instance, a lot 
of them are getting certifications are staying with us. They 
are not just taking them and leaving. But we can check into 
that and see what the percentage is.
    [The information referred to can be found in the Appendix 
on page 62.]
    Mr. Andrews. I do not have any bias to asking that 
question. I would like to know your opinion because I do not 
know what the right answer is.
    Ms. Gregory. For instance----
    Mr. Andrews. We certainly do not want to create 
disincentives for people to get the certification and tie them 
up. But, on the other hand, we do not want somebody to get 
trained on our dime and leave.
    Ms. Gregory. But, for instance, the certification for 
Certified Defense Financial Manager, which is a frequent one 
that they receive, is only $95.00 a module, or for all three 
modules is $285.00 per person. So it is a small dime on that 
one. Now, if you are getting a CPA it would be more than that.
    Mr. Andrews. Obviously.
    Secretary Commons, you describe this technician that used 
to process vouchers and now we call him or her a financial 
technician. What is the difference, in terms of their 
responsibilities and their compensation? If I were one of these 
folks previously, what did I do and how much money did I make? 
And now what do I do and how much money do I make?
    Secretary Commons. Normally, the focus before would be very 
specific. For example, you may be a military pay clerk or you 
may just pull vouchers. Now, what we have said to them is, you 
need to understand more about the entire process. As to being 
so narrowly focused so that you only understand military pay 
and how that functions, you need to understand civilian pay.
    You need to understand contract vendor pay, and how that 
process works. So what we did was to try to broaden their skill 
level so that we could better use them instead of just----
    Mr. Andrews. Have them play positions, not just second base 
or not just right field?
    Secretary Commons. Yes.
    Mr. Andrews. Do you make more money if you can play more 
positions? Do you pay them more?
    Secretary Commons. Well, experience, and you are able to 
move up. You are able to move into positions that would pay you 
more because your skill set is not so narrow that you can only 
apply for positions in one particular area.
    Mr. Andrews. Gives you more paths to advance your career 
than----
    Secretary Commons. Yes.
    Mr. Andrews. Secretary Matiella, do you have any estimate 
on how much the Department of the Army spends a year to train 
people in the financial field?
    Secretary Matiella. I cannot give you a figure right now. I 
will have to get back with you on that.
    Mr. Andrews. I would be interested, I think the committee 
would be interested, in seeing that. And then----
    Secretary Matiella. Right.
    Mr. Andrews [continuing]. We would like to know whether 
that figure has gone up or down.
    Secretary Matiella. Right.
    Mr. Andrews. And then what metrics you use to measure how 
effective you think the training has been.
    Secretary Matiella. Exactly. We do have quite a very large 
training program. It goes all the way from providing graduate 
education to providing week-long or hours-long cost training. 
But I will get that information for you.
    [The information referred to can be found in the Appendix 
on page 62.]
    Mr. Andrews. We would like to see that----
    And then, Secretary Morin, the 40 senior audit personnel 
that you are using at AFAA [Air Force Audit Agency], how are 
those people selected? Who picked them, and on what basis?
    Secretary Morin. Yes, sir. Those folks were selected by the 
auditor general of the Air Force and his staff. We worked 
closely--Mr. Ted Williams, who is from New York----
    Mr. Andrews. Speaking of baseball, yes, I was going to say 
``The Splendid Splinter.''
    [Laughter.]
    Secretary Morin. Yes. Unfortunately, Mr. Williams is a 
Yankees fan.
    Mr. Andrews. That is unfortunate on a lot of levels, yes, 
but go ahead.
    [Laughter.]
    Secretary Morin. I have to restrain from comment. My wife 
is also a Yankees fan.
    Mr. Andrews. There is counseling for people like that.
    [Laughter.]
    Secretary Morin. The true challenge is, I am from Detroit.
    Mr. Andrews. Uh-oh. Oh, you must have a very strained 
household this week.
    Secretary Morin. Mr. Williams and his staff identified 
specific folks reporting to him, and also about 80 specific 
auditors who were working in the field to support that effort. 
We have a very collegial and collaborative relationship, but 
you do need to maintain an appropriate level of independence 
between----
    Mr. Andrews. This is the final question. My time is up. 
What skill level do those 40 senior people have that are 
working at AFAA on the financial statement?
    Secretary Morin. Virtually all of them have graduate 
degrees and a substantial chunk of them are either CPAs or have 
other audit certifications. I can get you the precise numbers--
--
    [The information referred to can be found in the Appendix 
on page 62.]
    Mr. Andrews. Okay.
    Secretary Morin. But it is a substantial chunk.
    Mr. Andrews. Thank you very much.
    Mr. Conaway. Thank you.
    Mr. Young, 5 minutes.
    Mr. Young. Thank you, Mr. Chairman. Thank you to all of our 
witnesses for being here this morning.
    Ms. Gregory, is your department supplementing its financial 
management workforce with contractors? If so, can you give me a 
sense of the extent to which you are doing that, how you make 
those determinations, and what skill sets you are supplementing 
the workforce in?
    Ms. Gregory. I will speak primarily for a department-wide 
view of it. Yes, we do have contractors, and we look at the 
different skill sets that we need that we are missing. For 
instance, audit readiness is probably the best example. That we 
have a large portion of auditors because our organic auditors--
I should say accountants, not the auditors, the accountants--on 
the organic side predominantly have been used to doing 
budgetary accounting as opposed to proprietary accounting that 
is now needed to have that skill set.
    That is why we had to ramp up and use contractor support 
from predominantly large accounting firms. Now, throughout, and 
having been raised in financial management in the Department of 
Defense for over 30 years, I have worked at every level and I 
have watched us now, particularly since September 11, 2001, 
when the defense budget went up dramatically, we did not 
throughout--and I think we can say this for both Services and 
the agencies--we did not go up proportionately in the staff 
within financial management.
    So when we had to, for instance, for tracking certain kinds 
of money that came in, for instance for the global war on 
terrorism, that oftentimes we did, on the budget side, hire 
some contractors to do that.
    Now with insourcing and the efficiencies, we have taken a 
look at that--for instance, DFAS, when the insourced Defense 
Financing and Accounting Service took several hundred 
contracting positions and converted them into organic 
positions.
    Mr. Young. So it sounds like your long-term plan is to 
bring a lot of that in-house as you get----
    Ms. Gregory. Well, there is a balance. And so that we are 
looking at, right now, what is the balance. And I think that we 
have got it about right. That we will continue to need a lot of 
contractor support for special projects that we might be 
working on. Or, for instance, definitely for audit readiness we 
have to have the contractor support.
    Mr. Young. Okay. And for all of our witnesses here if you 
have an answer to this, are you taking efforts pursuant to the 
Efficiencies Initiative to actually reduce personnel in various 
areas? It is something you may have touched on, but if you 
could discuss that. If so, where are those areas where you are 
reducing the number of personnel, and what impact is that 
having on your workforce?
    Secretary Matiella. With our new systems, the areas that we 
are reducing personnel are on those personnel that are going to 
be creating, you know, more transactional-level data; the 
accounting technicians, the budget technicians. And we are 
focusing on not growing our workforce.
    So we are going to be left with those accountants, those 
budget analysts that are able to do the analytics. So in the 
long run, we see that our workforce will be reduced because our 
systems will be able to do more and we will rely less on people 
having to input.
    Secretary Commons. We are not, at this time, planning any 
reduction in the financial management workforce. Again we do 
believe our workforce is right-sized at this point in time and 
that we are moving forward. So I am not anticipating any 
reductions. However I must tell you, in the current fiscal 
environment everything is on the table so it does not mean that 
I will not be subjected to some reduction in the financial 
management workforce.
    What I have done is to ask my major commands to let me know 
if they are experiencing any significant reduction in the 
financial management workforce so that we can take the 
appropriate action.
    Mr. Young. Where would you start if you were asked right 
now? I mean, what would be the first? You have indicated you 
are right-sized, but where would you begin to cut? Is that 
something you have contemplated?
    Secretary Commons. Not really because I think I have the 
support of senior leaders----
    Mr. Young. Okay.
    Secretary Commons [continuing]. In that we are focused on 
achieving an auditable financial statement. They support that, 
they understand that we need to put the resources on to achieve 
that. And so I am pretty confident that we can maintain the 
workforce that we have.
    Secretary Morin. Mr. Young, while our core audit readiness 
workforce is growing and continues to grow, we are moving 
forward on significant overhead efficiencies across the Air 
Force. And financial management is by no means exempt from 
that.
    Across the staff that works for me, we have identified 
already about 78 positions worth of efficiency reductions that 
we can take, and we are pressing forward to implement those 
now. Those are, as my colleagues alluded, primarily in 
transaction processing-type activities, where increased 
reliance on automated systems is helping us to do those more 
efficiently.
    Mr. Young. Thank you. Our time is up.
    Mr. Conaway. Steve.
    Mr. Palazzo. Well, good morning. Thank you all for being 
here.
    I have several questions. I am going to kind of jump around 
a little bit. But my colleague here mentioned, he talked 
about--or the insourcing for DFAS was brought up. Can you tell 
me--I meant to ask this question last week, when the DFAS lady 
was here--how many jobs were actually taken from contract and 
insourced? And what was the motivation there?
    Because typically, insourcing is, to me, frowned upon. I 
think you know, if there is a business in the private sector 
that can do it and do it better it should, you know, allow them 
to deliver it to us. So just some of the methodology behind 
what took us--if you can answer that, please, Ms. Gregory?
    Ms. Gregory. We can get specifics from the DFAS, but I will 
just give in general terms. There were several hundred 
positions that were moved back in the insourcing. But the key 
thing is, when there was an A-76 requirement to look at this, 
when we study in anything that we outsource, there was always 
that required by OMB Circular A-76, as you know. So they did 
that, and then the dynamics have changed.
    So I would be happy to get more in-depth if you would like 
to have the specifics on DFAS, if you want to know the specific 
number of people. Because I know Ms. Smith was here last week, 
and I would prefer not to speak in the specifics of that. But I 
know they did--it was more cost-effective than not to bring 
them in.
    So again, sometimes cost factors changed or the number of 
people that they needed changed. So I would like to come back 
and take that one for the record please.
    [The information referred to can be found in the Appendix 
on page 61.]
    Mr. Palazzo. Okay. That is--anything you can provide my 
office on that.
    Now I guess in general--you know this might be outside the 
scope, just peaked my curiosity--are there any major insourcing 
efforts going on, DOD-wide, that you may know of? I remember 
Secretary Gates saying something about in the middle of the 
global war on terror that he was going to bring 10,000 people 
back into the military.
    Has that happened in the DOD civilian workforce? Has that 
happened and, if so, what are the amounts we are looking at?
    Ms. Gregory. I believe the Secretary had mentioned there 
were 30,000 positions that we were going to insource, and I can 
get back to you, too, on the specifics of that. I know that 
effort was lead by an area outside of financial management to 
keep track of it.
    But I know that we also went through the efficiencies 
drills that we are going through now from last year. So there 
is a point there that we can get some more specifics on where 
we are on that 30,000. But again, all the Department is 
stressed on doing what is most cost-effective to still get the 
mission done.
    [The information referred to can be found in the Appendix 
on page 61.]
    Mr. Palazzo. Okay. I will not dominate the conversation 
with insourcing, but do you all have a hiring preference for 
veterans within the 48,000 workforce? Can you just--is it a 
point-based system, or is it just subjective?
    We will start over here. Sure.
    Secretary Morin. Yes, sir, we follow the OPM hiring rules, 
which include veterans' preference and a special preference for 
disabled veterans.
    Mr. Palazzo. So that is pretty much the same for everybody?
    Secretary Morin. Yes sir.
    Mr. Palazzo. Okay. If you are a CPA or CMA [Certified 
Management Accountant], and you have gone above and beyond what 
you need to do, and you are striving to be the best in your 
field, is there a financial incentive to be a CPA within the 
civilian workforce, or a CMA or, preferably, a CPA?
    Secretary Matiella. I used to be a CPA and a civil servant, 
and the incentive is that you become more promotable. When you 
are competing with others for more responsible positions, I 
think that it certainly helps. In terms of getting greater 
salaries because you are a CPA, no, that is not the case.
    Mr. Palazzo. Okay.
    Secretary Matiella. Now you might get, because of your good 
work, large amounts of award money for good performance. But 
again, that is always tied into actual performance, not to the 
fact that you have a certification.
    Mr. Palazzo. Okay. You know, in the private sector if you, 
you know, pass your CPA exam sometimes they will give you a 
$1,500 or $2,500 bonus, just depending on, I guess, the level 
of the firm. Within the military, there are 10,000 military 
personnel that is involved in the DOD finance. How much is 
officer and how much is enlisted? Is it a typical breakdown 
that y'all know of?
    Ms. Gregory. We can get that for you across the Department. 
Right now, I just have it at the aggregate level. And that 
includes Guard and Reserve, also, the 10,000 number. So we will 
take that for the record and get that for you approximately. I 
know, by the Services you have it probably have it broken down.
    [The information referred to can be found in the Appendix 
on page 61.]
    Secretary Morin. Yes, ma'am. For the Air Force, I can tell 
you we have about 900 officers and about 3,800 enlisted.
    Mr. Palazzo. Do you feel like it is a problem attracting or 
having qualified financial managers in the military side of it?
    Ms. Gregory. You know, having been one for almost 30 years, 
that in serving with the officers and enlisted on the financial 
management side, they worked side-by-side, they had the skill 
sets, they were well-trained. So it was a good melting. And, of 
course, the civilians then usually offered more stability in 
terms of like at the installation level in particular. That 
they would have the long-term knowledge of organizations.
    Mr. Palazzo. Okay. And just to wrap up, it sure would be 
nice, you know, if you are a CPA in the civilian world and you 
wanted to become--join the military--you know be treated like a 
lawyer or a doctor or a chaplain and go from 01 to maybe an 02 
or an 03 slot. Just a little incentive there to attract the 
best and brightest.
    Mr. Conaway. All right, thanks.
    Scott.
    Mr. Rigell. My colleague is a CPA. Good morning, everyone. 
Thank you for being here. Appreciate what you are doing in 
service to our country. And I am convinced and impressed and 
grateful for the level of resolve that I see to accomplish the 
mission. And I have no question that there is a firm commitment 
to make sure that we are audit-ready and we achieve those 
objectives.
    I know what a challenge it is, certainly at a smaller 
organization, to have everyone understand what the objective is 
and then work toward accomplishing that. And with an 
organization this large that, literally, is around the world 
and as complex as the Pentagon, you know, it is a daunting 
task.
    But I do want to ask you, Ms. Gregory--I will direct it to 
you, and if others are better suited to answer it, you can also 
help here--but to what extent would--let us say someone who has 
been with the accounting function here for six months or a year 
or so be aware of, would understand and embrace, the audit 
readiness objective in their department and really understand 
how their department's contribution plays into the larger role?
    I certainly know it is a challenge, but I do believe to the 
extent that people understand where we are headed overall that 
we are better off. And I will be asking, on our CODELS 
[Congressional Delegations] going forward--and that is military 
CODELS are essentially all I am doing, you know--I will be 
asking mid-level managers, ``Are you aware of DOD's audit 
readiness goals?''
    I am going to push a little bit on that, and I hope to 
comeback and say, ``Look, you are doing a great job on this.'' 
Could you comment briefly on that please?
    Ms. Gregory. Thank you, Congressman. First of all, that is 
the main impetus behind why we are leaning forward on this and 
getting support from the House and the Senate, which we 
appreciate. But when the under secretary said let us focus on 
getting the whole workforce involved in audit readiness and the 
importance of it. So at level one and level two and level three 
we will go code every position just like the acquisition 
workforce. And so we will have the appropriate level.
    So, for instance, if you are a soldier coming in, or you 
are GS-5, then there will be a program. And we are working 
right now. Matter of fact, our office is physically located 
with the Deputy CFO's [Chief Financial Officer] financial 
improvement audit readiness. So every morning we see 60-some 
people working on that.
    And we are, right now, partnering with them to take the 
courses that they have on financial improvement audit readiness 
and put them online. And then we will also, then, continue 
partnering with them for the appropriate level to have the more 
difficult awareness of all the audit readiness.
    So we are making them aware, putting it as part of the 
mandatory part of the certification program. So it is one of 
the main pillars and one of the main focuses.
    Mr. Rigell. And they understand, I hope, how their 
individual role contributes to the Department, which 
contributes to this overall. Okay, I am encouraged by that, and 
hope to come back in several months later on and tell you come 
good stories about how that played out.
    I want to follow up briefly on a theme that I was pursuing 
at the last hearing. And that relates to the difficulty of 
establishing a benchmark for an incoming senior executive, 
whether it is a general or a captain, a colonel, for his or her 
command, and establishing that benchmark so that they can be 
accountable, then, 2 or 3 years later.
    Secretary Commons, would you please comment on how a senior 
executive or senior leader--we establish that benchmark so we 
can know how they did a couple of years later?
    Secretary Commons. Certainly. As I mentioned at our last 
hearing, we did include a performance goal in each senior 
executive's performance for the year. And so that will give us 
a good base of did you actually accomplish what we asked you to 
accomplish, or did you not?
    For the flag general officers and our commanders, what we 
did 2 years ago is, we actually wrote a plan for each of our 
major organizations to say this is your contribution to our 
financial improvement program. And what I had done was to have 
it signed by the commander himself, by the commanding officer.
    Previously, we had really put it down and had the 
comptroller sign it. I thought that was not effective enough. 
So I, in fact said, ``I need to have the commanding officers 
signing this agreement so they understand exactly what they 
have agreed to do, how they plan to improve the financial 
management in their own organization.''
    So that is the way we are trying to get it down to each 
organization and make everybody accountable.
    Mr. Rigell. Well, you are increasing the accountability. I 
applaud that. Thank you so much.
    I yield back.
    Mr. Conaway. I thank the gentleman. Anyone else on the 
panel have a second round? Okay.
    A couple of this and that. The CPAs and others have annual 
continuing professional education requirements and others. Do 
you reimburse these employees for maintaining their 
certificates, or their licenses?
    Ms. Gregory. Yes, we do. And also as part of our DOD 
certification program, although we are encouraging them to have 
one of those 20 test-based certificates it is also going to be 
that it is going to be mandatory that they have so many CPEs, 
Continuing Professional Education credits. And that will be 
part of the training budget that they will request and receive.
    Mr. Conaway. All right.
    Ms. Matiella, you mentioned some sort of an existing audit 
program for 2011 through 2014. I could not figure out what you 
are auditing. What is it that you are--in your testimony, you 
talked--I thought it had to do with human resources. But what 
is it that you are auditing each year?
    Secretary Matiella. Well we are conducting audit 
examinations at all of the installations that have already 
implemented GFEBS [General Fund Enterprise Business System] to 
make sure----
    Mr. Conaway. Oh, okay.
    Secretary Matiella [continuing]. That they have implemented 
our new accounting system correctly, that they are practicing 
the right technique and that they are becoming compliant not 
only in the systems but in their processes. And we believe by 
having these examinations every single year that it is also a 
learning experience for the people who are going through the 
examination.
    They are understanding what is required by the auditors. 
They have a better understanding of what compliant practices 
are. And so it is not only work for them, but it is also a 
learning opportunity for them in terms of what is auditability 
about.
    Mr. Conaway. Okay, all right. I understand. Thank you very 
much.
    Well, closing comments, Rob?
    Mr. Andrews. Well I would like to thank the chairman, thank 
the witnesses. I hear that we are all moving in the same 
direction, which is good. That there is this level of 
commitment that Mr. Rigell just talked about throughout the 
Services to getting these audits done.
    I think in this subsection of discussion, though, that I 
heard another goal articulated today that I hope we all follow 
up on. Which is that on a permanent basis, a financial 
management professional is a person held in very high esteem 
and supported, both in the uniform track in terms of promotion 
for the uniform personnel, and the civilian track.
    That this becomes, you know, one of the career-building 
things that people want to do. And, you know, that is obviously 
a challenge because there are so many dramatic and heroic and 
significant things that people in the Department of Defense do, 
both uniform and non-uniform. Thank God they do them.
    And those are, you know, things that we are very grateful 
as a country that people do. They cannot do their jobs if you 
all do not do yours. If the infrastructure is not there to 
support those who do the most difficult missions the difficult 
missions become a lot more difficult. So what we are looking 
for is ways--financially, educationally, in terms of pride and 
self-respect and self-esteem--that we can elevate these 
professions within our department.
    Obviously, government-bashing is very much in vogue. And I 
do not mean that as any ideological criticism, it comes with 
the territory. We all sort of understand that. But the reality, 
a lot of what people do is really very good. And I think we 
have to find a way to motivate people who do that good work 
with compensation, but also with praise and with professional 
esteem.
    And I think each one of you has exemplified that in your 
own careers, in your own work, and your work here this morning. 
So we would like to create that kind of environment where young 
men and women like you decide to go into this field and excel 
at it. Because the country will be better. So thank you.
    Mr. Conaway. Thank the gentleman.
    One of the things that we hope this panel has put together 
is an ongoing way to assess that we are on track with this 
overall goal that everybody wants to get to. And like Scott 
said, I appreciate and sense the resolve you bring to the table 
to make this happen.
    One of the things that will happen next year. It may not be 
this group, but one of the things that will happen next year, 
we hope, is that we will look at those performance evaluations. 
That we will say, ``Okay, here is what happened across the 
spectrum of those. Some folks did it really well and some folks 
didn't. And for those folks who didn't do it well, there are 
consequences.''
    ``And for those folks who did it well, there are really the 
appropriate consequences, as well, because we just simply have 
to make this happen.'' And I know you agree with me in that 
regard. But the one of the things it will do is to see how well 
this system works in terms of keeping the civilian workforce 
which has it specifically in their performance evaluation 
plans, as well as the military side who are responsible for 
making it happen also.
    We just simply have to hold each other accountable for 
doing the good job that must be done. And as we open this 
hearing this morning, it is all about the people. You cannot 
make this thing work without good people, well-compensated, 
proud of the work they do, and knowing that the Nation is proud 
of them as well.
    So, gentlemen, thank you very much and we will adjourn.
    [Whereupon, at 9:05 a.m., the panel was adjourned.]



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                            A P P E N D I X

                            October 6, 2011

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              PREPARED STATEMENTS SUBMITTED FOR THE RECORD

                            October 6, 2011

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              WITNESS RESPONSES TO QUESTIONS ASKED DURING

                              THE HEARING

                            October 6, 2011

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            RESPONSES TO QUESTIONS SUBMITTED BY MR. PALAZZO

    Ms. Gregory. From April 2009, when Secretary Gates announced an 
initiative to rebalance the Department's workforce and reduce reliance 
on contracted services, through October 2011, the Defense Finance and 
Accounting Services (DFAS) has formally converted a total of 668 
positions previously performed by contractors to Government positions. 
The majority, 606 positions, represent the Retired & Annuitant (R&A) 
Pay function that was converted on February 1, 2010.
    The motivation to insource was compliance with Section 324 and 
Section 807 of the NDAA for Fiscal Year 2008, Public Law 110-181, 
January 28, 2008. Section 324 required the Department to create 
guidelines and procedures to ensure that consideration is given to 
using DOD civilians to perform new functions or functions that are 
performed by contractors. Section 807 required the Department to create 
an inventory of service contracts for reporting purposes. Insourcing is 
also a valuable means to achieve cost savings.
    DFAS used the Agency Section 807 service contract inventory as a 
baseline to identify insourcing opportunities from the pool of existing 
service contracts. For each contract selected, we then executed a 
business case analysis which primarily compared the cost of contractor 
performance with the cost of Government performance. This cost analysis 
was performed in compliance with Department policy and instruction. We 
also examined additional relevant items such as mission impact, 
customer service, and the ability to recruit and sustain Government 
workforce for certain skill sets. Cognizant senior leaders then made 
fact-based, best value business decisions on insourcing each contract.
    DFAS has used insourcing to get a full picture of its total 
workforce (General Schedule and Contractor) and make sure we are 
achieving the right overall manpower mix that will allow DFAS to manage 
costs more responsibly for the Department and the warfighter. [See page 
17.]
    Ms. Gregory. In April 2009, Secretary Gates announced an initiative 
to rebalance the Department's workforce and reduce reliance on 
contracted services. As part of this insourcing initiative, the 
Department planned on establishing more than 30,000 new civilian 
positions by FY 2015, including 10,000 specifically in support of the 
acquisition workforce. In FY 2010, the Department established nearly 
17,000 new civilian positions as a result of insourcing contracted 
services, of which approximately 1,100 were in the financial management 
workforce. Through the third quarter of FY 2011, an additional 5,300 
civilian positions have been established as a result of insourcing 
contracted services, including more than 200 in the financial 
management workforce.
    Insourcing has been, and continues to be, a very effective tool 
used by the Department to rebalance the workforce, realign inherently 
governmental and other critical work to Government performance (from 
contract support), and in many instances to generate resource 
efficiencies. While the Department, as part of its Efficiency 
Initiative, has been asked to hold to FY 2010 civilian funding levels, 
with some exceptions, for the next three years, we remain committed to 
meeting statutory obligations to annually review contracted services, 
identifying those that are inappropriately being performed by the 
private sector and should be insourced to Government performance. These 
include services that are inherently governmental or closely associated 
with inherently governmental in nature; may otherwise be exempted from 
private sector performance (to mitigate risk, ensure continuity of 
operations, build internal capability, meet and maintain readiness 
requirements, etc); or can be more cost effectively delivered by the 
Government. Those contracted services that meet the necessary criteria 
(consistent with governing statutes, policies, and regulations) will be 
insourced by absorbing work into existing Government positions by 
refining duties or requirements; establishing new positions to perform 
contracted services by eliminating or shifting equivalent existing 
manpower resources (personnel) from lower priority activities; or on a 
case-by-case basis, requesting an exception to the civilian funding 
levels. [See page 17.]
    Ms. Gregory. The breakout of Active Duty officer and enlisted in 
financial management positions is, 1,912 for officers and 6,164 for 
enlisted for a total of 8,076. Specific information on the Reserve 
components is not readily available. The total approximate number of 
Reserves in financial management positions is 2,000. The ratio of 
officer and enlisted in the Reserves should be similar to the Active 
Duty. [See page 18.]
                                 ______
                                 
            RESPONSES TO QUESTIONS SUBMITTED BY MR. ANDREWS
    Ms. Gregory. According to the Department of Defense (DOD) Civilian 
Personnel Management System: Training, Education, and Professional 
Development (Number 1400.25, Vol 410) regulation states a Continuing 
Service Agreement (CSA) is required for training that exceeds 80 hours, 
at a minimum. DOD Components may establish lower minimums as 
appropriate. A CSA must include provisions for an employee to reimburse 
the DOD Component for training costs, except pay or other compensation, 
if the employee voluntarily or involuntarily separates from service in 
the Federal Government before completing the agreed period of service.
    The Authorization, Agreement and Certification of Training form 
states that if an employee voluntarily leaves the agency before 
completing the period of service agreed to, he/she will reimburse the 
agency for fees, such as the tuition and related fees, travel, and 
other special expenses (excluding salary) paid in connection with 
training. [See page 13.]

    Secretary Matiella. Army civilian financial management training and 
professional development were executed through colleges and 
universities at $3.3 million in fiscal year 2009, $3.9 million in 
fiscal year 2010, and $3.6 million fiscal year 2011. For active Army 
military personnel, we spent $3.3 million in fiscal year 2010 and 
remained steady at $3.3 million in fiscal year 2011.
    Our Army learning institutions and universities routinely use 
evaluations, performance test and course critiques to improve how they 
train and educate Soldiers and Army Civilians. We use the feedback from 
their measuring tools to develop and implement relevant training and 
education to meet the students' competency needs. [See page 14.]

    Secretary Morin. The AFAA staff working on financial statement 
audit support are extremely experienced. There are 41 people in AFAA 
working on the financial statement. Most are at the grade of GS-13. In 
terms of education, 13 have BS Degrees and 27 have Masters Degrees. Of 
that total, 59% (24 people) have relevant certifications like Certified 
Internal Auditor (CIA), Certified Defense Financial Manager (CDFM), and 
Certified Public Accountant (CPA). The average number of years of 
financial management and audit experience is 20. In addition to the 
post secondary education and extensive financial management and audit 
experience, each auditor is required to hone their professional skills 
with a total of 80 Continuing Professional Education (CPE) hours over a 
two-year period. [See page 15.]

                                  
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