[House Hearing, 117 Congress]
[From the U.S. Government Publishing Office]


                                     

                         [H.A.S.C. No. 117-23]
 
                      THE DEPARTMENT OF DEFENSE'S

                       FINANCIAL IMPROVEMENT AND

                         AUDIT READINESS PLAN:

                     FISCAL YEAR 2020 AUDIT RESULTS

                          AND THE PATH FORWARD

                               __________

                      COMMITTEE ON ARMED SERVICES

                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED SEVENTEENTH CONGRESS

                             FIRST SESSION

                               __________

                              HEARING HELD

                             APRIL 28, 2021
                             
                             

                                     
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]





                           ______

             U.S. GOVERNMENT PUBLISHING OFFICE 
48-179               WASHINGTON : 2022 
 




                                     
                      COMMITTEE ON ARMED SERVICES
                    One Hundred Seventeenth Congress

                    ADAM SMITH, Washington, Chairman

JAMES R. LANGEVIN, Rhode Island      MIKE ROGERS, Alabama
RICK LARSEN, Washington              JOE WILSON, South Carolina
JIM COOPER, Tennessee                MICHAEL R. TURNER, Ohio
JOE COURTNEY, Connecticut            DOUG LAMBORN, Colorado
JOHN GARAMENDI, California           ROBERT J. WITTMAN, Virginia
JACKIE SPEIER, California            VICKY HARTZLER, Missouri
DONALD NORCROSS, New Jersey          AUSTIN SCOTT, Georgia
RUBEN GALLEGO, Arizona               MO BROOKS, Alabama
SETH MOULTON, Massachusetts          SAM GRAVES, Missouri
SALUD O. CARBAJAL, California        ELISE M. STEFANIK, New York
ANTHONY G. BROWN, Maryland,          SCOTT DesJARLAIS, Tennessee
RO KHANNA, California                TRENT KELLY, Mississippi
WILLIAM R. KEATING, Massachusetts    MIKE GALLAGHER, Wisconsin
FILEMON VELA, Texas                  MATT GAETZ, Florida
ANDY KIM, New Jersey                 DON BACON, Nebraska
CHRISSY HOULAHAN, Pennsylvania       JIM BANKS, Indiana
JASON CROW, Colorado                 LIZ CHENEY, Wyoming
ELISSA SLOTKIN, Michigan             JACK BERGMAN, Michigan
MIKIE SHERRILL, New Jersey           MICHAEL WALTZ, Florida
VERONICA ESCOBAR, Texas              MIKE JOHNSON, Louisiana
JARED F. GOLDEN, Maine               MARK E. GREEN, Tennessee
ELAINE G. LURIA, Virginia, Vice      STEPHANIE I. BICE, Oklahoma
    Chair                            C. SCOTT FRANKLIN, Florida
JOSEPH D. MORELLE, New York          LISA C. McCLAIN, Michigan
SARA JACOBS, California              RONNY JACKSON, Texas
KAIALI'I KAHELE, Hawaii              JERRY L. CARL, Alabama
MARILYN STRICKLAND, Washington       BLAKE D. MOORE, Utah
MARC A. VEASEY, Texas                PAT FALLON, Texas
JIMMY PANETTA, California
STEPHANIE N. MURPHY, Florida
Vacancy

                     Paul Arcangeli, Staff Director
               Michael Hermann, Professional Staff Member
               Geoff Gosselin, Professional Staff Member
                      Natalie de Benedetti, Clerk
                      
                            C O N T E N T S

                              ----------                              
                                                                   Page

              STATEMENTS PRESENTED BY MEMBERS OF CONGRESS

Rogers, Hon. Mike, a Representative from Alabama, Ranking Member, 
  Committee on Armed Services....................................     2
Smith, Hon. Adam, a Representative from Washington, Chairman, 
  Committee on Armed Services....................................     1

                               WITNESSES

Glenn, Douglas A., Deputy Chief Financial Officer, Department of 
  Defense; accompanied by Wesley C. Miller, Performing the Duties 
  of Assistant Secretary of the Army for Financial Management and 
  Comptroller; Alaleh Jenkins, Performing the Duties of Assistant 
  Secretary of the Navy, Financial Management and Comptroller; 
  and Stephen R. Herrera, Principal Deputy Assistant of the Air 
  Force for Financial Management and Comptroller.................     3

                                APPENDIX

Prepared Statements:

    Glenn, Douglas A., joint with Mr. Miller, Ms. Jenkins, and 
      Mr. Herrera................................................    37

Documents Submitted for the Record:

    [There were no Documents submitted.]

Witness Responses to Questions Asked During the Hearing:

    Mr. Langevin.................................................    53
    Mr. Moore....................................................    54
    Mr. Norcross.................................................    54
    Ms. Speier...................................................    54
    Mr. Wittman..................................................    55

Questions Submitted by Members Post Hearing:

    Mrs. Bice....................................................    59
    Mr. Morelle..................................................    61
    Mr. Moulton..................................................    59
    
                 THE DEPARTMENT OF DEFENSE'S FINANCIAL

                 IMPROVEMENT AND AUDIT READINESS PLAN:

                   FISCAL YEAR 2020 AUDIT RESULTS AND

                            THE PATH FORWARD

                              ----------                              

                          House of Representatives,
                               Committee on Armed Services,
                         Washington, DC, Wednesday, April 28, 2021.
    The committee met, pursuant to call, at 11:03 a.m., via 
Webex, Hon. Adam Smith (chairman of the committee) presiding.

  OPENING STATEMENT OF HON. ADAM SMITH, A REPRESENTATIVE FROM 
       WASHINGTON, CHAIRMAN, COMMITTEE ON ARMED SERVICES

    The Chairman. Good morning, everybody. We are on a full 
remote hearing. The first time we have done this in a little 
while, so forgive me if there is a bug or two as we work our 
way through it. But we have a full committee hearing this 
morning on ``The Department of Defense Financial Improvement 
Audit Readiness Plan: Fiscal Year 2020 Audit Results and the 
Path Forward.''
    We have four witnesses before us. Douglas Glenn, who is the 
Deputy Chief Financial Officer for the Department of Defense, 
he will be the only one offering testimony. The other three 
will be here and available to answer our questions as we get to 
them. And they are: Wesley Miller, who is the senior official 
performing the duties of the Assistant Secretary of the Army. 
Alaleh--sorry. I practiced this, too. Alaleh Jenkins, who is 
performing the duties of the Assistant Secretary of the Navy, 
Financial Management and Comptroller. And Stephen Herrera, who 
is the Principal Deputy Assistant of the Air Force for 
Financial Management and Comptroller for the Department of the 
Defense.
    So I think we are all very familiar with the subject this 
morning. I will not give a long opening statement. This is an 
effort to audit the Pentagon and the basic point of this is do 
a better job of spending the money that we spend. I know that 
we always have very big debates about what the top-line numbers 
should be, how much money we should spend and I understand that 
is important.
    But it is equally important how we actually wind up 
spending the money that we spend and there are a number of 
different ways that we can be more efficient and more effective 
in doing that. The ranking member and I are, you know, working 
on those. But one of the biggest ones is to know where we are 
spending the money and that is the purpose of the audit. To be 
able to go dollar for dollar all across the 700 and whatever it 
is, 50 billion, roughly, dollars that we spend in the Pentagon 
and be able to identify where it is spent so we can figure out 
what areas we may be able to find savings and better track that 
money.
    I do want to thank a number of folks at the Department of 
Defense both current, those who were there during the Trump 
administration, and those came before who have worked very hard 
over the last decade to get us to the point where we can do an 
audit. We are not quite there yet getting the full audit. Every 
year we are making improvements.
    But I just want to close with two points. One, that it is 
enormously important that we get this done. That we get to the 
point where we understand where the Pentagon is spending its 
money so we can better track and do it in a more efficient 
manner than we are currently doing it. And number two, we have 
a long way to go to get there. So I am anxious to hear from our 
witnesses today on how that process is going and how we are 
going to get there.
    And with that, I will turn it over to the ranking member, 
Mr. Rogers, for his opening statement.
    Mike, do we have you there?
    Mr. Rogers, are you hearing me? I see you, but you are not 
saying anything.
    Katy, do we know what is going on here?
    Staff. Sir, they are working through some technical 
difficulties with the ranking member. He cannot hear.
    The Chairman. Ah.
    Mr. Rogers. Can you hear me?
    The Chairman. Yes.

 STATEMENT OF HON. MIKE ROGERS, A REPRESENTATIVE FROM ALABAMA, 
          RANKING MEMBER, COMMITTEE ON ARMED SERVICES

    Mr. Rogers. Good. Thank you, Mr. Chairman.
    The DOD [Department of Defense] is the largest Federal 
agency with nearly 3 million service members and civilian 
employees. It has an annual budget of over $700 billion and 
more than $3 trillion worth of assets under management. 
Maintaining financial control over this behemoth is critical to 
ensure taxpayer accountability and avoid waste, fraud, and 
abuse. Unfortunately, we don't know if that is the case because 
DOD has yet to pass an audit. Progress is being made, but the 
Department still has a long way to go.
    The 2020 audit continues to highlight obsolete financial 
management systems, poor inventory controls, and cybersecurity 
weaknesses as major challenges. It likely won't be until the 
end of this decade before the Department has the proper 
systems, procedures, and controls in place to pass an audit. I 
think that is unacceptable. I look forward to hearing from our 
witnesses on what can be done to expedite that timeline and how 
this committee can be helpful in that effort. And with that, 
Mr. Chairman, I yield back.
    The Chairman. Thank you very much.
    So we will turn it over now to Mr. Glenn for his opening 
statement to update us on how all of that is going.
    Mr. Glenn, the floor is yours.

STATEMENT OF DOUGLAS A. GLENN, DEPUTY CHIEF FINANCIAL OFFICER, 
    DEPARTMENT OF DEFENSE; ACCOMPANIED BY WESLEY C. MILLER, 
 PERFORMING THE DUTIES OF ASSISTANT SECRETARY OF THE ARMY FOR 
     FINANCIAL MANAGEMENT AND COMPTROLLER; ALALEH JENKINS, 
   PERFORMING THE DUTIES OF ASSISTANT SECRETARY OF THE NAVY, 
 FINANCIAL MANAGEMENT AND COMPTROLLER; AND STEPHEN R. HERRERA, 
   PRINCIPAL DEPUTY ASSISTANT OF THE AIR FORCE FOR FINANCIAL 
                   MANAGEMENT AND COMPTROLLER

    Mr. Glenn. Good morning and thank you. Chairman Smith, 
Ranking Member Rogers, distinguished members of the committee, 
I appreciate the opportunity to testify before you today on the 
Department of Defense financial statement audit, a key priority 
for us all. I am joined by my esteemed military department 
colleagues, each serving the capacity of performing the duties 
of their respective Assistant Secretary for Financial 
Management and Comptroller: Mr. Wes Miller, representing the 
U.S. Army; Ms. Alaleh Jenkins, representing both the U.S. Navy 
and Marine Corps; and Mr. Stephen Herrera representing both the 
Space Force and the U.S. Air Force.
    Leaders and financial managers throughout the DOD are 
embracing our audit responsibilities and as good stewards of 
taxpayer dollars are working to increase transparency in how we 
manage the resources entrusted to us. Additionally, we are 
keenly aware that DOD is the primary obstacle to the U.S. 
Government achieving a clean audit and something we would all 
like to see. We are working closely with other Federal agencies 
and oversight bodies such as Department of Treasury, the 
Government Accountability Office, the Office of Management and 
Budget, as well as the larger financial communities such as the 
Federal Accounting Standards Advisory Board, the American 
Society of Military Comptrollers, and the Association of 
Government Accountants.
    Having just completed our third annual consolidated audit, 
the Department continues to make steady progress toward not 
just an unmodified audit opinion but, perhaps more importantly, 
improved financial management and data integrity for decision 
making. Our audit transitioned more than 3,400 notices of 
findings and recommendations last year. They also looked to see 
whether we successfully closed past findings. As of early 
April, our auditors validated that we have successfully closed 
23 percent of our prior year findings. Also I am happy to note 
that DOD increased our clean opinion count to eight, and these 
entities represent 35 percent of DOD's $3.1 trillion assets. If 
you include the Medicare-Eligible [Retiree] Health Care Fund, 
which received a modified opinion, the assets under a clean 
opinion increased to 44 percent.
    In 2020, the Department began using material weaknesses to 
prioritize our corrective actions and to strategically move the 
Department closer to an unmodified opinion. Material weaknesses 
are issues that if left unaddressed have the potential to lead 
to significant, erroneous reporting and are the specific issues 
cited in the OIG's [Office of Inspector General's] report that 
are preventing the DOD from achieving an unmodified opinion. 
The Department's 2020 audit report noted 26 departmental 
material weaknesses. The auditors found no new material 
weaknesses at the Department level, but we were successfully 
able to downgrade two of those material weaknesses. I believe 
that this allows me to say that last year's audit report is 
better than the prior years.
    In addition to improved opinion accounts, material 
weaknesses, and NFR [notices of findings and recommendations] 
closures, our collective efforts resulted in an improved rating 
for DOD Financial Management in GAO's [U.S. Government 
Accountability Office's] 2021 High Risk List. The audits are 
driving the cultural changes needed for business reform goals. 
The audits demand information technology system improvements 
and data consolidation. It is arming our decision makers with 
real-time, Department-wide views and advanced data analytic 
capabilities. We are now able to use dashboards, metrics, and 
analytics at a departmental level to support efficiencies, 
sustain improvements, and harness the power of data for better 
decision making.
    At the risk of sounding dramatic, the audit is also driving 
improved national security. We already know DOD systems are 
primary targets for cyberattacks, both foreign and domestic. 
Auditors annually test our processes and procedure controlling 
who can access our systems, what levels of access they can have 
and what procedures they can perform, and who can access the 
coding and configuration capabilities. Even with this good 
news, it is reasonable to ask how does this benefit the 
taxpayer and is it worth what we are spending on audits? 
Annually, we pay our IPAs [independent public accountants] 
roughly $185 million for audits and examinations. This is less 
than 1 percent of total annual budgetary resources and well 
within industry standards, and return on investment is highly 
positive.
    The audit is giving taxpayers improved accountability for 
the assets entrusted to us, transparency in our use of those 
assets, and is pushing DOD and the U.S. Government closer to a 
clean opinion. We believe the return on investment will 
continue to grow as audits mature, root causes to problems are 
addressed, and our data is made more accurate and reliable and 
timely.
    Now that we have highlighted our overall audit results, I 
would like to spend a few minutes on the status of each 
military department and their planned approach for audit over 
the next few years.
    In 2020, the Army made significant progress, particularly 
in the area of information technology, and reduced their NFR 
account over the prior year by 30 percent. The Army used 
workflow technology to validate and improve the quality of 
50,000 real property asset records. Improved data analytics has 
helped to identify ``ghost'' general equipment assets such as 
tanks and helicopters that should have been removed from the 
appropriate system, and a machine logic they are using is 
helping Army to address and reduce unmatched transactions 
between their systems, resulting in better and more efficient 
asset management.
    The Army has developed an audit roadmap that identifies 
milestones to remediate their material weaknesses. Over the 
next 2 years, Army will focus on remediating Fund Balance 
[with] Treasury issues, the most material item on their 
financial statements. Establishing beginning balances is also a 
near-term priority and essential to achieving an Army clean 
audit opinion.
    The Army's third priority is a completeness of their 
property, plant, and equipment as well as inventory 
populations, which ensures they have accountability and 
supporting documentation over their assets and transactions.
    The Department of the Navy is optimizing financial systems, 
enhancing processes, and investing in its workforce. Focusing 
on these three components directly benefits the Department of 
Navy mission, sailors, and Marines by strengthening readiness 
and lethality.
    Optimizing the Department of Navy financial system 
requirements entails consolidating its accounting systems into 
one unclassified system for each service--the Defense Agencies 
Initiative for the Marine Corps and Navy ERP [Enterprise 
Resource Planning] for the Navy. These are planned for October 
2021 and October 2022, respectively. This reduces the 
complexity, increases the audibility, shrinks operating costs, 
and minimizes cyber vulnerability.
    In addition, just as data is a strategic asset so is the 
Department of Navy [DON] workforce. The Department of Navy is 
investing in its workforce through upskilling and employing 
best practices, thereby ensuring the DON workforce has the 
skill sets necessary to execute and improve its processes.
    At the beginning of 2021, the Department of Air Force 
established a multiyear audit roadmap, and an integrated master 
schedule collects objective data inputs from across the Air 
Force to manage near- and long-term audit goals. Leveraging 
this matured, data-driven approach, the Air Force is making a 
conscious decision to prioritize reductions in most of its 
significant weaknesses over the next 18 months. This includes 
the reported value of its military equipment both in production 
and in use and the balance of Air Force cash accounts within 
the Department of Treasury, which together represents 70 
percent of the assets reported in the Air Force financial 
statements.
    The Fourth Estate--which comprises the other Defense 
organizations, Defense Agencies, and DOD Field Activities--is 
also making steady progress. Auditors have thus far validated 
the closure of 30 percent of the Fourth Estate prior-year audit 
findings. The closure rate for IT [information technology] 
findings alone rises to 78 percent for Fourth Estate. Of the 25 
DOD service provider examinations, 12 have resulted in an 
unmodified opinion, which is an increase of 1 over the prior 
year.
    The Defense Finance and Accounting Service, one of our 
major service providers, is championing financial excellence 
through transparency of our financial data and helping lead 
efforts to reconcile our Fund Balance with Treasury. A project 
to resolve our aged or old statement of differences, which is 
similar to reconciling hundreds of checking accounts each with 
billions of dollars in them spanning decades of time, has 
resulted in 99 percent reduction in total differences. Our aged 
or old balances in our suspense accounts was similarly reduced 
by 98 percent over the prior year.
    The annual audit regimen has set the Department on an 
irreversible course in support of business reform, reinforcing 
accountability to taxpayers, and directly contributing to 
enhanced military readiness. By continuing to equip the 
workforce with the resources and tools to respond to audit 
requests and remediate our audit findings, the Department will 
achieve its audit goals of business excellence and sustain an 
improved level of business proficiency for the benefit of the 
warfighter and the American people.
    I suspect we all look forward to the day when we hear on 
the evening news or the drive home, ``For the first time in 
history, the U.S. Government has achieved a clean audit 
opinion.'' We need hearings like this. We need to be asked hard 
questions and asked about the assets entrusted to us, and we 
welcome your continued collaboration and oversight. You and 
your colleagues have continued to stress the importance of 
these audits which we need for continued progress. We 
appreciate the confirmation questions you have posed to 
nominees that reinforce this message. The DOD IG [Inspector 
General] and GAO both have recognized our strong tone-at-the-
top and that is due, in part, to you holding us accountable. We 
look forward to your questions.
    [The joint prepared statement of Mr. Glenn, Mr. Miller, Ms. 
Jenkins, and Mr. Herrera can be found in the Appendix on page 
37.]
    The Chairman. Thank you very much. I appreciate that. So we 
will go through the members. They are being texted who is up 
for the questions, so we will go through in order limiting you 
to 5 minutes. For our witnesses, we try to keep it to 5 
minutes, so even if the member does the old trick of asking you 
a 4-minute-and-50-second question, that means you only have 10 
seconds to answer said 4-minute-and-50-second question. I will 
try not to be rude, but we do want to get to everyone who we 
want to get to here. And also, members, so we have, you know, 
Ms. Jenkins, but the other three we have Army and Navy and Air 
Force representative though they haven't shown up on the 
screen, if you have questions specific to those service 
branches, those other three witnesses are available to answer 
those.
    Just a couple of areas, one in terms of, you know, the big 
picture thing in understanding the audit issues, so two 
questions on that. One, can you give us some idea of when you 
think that happy day that you referenced at the end of your 
opening statement will be achieved?
    And just to sort of frame that, so we have the Department 
of Defense, but there are a lot of other agencies in the 
government. Let's take CMS [Centers for Medicare and Medicaid 
Services], for example, you know, Medicare and Medicaid. Do 
they have a full audit? Are they able to go through and say, 
here is everywhere that we are spending our money and all of 
the assets? How does what DOD is doing compare to what is going 
on at other agencies and how could that potentially guide us to 
get to where they are assuming they are in a better place, if 
that question makes sense?
    Mr. Glenn. I don't know if CMS is audited individual or 
specifically as a standalone entity. It is part of HHS [U.S. 
Department of Health and Human Services] which I know as a 
whole does receive a clean audit opinion. We are, as I alluded 
to, working with other organizations and have already on a 
couple of occasions reached out. For example, we reached out to 
the Department of Homeland Security to talk about how they 
recently litigated their contingent legal liability which was 
successful. That was one of the two material weaknesses we were 
able to mitigate this year.
    We recently just chatted with the Department of Energy, and 
thank you to the Association of Government Accountants for 
facilitating that conversation. But we sat down with the 
Department of Energy to understand how they handle property in 
the hands of contractors, which is one of our priority areas 
and material weaknesses.
    The Chairman. So, but you don't have any sort of estimate 
on when you are going to get to the place that HHS is now?
    Mr. Glenn. I can give you an estimate. I struggle with this 
question because I know you are not going to let me off the 
hook with anything other than a firm date. I struggle because 
you are asking my opinion when somebody else will reach an 
opinion and----
    The Chairman. Sure. And just so you are clear, I don't want 
a firm date because I know that it would be a ridiculous 
question. What I am searching for is, ``Yeah, we really don't 
know. It is too far out to really understand,'' or, you know, 
``3 to 5 years is reasonable, 1 to 2 isn't,'' or ``talk to me 
in 2 years and we will see.'' That is kind of what we are 
looking at.
    Mr. Glenn. I won't shy away from the question. I will stick 
to what is said before that if I was in Vegas betting, I 
couldn't pick a better year, but I would say 2028. We are 
looking very closely at our corrective action plans and the 
final dates for remediation are 2028, so----
    The Chairman. Yes.
    Mr. Glenn [continuing]. If everybody sticks to those plans, 
we should be able to declare a victory that year.
    The Chairman. And I think it is crucially important that we 
do. As I know some people have speculated, look at all the 
money we are spending just to try to get to here, is it really 
worth it? It absolutely is.
    Mr. Glenn. Absolutely. And I am happy to specify why I 
think that.
    The Chairman. Yes. No, I think you did a good job in your 
opening statement. And the last thing I would ask is, I am 
particularly interested right now in our software and 
technology; software in particular as we are trying to make 
sure we have the strongest information systems we can have. How 
are we doing in terms of, you know, estimating the software we 
own, how we buy it, how we can do that in a more efficient and 
effective way?
    Mr. Glenn. I think we need a lot of change there, sir, to 
be honest. But we have a large number of systems that are 
collecting financial information, and every time you have 
multiple systems, they have to pass that along to some other 
system so it can be consolidated to produce consolidated 
statements. And every time you have an interface point you need 
a reconciliation and you have an opportunity for stuff to get 
lost or perhaps it has to be translated and you lose stuff in 
the translation.
    So we need to do a better job of consolidating the number 
of financial systems within the Department and that is a 
challenge because a lot of times these systems, while they may 
not have been designed for the audit, they were designed for 
something else and they have a very real value-added purpose, 
but people are very hesitant to let that go just for financial 
reasons.
    The Chairman. Understood. Thank you.
    Mr. Rogers is recognized.
    Mr. Rogers. Thank you, Mr. Chairman.
    Mr. Glenn, what, if any, additional resources or 
authorities does DOD need to expedite financial modernization 
and hopefully get a clean audit sooner?
    Mr. Glenn. Sir, could you repeat that question? I want to 
make sure I heard it right.
    Mr. Rogers. Yes. I am interested in knowing what additional 
resources or authorities Congress needs to give you that would 
expedite your ability to create financial management 
modernization and hopefully get a clean audit sooner.
    Mr. Glenn. Thank you. I suspect in the years ahead you will 
be seeing budget requests for system migrations and perhaps new 
enterprise resource planning systems. In June, we will be 
sending up a report on audit incentives which will have, 
potentially have some additional budgetary flexibilities we 
might be asking for. We are working through those right now 
with our Budget Department.
    Perhaps some flexibilities around expired funds that for 
entities that have shown, demonstrated progress on the front. 
Perhaps also an incentive like a working capital fund we could 
perhaps generate to help incentivize progress and/or system 
implementations and modernization efforts.
    Mr. Rogers. And what do you see is the biggest deficiency 
the DOD has to getting a clean audit and what are you doing to 
address that main deficiency?
    Mr. Glenn. Tactically, it is probably Fund Balance with 
Treasury, which is reconciling with Department of Treasury. 
Fortunately, thanks to DFAS [Defense Finance and Accounting 
Service] we made huge progress last year. That was the 99 and 
98 percent reductions. I think we will get there. We have a 
pretty good chance this year; if not this year hopefully next. 
Strategically though it is probably the systems issue that we 
talked about earlier. We really need to reduce the number of 
systems. People are hesitant to do that and it really takes a 
strong change management effort to do that.
    Mr. Rogers. All right. Thank you very much.
    Thank you, Mr. Chairman. I yield back.
    The Chairman. Thank you.
    Mr. Langevin is recognized for 5 minutes.
    Mr. Langevin. Thank you very much. I want to thank our 
witnesses for being here today. Thank you for your testimony. 
Let's start with Mr. Glenn, if we could.
    You mention a lot of progress in the cybersecurity 
processes and procedures for Defense financial systems, but the 
inspector general report on the audit stated that ``DOD did not 
make significant progress,'' and you are nearly 50 percent away 
from reaching your goal in all five IT priority areas. So 
despite prioritizing this effort, why have you failed to make 
meaningful progress?
    Mr. Glenn. I think it is the change management effort, sir. 
And you are absolutely right, more is needed. Cyber 
vulnerability is an area that DOD should be leaving and we are 
aggressively working on that. One quarter of all NFRs relate to 
IT access controls, so right now there is a number of efforts 
within the Department including a centralized identity 
potential in access management implementation that we 
anticipate having nine systems deployed onto by the end of this 
fiscal year and which we plan to expand throughout the 
Department.
    Mr. Langevin. Okay, so that is, I think, my second 
question. I wanted to know your timeline. What is your timeline 
for securing DOD financial systems?
    Mr. Glenn. Sir, I would have to take that for the record. I 
would have to go back and look at our corrective action plans 
and I would prefer to give you a more detailed response, 
because the IT issues have a number of categories and I can go 
back and look at the corrective action plan dates and give you 
the more detailed response on when that we anticipate them 
being remediated.
    [The information referred to can be found in the Appendix 
on page 53.]
    Mr. Langevin. And the Defense Information Systems Agency, 
DISA, Working Capital Fund received a clean opinion in fiscal 
year 2020, but it had a previous clean opinion in 2016 before 
backsliding in 2018 and 2019. Mr. Glenn, how do we know that 
the agencies aren't making temporary improvements that will 
fall apart after a year or two?
    Mr. Glenn. Probably because of hearings like this, sir, and 
the annual audit. Getting it audited every year and getting 
that status check from the auditors and knowing that the 
Secretary and Deputy Secretary are paying very close attention 
to the number of clean opinions on the Department and that we 
are being held accountable for making sure that that number 
increases each year, I can guarantee you there would be a 
significant backlash on any entity that lost its opinion.
    Mr. Langevin. Okay. Any other thoughts on how we sustain 
successes that we have made in addition to oversight?
    Mr. Glenn. Sir, I think it is keeping up the audit. It is 
just keeping that annual feedback, getting those NFRs, getting 
corrective action plans against those NFRs, and holding 
ourselves accountable for continued progress.
    Mr. Langevin. Thank you.
    I have a question for Ms. Jenkins. So I am disturbed by the 
inspector general's findings that the Navy lacks oversight of 
Trident missile system assets because contractor assets were 
not recorded in a government-owned system. Can you elaborate on 
this finding and the timeline towards fixing it?
    Ms. Jenkins. Sir, the finding pertained to equipment and 
parts that make up the Trident missiles, so we do have full 
accountability of our Trident missiles, their location, and it 
had to do with some of the parts and pieces at the assembly. We 
have been working really hard with our contractor over the past 
2 years to put the same rigor and discipline over the 
accountability of these parts and pieces and we are confident 
that we are going to have that resolved this year.
    Mr. Langevin. Well, I hope so, because this is something 
that is very troubling when I heard this and we need to pay 
much closer attention to this and nothing can slip through the 
cracks on that contractor asset portion, especially.
    So I have heard personal stories from service members at 
lower level units that the audit and corrective action plans 
are incredibly disruptive events. Mr. Miller, Ms. Jenkins, and 
Mr. Herrera, can you talk about the audit's impact in readiness 
at the tactical level?
    Mr. Miller. Sir, this is Wes Miller with Army. I will jump 
there first. As far as the tactical level in being able to get 
to the issues as far as inventory and supply management, there 
is where knowing what we have in the way of preparedness is so 
critical. Not only as far as with inventory items, but also as 
far as the assets themselves as far as our tactical equipment, 
and knowing that we can, in fact, report those the correct way. 
So that is where I would see a benefit as far as to those 
individuals at the tactical level as far as having the 
assurance that the accounting system is keeping up with what 
they are actually doing and what they have on hand.
    The Chairman. And I do believe the gentleman's time has 
expired. I say that because I can't find the clock on my 
computer. The staff is trying to help me.
    Mr. Langevin. It did expire, Mr. Chairman.
    The Chairman. Okay, sorry about that. So while I am trying 
to figure that out, I will get to it, and Mr. Lamborn is 
recognized for 5 minutes. If for some reason I disappear, Katy, 
you are just going to have to call on the next person. I am 
going to try to figure out this clock thing. We have Mr. 
Lamborn for 5 minutes and then Mr. Courtney, and I will be 
working on the clock. If it doesn't work out, somebody else is 
going to have to jump in.
    Go ahead, Doug.
    Mr. Lamborn. Mr. Chairman, can you hear me okay?
    The Chairman. Got you loud and clear, yes.
    Mr. Lamborn. Okay. Actually, I am on two web Zoom 
committees at the same time. I have a markup going 
simultaneously here so I am a little bit distracted, so for 
that reason, Mr. Chairman, I am going to pass on questions and 
let you go to the next questioner.
    The Chairman. Certainly. I think if we are keeping the R/D
[Republican/Democratic] thing then I will go to Mr. Wittman. 
And I did find the clock so, you know, small victories.
    Mr. Wittman is recognized for 5 minutes.
    And we don't hear you, Rob. You may be muted there.
    Mr. Wittman. I am sorry, Mr. Chairman. I didn't click the 
right button, but thanks again.
    And, Mr. Glenn, I appreciate you talking about the critical 
nature of audits and I think it is incredibly important. You 
know, it is a very complex system we see within the Pentagon, a 
large number of unknowns, and what we want to do is to be able 
to take those down to zero on those. But, you know, that is a 
long process. We want to make sure too that we are keeping in 
mind the areas where we need to take action.
    In your written statement you appeared to implicitly refer 
to audits of material weaknesses, and listen, we understand 
that those things are there and that is why I believe there is 
some action that needs to be taken. And my colleague, Mr. 
Garamendi, and I introduced the bipartisan Naval Readiness Act 
and it was aimed at really helping define variables and 
material deficiencies in an actionable way. In other words, how 
do we identify that and how do we take actions?
    So I wanted to get you to elaborate on the importance of 
routine inspections on DOD readiness in making sure that is 
part of this system of audits. So it is not just what is on the 
balance sheet, it is also, you know, what are we doing to 
define material readiness and to clearly define where those 
deficiencies are?
    Mr. Glenn. Well, apart from the financial statement--and 
you mentioned the naval audit readiness. I will probably turn 
to Alaleh here in a second--one of the neat cultural changes 
that the audit has driven is you heard me talk about data. It 
is driving a culture of data and the Department is realizing 
the power of data.
    It started with just a database of audit findings and, 
obviously, we are at the just over 3,400 now, but also putting 
corrective actions plans against those findings and having a 
central database that we can go into, see the issues and status 
for corrective action, really has unlocked the power of 
centralized data. So now we have departmental dashboards. And 
I'm getting to the readiness question, because at the Deputy 
Secretary and Secretary level there now are dashboards on 
readiness with various metrics measuring how we are doing.
    In terms of capturing the full population of readiness 
issues, that is probably a little outside the swim lane of the 
financial statement audit; but within the financial swim lane 
we have a management's internal control program where we go out 
and do various assessments. I am very thrilled to say that the 
audit, last year's audit introduced no new issues. Of course, 
that takes a little bit of an explanation.
    If you are counting material weakness it goes up by one 
over in the last, over the prior year, but the only reason it 
went up was because our IG friends expanded one prior year IT 
material weakness into four categories which had already 
existed. So I am hoping, very much hoping and believing that we 
have all the financial issues on the table.
    Alaleh, can you speak to the naval readiness aspect of 
this?
    Ms. Jenkins. Yes, sir. As for financial statement audit, 
one of the areas that the auditors are looking at at the 
Department is ensuring that we follow our own policies and 
procedures, because specifically inside the Department of the 
Navy we focus a lot of time and effort to ensure that we have 
proper accountability over our assets, material, our gears, 
people, their condition, their location, so that we have the 
enterprise visibility. We know what we have, what is available 
for use, can it sit up, you know, and ensuring that the 
resources are not going to buy material that we already have on 
hand.
    So I see that as direct support to our overall readiness of 
the parts and pieces that we have for maintenance of our ships 
and aircrafts. One of the examples that I like to use is that 
our logistics community started this naval material 
accountability campaign since 2018, where we go base to base 
and count every item that we have on that base. And today, we 
have identified about $3 billion worth of equipment and 
property that we were able to put back into the system and make 
it available for use.
    Mr. Wittman. Very good.
    I want to jump in and follow, Mr. Glenn, with a point that 
you started with and that is the use of IT in using automation 
within our systems. I think there is a tremendous amount of 
potential there. Instead of doing audits line by line the old-
fashioned way, what we are doing with supply chain management 
systems, what we are doing with digitizing much of what we 
manage and transact in Department of Defense, seems like to me 
the digital means is really the way of the future.
    So if you would just give us a brief overview of what DOD 
has done to ensure that our audits, auditors, I should say, are 
prepared for the digital age.
    Mr. Glenn. You are asking me to talk about what our IG 
friends have done. I am at a bit of a loss. I am anxiously 
waiting to see that. I know before I came to DOD there was a 
lot of talk about how the audit community would be using some 
of the IT resources. I can share that there is two areas where 
we put in place some emerging technology. Optical character 
recognition----
    Mr. Wittman. Thanks. If you will do that--my time has 
expired. If you can just get that to me aside.
    Mr. Chairman, I yield back.
    [The information referred to can be found in the Appendix 
on page 55.]
    The Chairman. Thanks, Rob. I was giving you a few extra 
seconds just because of the microphone problem up-front, but 
the time was up.
    Mr. Wittman. Thanks.
    The Chairman. Mr. Courtney is recognized for 5 minutes.
    Mr. Courtney. Thank you, Mr. Chairman. And, you know, 
actually, I just wanted to begin by sort of making sure that 
all the members know that the forensics of this audit process 
actually began in the House Armed Services Committee. Adam and 
Mac Thornberry set up special committee on auditability, which 
I drew the short straw and was a member of that, which met at 8 
o'clock in the morning with gallons of coffee to sort of as a 
layperson try to understand accounting terminology. But that 
actually produced language in NDAAs [National Defense 
Authorization Acts] which responds to this point.
    I just think that is important to sort of put on the 
record, that this is an example where Congress really drove 
this process and the benefits that we are hearing about this 
morning. You know, it was a good bipartisan vision by Armed 
Services.
    You know, there is a slide deck on page 50, which actually 
has a document that is called Ranking Results, which lists the 
parts of the Department that are unmodified audit opinions 
versus those with modified opinions, and then there is a 
numerical ranking of the different agencies. And, Mr. Glenn, I 
was just wondering, number one, just for the benefit of 
everyone, what is a modified opinion versus an unmodified 
opinion and what do those ranking numbers mean in terms of, you 
know, do people at the bottom have the most work to do to get 
their audits clean? I mean, is that how a layperson should 
interpret that chart?
    Mr. Glenn. That is an extremely [inaudible] that I would 
say the people on the bottom just--they may not have as far to 
go, but they also may not have demonstrated as much progress in 
addressing the issues they have. The unmodified opinion is 
clean. It basically says, yes, we have looked at it, our 
financial statements are materially accurate.
    A modified opinion is your statements are accurate except 
for 1, 2, 3 issues that they will specifically cite. We are, 
unfortunately, under a disclaimed audit opinion which basically 
says there are so many issues that are so pervasive, we cannot 
give you----
    Mr. Courtney. Great. Well, thank you. Again, I think it is, 
you know, particularly, you know, I think these hearings are 
great to keep the, you know, momentum moving forward, which 
again originated in the House. But also I think it is good to 
make sure that we all are on the same baseline in terms of 
terminology, so.
    Mr. Glenn. If I could, I would like to expand on that 
ranking report and I just want you to say that was a good idea. 
People on the bottom quartile hate it because there is an extra 
reporting burden that goes with it, but I promise you we have 
some very tough conversations with the folks on the bottom of 
that list who don't want to be there. So it is driving positive 
impacts.
    Mr. Courtney. That is great.
    Thank you. I yield back.
    The Chairman. Thanks, Joe. And thanks for serving on that 
committee way back when. We appreciate the work.
    Ms. Hartzler is recognized for 5 minutes.
    Mrs. Hartzler. Thank you, Mr. Chairman. Very, very 
important hearing.
    Mr. Glenn, I understand that IT and cybersecurity 
weaknesses make up a large proportion of the notices of finding 
recommendations highlighted by the auditors, so what corrective 
action is the Department implementing to address these 
cybersecurity concerns?
    Mr. Glenn. A number of them. They are about half. Overall, 
they are about half of our NFRs. Probably the biggest effort is 
the Identity, Credential, and Access Management [ICAM] system 
that DISA, Defense Information Security Agency, is 
implementing. That is what I was talking about earlier that we 
are piloting nine systems onto that, that should be deployed at 
the end of this fiscal year.
    Also, this Friday, we have a periodic IT functional council 
meeting where it used to be CMO [chief marketing officer], CIO 
[chief information officer], and CFO [chief financial officer] 
partnered up to talk about IT issues, but as you probably know 
CMO has been dissolved so now it is CIO and CFO linking arms to 
drive system reductions and drive improvements in IT controls. 
And, in fact, the top five issues that are not dependent on 
ICAM, we are specifically focusing on this Friday with senior 
management and the services to ask ourselves why are there 
shared accounts? Why is there privileged access that is not 
necessary? Why do developers have access to the production 
environment and not just the test environment?
    Mrs. Hartzler. Okay, great. Now I understand that you found 
that the DOD lacked policies, procedures, controls, and 
documentation necessary to accurately record and monitor 
government property in the possession of contractors, and DOD 
has acknowledged this weakness and formulated a corrective plan 
or action plan. So can you describe the corrective action plan 
to the committee and the challenges that you face with 
contractor property, government property?
    Mr. Glenn. Sure. Yes, probably the best example is the 
strike fighter. Right now we have a material weakness at the 
departmental level in the strike fighter because while the 
planes are all accounted for and on the service books and under 
audit, the parts and equipment--and we are talking about tens 
of billions of dollars--unfortunately, are not on the 
Department statements and therefore they are not subject to 
audit and the audit scrutiny, at least their financial 
statement audit scrutiny.
    The IG and GAO are still free to go in there for--and the 
Contract Audit Agency are still free to go in there. But what 
we are doing about it is we are counting all the stuff that is 
out there that is about three-quarters complete last time I 
checked. We are moving it to an accountable property system 
that is in DOD, and not just at our contractors', and we will 
get it subject to audit procedures. We are going to get the 
findings, we are going to put corrective action plans against 
those findings, and we are going to hold ourselves accountable 
for progress.
    Mrs. Hartzler. Very good. So to the service witnesses, 
could you expand on what Mr. Glenn has just shared and tell 
about what you specifically are doing with contractor hold 
material through the audit effort?
    Mr. Miller. Yes, this is Wes Miller with Army. We have 
expanded our particular review analysis of the problem. One of 
the first key items with that we went through initially looking 
at the number of contracts which we felt were involved there. 
We expanded those as far as using the character reader as far 
as contracts and we have expanded that to where now we are 
looking at contracts that are in the area of 70,000 rather than 
7,000.
    So we have created that workgroup as far as to understand 
the magnitude of the problem and how we can get these items 
that are with the contractors under control, ma'am.
    Mrs. Hartzler. Good.
    Ms. Jenkins. Ma'am, this is Alaleh from the Department of 
the Navy. I will just address that quickly as well, because we 
have a large amount of property and supplies in the hands of 
the contractors. We are working with our [inaudible] community 
to make sure that all of our contracts have the appropriate 
clauses for property accountability, for one; ensuring that we 
put in the same work with our contractor community, that they 
have the same type of discipline imposed as procedures to do 
proper count; and also reporting to the government a list of 
the property that they hold for us and make sure that they 
maintain the property record and subject to audit on an annual 
basis.
    Mrs. Hartzler. Very good.
    Air Force.
    Mr. Herrera. Yes, ma'am. This is Steve Herrera. Hopefully 
you can hear me?
    Mrs. Hartzler. Yes, I can.
    Mr. Herrera. Thank you. So we are doing a lot of the same 
things the Army and the Navy are doing. Effectively, we are 
also working very closely with our contracts to see what kind 
of systems and processes they have and where possible we are 
going to leverage those capabilities. Now most of the inventory 
is also on their financial statements and they have to report 
and account for it, so we don't want to reinvent the wheel.
    The Chairman. Thank you. I apologize, but the gentlelady's 
time has expired.
    Ms. Speier is recognized for 5 minutes.
    Ms. Speier. Mr. Chairman, thank you.
    This question is for Ms. Jenkins. The Navy is proposing to 
cut staff in the Naval Audit Service by two-thirds, which is an 
astonishing turn of events when you have 26 material 
weaknesses. Why is that happening and how is that going to 
improve your ability to do your job?
    Ms. Jenkins. Ma'am, the decision on the cut to the Audit 
Service by no means meant that it was not value, the power of 
oversight and audit. As a matter of fact, since 2018, when the 
financial statement audit started, we have expanded the level 
of resources and effort that has gone into this remediation 
activities through building our management internal control 
program, supporting the financial statement audit, and then we 
have other oversight bodies such as our now IT----
    Ms. Speier. Excuse me. Ms. Jenkins, are you reducing the 
Audit Service by two-thirds or not?
    Ms. Jenkins. At this point, ma'am, I will take the question 
for the record to get you the exact number. There is a 
reduction in our audit, but is based on--that reduction is 
based on rightsizing the organization to continue to meet their 
function based on their plan audit and based on the number of 
audits that they complete on an annual basis. By no means this 
means that we are taking the functions away from them.
    [The information referred to can be found in the Appendix 
on page 54.]
    Ms. Speier. Mr. Chairman, I would like for us to look into 
that further.
    Mr. Glenn, there is a lot of old IT systems. Maybe for the 
record if you could provide us your plans to upgrade or replace 
them, and I am going to yield the rest of my time to Ms. 
Slotkin.
    [The information referred to can be found in the Appendix 
on page 54.]
    Ms. Slotkin. Thanks, Representative Speier.
    Mr. Glenn, I guess my question is this. We are all having 
this debate about the top line of the DOD budget, but we also 
know that Members of Congress, you know, we don't like when 
facilities are closed, when locations are closed, when legacy 
weapons systems are closed. Are you able through the audit 
process to put a monetary figure on what we traditionally think 
of pork?
    Mr. Glenn. No. It would be a subjective estimate and how 
would you define pork, and I am not sure how I would be able to 
answer that with any----
    Ms. Slotkin. So, for instance, if we had a tank facility in 
a certain State that was slotted by the Army and recommended by 
the Army to be shut down, but then, through passionate 
engagement by my peers, was pushed and urged to stay open, you 
could certainly put a monetary value on the cost of that 
facility, correct?
    Mr. Glenn. I could put a cost figure on it. Value, I am not 
sure. I mean, what do you include in the value proposition?
    Ms. Slotkin. Mm-hmm.
    Mr. Glenn. It would be such a nebulous scope of benefit 
that I would struggle to give you a reliable figure. And some 
of that would be non-monetary.
    Ms. Slotkin. Mm-hmm. And tell me a little bit about your 
process. I am sorry. Just so we understand of getting to this, 
you said 20-, by the end of the decade, or 2028, you think we 
will have the clean audit; is that right? Was that your figure?
    Mr. Glenn. Yes.
    Ms. Slotkin. Okay. And I know you have been asked this, but 
is there anything else we could do to speed that up? Because it 
is very hard for us to explain to our constituents why the 
largest chunk of the national budget is unable to be audited. 
Is there any other things that we could do to speed that up?
    Mr. Glenn. Well, we will be sending out the paperwork for 
incentives here in June. But to answer you directly, not 
really, not that I haven't mentioned because there is only so 
much money you can throw at it and there are only so much 
people you can throw at it and we start to get diminishing 
marginal returns. And at the heart of this, we really want to 
make sure that we are using the resources entrusted to us 
efficiently.
    We will be sending up a report also on unfunded priorities 
with the audit, but there is not going to be anything in there. 
We are resourced to do this. Unfortunately, it is just going to 
take time. There are--you are talking about decades of 
processes and procedures and cultures that have developed that 
we need to change. And I understand it is hard to sell, ``Why 
does it take 10 years for the Department of Defense to do 
this,'' but, all right, you have probably heard us use DHS as 
the benchmark; it took them 10 years. Our assets are 17 times 
those of the Department of Homeland Security.
    If you look at us on the Global 100 List, Walmart is number 
one at 500-, I think it is $524 billion. We spent $817 billion 
last year and we are far more complex than Walmart. We got all 
the inventory. We have hospitals, police forces we also have to 
account for--plus we have a whole separate set of----
    The Chairman. Again, I apologize, but the gentlelady's time 
has expired.
    I do just want to follow up on one point that Ms. Slotkin 
made as we are trying to figure out, as she points out, a lot 
of, you know, congressional efforts to stop the DOD from 
stopping spending money, if you will. Okay, you can't get rid 
of this program, you can't move that asset. And this is I think 
why the audit is so important.
    When we get into those arguments and we get excited, but 
say, look, if you are insisting on continuing to keep this 
thing in your district, this is what it is going to cost, 
typically what members--they get all kind of creative about, 
``Well, no, actually, it will save money because we will move 
this over there.'' And it is all nonsense, but it is nonsense 
that is hard to contradict because we don't have the audit 
numbers.
    So any progress you can make on that. And the example that 
occurs to me is, you know, getting rid of old systems, like 
when we wanted to shut down a B-1 squadron, okay, and then the 
argument went into that. If you can give us more concrete 
figures on, here is what it is going to cost, then we can make 
a more informed decision and have a clearer argument as we are 
pushing forward on that.
    Because that is the part that always frustrates me, is we 
get into this big argument about, you know, we are going to 
save all this money and you think that is the fight, you know, 
that the member is going to say, no, we need to spend this 
money, then, like I said, they get creative and come up with 
some nonsense argument about how it will actually save money to 
keep spending it. So if we could get the audit it would really 
help us make the right decisions on that.
    Mr. DesJarlais is recognized for 5 minutes. Dr. DesJarlais, 
I apologize. Go ahead.
    Dr. DesJarlais. Yes, sir. Caught me a little off guard.
    Mr. Glenn, what has the reception been like within the 
Department for your audit efforts? And I understand that your 
team has visited over a hundred locations just this year as 
part of the undertaking and that their audit of inventory and 
other assets is likely something that is still pretty foreign 
to a lot of the individuals that you are interacting with in 
the DOD, so have you encountered any resistance or pushback to 
your efforts?
    Mr. Glenn. The short answer is no. And I know Navy and the 
Army have had some great results surrounding inventories, so I 
will let them talk here in a sec. But the short answer is we 
are finding stuff that we didn't know was in the system. We are 
finding stuff in the system that we didn't know it was there. 
And I heard the question earlier about, you know, burdens to 
the folks at the front lines, but when you are saving more 
money than you are spending it is a positive return on 
investment. And it allows you to redirect that funding to 
higher, other priorities.
    So, yeah, just alone, and I will give you one number out of 
our financial statements. In 2017, we looked [at] our 
unobligated expired funding. This is money we can no longer use 
because it is expired and it is unobligated. And I need to be 
careful here because there is always some amount, and I can't 
give you a specific number, but you always [have] some level of 
expired unobligated. But it was 33.6 in 2017 and it is down to 
21.2 at the end of last year. And that says to me we are using 
our funding more efficiently. We are giving it to higher 
priorities and making sure it actually gets used and spend it 
on value-added efforts. So that alone clearly makes it 
worthwhile to me in quantifiable benefits.
    I know I am a little bit off the inventory topic, so, 
Alaleh, can you bring us back with benefits you guys have 
realized with your inventory efforts?
    Ms. Jenkins. Yes, of course. I would say that inside the 
Department of the Navy we have embraced the audit. One might 
ask why Navy has so many audit findings and I always say it is 
a sign of progress because auditors have been to every site. 
They have been onboard of our ships. And even during the COVID 
[coronavirus disease] last year, we put in place virtual 
procedures so they can still continue on testing our inventory.
    One of the areas that I say I am always very proud of what 
we were able to accomplish just year two of the audit, we 
essentially did a hundred percent count of all of our real 
property assets, fence-to-fence, and we were able to establish 
the baseline. And I always use an example of every year we go 
after and continue that inventory count what we are identifying 
in assets that have been demolished, removed, and clean up the 
records and bringing up dollars, sustainment dollars, that we 
can put towards other projects that we have and that can 
sustain that.
    In the case of the inventory, we are identifying materials 
that at the local level we had visibility but it was not in a 
property system. So we made it available. We were able to fill 
our open requisitions. We had examples, this goes back a couple 
years ago, where we had planes at Lemoore waiting on parts and 
pieces, and by identifying warehouses that have, say, F-18 
landing gears that we can know we are able to put that in place 
and get these planes repaired and up and flying direct 
alignment to the readiness and real fighting machine.
    Dr. DesJarlais. Okay.
    I wanted to get in one more question. I see I am down to 
just a minute here. But one frustration from constituents is 
always the cost overage on bids whether it is an F-35, other 
weapons systems. And I realize when something is being 
developed every 10, 15 years, things change, but is there 
anything that can be done about accountability? In the private 
sector if you bid a contract, you have some obligation to honor 
it. It seems like in defense that that is not so much the case.
    Is there going to be anything that you can tell us where 
people will be held a little more accountable of what they say 
they can do something for and then it ends up costing the 
taxpayer a lot more?
    Mr. Glenn. I think so, sir. That is one of the byproducts 
of having centralized data and dashboards. You can do analyses 
on it and you can expose things just from an analytical method 
that perhaps you couldn't have done before without sending out 
a specific auditor. I should note that financial statement 
audits are not specifically designed to detect fraud, but they 
certainly report it if they find it. And they also don't 
necessarily ask are we getting the best value for an 
expenditure. We are really looking to make sure we captured, 
recorded, and reported that information accurately so that we 
can do analysis or ask questions and look at things differently 
in----
    The Chairman. Again, I apologize. The gentleman's time has 
expired.
    Mr. Norcross is recognized for 5 minutes.
    Mr. Norcross. Thank you, Mr. Chairman. Actually, pick up 
exactly what we were discussing.
    Mr. Glenn, can you define what a clean audit is? Because 
that doesn't mean money is being spent correctly or the highest 
priority, it just means that the statements are being fairly 
presented. Is that your understanding of what a clean audit is?
    Mr. Glenn. Yes. There is a lot more to it, but 
fundamentally, yes.
    Mr. Norcross. Right, to different phases or particularly 
the other, you know, other findings. And right now you said 
where you can't give an opinion it is a disclaimer of an 
opinion, correct?
    Mr. Glenn. Yes.
    Mr. Norcross. Okay. And that is when we say clean audit, 
people are going to make the assumption that somehow you are 
doing it the right way. It just means that the statements 
accurately reflect what is going on. They can be horrible 
priorities not spent the right way, like you hear clean audit, 
don't confuse those two. Because that brings me to the F-35. 
You were speaking that the parts were not part of the scope, or 
were you not allowed to go in the Lockheed Martin system and do 
the count? Because there is a big difference here.
    Mr. Glenn. No, we are going in and counting it now. We were 
running on their controls and systems previously. That will 
never pass muster for the audit, so we are going in to do 
accounting for it and putting it in our systems now.
    Mr. Norcross. And when you say now, this year or next year?
    Mr. Glenn. Yes. We hope to have strike fighter equipment 
balances in the 2021 financials.
    Mr. Norcross. Are you experiencing any resistance from any 
of the contractors in turning this over?
    Mr. Glenn. I would rather talk to some folks who are closer 
to the effort, so let me take that back for the record. I will 
share that progress is a lot slower than I would have hoped.
    [The information referred to can be found in the Appendix 
on page 54.]
    Mr. Norcross. Thank you. I just want to switch gears here 
for a moment. Mr. Miller, it states here that the Army has made 
substantial improvement year over year. Love the Army. Why were 
you able to do it and we weren't making substantial improvement 
on the other services? Anything that you can share that the 
Army is doing that can lead us to the direction of the other 
services, what they can do to make this go faster?
    Mr. Miller. Yes, sir. Sir, I believe that all services are 
making the improvements each year. As far as substantial 
improvement, there have been some areas that we have had some 
large successes. Within the area of Fund Balance with Treasury, 
we have made some big improvements over what we previously had 
so we have a little further to go, but we see that as one 
particular area that we are receiving a better indication that 
we are in a go-forward position.
    And so I would say another area that we are having is we 
are having success with education of individuals knowing what 
the requirements are as far as to perform audits. The systems 
owners, the process owners are the individuals that really need 
to know what is expected, what is required for an audit, sir.
    Mr. Norcross. So there is still question out there on how 
to even collect the information for the audit; is that what you 
are suggesting or is this more by a program or particular area? 
Because, yes, we are into this many years now, and certainly 
people asking what do I need for an audit seems a little bit--
--
    Mr. Miller. Yes, sir. The need for the process owners to 
know what is expected by the auditors is there is still an 
education factor there, sir.
    Mr. Norcross. Wow. I yield back. Thank you.
    The Chairman. Thank you. Mr. Johnson is recognized for 5 
minutes.
    Mr. Johnson. Sorry about that, Mr. Chairman. I wasn't 
expecting that.
    Let me ask a question, Mr. Glenn. You are undoubtedly aware 
of the Department's outsized share of our nation's tangible 
assets. Obviously, we have all talked about this. We are all 
concerned about it, watching it closely; 2.1 million service 
members, 770,000 civilian employees in 4,600 locations. It's a 
lot to say grace over. And we get it is going to take time. 
Although it has been said by many of my colleagues already this 
morning, this is a difficult thing to explain to our 
constituents, that it takes a decade to do it for this whole 
audit process.
    But our fundamental need to maintain peace through strength 
is necessary, we all know that, but also very considerably 
expensive, we know that as well. So it is our duty as lawmakers 
to make sure these precious limited resources are spent as 
wisely and effectively as possible and that is why we are 
applying the pressure that we are. We have to. It is our 
obligation.
    I understand the routine DOD audits like the one we are 
discussing today aren't necessarily meant to identify waste, 
fraud, and abuse, necessarily, I guess, but I am curious if you 
can comment on how the work that is done through these audits 
leads to better financial management and accountability. In 
other words, how do I explain to my constituents what the real 
value is? We are going to wait 10 years for it; what do we get 
in the end?
    Mr. Glenn. All right. I would say there are seven different 
value propositions. The job of accountants, when I was in 
college, was to write timely, useful information. We talked 
about the clean opinion audit earlier and it just says the 
statements are materially accurate. Which is true, but having a 
clean opinion on your financial statement says you have 
processes and procedures to capture, record, and report 
financial information accurately, and when you do that you get 
information for decision making.
    So the information to get there requires a lot of 
efficiency in how you capture, record, and report. So I can't 
tell you how much we are going to save because we are not 
reconciling and adjusting more than necessary, but I am 
comfortable with more than a $185 million a year that we are 
paying our IPA friends. Better data for decision making. What 
is that going to be worth to you guys when you give us 
inquiries and we are sitting on a clean opinion and we come 
back with a financial response, what is that going to be worth, 
you knowing that that information has undergone an audit or it 
has come from a process that has been audited and passed? Or 
what is the value of transparency and accountability to what we 
are doing with the $3.1 trillion in assets that we have or the 
$817 billion that we are spending every year? The 
cybersecurity, when we get rid of that IT material weakness, 
what is the value of a prevented hack or a prevented system 
intrusion by a potential adversary?
    And the real reason I get so passionate, it is about public 
trust in government which I think we all know is, 
unfortunately, very low. And our industry has failed to deliver 
a clean opinion to the American people, so I don't blame them 
for at least on the financial front doubting what we tell them 
financially.
    So if we can get--when we get DOD to a clean opinion and we 
get the U.S. Government to a clean opinion, at least we can 
feel, or I can feel, we can feel that our industry has done 
what it can to help boost that percentage. I don't know what 
the value is, but I am very comfortable it is more than $185 
million.
    Mr. Johnson. Can you provide any examples of 
recommendations incorporated from previous audits that have led 
to better financial management in the Department?
    Mr. Glenn. Yes. You know, I will just share an email I saw 
a few months ago. It was from an accountant, a Defense, DFAS, 
Defense Finance and Accounting Service accountant, and we were 
talking about our schedule of differences. So every month we 
have to report our collection of the disbursements to Treasury, 
and Treasury compares what we report to what they have actually 
done and they send us a report back, like here is all the stuff 
that we did that you didn't report or here is the stuff that 
you reported that we didn't do, and we reconcile it.
    And that report, that schedule of differences, and I 
mentioned it is 99 percent reduced over the prior year. The 
email said, from this accountant: ``Wow, I have never seen this 
balance so low.'' And I forget the date, but the days required 
to reconcile now is significantly less. It is a fraction of 
what it used to be because we don't have to weed through all 
that extraneous data.
    Mr. Johnson. Well, that is good.
    I don't know how much time I have left, Mr. Chairman. I 
would just make one comment and say that we appreciate the 
complexity of the audit. You know, our frustration, I think, is 
understandable that it takes a decade. Somebody referenced 
Walmart earlier and that is a big operation. Not as complex as 
DOD, but if Walmart or Amazon or one of the other private 
sector companies needed an audit, I am pretty sure they could 
get that done in a year or less because their bottom line would 
be riding on it, and so much more is riding on this.
    The Chairman. The gentleman's time has expired. I apologize 
the clock is not out in front of you.
    But Mr. Carbajal is recognized.
    Mr. Carbajal. Thank you very much, Mr. Chairman. Let me 
start off by thanking you for holding this important hearing.
    We certainly owe the American taxpayers a transparent 
discussion about financial accountability within the 
Department. I was shocked when I first came to Congress to 
learn that the DOD, the Department had never had a completed 
clean audit. I was flabbergasted. I was shocked. And I hope 
that the American people that are watching this hearing know 
that I and many of my colleagues share great concern about 
this. This is kind of ridiculous that the United States 
Government cannot complete a clean audit of the Department of 
Defense, when you consider all the money we spend for our 
national security.
    So, Mr. Glenn, your testimony highlights the success of the 
audit, but I would like to ask you about the less positive 
outcomes so far. What Department-wide material weaknesses has 
the audit identified that will be the most difficult to 
remediate in order to achieve a sustainable clean audit 
opinion?
    Mr. Glenn. Well, to answer you directly, sir, the hardest 
will probably be the material weaknesses that are more 
accounting issues as opposed to direct warfighter support. It 
is one thing to say, hey, we need to count all of our inventory 
because we need to make sure we know what is available to 
support the warfighters. Everybody gets that. And we have to 
count our tanks and planes and buildings so we need to know 
exactly what we have. People get that.
    But when it comes to what is the value you put on a tank, 
how much should you record toward a plane, that is where 
people--it is more than an accounting issue. We have to find a 
solution to that if we are going to see that clean opinion and 
get that seal of approval and those are going to be the tougher 
ones.
    And just that--I am going to, unfortunately, extenuate your 
point earlier, there are 24 agencies in the executive branch. 
DOD is the only one who has never had a clean opinion. The 
other 23 have; 22 of them are clean right now. One of them took 
a backslide because of the CARES Act and corona, but they made 
it back. So yes, we are the only executive branch agency 
without a clean opinion.
    Mr. Carbajal. Well, thank you. Unfortunate.
    Can the rest of the witnesses, the Department witnesses, 
address that as well?
    Mr. Miller. Sir, one of the particular challenges I see is 
that of the internal controls behind our systems. There is that 
particular item as far as making sure that the controls are in 
place and it reduces the amount of risk that you have 
throughout the entire community to make sure people are 
performing the particular functions just as they are supposed 
to. So internal controls would be where I see the greatest 
benefit that we will receive as far as when we get the audit 
opinion.
    Mr. Herrera. Sir, for the Department of the Air Force, our 
IPA has confirmed throughout they feel like we have done a very 
good job demonstrating that we have positive control over the 
inventory entrusted to us, so I think that is very positive.
    But to Mr. Glenn's point, of all the systems that we have 
that are our accounting property systems of record are very, 
very old and weren't necessarily built from an audit-compliant 
standpoint. So we continue to do the work that we need to do to 
value the systems but, for example, a lot of our 
infrastructure, our real property, is extremely old; selecting 
the documentation associated with that and making sure that 
that is properly booked in our APSRs [Accountable Property 
System of Record] and then feeding it to a financial statement 
is difficult. It doesn't mean we don't have a good assessment 
of where the inventory is, where the buildings are, and how 
much is being maintained. Thank you.
    Mr. Carbajal. Thank you. I am going to go ahead and reclaim 
my time back because I have one more question and limited time.
    Mr. Glenn, I understand that the estimated time can take up 
to 10 years to receive an unmodified audit opinion. Is that 
your expectation?
    Mr. Glenn. My best guess, sir.
    Mr. Carbajal. Help me understand what the next steps are 
over the next decade to get to that point. I mean, what are the 
concrete steps? I know you touched on it a little bit earlier, 
but what are they?
    Mr. Glenn. There is a lot of little ones. We have the Fund 
Balance with Treasury solved. That is a priority material 
weakness because if we had a problem there, we have got a 
problem somewhere else in our financials as well. We have got 
to get that IT stuff under control just from a national 
security standpoint, let alone a financial standpoint.
    The Chairman. And I apologize, sir. That was not a 15-
second question but that is all you have. So the gentleman's 
time has expired and Ms. Bice is recognized for 5 minutes.
    Mrs. Bice. Thank you, Mr. Chairman. And I want to sort of 
echo what my colleague from California said. I was surprised to 
learn that prior to the 2014 NDAA there was no statutory 
requirement for a DOD full audit and I think the American 
people would probably be surprised to know that. I am glad that 
the audit is happening. I am concerned about the timeline, 
taking another 6 to 8 years for the full and complete audit and 
I certainly agree with my colleagues on the committee that we 
need to try to speed that up.
    A couple things. First, I want to go back to Chairwoman 
Speier's comments about the Navy cutting audit staff. Ms. 
Jenkins, how in the world could the Department of Navy expect 
to get a clean audit in a timely and efficient manner when you 
are looking at cutting two-thirds of your audit staff?
    Ms. Jenkins. Ma'am, the scope of the naval audit is 
essentially doing investigation or inspection or audit at the 
discretion of the Secretary on certain programs. What we are 
doing, we have a whole new workforce that is really looking at 
whatever remediation that comes out of that financial statement 
audit result. So, two separate, complete kind of scope of work.
    We are heads-down focused on addressing all the issues that 
are coming out of the financial statement audit. We have been 
able to show a steady progress year after year on material 
weaknesses: three last year, two the year before. We are 
actually leveraging Nav Audit as a support in sustaining the 
areas that we have corrected and fixed. So reduction of the Nav 
Audit, it was to reshape, refocus their staffs, their resources 
towards some of the high-priority programs at the discretion of 
the Secretary and that is what their focus is of an internal 
audit on the Department of the Navy.
    Mrs. Bice. Are you suggesting that you don't need those 
two-thirds staff to be able to speed up the timeline of getting 
to a clean audit?
    Ms. Jenkins. Ma'am, no. They are not serving to organize 
for the remediation. The Nav Audit does internal audits. What 
we are getting at a financial statement audit and we have a 
whole workforce that works on the correcting of those fixes, so 
complete, separate scope of work. Yes, ma'am.
    Mrs. Bice. Thank you for clarifying.
    Mr. Glenn, I noticed in the joint testimony that there are 
hundreds and separate IT systems within the DOD, many of which 
are dated or obsolete. Seems to me that having an outdated 
software system is both impractical and it is dangerous from a 
cybersecurity perspective. As we make investments to modernize 
the Department of Defense, what steps should we be taking to 
move away from the older, outdated software platforms that are 
currently still in existence?
    Mr. Glenn. The steps are we need to look at all the systems 
that are out there--and it was 294 the last time I checked, so 
you are right, it is hundreds--look at the functionality they 
perform and ask ourselves what other systems do this 
functionality? Do we really need multiple systems doing the 
same thing? Is there other functionality that is going in there 
that a particular system captures? And then collectively say, 
no, you need System A, you need to go to System B, or you need 
to modernize or you need to get a new system and have a--and 
get a decommission date. And that is really a struggle getting 
people to commit, when are you going to let go of your system? 
When are you going to change your comfort zone and go somewhere 
else? That really is a challenge. It has been a struggle with 
every agency I have been at and every part of my career. People 
hate systems when they are coming in and they love them when 
you try to take them away.
    Mrs. Bice. Yes, and I think my concern is as a member of 
the new cyber committee recognizing that we have so many 
outdated or obsolete platforms that are the vulnerabilities 
within the DOD, we need to be looking at doing that sooner 
rather than later. Anyone else want to comment on that 
particular topic?
    Mr. Herrera or someone?
    Mr. Miller. Yes. Wes Miller with Army. We are looking at 
the need to converge our ERPs [enterprise resource planning]. 
Rather than having three ERPs, we are looking to collapse that 
to one ERP so that the information will exchange easier between 
our working capital fund, our supply chain management, as well 
as the base accounting system.
    Mrs. Bice. And if I could just ask one last quick question, 
do you need additional resources to do that?
    Mr. Miller. Yes, there is going to be an investment for 
that. We are going through----
    The Chairman. And that answer will have to cover it. The 
gentlelady's time has expired.
    Mrs. Bice. Thank you, Mr. Chairman.
    The Chairman. Ms. Sherrill is recognized for 5 minutes.
    Ms. Sherrill. Thank you, Mr. Chairman. And I think that the 
chair went over some of the benefits, but to all of the 
witnesses, can you give me an overview of just the broad 
benefits of an audit of the DOD?
    Mr. Glenn. Well, it is going to drive more efficient 
processes. It is going to drive better data, better 
transparency, and what we are doing with the assets and 
resources entrusted us better accountability for what we have, 
hopefully better public trust once we deliver the clean 
opinion, better cybersecurity which should translate into 
prevented intrusions into our systems, and better inventory 
management knowing what we have, what we need, and only 
ordering what we----
    Ms. Sherrill. I was glad to see over this audit that 
serious progress had been made since fiscal year 2019's audit 
was concluded, particularly in things like the Defense 
Information System Agency's Working Capital Fund going from a 
disclaimer to a clean result. As you were doing that, what are 
the best practices that you gleaned from that progress and how 
do you plan to implement them in the upcoming fiscal year?
    Mr. Glenn. I believe a short answer is getting the dirty 
laundry on the table. Open up with your auditors. Tell them up-
front where you know you have got issues. Don't make them test 
it to tell you what you already know. That will give you some 
credibility so when you go back to your auditors and say, look, 
I think this area is clean now, we have put in new procedures 
that allow us to be confident that we are capturing and 
recording and reporting information accurately, and then using 
auditor recommendations for issues that still exist to really 
drive change.
    And I think that has been part of the challenge, letting 
people know it is okay to put the issues on the table because 
then you can work them together. Either between OSD [Office of 
the Secretary of Defense] and the components or with the 
auditors. And not to impair their independence in any way, and 
know we'll never help you clean up something, but saving them 
the time and effort to test stuff that you know is already 
broken and being honest about your issues goes a long way in 
moving the process forward.
    Ms. Sherrill. And then I think, you know, this is the--we 
had a brief in the last Congress about the audit and were told, 
you know, were given about a 10-year timeframe, and now it 
seems like 2 years later we are given another 10-year 
timeframe.
    Mr. Glenn. Ten years. It is still at 2018. We started in 
2018 and we are predicting 2028, so it is still 10 years.
    Ms. Sherrill. It is still 10 years. Okay, that is better to 
hear. Am I correct in understanding that it took Homeland 
Security about 10 years to pass the audit?
    Mr. Glenn. You are correct.
    Ms. Sherrill. And then this past fiscal year presented 
challenges that we hadn't expected so we are willing to 
mitigate the damage from COVID, but it did increase some 
expenses, new lines of effort, new needs, so what impact do you 
anticipate the pandemic having on the fiscal year 2021 audit 
results?
    Mr. Glenn. About the same as we had last year. Basically, 
the travel. Auditors need to inspect and observe certain 
controls in operation, but they use this example of inventory 
taking. So we have warehouses full of parts and equipment and 
supplies. We need to demonstrate to the auditors that our 
system shows exactly what is on the shelves out in the 
warehouse and that means counting what is on those shelves and 
comparing it to the system, make sure the system shows exactly 
what is out there--and the auditors just weren't always able to 
do that.
    And I have got to be fair and give our IPA and OIG 
friends--and I say friends because at the end of the day I 
believe we want the same thing: good internal controls and 
strong financial management. They really did a great job of 
finding alternative procedures that they could rely on. It 
still had an impact, but it really was minimized by their 
flexibility in scratching their heads and finding ways to make 
it work.
    Ms. Sherrill. Thank you, and I yield back.
    The Chairman. Thank you.
    Mr. Franklin is recognized for 5 minutes.
    Mr. Franklin. Thank you, Mr. Chairman. And many of my 
questions have been answered, but I do want to echo what many 
others have. I am stunned that a Department that consumes more 
of our discretionary resources than any other department in the 
government didn't see fit to just a handful of years ago to 
decide it was worth auditing where all that money was going, 
but I am encouraged by the progress.
    I did have a couple of, well, specific questions diving 
into some of the data that was presented to us and this will be 
for Ms. Jenkins again.
    With respect to the Navy, the NFRs, you know, notice of 
findings and recommendations, I did notice that the Navy has 
more of those from fiscal year 2019 than all of the other 
services combined. Is that just a difference in the way that 
the Navy was conducting its audits or are there just more 
problems?
    And then just kind of half facetiously and then maybe not, 
is the success of all those findings, was that having anything 
to do with the decision that it is no longer as high of a 
priority program and your personnel numbers are being cut?
    Ms. Jenkins. Sir, I would say that the number of NFRs, it 
is a sign of progress for us. As I said, you know, we open up 
doors and we ask, and embrace audit and we ask the auditors to 
dig in deep, look at every [inaudible] and every element and, 
quite frankly, we ask them to give us detailed findings so that 
we can address them at the lower level of detail.
    So the more and more that we are getting insight from them, 
the more--you know, of course, [inaudible] and the more we get 
after it. I would say that it is kind of [inaudible] as far as 
[inaudible] the amount of [inaudible] have been able to 
accomplish. From the number of just the findings that were 
resolved, every year over 20 percent of our findings were 
resolved. But, most importantly, the benefit that we got and 
the progress that we're showing is with [inaudible]. We got 
[inaudible] in 2019. We were able to demonstrate 100% 
accountability of our real property.
    The past 3 years--or 2 years, rather, we have closed 
[inaudible] across all three audits that we have, because we 
have two for the Navy and then one for the Marine Corps.
    And then just that as we were talking about the systems, so 
one of the large number of our findings are around the business 
system environment and how complex it is. And we have been able 
to shut down systems, five of them so far. And we are on target 
to get on one accounting system for the Navy--or two accounting 
systems for the Navy, [inaudible] and one for the Marine Corps.
    So as I stated previously on the Nav Audit personnel, it 
is--again, we strive in the organization to match the number of 
audits with the planned audits that we have. I am not a 
personnel expert, but my understanding is that those personnel 
are going to be put in other positions that matches their skill 
sets. So we are going to be retaining those skill sets. And 
while we have Nav Audit as an arm of the internal audit 
function within the Department of the Navy, we have a complete 
separate workforce that we have expanded over the years the 
number of our skill sets and expertise that is focused on 
building the internal controls and all the work that comes in 
as a result of the financial statement audit [inaudible].
    Mr. Franklin. Okay, thank you.
    And this question will be for Mr. Glenn. It appears, you 
know, the services are doing their respective audits, and I am 
just wondering as these results are being looked at is there 
any way to, or are you looking at these from a holistic 
perspective to see if there are some trends that are being 
picked up in one service that may not have been picked up on 
audits in others but would have application to them? Because, 
obviously, despite the best audits, you are not going to catch 
everything.
    Mr. Glenn. True. You know, the communication across the 
Department is good. So where one of these is making progress, 
we are quick to highlight it so others can learn. That has been 
one of the cultural changes that the audit has brought. It is 
really more of a collaborative front. A lot of times the 
services are confronting similar issues, and we hold weekly 
meetings on Mondays called Financial FinOps, Financial 
Operations, where we talk about the issues, talk about best 
practices or ways to solve so that--yes is the short answer, 
sir.
    Mr. Franklin. Okay, thanks. And just one final comment as 
far as the sense of urgency. You know, we put our minds to it. 
We decided we wanted to put astronauts on the moon and by the 
end of the decade, and we did it in less time than what we are 
talking about getting a clean audit here. So it seems to me 
that if we really were serious about this, we could focus the 
energy and resources to get it done sooner. But with that, Mr. 
Chairman, I yield back.
    The Chairman. Thank you. Before I move on, I had one 
question I wanted to get and I have to leave in a minute. I 
will recognize Mr. Kim in just a minute.
    You mentioned earlier a reduction in the amount of 
unobligated balances; basically, money that we had obligated 
for a particular purpose, that purpose expired and the money is 
just sort of hanging around. There is also money in the 
Pentagon that has been obligated for a particular purpose, that 
purpose hasn't yet expired but they haven't spent it. That is 
sort of the uncosted balance portion, and that seems like a 
pretty bizarre concept in general that there is all this money 
sort of sloshing around the Pentagon that at the moment doesn't 
have a specific purpose.
    So we have got that and that sort of ties into an issue 
that we deal with all the time and that is the unfunded 
requirements list combined with the fact that frequently we in 
Congress will add back in programs that the Pentagon has not 
funded. As it has been explained to me, the Pentagon knows that 
we are going to do that so part of the reason that they don't 
ask for that is they don't want to box themselves in. They know 
we will do it and they are trying to sort of--they are trying 
to preserve--and slush fund is an ugly phrase, but--this pot of 
money that is just sort of hanging out there that they could 
potentially reprogram.
    Is that as big of a problem as it appears to be? I have 
been working with the NNSA [National Nuclear Security 
Administration] in particular and I know that they have got 
about $8 billion in uncosted balances. Meantime, you know, they 
are crying bloody murder and their budget gets cut by about a 
billion. You know, what has the audit found out about all this 
money, this unobligated money that is sloshing around? Because 
it seems to me that if you have a bunch of unobligated money, 
therein, how are you also coming in and saying, oh, but our 
budget needs to be bigger?
    Mr. Glenn. Well, I don't think it's fair to say sloshing 
around. And thank you for caveating slush fund. There are no 
slush funds that are hanging out there.
    I should note that the obligations that are out there, they 
are for specific purposes and are supported by specific reasons 
and needs. The funding that I mentioned earlier, the 
unobligated expired, like I said, there is always going to be 
some amount of that. If I obligate a hundred dollars to do 
something and the contracted bill is at for $98, I have a 
residual of two dollars.
    I can't--I should not leave it there as obligated because 
the product has been delivered and the financial statement 
auditors will say that two dollars is not an obligation, de-
obligate it, which is the right thing to do. And so if the fund 
is expired, that two dollars becomes unobligated expired. And 
that is good financial management. That is good--that is 
value----
    The Chairman. Where does the two dollars go?
    Mr. Glenn. It sits there and eventually goes back to 
Treasury. It is available for increases to existing 
obligations, but it is not available for new obligations. So, I 
hesitate to say sloshing around. It sits there for 5 years just 
in case it is needed for existing obligations, and then after 5 
years it goes back to Treasury.
    The Chairman. Okay. I could pursue that more but I will do 
that at another time. I think that is a crucial question. In a 
budget as large as the Pentagon, there is a lot of that money 
and we ought to figure out how better able to handle it.
    Mr. Kim is recognized for 5 minutes.
    Mr. Kim. Thank you. Thank you, Mr. Chairman. Thank you, 
everyone, for joining us here. And, Mr. Glenn, I wanted to just 
ask you a couple of questions here. I was reading here with 
interest the testimony that you had and I want to kind of zoom 
in on the part that you talk about when it comes to use of 
artificial technology, robotic process, automation, bots, 
things like that. And it sounded like this was potentially an 
area of not only efficiency but also potential growth in terms 
of our ability to understand how we can be better stewards of 
the taxpayer dollars.
    And so I guess I just wanted to get a little bit more of a 
sense from that from you, you know, I am interested in 
understanding the strides that the services are making to use 
artificial intelligence to find, you know, ``ghost equipment'' 
or duplicates for accountability purposes or other challenges 
that you have identified that might be able to be solved 
through this problem.
    And I am also just trying to get a sense of, you know, what 
scale can this be utilized too within the purposes of what you 
are doing and DOD as a whole to help with that efficiency? Is 
this something more on the margins to kind of get to some areas 
that we have been struggling with and combine some 
efficiencies, or is there a place where this could potentially 
be a very central core element to how we not only conduct 
audits but think about efficiencies within the DOD process?
    Mr. Glenn. Okay, thank you. Tell you what, I will give an 
example of where we are using optical character recognition. 
And, Wes, I will probably turn to you for robotics because you 
have got a good story there. There's new accounting standards 
on leases that if the leases meet certain criteria, they get a 
special accounting treatment. Well, we have got thousands of 
leases and probably hundreds of thousands of pages documenting 
those lease terms. And that is one of those things that is 
harder to sell to the people at the front lines: ``Hey, we need 
to read these thousands of pages to look for specific criteria 
to know how to treat these leases in the financial 
statements.'' That is just--it is a tough value proposition.
    But we have, I mentioned the centralized data, something 
called advanced analytics, or Advana is the short term. It has 
something called optical character recognition. And one of the 
things we're planning to do is we're going to feed these 
hundreds of thousands of pages of leases through Advana and the 
optical character recognition capability to look for specific 
terms. And it will be able to, should be able to, spit out 
results in minutes about what leases are probably good 
candidates for the specific accounting treatment.
    We are looking for all sorts of opportunities for that. 
Trust me, we don't want this to be any harder than it needs to 
be, and bots have saved tens of thousands of hours, people-
hours, across the Department, in support the audit and other 
avenues.
    Wes, do you want to add to that?
    Mr. Miller. Yes. Mr. Kim, we have on our staff a data 
scientist to assist and to advise as far as different types of 
initiatives that can help as far as to identify inconsistencies 
within our data. We have used as far as the optical character 
reading as far as to look at contracts. We are working in the 
area as far as with bots to identify as far as documentation to 
be used to support our facility structures and we make sure 
that we can document those for our auditors so that it speeds 
up and improves the audit concept.
    We have done data comparisons as far as for inventory 
management where items may be misidentified within the system. 
We can look for the particular items where we can see that 
there is a match and where the item is, in fact, accounted for 
within the system. So these are some of the things that we are 
doing. We find that it is necessary to have that data scientist 
with us and to help educate our people as far as the tools that 
are available.
    Mr. Kim. No, look, I appreciate that. That is very helpful. 
And look, my time is running down and I never like to put the 
chairman in a position where I ask a question at the very last 
second and expect an answer.
    So what I will just say here is that I have done--I have 
been connecting with a lot of small tech companies that are 
doing some very interesting, you know, AI [artificial 
intelligence] type efforts, you know, along these lines, so 
this is something I would love to see a conversation on, see if 
there is any potential ways that we can draw upon, you know, 
some of these, you know, really interesting firms that are 
doing this type of work to just try to make sure we are staying 
more efficient.
    So I will make sure we reach on out offline, but just 
thanks for what you do. Appreciate it. Chairman, back to you.
    The Chairman. Thank you.
    Mr. Moore, I believe, has rejoined us. I saw him and then 
he moved on. Mr. Moore, are you with us?
    I swear I saw him and then he disappeared.
    I am hesitating here because Mr. Moore is the last 
questioner that we have here. I see his name. I do not see his 
picture and he is muted. So rather than having all of us all 
just sit around here, that is all we have got. If Mr. Moore 
comes back on while I am doing my concluding comments here then 
we will take him, but those are the only questions that we 
have.
    I just want to thank our witnesses and thank the members. 
This is very, very difficult and I know that, you know, as a 
number of members have indicated and I had the same reaction, 
basically, what it means is we don't know where we are spending 
all of our money but there is a lot of it. This is difficult 
but important. I appreciate you doing that. And now my closing 
remarks are not going to be closing remarks because Mr. Moore 
has, in fact, returned to us.
    So, Mr. Moore, you will take us to the close here. You are 
recognized for 5 minutes.
    Mr. Moore. I apologize. We jumped a few. Thank you. So 
thank you, Chairman. I will bring us to close, then. I want to 
recognize the witnesses and thank you all for your service 
carrying out the thankless job and herculean duty of auditing a 
budget in the hundreds of billions of dollars.
    I have two questions that should carry us on to--first one 
is for Mr. Glenn. My primary concern lies with the recent DOD 
report stating that nearly 400 separate IT systems are being 
used to process accounting data, many of which are dated or 
obsolete. Modernization is a recurrent theme on this committee. 
I am curious why the DOD has not leveraged the remarkable 
talent and innovation this country has to offer to improve the 
way DOD does business.
    Can you give some context or explain the DOD efforts to 
modernize IT systems as they relate to financial management?
    Mr. Glenn. Yes. CIO and CFO are linking arms because we 
very much get that less IT systems equals less IT cost, less 
cyber vulnerability. We are all kind of talking about change 
management here. Look, it is not like it is 400 IT systems that 
only capture financial information. They have financial 
information and other reasons and value propositions. So it is 
not as easy as you think to say, ``Why don't you just put them 
all in one financial system,'' plus there is the comfort zone. 
I mentioned earlier that people hate new systems and they love 
the systems that we try to take them away.
    And people get comfortable with them and you really have to 
hold them--you have to tell them exactly where they need to go 
or how to replace that functionality and you have to hold them 
accountable for a decommission. And we are doing that. We have 
quarterly meetings, joining the CIO and CFO and the services 
and saying, ``All right, what systems are out there, where is 
it people get functionality, where are you going to migrate to 
and when are you going to do it?''
    Mr. Moore. Excellent. No, you know, in my opening I 
mentioned herculean effort, so I do understand the difficulty 
and the nature of this. Can you just briefly address 
Congress's--what timeline can we expect on moving data to the 
cloud that could ultimately help the auditing efforts? If you 
have any context on that, that would be great to hear.
    Mr. Glenn. I will have to take that for the record, sir. It 
kind of depends on scope. There are a number of cloud efforts 
across the way and if you would like, I would be happy to let 
the services talk. But I would have to take that for the record 
to give you a detailed and quantitative response.
    [The information referred to can be found in the Appendix 
on page 54.]
    Mr. Moore. Okay, understand.
    Mr. Herrera, the annual audit highlights the numerous 
challenges facing DOD's financial management, business systems, 
and cybersecurity. How does the Department overcome the impact 
of rapid turnover to maintain focus on auditory challenges?
    Mr. Herrera. Sir, do you mean rapid personnel turnover?
    Mr. Moore. Yes.
    Mr. Herrera. You know, sir, that is an interesting question 
and then certainly one that I think the entire Department 
faces. I would say as we went through the pandemic last year, I 
think we are all incredibly enlightened in what is in the art 
of possible in terms of how we manage our workflow. So we 
probably, prior to the pandemic, did very limited telework 
except for when we had snow days and whatnot in the NCR 
[National Capital Region].
    But we are recognizing that there are opportunities to do 
substantially more teleworking and whether that is full-time, 
part-time, or just situational. And frankly, sir, it enables us 
to have a happier workforce and makes us more competitive in 
the marketplace for the talent we are all vying for.
    Mr. Moore. Yes, that'll be a consistent theme, at least on 
my end, of retention efforts and of cost savings that that 
ultimately does to us, so I do appreciate the concept, you 
know, the private sector has seen an incredible flexibility 
over the last year with the disruption of the pandemic. The 
more we can embrace that in certain ways and just be thoughtful 
of it is important, so I appreciate those comments.
    Mr. Herrera. No, I am certainly questioning it as a senior 
financial manager for the Department of the Air Force.
    Mr. Moore. Yes, retention will be a cost savings across the 
board and definitely worth highlighting and keeping at the 
forefront. So thank you all for your participation. And, 
Chairman, I yield back.
    The Chairman. Thank you. And I think those are very 
important questions. I think software is a big, big part of our 
problem because, you know, we have such old systems that, you 
know, they are very difficult decisions. I know within DOD that 
is a huge problem. So, you know, you have got the old system, 
you know how to use it, it is not working very well but, you 
know, it is very expensive to move in a new one and you have 
got to make sure you move in the right new one. But that is 
why, in addition, as Mr. Moore pointed out, the cloud is so 
important.
    I am really rather distressed by the delay in the JEDI 
[Joint Enterprise Defense Infrastructure] program and, yes, I 
am abundantly aware of the reason for that delay, and it is 
reasonably close to home here. But I think getting, you know, 
getting that moving forward--if DOD could snap their fingers 
and have better updated software systems tomorrow, I think that 
would solve about half of this problem. Now I know they can't, 
but we need to work harder, I think, to get better updated 
software systems, get rid of the old ones, consolidate, take 
advantage of new technology.
    So we will be very interested and that is going to be a 
major focus of the committee when we are looking at our funding 
options. In fact, I would love to find ways to save money on 
these, you know, what we call legacy programs, which is really 
not an accurate description. It is more programs that are no 
longer helping us; you know, whether they were created like 6 
months ago or 60 years ago, if they are not helping us achieve 
our current goals then we have got to move off of them and move 
on to the others.
    And as Ms. Slotkin made clear, one of the biggest 
impediments in doing that is members wanting to take care of 
the programs in their district. But I would love to find a 
patch of those that aren't helping us, get rid of them, and use 
that money to give us the information systems that we need. 
That to me is the key transition to getting DOD to where it 
needs to be. So that is all the comments I have. Mr. Rogers had 
to leave, so we don't have a ranking member. But I would just 
say, does anyone else have anything for the good of the order 
before we adjourn?
    Terrific. Well, thank you very much. I appreciate the help. 
This is not an easy task. And I will say that with each passing 
year I become, I guess I would say, less bored by this hearing, 
because I am learning more and more about it so I can follow it 
enough to be focused. And I certainly understand the importance 
of it.
    So the dedication of members, staff, and DOD are pushing 
forward on a crucially important and not easy issue, I 
appreciate everyone involved with that. And with that, we are 
adjourned.
    [Whereupon, at 12:43 p.m., the committee was adjourned.]



      
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                            A P P E N D I X

                             April 28, 2021

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              PREPARED STATEMENTS SUBMITTED FOR THE RECORD

                             April 28, 2021

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[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
      
 

      
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              WITNESS RESPONSES TO QUESTIONS ASKED DURING

                              THE HEARING

                             April 28, 2021

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             RESPONSE TO QUESTION SUBMITTED BY MR. LANGEVIN

    Mr. Glenn. Fiscal year (FY) 2027 (for full remediation). Threats to 
DOD information systems and their data can arise from external threats, 
such as foreign adversaries, and internal or insider threats, such as 
employees and service providers. To address these threats, the 
Department has established security measures that include the 
following:
    --  A Layered Defense that leverages technology-based protection 
mechanisms such as cloud-based internet isolation, perimeter defense in 
the form of DOD Internet Access Points security suites, joint regional 
security stacks, and end point security solutions, to safeguard its 
networks against external threats;
    --  An insider threat program designed to deter, detect, and 
mitigate risks to high-value data and systems posed by trusted 
individuals authorized to access them;
    --  Requiring Federal Risk and Authorization Management Program 
and/or DOD certification for commercial hosting service organizations; 
and
    --  Long-standing collaborative partnerships with other federal 
agencies and standards organizations to build/enhance cybersecurity 
tools, incident response services, and assessment capabilities.
    While the above measures are not examined during financial 
statement audits, they do present evidence of their effectiveness, 
including insider threat controls, as demonstrated by the following:
    --  Twenty-five DOD-owned systems received favorable opinions from 
their Service Auditors in FY 2020 (Statement on Standards for 
Attestation Engagements (SSAE) No. 18), including controls related to 
access.
    --  DISA received two unmodified opinions from its Service Auditors 
(SSAE No. 18), including access controls, for conventional hosting 
services and MilCloud, covering the infrastructure used to host 101 DOD 
applications.
    --  Commercial cloud service providers currently hosting 20 DOD-
owned applications relevant to financial reporting have all received 
unmodified opinions from their Service Auditors (SSAE No. 18), 
including controls related to access.
    However, the DOD financial statement audits conducted over the last 
three years (FY 2018-FY 2020) resulted in a quarter of all Notices of 
Findings and Recommendations (NFRs) related to access controls over DOD 
systems that lead to elevated risk. The Department takes these findings 
very seriously. The DOD Chief Information Officer (CIO) and the Under 
Secretary of Defense (Comptroller)/Chief Financial Officer (USD(C)/CFO) 
are actively engaged to address these audit findings. Some are fixable 
in the short term, while others require a longer term, entity-wide, 
strategic solution.
    Short Term--Status of Corrective Actions to Address High-Priority 
Access Control NFRs
    --  Based on a joint analysis of access control-related NFRs, the 
DOD CIO and USD(C)/CFO issued a policy memo directing corrective 
actions on specific conditions that present potential for elevated 
cyber and audit risk. In FY 2020, the Department's auditors closed 27 
percent of the high risk conditions that were reported during the FY 
2019 audit year. The closure and recurrence status of these specific 
conditions is captured and reported to executive leadership during 
regularly scheduled meetings of the Information Technology (IT) 
Functional Council.
    --  The DOD CIO is currently reviewing the corrective action plans 
associated with known high-risk, access-related conditions to assess 
interim milestone dates and is identifying opportunities to accelerate 
their remediation.
    Long Term--Strategic Measure to Improve Management of End-user 
Access Rights
    --  A provisional project plan from the CIO and CFO, extending 
through FY 2027, was delivered to the Deputy Secretary of Defense. The 
plan lays out a timeline for implementing Identity, Credential, and 
Access Management technology solutions for 260 systems relevant to 
internal controls over financial reporting. According to the CIO and 
CFO, nine of these systems are currently on-boarding under a pilot, and 
the plan will be updated with lessons learned from this effort. Given 
the complex nature of the DOD operating environment, including the 
number of users and organizations, this technology is required to 
manage user access rights and secure these systems.   [See page 9.]
                                 ______
                                 
             RESPONSES TO QUESTIONS SUBMITTED BY MS. SPEIER
    Mr. Glenn. Over the last year, the Department continued to 
rationalize and simplify the defense business system environment by 
developing and improving methods to track progress, along with 
providing direction and guidance to the Military Departments and the 
Fourth Estate. Currently, the Department is tracking 257 audit-relevant 
systems and is working to consolidate and/or modernize systems to meet 
audit requirements. In FY 2020, four systems retired as planned; in FY 
2021, six audit-relevant systems are on track to be retired. Currently, 
the consolidated migration plan is tracking 37 target systems to retire 
in FY 2022 and beyond. Additional details regarding the Department's 
efforts to rationalize and simplify the Defense business system 
environments will be reported in the annual Defense Business Systems 
Audit Remediation Plan, due to Congress in June 2021.   [See page 15.]
    Ms. Jenkins. The Naval Audit Service organization will be reshaped 
from a requirement of 284 to 120. Our intent is to shape the DON 
audit workforce to appropriately meet the assigned workload at the 
Naval Audit Service while aligning and investing in oversight 
authorities across the DON, to include our Inspector General, law 
enforcement entities, and management internal control oversight 
functions. The NAS will be staffed to continue to meet its important 
and necessary function based on its planned audits and in consideration 
of the number of audits completed on an annual basis. All functions 
assigned to the NAS today will remain with the NAS throughout this 
workforce reshaping. It is important to note the Naval Audit Service 
has never participated in financial statement audits nor been a part of 
the workforce that helps to track financial statement audit findings or 
support financial statement audit remediation.   [See page 15.]
                                 ______
                                 
             RESPONSE TO QUESTION SUBMITTED BY MR. NORCROSS
    Mr. Glenn. Currently, we are not experiencing any resistance from 
the contractors in providing physical assets and inventory. There were 
contracting delays between the F-35 joint program office (JPO) and 
Pratt & Whitney which have now been resolved, and the metrics related 
to Pratt & Whitney inventory status are expected to improve starting in 
June 2021. The contractors have provided reports for the F-35 
contracted inventory team to validate existence of the assets and give 
the F-35 JPO their independent baseline property record. The inventory 
team occasionally works on a non-intrusive basis, such as overnight or 
third shift, so as to not impede any production operations. Working 
under these agreed-upon constraints has extended the initial planned 
timeline for inventory efforts. Additionally, there was a travel hold 
of approximately six months from March through August 2020 due to the 
COVID-19 pandemic. The inventory team continues to adjust travel and 
site planning due to localized restrictions and COVID-19 spikes in 
several supplier site locations, further delaying the inventory 
timeline. The JPO reports biweekly metrics on prime contractors' 
progress to the Office of the Under Secretary of Defense (Comptroller) 
(OUSD(C)). The metrics as of May 14, 2021, are attached.   [See page 
19.]
                                 ______
                                 
              RESPONSE TO QUESTION SUBMITTED BY MR. MOORE
    Mr. Glenn. Relative to audit, the DOD is realizing the benefits of 
data in the cloud today. While the process to fully migrate its 
Enterprise Resource Planning (ERP) databases and applications to the 
cloud is still ongoing (through FY 2028), the benefits from an audit 
point of view are already prevalent. Components' General Ledger (GL) 
systems are migrating their data to cloud-based platforms, improving 
auditability and accountability through data standardization and 
visibility. To date, 2 of 26 GL systems across DOD are either fully 
operating (or partially operating) on the cloud. In 2017, the DOD began 
building its cloud-based analytics tool, Advana, to consolidate all its 
information into a single source of truth. Advana translates and 
standardizes data from disparate systems and converts it into a usable 
format for managers, decision makers, and auditors ease of access. 
OUSD-Comptroller built tools within Advana to:
    --Aggregate and reconcile audit populations;
    -- Enable entities to drill from the financial statements down to 
GL details;
    --Better track and resolve auditor findings;
    --Improve funds management; and
    -- Reduce cash reconciliation differences between the DOD's 
accounting systems and the funds holder, the Department of the 
Treasury.
    ERP migrations result in instant, large-scale audit improvement 
from legacy systems by allowing timely data visibility to fully assess 
audit assertions (existence, completeness, accuracy, valuation, etc.). 
Enhanced cybersecurity and financial regulatory compliance results in 
reliable data for the auditors. Concurrent efforts to augment the ERP 
databases and applications at the component level to the cloud is 
planned to be completed by FY 2028.
    Additional details on Military Department plans on transitioning to 
the cloud are as follows:
    Army  Army has three ERPs: General Fund Enterprise Business System 
(GFEBS), Global Combat Support System-Army (GCSS-A), and Logistics 
Modernization Program (LMP). GFEBS was migrated to a cloud environment 
last year. Migration is currently underway for GCSS-A (estimated 
completion date (ECD) Quarter 1, FY 2022) and LMP (ECD--Quarter 4, FY 
2021).
    Department of the Navy  The Navy ERP database layer was lifted and 
shifted from the old legacy database by fully migrating to a partially 
cloud-based solution with over 72,000 users, driving timelier and more 
informed operational, financial, and budgetary decisions. The DON is 
actively consolidating the various financial and GL-related systems and 
processes used within the Navy into that single cloud-based ERP SAP 
system by FY 2023. These system efforts have resulted in many audit 
benefits, including but not limited to an improved audit response. This 
is evidenced by steady year-over-year increases in auditor Prepared by 
Client timeliness (96 percent, 6 percent improved over FY 2020) and 
completeness (96 percent, 3% improved over FY 2020). The U.S. Marine 
Corps is migrating its financial systems and GL capability to Defense 
Agencies Initiative, which is planned to migrate to a cloud-based 
Oracle platform by FY 2023.
    Air Force  The Air Force is targeting a Defense Enterprise 
Accounting and Management System (DEAMS) migration to cloud hosting by 
the end of FY 2024. The DEAMS production application is not hosted in a 
cloud environment. The DEAMS program does leverage cloud hosting for 
development and support applications. The DEAMS program office plans to 
begin laying the foundation for a cloud migration under the next 
contract award in FY 2022, beginning with feasibility studies and risk 
reduction. Our best estimate of the migration date is the FY 2024 
target.   [See page 31.]
                                 ______
                                 
             RESPONSE TO QUESTION SUBMITTED BY MR. WITTMAN
    Mr. Glenn. The DOD has initiated multiple initiatives to assure its 
auditors are prepared for the digital age. These initiatives have 
gained traction in areas such as audit response, audit reporting, and 
video communications. Taken together, not only are our auditors 
prepared for the digital age, but also these efforts have translated 
into more efficient and cost-effective audits. Here are a few areas in 
which the Department has excelled in this regard.
    Audit Response  The DOD has developed a SharePoint-based platform 
to digitize the majority of its responses to audit requests for the 
consolidated DOD financial statement audit. The Financial Improvement 
and Audit Remediation (FIAR) Audit Response Center (ARC) tool is used 
by OUSD(C) to manage the workflow of audit requests between external 
auditors and reporting entities. The FIAR ARC tool enables auditors to 
submit audit requests digitally and OUSD(C) audit liaisons to route the 
requests to appropriate assignees. The tool serves as a centralized 
repository for supporting documentation in electronic format that has 
been submitted to auditors. Automatic email notifications alert 
reporting entities when a new audit request has been received and alert 
auditors when a corresponding response has been delivered. OUSD(C) 
provides recurring training on use of this platform for its auditors, 
financial management personnel, and audit support teams.
    Audit Reporting  In recent years, the Department has developed a 
Notice of Findings and Recommendation (NFR) database. The platform 
serves as a central repository for all NFRs issued by financial 
statement auditors. It also requires auditors to map NFRs to material 
weaknesses. The database includes Qlik dashboards that provide 
leadership with real-time visibility into the progress that Components 
are making in developing and implementing corrective action plans 
(CAPs) in response to identified NFRs and material weaknesses.
    Data Analysis Software  The DOD Office of Inspector General (OIG) 
utilizes an IDEA analytics tool to perform common audit procedures, 
such as searching for duplicate transactions. The DOD OIG data 
analytics team uses more powerful computers and has staff more familiar 
with reviewing large data sets and writing code to perform complex 
algorithms. For example, in 2021 the DOD OIG data analytics team helped 
DOD OIG auditors standardize $55 billion of disbursement data and 
compare that data to an $8 billion asset account. This allowed auditors 
to identify unexpected relationships and better focus the sample.
    Video Communications  The COVID-19 pandemic required the Department 
and its auditors to make significant modifications in their approach to 
the FY 2020 and FY 2021 financial statement audits. The DOD and its 
auditors have adapted by increasing the usage of virtual tools such as 
Defense Collaboration Services and Microsoft Teams to perform business 
process and information systems walkthroughs remotely. Testing for IT, 
Fund Balance with Treasury, spare engines, military equipment, and 
other areas have been successfully performed virtually by the 
Department. Thus far, the pandemic has not resulted in any Components 
having their audit opinions adversely impacted. This is due in large 
part to the DOD and its auditors making a successful transition to 
increased reliance on video and other virtual technologies.   [See page 
12.]

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              QUESTIONS SUBMITTED BY MEMBERS POST HEARING

                             April 28, 2021

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                   QUESTION SUBMITTED BY MR. MOULTON

    Mr. Moulton. Mr. Glenn, automation and artificial intelligence are 
becoming increasingly integral to all DOD processes, and accountability 
is no different. I appreciated your testimony on how automation and AI 
are serving the auditing process. Have you been able to leverage a 
workforce already trained in these areas, or are you providing 
additional data science training? If so, what does that training look 
like?
    Mr. Glenn. The Department of Defense (DOD) realizes how important 
Artificial Intelligence (AI), automation, and data science are to 
remain competitive and agile while protecting our Nation's defense. We 
have leveraged special hiring authorities from the DOD Cyber Excepted 
Service (CES) to increase our access to AI talent. CES is an 
enterprise-wide approach for managing civilian cyber professionals and 
has expanded to include AI and other digital professionals. It offers 
flexibilities for the recruitment, retention, and development of 
professionals with specialized experience across the Department. To 
develop the skills of our current workforce, the Joint Artificial 
Intelligence Community (JAIC) is leading a series of DOD AI Training 
Pilot Programs to assess the appropriateness and feasibility of readily 
available training solutions. In June 2021, the JAIC is launching a 3-
month pilot program for DOD Product Managers, and in July 2021, a 5-
month pilot program for data scientists will be launched. In turn, the 
JAIC will leverage outcomes from these pilot programs to inform the 
development of future DOD AI Education and Training Initiatives. We 
have also established a baseline for training, consistent training 
standards, and learning competencies for the data science community. By 
2022, we plan to create widely accessible training on various data 
science topics using online open courses. The Department intends to 
make these data training and education courses accessible through a 
program called Advanced Distributed Learning, which enables 
interoperability and easier access to shared advanced technology 
training across the Department.
                                 ______
                                 
                    QUESTIONS SUBMITTED BY MRS. BICE
    Mrs. Bice. Reports in the press have noted that the Department of 
the Navy intends to move forward with reducing the size of the Naval 
Audit Service from its current 290 employees down to 120 employees by 
the beginning of Fiscal Year 2022. At a time when the Department of 
Defense is still years away from obtaining a clean audit, this action 
seems misguided. As you know, the role of the Naval Audit System is 
also critical to ensuring taxpayer dollars are properly spent and 
accounted for.
    1. In the joint testimony, you state on page 6 that ``The audit of 
the Department of the Navy (DON) is premised on . . . investing in its 
workforce.'' How do you explain the incongruence between the testimony 
which notes the importance of workforce investments and the proposed 
action to reduce staffing within the Naval Audit System?
    2. How will a reduction in staffing within the Naval Audit System 
impact the timeline for the Department of Defense to achieve a clean 
audit? If the Navy were to reverse its decision and maintain its 
current staffing levels, what would be the impact on the timeline to 
achieving a clean audit for the Department of Defense?
    Mr. Glenn. 1. The Department of the Navy (DON) continuously 
assesses its workforce's skillset, to ensure capabilities keep up with 
requirements while informing its recruiting and training programs, as 
it modernizes and transforms its operations. The DON believes investing 
in its workforce takes many forms, including assigning employees to 
meet workload demands. I am told that, in light of the many ongoing 
audit and oversight functions across the DON and to ensure proper 
personnel resources are allocated to meet workload, the DON determined 
it could effectively carry out the work assigned to NAS and redeploy 
personnel to other important work. The DON has held several ``Town 
Halls'' with NAS employees to keep them informed and share information 
on the Civilian Placement Process. According to the DON, this will 
afford NAS employees the opportunity to broaden their work experience 
and enhance their skillset that may be helpful in remediating the 
financial statement audit findings.
    2. I do not see an impact to the timeline for a Departmental clean 
financial statement audit opinion. While Naval Audit System (NAS) 
auditors and financial statement auditors have similar capabilities, 
they more often than not have different roles/functions. NAS auditors 
have never been used to conduct any part of the DON's annual financial 
statement audit. Given that we have independent financial statements 
auditors identifying our internal control deficiencies now, deploying 
NAS auditors to test the same controls only expends additional effort 
to tell us what we already know.
    Mrs. Bice. Reports in the press have noted that the Department of 
the Navy intends to move forward with reducing the size of the Naval 
Audit Service from its current 290 employees down to 120 employees by 
the beginning of Fiscal Year 2022. At a time when the Department of 
Defense is still years away from obtaining a clean audit, this action 
seems misguided. As you know, the role of the Naval Audit System is 
also critical to ensuring taxpayer dollars are properly spent and 
accounted for.
    1. What impact will a reduction in staffing within the Naval Audit 
System have on ensuring accountability for taxpayer dollars in carrying 
out Navy and Marine Corps programs and procurement?
    2. What are the roles of the 170 employees that will be laid off? 
How do those roles support the current audit process that is being 
done?
    3. With a reduction of staff in the Naval Audit Service, would 
there be an increased need for external private contractors to fulfil 
the Service's mission? What are the projected costs of relying on 
private contractors to fulfil the Naval Audit System's missions?
    4. In the joint testimony, you state on page 6 that ``The audit of 
the Department of the Navy (DON) is premised on . . . investing in its 
workforce.'' How do you explain the incongruence between the testimony 
which notes the importance of workforce investments and the proposed 
action to reduce staffing within the Naval Audit System?
    Ms. Jenkins. 1. The Department of the Navy (DON) values the 
importance of independent assessments and audits, especially those that 
regularly check for program performance or annually review our 
financial statements. In fact, multiple entities conduct audits across 
the DON enterprise, including the Naval Audit Service (NAS), the Office 
of the Naval Inspector General, the Naval Criminal Investigative 
Service (NCIS), the DON Managers' Internal Control Program, the DON 
Acquisition Integrity Office, the Department of Defense Office of 
Inspector General (DOD OIG), DOD OIG-contracted Independent Public 
Accountant (IPA) firms performing financial statement audits, and the 
Government Accountability Office. Of note are the annual full financial 
statement audits, performed by the IPAs, who are hired and overseen by 
the DOD OIG. The financial statement audit entails reviewing the entire 
DON operation. Auditors review and assess our enterprise for 
accountability, compliance of our business and financial operations, 
processes, internal controls, policies, management oversight programs, 
systems compliance, cybersecurity, and fraud susceptibility. The rigor 
of annual financial statement audits is intentional and embraced by the 
Department, not just because they indicate whether the DON has control 
over how it is spending taxpayer dollars, but because they serve as a 
catalyst for our reform efforts, and facilitate improvements and 
innovation across the DON enterprise. The Department, as required by 
National Defense Authorization Acts, reports often to Congress on our 
financial statement audit progress. It is important to note the Naval 
Audit Service has never participated in these financial statement 
audits nor been a part of the workforce that helps to track financial 
statement audit findings or support financial statement audit 
remediation. The NAS right sizing was based on its planned audits, 
historical trend looking at past workloads of audits it completed, and 
assessing and realigning resources to meet DON oversight requirements 
across the enterprise. Reductions to the NAS budget in no way take away 
from its assigned work or its oversight responsibility. It is still 
focused on conducting program performance audits, as directed by the 
Secretary of the Navy. As a result, we do not anticipate any impact to 
audits that review Navy and Marine Corps programs and procurement.
    2. We do not intend to conduct a reduction in force at the Naval 
Audit Service; therefore, no personnel are expected to be laid off as a 
result of this workforce shaping effort. As a preliminary matter, DON 
intends to retain and realign NAS employees to meet enterprise needs. 
The NAS conducts program performance audits and attestations of DON 
activities and provides forensic audit support to NCIS and the 
Inspector General. This necessary and important work will continue. Our 
intent is to shape the DON audit workforce to appropriately meet the 
assigned workload at the Naval Audit Service while aligning and 
investing in oversight authorities across the DON, to include our 
Inspector General, law enforcement entities, and management internal 
control oversight functions. Using a Civilian Placement Process, we 
will realign personnel to critical positions within the Department of 
the Navy for which they are eligible and qualified, retaining our 
talented audit workforce. This will also afford our employees the 
opportunity to broaden their work experience and enhance their skills, 
which may assist with driving necessary remediation efforts to address 
audit findings, getting the Department closer to achieving a clean 
audit opinion. With respect to the role of NAS employees supporting our 
current financial statement audit, it is important to note the Naval 
Audit Service has never participated in these financial statement 
audits and the NAS is not assigned responsibility to track financial 
audit findings or support financial audit remediation. Annual financial 
statement audits are accomplished by auditors from an independent 
public accounting firm, hired and overseen by the DOD OIG.
    3. The workforce reshaping effort at the Naval Audit Service was 
done to both carry out the work assigned to the NAS and to balance 
resources across a multitude of work and functions across the DON. We 
do not anticipate increasing contractor support to fulfil the NAS 
mission. The Department of the Navy will continuously review the 
resource allocations of all DON organizations performing any kind of 
audit. Should there be a change in the need for additional resources 
for NAS, we will make those adjustments in the outyears, as part of our 
regular organizational oversight process.
    4. The Department of Navy continuously assesses its workforce's 
skillset, to ensure capabilities keep up with requirements while 
informing our recruiting and training programs, as we modernize and 
transform our operations. Investing in our workforce takes many forms, 
including assigning employees to meet workload demands. In light of the 
many ongoing audit and oversight functions across the DON and to ensure 
proper personnel resources are allocated to meet workload, the DON 
determined we could effectively carry out the work assigned to NAS and 
redeploy personnel to other important work. We have held several ``Town 
Halls'' with NAS employees to keep them informed as we move through 
this effort and to share information on the Civilian Placement Process. 
This will afford NAS employees the opportunity to broaden their work 
experience and enhance their skillset that may be helpful in 
remediating the financial statement audit findings.
                                 ______
                                 
                   QUESTION SUBMITTED BY MR. MORELLE
    Mr. Morelle. The Deputy Secretary of Defense in her private 
capacity last year wrote in a March 2020 ``Foreign Affairs'' article 
entitled, ``Getting to Less: The Truth About Defense Spending,'' the 
following: ``Predictably, for example, even though Congress directed 
the Defense Department to cut $10 billion through administrative 
efficiencies between 2015 and 2019, the Pentagon failed to substantiate 
that it had achieved those savings. The reason those efforts rarely 
succeed is that they merely shift the work being done by civilian 
employees to others, such as military personnel or defense 
contractors.'' How can we avoid encouraging such a situation in the 
future?
    Ms. Jenkins. Transferring duties currently performed by government 
personnel to contractor personnel must comply with established law and 
regulations pertaining to outsourcing. NAS staffing adjustments were 
based on its planned audits, historical trend looking at past workloads 
of audits it completed, and assessing and realigning resources to meet 
DON oversight responsibilities across the enterprise. The DON does not 
anticipate any new outsourcing efforts as a result of these changes.