[House Hearing, 119 Congress]
[From the U.S. Government Publishing Office]
TRACKING PROGRESS:
UPDATES TO DOD'S FINANCIAL
MANAGEMENT SCORECARD
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON GOVERNMENT OPERATIONS
OF THE
COMMITTEE ON OVERSIGHT
AND GOVERNMENT REFORM
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED NINETEENTH CONGRESS
FIRST SESSION
__________
APRIL 29, 2025
__________
Serial No. 119-20
__________
Printed for the use of the Committee on Oversight and Government Reform
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Available on: govinfo.gov,
oversight.house.gov or
docs.house.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
60-194 PDF WASHINGTON : 2025
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COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM
JAMES COMER, Kentucky, Chairman
Jim Jordan, Ohio Gerald E. Connolly, Virginia,
Mike Turner, Ohio Ranking Minority Member
Paul Gosar, Arizona Eleanor Holmes Norton, District of
Virginia Foxx, North Carolina Columbia
Glenn Grothman, Wisconsin Stephen F. Lynch, Massachusetts
Michael Cloud, Texas Raja Krishnamoorthi, Illinois
Gary Palmer, Alabama Ro Khanna, California
Clay Higgins, Louisiana Kweisi Mfume, Maryland
Pete Sessions, Texas Shontel Brown, Ohio
Andy Biggs, Arizona Melanie Stansbury, New Mexico
Nancy Mace, South Carolina Robert Garcia, California
Pat Fallon, Texas Maxwell Frost, Florida
Byron Donalds, Florida Summer Lee, Pennsylvania
Scott Perry, Pennsylvania Greg Casar, Texas
William Timmons, South Carolina Jasmine Crockett, Texas
Tim Burchett, Tennessee Emily Randall, Washington
Marjorie Taylor Greene, Georgia Suhas Subramanyam, Virginia
Lauren Boebert, Colorado Yassamin Ansari, Arizona
Anna Paulina Luna, Florida Wesley Bell, Missouri
Nick Langworthy, New York Lateefah Simon, California
Eric Burlison, Missouri Dave Min, California
Eli Crane, Arizona Ayanna Pressley, Massachusetts
Brian Jack, Georgia Rashida Tlaib, Michigan
John McGuire, Virginia
Brandon Gill, Texas
------
Mark Marin, Staff Director
James Rust, Deputy Staff Director
Mitch Benzine, General Counsel
Bill Womack, Senior Advisor
Jenn Kamara, Senior Professional Staff Member
Emily Allen, Professional Staff Member
Mallory Cogar, Deputy Director of Operations and Chief Clerk
Contact Number: 202-225-5074
Jamie Smith, Minority Staff Director
Contact Number: 202-225-5051
------
Subcommittee On Government Operations
Pete Sessions, Texas, Chairman
Virginia Foxx, North Carolina Kweisi Mfume, Maryland, Ranking
Gary Palmer, Alabama Minority Member
Tim Burchett, Tennessee Eleanor Holmes Norton, District of
Brian Jack, Georgia Columbia
Brandon Gill, Texas Maxwell Frost, Florida
Emily Randall, Washington
C O N T E N T S
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Page
Hearing held on April 29, 2025................................... 1
Witnesses
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Lieutenant General James H. Adams, III, Deputy Commandant for
Programs and Resources, U.S. Marine Corps
Oral Statement................................................... 6
Mr. Brett Mansfield, Deputy Inspector General for Audit, U.S.
Department of Defense Office of Inspector General
Oral Statement................................................... 8
Mr. Asif Khan, Director, Financial Management Assurance, U.S.
Government Accountability Office
Oral Statement................................................... 9
Written opening statements and bios are available on the U.S.
House of Representatives Document Repository at:
docs.house.gov.
Index of Documents
----------
* Questions for the Record: to Lt. Gen. Adams; submitted by
Rep. Sessions.
* Questions for the Record: to Lt. Gen. Adams; submitted by
Rep. Burchett.
* Questions for the Record: to Mr. Khan; submitted by Rep.
Sessions.
* Questions for the Record: to Mr. Mansfield; submitted by Rep.
Sessions.
These documents were submitted after the hearing, and may be
available upon request.
TRACKING PROGRESS:
UPDATES TO DOD'S FINANCIAL
MANAGEMENT SCORECARD
----------
Tuesday, April 29, 2025
U.S. House of Representatives
Committee on Oversight and Government Reform
Subcommittee on Government Operations
Washington, D.C.
The Subcommittee met, pursuant to notice, at 10:19 a.m., in
room 2247, Rayburn House Office Building, Hon. Pete Sessions
[Chairman of the Subcommittee] presiding.
Present: Representatives Sessions, Foxx, Palmer, Burchett,
Gill, Mfume, and Randall.
Mr. Sessions. The Subcommittee on Government Operations
will come to order.
Welcome, everyone. And to our guests who have taken time to
be here, as well as the Members and their staff, thank you very
much for preparation for today.
Without objection, the Chair may declare a recess at any
time. And I would recognize myself for the purpose of making an
opening statement.
I would like to welcome everybody to today's hearing
regarding updates to the Department of Defense's progress
toward achieving a clean audit opinion. I would like to thank
our witnesses for testifying today on this very important
topic. I would also like to thank Subcommittee Members on both
sides for staying committed to shining a light on financial
management issues that the Department of Defense faces in
working toward a solution, together, to that future.
I have said this before but financial transparency of the
military is critical. It is critical for the military, and it
is critical for the American people to know that they have the
confidence that is being well managed.
So, the question is, how can we remain confident in the
Department of Defense's ability to protect American assets and
interests if they cannot properly manage their expenses or
assets, perhaps not even knowing where they are?
We are here today because the Department of Defense is
still unable to achieve a clean audit of their financial
statements. In Fiscal Year 2024, the Department of Defense
reported more than $909 billion, half of the discretionary
spending of the United States, but still holds the distinction
of being the only Federal agency that has never passed a
comprehensive audit.
The Department of Defense has more than 28 components, and
it is fair to say that some are doing better at financial
management than others. For this year's past financial audit,
components that could not be audited accounted for at least 48
percent of DoD's total assets and at least 64 percent of DoD's
budget.
It is important to note that this is more than just a paper
exercise; it is understanding where your assets are and how
much taxpayer funding is left. It is important that the
military gain a complete picture of military readiness, as well
as Congress that counts on these reports.
Even though roughly half of DoD passed, the services who
received the most amount of money and the most assets account
for the areas where they are struggling to track their spending
and assets. Balancing the checkbook is more than just military
preparedness. I believe it goes hand-in-hand, both
understanding where the checkbook is, where the assets are, and
military preparedness.
Financial security is national security. The Joint Strike
Fighter Program is a multiservice, multinational program that
will cost more than $2 trillion over its lifetime of service
according to the GAO.
For Fiscal Year 2024, auditors found that DoD management
did not account for, manage, or report Joint Strike Fighter
government property. Not fully reporting this information
resulted in material misstatements across DoD assets.
Because DoD could not provide reliable information to
verify the existence, completeness, or value of the program's
government properties, auditors were unable to quantify the
amount of these misstatements. This means that there are
monetary and operational gaps.
Last September, the Subcommittee, with the help of GAO,
created a scorecard to track DoD's progress toward achieving a
clean audit opinion. Rather than continuing to say that DoD is
not doing a good job making progress toward achieving a clean
audit, we wanted something that would show that they were, in
fact, on the road--and I think we will hear today--to fixing
not only those things that are internally imperative to this
but good ideas from certain elements within DoD that are taking
the lead. This is especially important because DoD is mandated
to achieve a clean audit by 2028. It is and should remain the
goal of this Subcommittee and of Congress to hold DoD
accountable.
Today, we plan to discuss the progress that DoD has made
and the challenges they face. As this new Administration is
planning for the future, it will be imperative to understand
where the Department has been, where it needs to go, and what
is standing in the way.
Today, we are also unveiling the new section of the
scorecard that focuses on fraud risk management. We have talked
about fraud prevention for many years, so I am very excited to
see a new method to track progress in preventing fraud in the
areas of procurement and contracting. Strong financial
management systems are an important part of fraud prevention.
Seeing inside that is essential.
What we have seen over the years is that DoD has struggled
in maintaining and updating systems, and these systems are
critical if we are going to get where we want to go with a
clean audit.
Last Congress, we were told that DoD had to achieve a clean
audit opinion by December 2028. We made that commitment, and
today I think we will show where there is strong significant
progress by 2026. That is why we are here. We are having this
discussion. But it also is a commitment by the gentleman, the
Ranking Member, Mr. Mfume, and myself to make sure that we go
beyond these hearings and to actually engage the Department of
Defense.
Unfortunately, today the Office of the Secretary of Defense
will not be a part of the conversation. They will be missed.
And both Mr. Mfume and I plan to visit the Pentagon to lead
that discussion with the Secretary of Defense. We hope that
they will see this as an opportunity to listen and learn, to
take some of what we are hearing today, but to move forward
together.
And I would now yield for--the gentleman's time for an
opening statement, Mr. Mfume. The gentleman is recognized.
Mr. Mfume. Thank you very much, Mr. Chairman. Good morning
to you, good morning to our witnesses, and good morning to
those of you in attendance.
I want to particularly thank Chairman Sessions for doggedly
following up on this issue. He and I feel very, very strongly,
as some of you know, that we just cannot keep going down this
street.
I want to thank Mr. Khan, Mr. Mansfield. Good to see both
of you again.
Last September, we held the second hearing to address
financial accountability in the Department of Defense. So, as
fate would have it, we are back here today to continue that
conversation in light of the Department of Defense's continued
inability to pass a Department-wide audit. It is not new for
the DoD, and I share the Chairman's commitment to holding that
entire agency accountable.
For years, the Department of Defense has tried but, as we
know, failed to successfully complete a clean Department-wide
audit. A clean audit is not judging the merits of DoD's
spending, which we do not do in this Committee, but it is
asking what is that spending and how do you explain that
spending and the accountability of it. DoD has failed to meet
this basic standard to provide proper evidence to show that
they accurately accounted for their finances.
Now, let me be redundant. There have been seven--if you are
listening at home or watching--seven straight audits that have
been failed by the Department of Defense. I want to be
deliberately redundant about this because that number, every
time I say it, continues to strike a great deal of horror in me
that it happens and continues to happen.
[Chart.]
Mr. Mfume. And I want to underscore that--I am not really
into a lot of graphics, Mr. Chairman, but this time I want to
just repeat the fact that we have had seven audits. And you can
see going back to 2018--raise it up, would you? Failed, failed,
failed, failed, failed. That is embarrassing. This is the
greatest country on the face of the Earth, and we cannot even
get an audit completed?
So, I hope that if the leadership of the Department is
watching, that they understand how serious this is for those of
us who, personally, are just offended that this continues to
happen. I cannot stress enough my thanks to the Chairman for
working on this issue together.
So, while the Department of Defense has still not produced
a clean audit, there was significant progress under the
previous Administration. That progress was spurred by Secretary
Lloyd Austin's focus on modernizing financial systems, which
helped to lead the U.S. Marine Corps to adopting a 2-year audit
approach and achieving a clean audit opinion for Fiscal Year
2023 and 2024. God bless the United States Marines.
That progress is critically important, so I think it is up
to us to determine how to get other components at DoD up to the
standard that the Marine Corps is at.
Chairman Sessions and I are dedicated to ensuring
accountability for the hundreds of billions of dollars in
spending and the $4 trillion in total assets that make up our
defense budget.
In Fiscal Year 2024, U.S. taxpayers entrusted $909 billion
to the Department of Defense; one of the largest investments in
our Nation's history. And while we continue to provide the DoD
with escalating sums of money, only 11 out of the 24 total
components at DoD were able to achieve a clean audit.
The components that failed, unfortunately, include the
Army, the Navy, and the Air Force. Those three alone comprised
90 percent of DoD's assets by dollar amount.
Now standing in the way of a clean audit is the wide
prevalence of material weaknesses, which we have been told over
and over again. That is an accounting--term for the areas in
which the Department of Defense lacks internal controls over
financial reporting. Material weaknesses.
Year after year, these material weaknesses caused the
Department of Defense to be the only major Federal agency
unable to achieve a clean audit opinion. This, along with a
number of other longstanding issues, serves as a daily reminder
of DoD's history of pervasive deficiencies in financial
management systems, business processes, internal controls, and
financial reporting.
So, under these conditions, it makes the Administration's
goal of raising the Pentagon's budget to a trillion dollars
particularly puzzling. Absolutely puzzling, I should say. Under
the Department, we have seen so many things take place, and I
am convinced that until the Department can restore full faith
and accountability for these critical dollars, I cannot justify
increasing their budget even further, especially in light of a
pressing need for funds and so many other areas of overall
spending where we have taken a chain saw and cut the hell out
of it.
It is even harder for me to justify any increases in the
Pentagon's budget in the midst of its current leadership
crisis. During our last hearing on this topic, our witnesses
discussed the importance of leadership from, quote, ``the top
down.'' And they said that was important in creating a culture
within the DoD where accountability, at long last, really does
matter.
Right now, we are seeing a distinct lack of leadership,
especially in the realm of accountability. And I join the
Chairman in expressing the hope that either Secretary Hegseth
will come before this Committee and talk to us about that
accountability and what is being done or that we will find
ourselves at the Pentagon trying to again get some real clear
information about the struggles at DoD.
It is our largest Federal agency, as I said, employing more
than 3.4 million Americans, including 1.3 million Active Duty
servicemembers. And in their efforts to keep our Nation safe,
we must ensure our servicemembers have the most sophisticated,
modernized technology and systems to eliminate financial
errors. Just like we have tried to provide that to win wars, we
need the best sort of technology that we can provide to
eliminate financial errors and to streamline data entry and
obtain the most effective national security we can for the tax
dollars we invest.
I think it is fair to say that Congress cannot allow
another failed audit to go by. Do not want to be here next year
talking about the eighth year in a row as we move toward this
2028 mandate. It would be good to see just a little bit of
progress on that road and, personally, I have not seen it.
But I want to thank all of those who have worked on this
important matter since our last hearing. I thank you over and
over again for your efforts to give us direction and
understanding on some of this and to provide real transparency
about where, really where, all of our military spending goes.
With that, Mr. Chairman, I again want to thank you. And I
yield back.
Mr. Sessions. The gentleman yields back his time.
I would like to reinforce for our witnesses that are here
today and those of the staffs that are here to recognize that
Mr. Mfume and I are doing this across the entire government. It
is not just the Department of Defense; it is areas, where some
$300-to $500 billion in our immediate past was the guess from
OMB and CBO about the amount of money, that went to misdirected
payments. And both Mr. Mfume and I are together on this; him
using not just a strong voice and working together, but us
sincerely wanting to make sure that the money goes to the
intended purpose and not outside of that. So, Mr. Mfume, I
wanted to thank you.
And as we said last year, we would do this year, as we are
saying today, we will be pleased to show up at the Pentagon,
make those arrangements, and make sure that at the highest
levels of the Department of Defense they understand the work
that has gone on today must be prepared and continued for 2028.
I am pleased to welcome our witnesses for today:
Representing the United States Marine Corps, Lieutenant General
James Adams III; the gentlemen, Mr. Brett Mansfield; and Mr.
Asif Khan.
Lieutenant General Adams is Deputy Commandant for Programs
and Resources in the United States Marine Corps. Mr. Mansfield
is the Deputy Inspector for the Government for Audit at the
U.S. Department of Defense, Office of the Inspector General.
Mr. Khan is the Director of Financial Management Assurance at
the U.S. Government Accountability Office, GAO.
And we look forward to hearing from you today. And I would
ask that each of you would stand pursuant to Committee Rule
9(g).
The witnesses will raise their right hand to be sworn.
Do you solemnly swear or affirm that the testimony that you
are about to give is the truth, the whole truth, and nothing
but the truth, so help you God?
[Chorus of ayes.]
Mr. Sessions. Let the record reflect that each of the
witnesses has answered in the affirmative.
We appreciate each of you being here today and appreciate,
also, that what the testimony that you--you may be seated,
thank you. We appreciate that the testimony you will give today
would be along the line of making sure that this Subcommittee
hears you fully.
With that said, we normally extend 5 minutes. I have
notified each of you that if it takes you 6 or 7 minutes, we
are all ears. We want you to make sure you are given the time
so that this Subcommittee hears from each of you.
As a reminder, the buttons that are in front of you, you
would push them and then we would be able to hear you.
I now recognize the distinguished gentleman, Lieutenant
General Adams, for his opening statement. The gentleman is
recognized.
STATEMENT OF LT. GEN. JAMES H. ADAMS, III
DEPUTY COMMANDANT FOR PROGRAMS AND RESOURCES
U.S. MARINE CORPS
Lt. Gen. Adams. Chairman Sessions, Ranking Member Mfume,
and distinguished Members of the Subcommittee, thank you very
much today for the opportunity to appear before you. It is an
honor to represent the United States Marine Corps in my
capacity as the service's Chief Financial Officer, and to speak
to our financial management progress and continued challenges.
I am very proud to report that the Marine Corps received an
unmodified audit opinion on our Fiscal Year 2023 full financial
statement audit and maintained that opinion for the Fiscal Year
2024.
These are significant milestones, not only for our service,
but for the Department of Defense. They reflect many years of
determined effort and an enterprise-wide commitment to
accountability and stewardship.
I want to emphasize that while we are proud of our
achievements, we do not take them for granted. While an
unmodified audit opinion reinforces the Marine Corps'
reputation of accountability, discipline, and leadership, it
also reflects the dedication and hard work of the entire
organization, including financial management professionals,
acquisitions and logistics teams. These teams continue to work
tirelessly to ensure proper stewardship of resources, and their
commitment remains critical to achieving and sustaining a clean
audit opinion.
But these achievements are not the end state; they are
critical milestones along a very important journey, one that
demands continued focus, sustained investment, and
transformation across our financial and operational systems.
Unmodified opinions are difficult to earn. They require
rigorous internal controls, meticulous recordkeeping, and
transparent financial reporting. We remain committed to
continuous improvement in our financial management practices,
recognizing that an unmodified opinion is hard won but easily
lost.
Sustaining audit success within DoD requires recognizing
that we cannot operate in silos. The Defense Department
presents a complex audit environment characterized by numerous
IT systems, varying operational procedures, and common
deficiencies across components.
To achieve and maintain DoD-wide auditability, we must
prioritize streamlining, standardizing, and harnessing
technology, to include emerging technologies like artificial
intelligence to free up valuable resources, simplify our
business environment, and ultimately strengthen our financial
management posture.
One of our most persistent challenges remains the
modernization of our business IT infrastructure. Much of our
financial data continues to originate in legacy feeder systems
that were never designed to meet audit or modern data analytic
standards. These antiquated systems, some of which are decades
old, require manual intervention, reconciliation, and
workarounds that add complexity, introduce risk, and slow down
decision-making.
As the Chief Financial Officer of the Marine Corps, I see
firsthand how better systems enable better outcomes, not just
for auditors, but for commanders and warfighters. These
individuals rely on accurate, timely information to make
mission-critical decisions. The clean opinion is a clear sign
of progress, but system modernization is essential to sustain
and build on that progress.
The achievement of auditability across the military
services demands a shift in how we conduct business within DoD.
A key example is the current data systems environment which is
not conducive to finalizing agency financial reports by the
mid-November deadline. The Marine Corps innovative approach to
utilizing a 2-year audit to attain its first opinion is related
to the challenges with the financial reporting timeline. Our
approach allowed us to bypass typical mid-November audit
closeout activities and dedicate that time, two full quarters
of time, to completing comprehensive audit procedures which
would have otherwise been impossible to accomplish given the
current constraints.
Adhering to the mid-November deadline is unrealistic in the
short term and sets us up for failure until data systems and
financial reporting processes are streamlined. We need a
realistic timeframe that allows for thorough and accurate
financial reporting.
As the Commandant of the Marine Corps has stated, these
efforts tell the American people that a dollar invested in the
Marine Corps is a dollar well spent, and it is part of how we
distinguish ourselves as a professional warfighting
organization. Passing an audit makes us more ready to fight
when our Nation calls.
Readiness for the warfighter means being accountable for
our assets, knowing where they are and in what condition they
can be found at a moment's notice. It also means having
accurate, timely, and relevant information in the hands of
decision-makers so that the widest determinations can be made
to successfully carry out every mission. We remain committed to
transparency, to reform, to delivering a more agile accountable
financial enterprise that supports the readiness and lethality
of the Marine Corps.
Thank you, again, for the opportunity to speak with you,
and I look forward to your questions.
Mr. Sessions. Thank you very much.
The gentleman, Mr. Mansfield, you are recognized.
STATEMENT OF BRETT MANSFIELD
DEPUTY INSPECTOR GENERAL FOR AUDIT
OFFICE OF INSPECTOR GENERAL
U.S. DEPARTMENT OF DEFENSE
Mr. Mansfield. Chairman Sessions, Ranking Member Mfume, and
Members of the Subcommittee, thank you for inviting me to
discuss the Inspector General's role in auditing the DoD's
financial statements in the DoD's efforts to obtain a clean
audit opinion. It is my privilege to represent the dedicated
oversight professionals who make up the DoD Office of Inspector
General.
The financial statement audits performed or overseen by the
Inspector General are critically important for maintaining the
public's trust, ensuring accountability, and improving
operations. The 2025 financial statement audits are ongoing so
I cannot speak to their results. So, I will focus on 2024 and
the previous 7 years of audit.
As my prepared statement today, I provided Part 1 of our
annual report on understanding the results of the DoD's
financial statement audits. We plan to issue Part 2 next month.
These reports explain the DoD's responsibility to prepare
auditable financial statements and establish internal controls.
It also talks to the links between financial management and
operational readiness. These reports also explain the DoD OIG's
responsibility to independently audit the DoD's financial
statements.
Fiscal year 2024 marked the seventh full-scale audit of the
DoD's financial statements. And for the seventh year, it
resulted in a disclaimer of opinion, or as Ranking Member Mfume
referred to, a failed opinion. But that does not tell the whole
story. The agency-wide financial statements are a consolidation
of audit statements and information from across the DoD.
In addition to the agency-wide financial statement opinion,
auditors issues opinion on individual reporting entities. In
Fiscal Year 2024, 11 received clean opinions, one received a
qualified opinion, and 12 received disclaimers of opinion.
These disclaimers of opinion were issued because the DoD
entities continued to have unresolved accounting issues and
material weaknesses.
When consolidated into the agency-wide financial
statements, the entity level deficiencies resulted in the OIG
identifying 28 agency-wide material weaknesses. However,
individual reporting entities have made progress toward clean
audit opinions. In fact, as a fellow witness stated, the Marine
Corps maintained its clean opinion this year. DTRA and DLA
obtained clean opinions. In addition, 14 entities either closed
or downgraded at least one material weakness in Fiscal Year
2024.
While these entities, some of them are not material, but
when it comes to their full contribution to the agency-wide
financial statement opinion, it does mark progress. And as
individual reporting entities, like the services or Defense
agencies, as they become better and they reduce material
weaknesses and they have more solid controls over financial
reporting, so will the DoD overall.
Today, I want to highlight three things the OIG has
identified during the past 7 years of audit. First, the DoD
needs accountability at all levels for financial management.
Senior leaders have set the right tone at the top. However, at
the individual level, personnel do not consistently understand
how the work they do impacts financial statements.
For example, a sergeant in a warehouse who was focused on
the operational readiness may not grasp the financial impact of
receiving inventory and recording inventory or tracking
customer orders and maintaining reporting documentation and how
that ultimately relates to operational readiness and knowing
what you have, where it is, and the condition it is in.
Second, the DoD has an extremely complex systems
environment, with over 4,700 systems across the DoD. More than
400 of those systems are relevant to financial management,
which have at least 2,000 interfaces between them. Some of
these systems have been in use since the 1950's. The systems
are not always interoperable, meaning they cannot talk to each
other. And many of the systems require manual processes and do
not have effective controls.
Third, the DoD's policies and procedures for accounting do
not consistently match the capabilities of the systems they
use. When implementing new systems, DoD components do not
change their policies or procedures to align with the system's
capabilities. Rather, they make modifications to the system to
match their current procedures, negating the value of the
system investment.
Addressing these weaknesses requires continued effort and
significant coordination within and between each DoD entity.
The culture must continue to change so that all personnel
realize that financial management has a direct impact on
operational readiness and is everyone's business.
The DoD Office of Inspector General will continue to ensure
that DoD receives full and fair audits of its financial
statements to identify deficiencies in areas for improvement
and to provide actionable information and recommendations to
the DoD. Our commitment to enhancing the DoD's financial health
through independent oversight remains steadfast.
Thank you, and I look forward to your questions.
Mr. Sessions. Thank you very much. Timely in conclusion
also. Thank you very much, Mr. Mansfield.
Mr. Khan, you are recognized.
STATEMENT OF ASIF KHAN
DIRECTOR, FINANCIAL MANAGEMENT ASSURANCE
U.S. GOVERNMENT ACCOUNTABILITY OFFICE
Mr. Khan. Good morning, Chairman Sessions, Ranking Member
Mfume, and Members of the Subcommittee. Thank you for the
opportunity to once again testify on the Department of Defense
financial statement audits.
As you heard, there has been some progress since our last
update. The tone at the top continues to be supportive of the
audit effort with the goal of achieving an opinion by 2028.
This is one of Secretary Hegseth's three priorities.
The audit uncovers weaknesses in DoD management systems,
improves coordination, and guides better decision-making, and
it has led to positive results, both financial and operational.
It has also identified vulnerabilities which require heightened
attention by DoD management.
Today, I would like to highlight two key items: the
expansion of DoD financial management high risk area, to
include fraud risk management; and then the next steps in DoD's
audit approach to reaching auditability.
First, effective fraud risk management is essential to
protecting the resources entrusted to the Department. The lack
of an effective fraud risk management capacity combined with
the identified material weaknesses compounds DoD's failures to
establish a strong financial management internal control
environment. This condition increases opportunities for fraud
against the Department's vast resources.
DoD spends over a trillion dollars annually. It obligated
over $450 billion for contracting in Fiscal Year 2023, making
it the largest contracting agency in the Federal Government.
The scope and scale of DoD's financial activity makes it
inherently susceptible to fraud.
For Fiscal Year 2017 through 2024, DoD, themselves,
reported over $10 billion in confirmed fraud. The actual fraud
is likely much higher, as the full scale of fraud is not known.
Now to my second point, the next steps in DoD's approach to
auditability. Some financial management processes are critical
to supporting DoD's mission, ensuring its financial resources
are being spent wisely and that there are controls in place to
minimize fraud, waste, and abuse. It also helps ensure DoD has
reliable information on what supplies and assets it has, where
they are located, so the Department can achieve its mission
effectively and efficiently.
As a first step to auditability, DoD will need to have
reliable data for preparing its financial statements to
successfully pass the audit. The Marine Corps was able to
achieve its first opinion through effective, strategic planning
and managing milestones. They augmented the capabilities of the
new general ledger system, the DAI, with manual, labor-
intensive methods which smaller agencies previously used to
obtain a clean audit opinion. This strategy involves tracking
transactions piecemeal and relying on manual workarounds for
recordkeeping as the feeder systems and underlying controls are
unreliable.
The goal of an effective financial management system is to
provide reliable information on a timely basis for decision-
making. It is yet unclear for other larger DoD components if
they may successfully employ the Marine Corps approach. But
what is clear, in order to succeed, the Department must be
realistic of the resource needs to prepare auditable financial
statements and coordinate detailed planning, enforce timelines,
and manage complexity.
To reap long-term benefits and meet the intent of producing
financial statements, DoD must also strengthen internal
controls and modernize systems to cut fraud risk and eliminate
inefficient workarounds. DoD must build a repeatable, reliable
financial management process that consistently generates
timely, accurate data to support operations and strengthen
national defense. And if Congress were to monitor milestones,
ensure accountability, and adapt where necessary, without
affecting the 2028 audit goal, it would go a long way toward
helping the Department achieve auditability and build that
repeatable financial management process.
My written statement provides much more detail on these
matters. I am able to address your questions about them and on
the broader subjects of DoD financial management and the
benefits of financial statement auditability.
Thank you once again for the opportunity to testify. I will
be happy to answer your questions.
Mr. Sessions. Mr. Khan, thank you very much.
All three of you completed the task well within the
timeframe, and that I appreciate.
We have a number of Members who are spread out, not only on
the Democratic side but the Republican side, and so today we
will attempt to take those Members as they appear. I would
first offer time to the distinguished gentleman from Tennessee,
Mr. Burchett. The gentleman is recognized.
Mr. Burchett. When you said distinguished and gentleman, I
did not look up. But then when you said Tennessee, I realized
you were talking about me, Mr. Chairman.
Mr. Sessions. Yes, sir. Yes, sir.
Mr. Burchett. Thank you, Mr. Chairman and Ranking Member
Mfume. I appreciate you all being my friend. I have a few
questions.
Mr. Mansfield, is DoD's Fiscal Year 2026 budget going to be
higher than Fiscal Year 2025's budget?
Mr. Mansfield. That is my understanding, yes.
Mr. Burchett. And how much of that spending is mandatory
and how much is discretionary?
Ms. Mansfield. That past majority is discretionary.
Mr. Burchett. The spending has increased, but I assume that
DoD still has not completed a clean audit. Is that correct?
Mr. Mansfield. Correct.
Mr. Burchett. Why is the Marine Corps able to complete a
clean audit but no one else at the Pentagon is?
Mr. Mansfield. So, I think it goes back to some of what my
fellow witnesses were talking about. It was a deliberate and
long-term effort to get to that point.
Mr. Burchett. To get to the point of not being able to pass
an audit?
Mr. Mansfield. Being able to pass an audit. So, there was
about a 3-year cycle. It was a 2-year audit, but they
capitalized on a lot of work that was performed in previous
financial statement audits to look at accountability and how
testing results were coming out. They implemented a new system,
DAI, which has some inherent controls within it. And then they
validated the information within that through a substantive
testing effort.
So, it was a very labor-intensive effort, taking actually a
little over 2 years. It was actually extended past the November
deadline into, I think, February in order to actually get the
full financial statement audit testing completed. So, it was a
deliberate and, kind of, I think, very manual, what I refer to
as a brute force auditing approach.
Mr. Burchett. Right.
Mr. Mansfield. It is not your standard approach of doing
internal control testing.
Mr. Burchett. I see part of our problem here is we are
preaching to the choir. You know, 8 years they have not passed
an audit. They cannot account for over a half a trillion
dollars. This is the Pentagon, not the Marine Corps. Half a
trillion dollars, sir, is an aircraft carrier. Somewhere in the
Pentagon we have lost an aircraft carrier.
And that hurts me because I come from the most conservative
area. My daddy fought in the first Marine division. His colonel
was Chesty Puller. My momma lost her oldest brother fighting
the Nazis. My wife is a widow, and the biological father of my
child was a master chief on a Navy sub. So, the military runs
very deep in my family, and patriotism does as well.
But when we continue to feed this insatiable diet of waste
and abuse, it continues to, I think, weaken us and weaken us
from a fiscal standpoint and a military standpoint. We continue
down this path of an antiquated system where we vote for huge,
bloated budgets for powerful Members of Congress, and we have
programs, apparatus, machinery, everything imaginable that gets
mothballed the day we put it out.
And, Mr. Chairman, that has got to stop. We have got to
educate the public, and they need to be as angry as I am about
this, because we cannot continue down this path.
I think we are endangering our military. We are endangering
our men and women. Daddy used to say--he was quoting somebody
else--but he said, old men make decisions and young men die.
And when we are sitting here having half-a-billion-dollar
aircraft being proposed, and we are putting out--we are
allowing the Chinese to make the microchips for them that could
possibly turn off some of those aircraft mid-flight, we have
been told--it is not just some conspiracy theory that is talked
about. And we continue down this path of greed. And when we
have Members of this body that profit from this and are allowed
to do individual stock trades and continue down this, the
public does not trust us. And dadgummit, they ought not trust
us. We have not been good stewards of their money.
This is going to continue until we get off our high horse
and realize what the heck is going on. And what is going on
right now is, we are allowing people to steal from us because
we are hogs at the trough. Congress is hogs at the trough, and
I am convinced of that. You want to follow the dadgum money
trail? It goes right back to Congress.
And someday I hope some Members of Congress are led out of
here in handcuffs because of that. Because these men, they are
the ones having to come out and defend the indefensible. And I
want to salute the Marine Corps and you all's great heritage.
And my momma said after daddy died, if daddy had not been and
go fight in that war, she probably could not have been able to
live with him because he loved this country and he loved the
Corps. He loved Chesty Puller as well, but that goes a lot
deeper.
So, thank you all.
Sorry, Mr. Chairman, I went to preaching. I did not even
have a--we will have a special love offering when this is all
over with. We did not even have an altar call. But thank you
for allowing me to indulge, Mr. Chairman.
Mr. Sessions. The gentleman yields back his time. Thank you
very much.
The distinguished gentleman from Maryland is recognized.
Mr. Mfume. Thank you, Mr. Chairman. I know there are other
Members. I am going to just waive my time right now so that you
can start the process of acknowledging them.
I do want to thank the gentleman who just spoke for always
speaking real and from the heart in a very basic way to
underscore the work of this Committee and the challenge, the
challenge, to change the status quo.
I yield back.
Mr. Sessions. The gentleman yields back his time.
The distinguished gentlewoman from North Carolina is
recognized, Ms. Foxx.
Ms. Foxx. Thank you very much, Mr. Chairman, and thanks to
our witnesses for being here today.
Mr. Mansfield, in 2024, the DoD Office of Inspector General
reported that many of DoD's financial management systems remain
noncompliant with statutory standards for accurate, reliable,
and timely information. Although DoD aims to achieve compliance
by Fiscal Year 2028, the OIG found its plans insufficiently
aggressive, citing delays in retiring outdated systems. The OIG
recommended expediting the retirement and replacement of 23
systems, potentially saving nearly $728 million in future
funding.
Mr. Mansfield, in your opinion, why is the Department of
Defense not being more aggressive in retiring financial systems
that are not cost effective and that are not compliant with
statutory requirements?
Mr. Mansfield. It is a complex--it is a complex story line.
So, if you think about the number of systems they have----
Ms. Foxx. Simplify it. We have short time.
Mr. Mansfield. No, so what I am saying is there is a lot of
systems. In order to replace them--you have 400 systems that
you are relying upon. To replace all of those at one point in
time is very difficult. And so, what the Department has not
done, I do not think, the best job of is prioritizing which
systems to replace, those systems that have the biggest impact
on the Department.
So, if you think about the most material portions of the
financial statements and the systems relied upon for that,
prioritizing those and making real decisions on which systems
are going to be used in the long term. So, identifying those
enterprise resource management systems they want to use across
the board and requiring use of those and to stop letting
individual entities make their own decisions on the systems
they use. There needs to be more of a strategic approach to
that.
Ms. Foxx. Thank you very much.
Mr. Khan, according to GAO, the Navy identified 14 legacy
systems they have plans to retire, which would save the
Department approximately $103 million. Are the other branches
also running legacy systems that would be more cost effective
to eliminate, and how many legacy systems are there that are
costing the branches and the DoD money to use?
Mr. Khan. Yes, there are other components which are running
legacy systems which are not producing reliable information. I
do not have a number with me right now. I will get that to you
for the record.
Ms. Foxx. OK. What prevents the military services from
using the same financial systems?
Mr. Khan. In part, they have quite different requirements.
It is big, complex. They have to do this in stages. First, they
have to do individual offices, components. But it is the scale,
and there are different practices which keeps them using one
system for the entire Department.
Ms. Foxx. Another question, Mr. Khan. A DoD IG audit of
financial improvements and audit remediation contracts for the
military components found that from Fiscal Year 2018 to Fiscal
Year 2022, the DoD spent approximately $4 billion on audit
remediation in support with the goal of obtaining a clean
audit, but that the Department made minimal progress to correct
its financial management. What specifically was the money spent
on, and how does $4 billion yield only minimal progress for
achieving a clean audit?
Mr. Khan. Most of the money went for the project planning
and putting in the basics of the system so they could be
integrated with the existing feeder systems that go into the
entire component. Results were achieved, but it is primarily
getting the data clean so they can be reliable to pass the test
of an audit, and that takes time.
Ms. Foxx. Did we get our money's worth, yes or no?
Mr. Khan. It is difficult to say.
Mr. Mansfield. Ms. Foxx, I would like to submit--since we
produced that report--I would say I do not think we got our
money's worth, for what it is worth.
Ms. Foxx. Thank you. Thank you.
Mr. Khan, I am very concerned about the lack of fiscal
responsibility we have historically seen at the Department of
Defense. As you know, Congress has directed the Department to
have a clean audit option by 2028. To maintain public trust and
accountability as the Administration continues to cut costs,
the Department must ensure the independence of its outside
auditors whose mission is to objectively evaluate waste, fraud,
and abuse.
Mr. Khan, what steps is the Department taking to ensure its
outside auditors are able to help the Department achieve a
credible clean audit.
Mr. Khan. The outside auditors have been vetted by the DoD
IG. They are the companies which go through a pretty lengthy
procurement process. The audit firms, these are CPA firms who
have been registered as such, they also go through peer review.
So, their reports, whether it is in the Federal sector, state
and local sector, or private sector, they have been peer-
reviewed by other CPA firms to make sure they meet auditing
standards and professional standards.
Ms. Foxx. But they are not being compromised by the DoD as
they do the audits. They are allowed complete independence, are
they?
Mr. Khan. Yes, as far as we can tell, they are independent.
They are not compromised by management or anything I can see
from where we are.
Ms. Foxx. Thank you very much, Mr. Chairman. I yield back.
Mr. Sessions. The gentlewoman yields back her time. And I
want to thank the gentlewoman for coming back. I know she is
busy. And I know we have other Members that are busy too.
Now I would like to yield to the distinguished gentlewoman
from the state of Washington, Ms. Randall. The gentlewoman is
recognized.
Ms. Randall. Thank you so much, Mr. Chair.
You know, like the gentleman from Tennessee, I come from a
family with a strong military tradition, including a
grandfather who survived pretty heavy combat in the Korean war.
I also represent Naval Base Kitsap and the intermediate
maintenance facility. And my neighbors know how important it is
that our Department of Defense is operating at the highest
possible level, that we are efficient with taxpayer dollars,
and that we are effective with our delivery of the mission.
Mr. Khan, GAO has made many recommendations for DoD on
financial management so that we will not be in this position,
with this big graphic that Mr. Mfume had, in the future. Which
of these recommendations could have the greatest impact on
DoD's efforts to modernize its financial system.
Mr. Khan. Thank you for that question, Congresswoman
Randall. The key that comes to mind is DoD's planning and they
are managing their milestones. Those are the key issues which
keeps DoD having to move their timelines. They need to be more
forceful in maintaining their timelines, and the way they can
do that is better planning to have more granular information
with intra-milestones so they are not reaching the end of time
and then realizing that all the steps have not been completed.
The other one, if I may touch on very quickly, is the tone
at the top needs to be, continue to be, very, very consistent
to make sure that this remains a focus. And just like Mr.
Mansfield was saying, it has to go through all the levels, not
just the top, but actually people who are delivering some of
this accounting information, they also have to embrace the
similar mindset.
Ms. Randall. Thank you so much.
And, General Adams, you know, we are very grateful for the
Marine Corps' leadership and, you know, leading the branch
through a successful audit. What lessons from the Marine Corps'
work can we learn and apply to DoD more broadly so that we can
help DoD and the Navy and other service lines achieve a clean
audit by 2028?
Lt. Gen. Adams. Yes, ma'am. I want to echo my fellow
witness' comment there at the end about tone at the top. I will
tell you, on the 8th of November 2019, General Berger, who was
the Commandant at the time, put a memo out to the force, all
commanding generals, all commanding officers, all the way down
to the lowest level, lowest echelon of command, saying audit is
important. It is important because we need to know what we
have, in what condition it is, how much money we have been
given by the taxpayers to spend on warfighting capability and
accountability for every single penny.
And so, that tone from the top is actually what drove us to
success. And I think I see that happening in the Department of
the Navy with the current acting CNO, starting the tone at the
top with the Navy. I am very excited about their opportunity to
be the next one out of the gate with regards to a clean and
unmodified opinion.
And I would say, just to echo another part of what my
fellow witness said, was--he said planning milestones. I equate
that to accountability. And that was the Marine Corps' critical
way of getting to the clean opinion, is it was not just the
tone at the top, it was holding people accountable at all
levels of command on a monthly basis by the Assistant
Commandant of the Marine Corps in a public forum as to the
achievement of the milestones that were on the plan.
And so, we continue that to this day. And, again, I see
that reflected in the Navy as they go on their audit journey
and track toward a clean opinion here in the future.
Ms. Randall. Thank you so much, General. I mean, we are
talking about this audit as an important way that we steward
taxpayer dollars. But what way has the Marine Corps' recent
success in financial management translated into increased
mission readiness?
Lt. Gen. Adams. So, first of all, and foremost, I am the
CFO, right. And so, I work for the Commandant to ensure that
those valuable taxpayer dollars that are provided to the Marine
Corps are spent in the most effective ways. And so, the audit
in the financial lane, allows me to identify where the next
available dollar is spent on the most resultant readiness.
Two, I mean, we talk about the audit as it is financial,
but it is also accountability of equipment. And knowing, as a
warfighter assigned a mission, and in the case of the Marine
Corps, always having to be ready, the mission comes at the
middle of the night. Like, you need to go here and do that. The
audit framework, the data that is the byproduct of the audit,
allows the commander to know what he has, or she has, where it
is, in what condition it is, and will they be able to
accomplish the mission. So, that combat capability, that
lethality that is delivered through audit readiness is a
critical, important part.
It has also been able to allow us to identify very clearly
how much equipment actually costs. And in the past, you maybe
know what was programmed for a piece of equipment. But in
reality, once the equipment is delivered and then it is
enhanced and you put all the special systems on it, the actual
true cost of equipment is known.
And then, last, and probably most importantly, it is a
layer of accountability that we are accountable to the U.S.
taxpayer to make the best use of every dollar, every penny that
is provided to the Marine Corps. And we feel strongly that that
audit allows us to do that.
Thank you.
Ms. Randall. Thank you so much. Mr. Chair, I yield back.
Mr. Sessions. The gentlewoman yields back her time. Thank
you for the questions.
The distinguished gentleman from Texas, Mr. Gill, you are
recognized.
Mr. Gill. Thank you, Mr. Chairman, for holding this
hearing. It is nice to be part of a bipartisan hearing where I
think we can all agree on what our goals are here. And thank
you to the witnesses as well for taking the time here.
Mr. Mansfield, can you remind us what the Department of
Defense's budget was in 2017?
Mr. Mansfield. Off the top of my head, it was $909 billion.
Mr. Gill. In 2017?
Mr. Mansfield. Oh, in 2017----
Mr. Gill. OK. It was about $582 billion, roughly.
Do you know what it was in 2024?
Mr. Mansfield. Last year, $910 billion.
Mr. Gill. Nine-hundred-ten billion dollars. So, it is a
pretty substantial increase, is it not? That is a lot of money.
Mr. Mansfield. Yes.
Mr. Gill. And can you remind us if the DoD has ever passed
an audit?
Mr. Mansfield. At the agency-wide level, no.
Mr. Gill. Got it. And how many audits has it had recently?
Mr. Mansfield. Seven full-scale audits.
Mr. Gill. And how much do those cost?
Mr. Mansfield. So, this year, the cost of audit is right
around $211 million.
Mr. Gill. $211 million this year?
Mr. Mansfield. I think that is right. Yes.
Mr. Gill. So, it is a lot of money. That is a pretty
substantial audit, is it not?
Mr. Mansfield. It is.
Mr. Gill. Got it. And can you sort of walk us through some
of the high-level reasons why the DoD has not been able to pass
an audit?
Mr. Mansfield. Well, it goes back to what we have been
talking about here. Systems is one of the main things, right.
And then, more importantly, you can have the best system in the
world, but if the data that is within that system is not
accurate, reliable, and supported, the system doesn't matter.
So, it gets to the fundamentals of accounting and just
operationalizing good controls.
So, when you receive a shipment, you count how many things
are in it, you validate that the cost you were charged is what
you expected, you make sure you have got the right line of
funding to pay for that, and then you make sure it is in your
books in the appropriate--in the appropriate place so you know
where it is at and what the condition is. If those pieces are
missing, the systems are not going to matter.
And then, as Mr. Khan indicated, the other thing is that
the planning process for the Department. In the way it makes
decisions, they are made piecemeal. They are made throughout
the Department individually for the good of the individual
entity, not always with consideration for the overall DoD
approach.
And so, I think that is one of the reasons they have so
many problems setting milestones and sticking with them, is
that so many individuals making decisions for their own
interest versus stepping back and saying what is the best
system for multiple entities to be using at the same time.
Mr. Gill. So, you have a pretty good idea what needs to be
done in order to pass an audit at least at a high level. Can
you help us understand why we have not passed an audit
recently?
Mr. Mansfield. The lack of execution on the fundamentals,
is what I would say.
Mr. Gill. And who is held accountable for that? And what
are the consequences whenever the DoD fails to pass an audit?
Mr. Mansfield. Well, the real consequence is lack of
confidence from the taxpayer in the DoD's ability to account
for and spend its money.
Mr. Gill. Right, I agree. But within the DoD, for instance,
is there somebody who gets fired, who gets demoted, who sees
their bonuses decrease? Is there any actual action taken
against any individual or group within the DoD for failing to
pass an audit?
Mr. Mansfield. I cannot speak to individual personnel
actions. But I can say, in recent years, the DoD has added, at
least at the executive level, an element in the performance
plans for their executives related to financial readiness,
getting down to the ability to support individual transactions.
So, there is an accountability measure they have now. It is up
to the Department's management to use that effectively in order
to spur change, though.
Mr. Gill. Right. But in other words, we are talking about a
budget of hundreds of billions of dollars every single year
that--and large portions of that are unaccounted for. We do not
know where this money is going. This is taxing my constituents,
all of our constituents here, hardworking Americans, to keep
our country safe, which again is something we all agree with.
And we have not seen anybody fired for the--what seems to be,
appears to be largely a total lack of accountability. We have
not seen any punitive measures against anybody in the DoD. Is
that right?
Mr. Mansfield. Not that I am aware of.
Mr. Gill. Got it. You know, I think that as we are thinking
about hundreds of billions of dollars that should be keeping
the American people safe, we--the American people expect
transparency, they expect accountability, they expect to know
where their hard-earned tax dollars are going, and we have got
to see some progress here. So, thank you very much for your
time.
Mr. Sessions. The gentleman yields back his time.
I have just talked to Mr. Mfume about--I would like for us
to approach my time and his time together here. He did not have
an opportunity, as I did yesterday, to spend an extensive
amount of time with each of you on an individual basis. You
came in either by yourself or with your team, and we tried to,
what I think would be, learn a little bit more. And I would
like to go through some of this, not in long discussions, but
just things that we learned.
And one of them is that the Marine Corps counts on the Navy
to look at a huge part of their assets. And the Marine Corps
sent this message down within their structure, but the Navy had
to do a lot of the work too. General?
Lt. Gen. Adams. Mr. Chairman, that is accurate. And the
Army did as well. Eighty percent of the ammunition that the
Marine Corps owns is stored in Army facilities. And so, our
audit involved coordination, detailed coordination with
multiple services as well as support from OSD.
Mr. Sessions. And so, it was a complementary exercise that
these other departments of DoD went through to provide you the
information. Because it was important for the Marine Corps on
their mission that they have put up and down their management
lines.
General Adams, I also spoke with you yesterday about
something that has been brought up today, and that is, how
would a lieutenant general look at this, how would a major
general look at this, how would a brigadier general look at
this, how would--going up and down the line? And you indicated
to me that it could be looked at differently based upon a
master sergeant who was there who was responsible for things.
Would you mind going through, if you remember that exercise
from yesterday, just very quickly so that we get a heads-up on
the thinking of people?
Lt. Gen. Adams. Yes, Mr. Chairman. The idea of how the
audit connects to, affects, and impacts individual marines at
different levels is different. If you are down at the master
sergeant level, maybe the captain or major level, you are
working the systems, you are processing receipt of equipment,
you are entering into systems. And you may not understand fully
how that action ties in to the overall audit.
As you move up the echelon and you start to look at high
levels of command where there is large bits of--large portions
of responsibility for formations that have missions assigned to
them, understanding accountability of resources and
understanding status of equipment is critically important to
knowing whether you can accept a mission or not.
And then at the highest levels, my level, at the Deputy
Commandant level or the Commandant level, understanding that we
are responsible primarily to Congress as we engage at our level
with regards to our budget, with regards to other activities,
to know that we can, with full faith, say we know exactly where
every dollar that you have appropriated to us is spent and it
is spent on the most important work.
Mr. Sessions. Yes, sir, and yet I think there is more to
the story, and that is, the higher you get up, I will call the
organization. If they were planning a mission, they would have
to look at the various components of the Marine Corps. Perhaps
there would be aviation involved. Perhaps there would be ships
involved. They gained a foothold off knowing where things are
as a result of the exercise they have done, and with great
consistency they were able to know where those assets are. And
we will go through this in just a second.
Mr. Mansfield, tell us about how important it is for them
to understand that what they have gained is now the opportunity
at the end of the audit to say this is where we are, and it
begins the process of knowing where all these assets are, as
opposed to just an audit, but rather where they are, what shape
they are in, and to do the things that will be necessary that
they will move forward on, because they now have a snapshot of
that and then they can move forward knowing where they are and
it will start there.
Mr. Mansfield?
Mr. Mansfield. Yes. So, as Lieutenant General Adams had
kind of talked to earlier, the next step after kind of where
the Marine Corps is, is developing those internal controls. A
financial statement audit validates the accuracy of information
at a point in time, to your point. So, during that one date we
know how many assets there are. We know how much value they
are. We know what is left in terms of fund balance with
Treasury, the amount of money that is available left for the
Department to spend. The important part, then, is having the
controls throughout the year. At any point in time throughout
the year, you have the controls and the processes in place that
you can have that same level of confidence, 2 months later,
that when you look down through those financial records and you
look into those systems supporting the financial statements,
you have that same level of fidelity as to what you have, where
it is, how much money you have left, how much it costs, that
you have to have that throughout the year.
And so that is where that second part that was talked about
earlier really comes into play. It is those internal controls.
It is those repeatable processes. So, I am not sure if I have
captured the picture for you.
Mr. Sessions. But it is available for the entire
organization, then, to see?
Mr. Mansfield. Absolutely, up and down the organization.
Mr. Sessions. Up and down the organization. And so, this is
where, then--and, Mr. Khan, it may have been in your
conversation with me--about some of the weaknesses inherent
where there are organizations that provide support to the
military, have key data that we could not get, like the F-35.
And so, the military actually did not have as much visibility.
Could you talk about, Mr. Mansfield and Mr. Khan, your idea
about things being managed outside of the Department of Defense
within those agencies of knowing the assets, resources, and
things they have?
Mr. Khan. Thank you, Chairman Sessions. I have several
examples, and I think they are the ones you mentioned in your
opening statement and they pertain to the joint strike program.
One is the global spare pool that is managed by contractors.
And its duty has not been successful in getting the
information, the data they need, which they can feed into the
financial system. So, that is still somewhat unknown as to what
the accuracy of that information is.
The other one is government property held by contractors.
And it happens. It is not just in the Department of Defense.
There are other Federal agencies, such as Department of Energy,
where the contractor has complex equipment they have procured
on behalf of the government, and they manage that. Similarly,
at DoD, there is material amount which is held by contractors
and the information about the location cost condition is not
known for it to be reliable to be put into the financial
statement. So, those are two examples.
Mr. Sessions. I have great respect for our contractors, not
only that they manage this, that they know what they have got,
but is there a need, General, to make sure that inside you have
that necessary information to make decisions? For instance, F-
35s, where they are, how many we have got, what is operational?
Is that entirely held by a contractor, or does the Marine Corps
or the Navy in perhaps in a circumstance have visibility into
that? Is it different recordkeeping?
Lt. Gen. Adams. Mr. Chairman, this is an excellent
question, and I think to approach it generally, there are some
specific issues with the F-35 in the way the accountability of
the funds to the actual pieces creates complications that we
are trying to solve as a department and break that thing apart
so we understand when the Marine Corps puts money in as a pro
share toward a--let's say it is a spare pool or maybe even, I
would say on the platform side, knowledge and understanding of
platform E&C, existence and completeness, is very good. It is
the spare part pool and it is the way it is funded with
partners and so forth. Everyone puts money in, and it is not a
clean transaction that you have otherwise.
Now, with regards to equipment in the hands of contractors,
for both the Marine Corps audit and the Navy audit, I will give
you a specific example. If there is a weapon system that
requires an interval of maintenance and we have to send it from
our magazine to Lockheed Martin or to Raytheon or to some
contractor in order to maintain that device, we know exactly
when we send it to them, and our independent auditors, as a
part of our site visits, actually go to those contractors'
locations. They can account for where all those things are and
in what condition they are.
So, I would say there are some specific examples out there
that we have highlighted that are adverse and negative and we
are working on them, but there are many that are very good.
And the accountability, with regards to specific equipment
in the hands of contractors, is actually really well done, and
it was a part of our clean audit opinion. Very small part. Much
bigger in the Navy's, and they are working on that right now.
Mr. Sessions. Well, I have nothing but great confidence in
these contractors that have developed these systems, understand
the intricacies of them, the placement of them. What I am
specifically saying is, does that come up the chain to where
your leadership has an opportunity to know, OK, we need to
order more of these or we are planning an exercise, perhaps,
where we will need twice the number or a quick reevaluation?
As we know, in the Ukraine war, a good bit of our equipment
was utilized there, and was that well within the leadership of
DoD to know, if they had to plan more, what would be necessary
for their needs so that we did not put more out the door than
our needs? It is those kinds of things that I just want to make
sure at the top--forget the clean audit or not. The visibility
to see equipment and how it was managed, is that a problem?
Lt. Gen. Adams. It is not a problem in that there is
specific accounting categories for those types of systems that
are in the hands of contractors, whether it is for maintenance
or maybe it is construction in progress. Knowledge of that
system is known. It is in the systems reported, and it is
included as we--let us say we are talking munitions. We know
how many munitions we have on hand and then how many are due to
come out, if it is work in progress, or those that are, like,
not in our hands but maybe they need a few months of retrofit
or upgrades. That whole enterprise is known.
Mr. Sessions. So, it kind of goes back to my questioning
about--we talked about a lack of visibility into these
contractors, but really there is information that flows back
and forth on a regular basis. Do you then capture that?
And I really want to make sure here, because I really
think, perhaps on the F-35 model, there was information there
that went back and forth that maybe someone was not capturing
and then someone did not have visibility when they went to it.
Help me understand that, General and Mr. Mansfield?
Mr. Mansfield. Let me speak to the Joint Strike Fighter a
little bit, because, you know, the Marine Corps experience may
be a little different than the rest of the departments in that.
For the Joint Strike Fighter, there is information that is
supposed to flow back and forth between the contractor and the
DoD. It is not flowing back and forth. So, within the
contractor structure it should.
Mr. Sessions. It does not flow back and forth.
Mr. Mansfield. It does not.
Mr. Sessions. But it should?
Mr. Mansfield. And it should and it should be reconcilable.
So, when the DoD provides, in the case of Joint Strike Fighter,
spare parts or the contractor buys spare parts for use on the
Joint Strike Fighter, the contracts are written in such a way
that it requires the contractor to maintain full accountability
of those: value, location, condition. And when those are then
placed onto an aircraft, the value of the aircraft, you know,
it changes because of that.
But in terms of managing that spare parts pool, there is
contract requirements that require the contractor to provide
information on the amount of property it has in its possession
that is owned by the DoD. That information is not flowing back
to the DoD and making it onto its financial statements.
Mr. Sessions. So, how do you know whether a product was
delivered or not? And that goes to the point of our contracting
updating that Mr. Khan is aware of that we are now saying we
need more contracting information.
I have a vast interest in trusting our contractors. I
support them. I believe in them. But how are we going to fix
this back and forth if you never really ever received it? How
do you know what you are paying for?
Mr. Mansfield. Yes. I think it comes down to clear contract
requirements. What is expected of the contractor? Clear and
measurable deliverables, right. So--and then there is--you have
oversight on the government side. The government has to be able
to validate that what they have gotten from the contractor is
what they required. And then finally, the DoD has to have the
wherewithal to hold a contractor accountable when it does not
deliver.
I think in the case of the government property in the
possession of contractors, both Joint Strike Fighter as well
as--I have other opportunities I can talk about that if you
would like--other entities having similar issues, there is no
accountability for the contractor. You know, I am not seeing
them have significant----
Mr. Sessions. Is that deliberate on what might be the
Marine Corps' issues, or how do we get at this? I know we are
going to put a scorecard on it, but how do we then properly,
professionally, acknowledging the contractors' role, but put
DoD where they have got to be aware of what came in to update
their systems for their needs? Is that a black hole, so to
speak? Is that something we just have not figured out?
Mr. Mansfield. I think the Department is aware of it. Let
me restate that. The Department is well aware of the issue.
They are working on solutions. They have--working on plans to
do counts of the--especially for the Joint Strike Fighter
specifically. They are working on doing counts of the Joint
Strike Fighter spare parts pool so that it can have a good
starting point to then, hopefully, follow on with clear
contract requirements and deliverables that they can hold the
contractors accountable for going forward.
For our role here at the OIG, we actually have an ongoing
audit looking at the broader issue of government property in
the possession of contractors. When that is released, I would
be more than happy to come up and talk to you about it, let you
know what we are looking at from a broader perspective across
the DoD, outside of just the Joint Strike Fighter, though.
Mr. Sessions. General Adams, you were very proud of, as we
are, of the initiative that the Marine Corps has taken. You
acknowledged, I think, respectfully the help that you received
from the United States Army, United States Navy. Did they learn
a lesson in that process where they now have a baseline of what
they have and did they extend that to more than just your
assets?
Lt. Gen. Adams. Mr. Chairman, to answer this, there are
multiple lessons that were learned as a part of our audit by
the Army and the Navy. One of those lessons had to do with a
material weakness that all services had with regards to its
fund balance with Treasury. And it was a--I would call it an
issue that--it was prevalent for many decades that the fund
balance with Treasury beginning balance and the trial balance
of the services, it could never balance.
And think of the fund balance the Treasury has. That is the
checkbook that the bank has and can you write checks against
that amount. And through our audit process and, quite frankly,
some of our really, really sharp accountants that were assigned
to the project, figured out a way of adjusting one--accounting
for the previous balances that were just continuing to roll
over year after year, actually nailing them down, figuring out
where they were, settling them, and then changing the actual
way that they accounted the fund balance of Treasury in a very
technical accounting way that was shared with the Air Force,
shared with the Army, and shared with the Navy. And they were
able to mitigate that material weakness across all the--so, it
really was a game changer in terms of overall DoD progress
toward a clean opinion.
Mr. Sessions. And as you alluded to yesterday, a lot of
internal work that went on with that meticulous work that was
because the systems, an antiquated system, it took a lot of
workarounds.
Lt. Gen. Adams. It did, yes, sir. But it is really
important, we took 2 years to get our initial opinion, because
we had to establish our baseline and go and account for--you
know, the Marine Corps is this year 250 years old, and we have
some stuff out there that is almost that old. Everything has to
be accounted for in existence and in condition. And so, it took
that long to get there.
But once you establish that position and you follow the
processes, procedures, and controls that you do have, we would
like to have more advanced integrated systems that are
connected and talking digitally, but we do not, but that does
not stop us from continuing to maintain visibility very
accurately on our position. Data access is a byproduct of the
audit process that really helps me and other commanders make
decisions every day, because you have immediate access to--
whether it is financial data or it is data about readiness or
personnel--all of that information is available as a byproduct
of the audit.
Mr. Sessions. Mr. Mfume?
Mr. Mfume. I want to go back to Mr. Khan and Mr. Mansfield
briefly. Gentlemen, is it true that DoD has no one in place to
serve as the CFO?
Mr. Mansfield. There is an acting CFO at the moment.
Mr. Mfume. And no one has been nominated. Is that correct?
Mr. Mansfield. I do not believe so.
Mr. Mfume. So, we are just flying around in limbo at DoD
with no real person to give direction that people are
expecting.
One of the things that I listened to with Lieutenant
General Adams was his comment about how the Commandant looked
at this, gave a direct order through the ranks, this is where
we are going, ladies and gentlemen, and this is how we are
going to get there. And everybody understood that, and they
were able to stand up a model after establishing for 2 years a
baseline and then follow through.
I think the difference here is that there was a clear,
dogged, deliberate, determined, and designed order to get this
done, to not have the Marine Corps reflected like all these
other agencies again and again and again. That is the real
difference. It is leadership. It is leadership.
So, I find it absolutely stunning that the Air Force
General, C.Q. Brown, Jr., was fired within the last 100 days,
that Admiral Linda Fagan was fired the day after she was sworn
in. I do not understand that. And that Navy Admiral Lisa
Franchetti, the highest-ranking officer in the Navy, was fired
also.
So, if we are firing these people and we may have somebody
acting here or not acting there, how in the hell are we going
to expect that by 2028, not even to mention next year, that we
are going to have an audit that can be stood up and talked
about like we talk about the Marine Corps model?
This is a damn shame. This is the United States. We are
better than that. We just cannot keep making these excuses,
which is why I want to see Secretary Hegseth, and the Chairman
has also indicated we need answers. We need to know what is
going on. We just cannot keep doing this.
And it is amazing to me now, and correct me if I am wrong,
that no other leader of any other entity has said the same
thing the same way as the Commandant of the Marine Corps. And
by the way, give him my appreciation, if you will.
It is just sad. It is sad. Maybe that is why they say send
in the Marines or the Marines will lead the way, and I am not
being funny here, but I am being funny in some respects,
because this does not have to happen. We do not have to hold up
the sign again to see how many failed marks there are. These
are dollars that people pay every year in taxes. Taxpayers have
a right--whether they are Black, White, Jew, gentile, Asian,
Latino, Native American, male or female, it does not matter--to
believe that their tax dollar is going to be spent in a way
that it can be accounted for. We cannot account for what has
been happening. And this has been going on since 2018.
This is really a shame. It is an embarrassment, quite
frankly. And I would hope that DoD sees it that way. I would
like to think that we are going to have a CFO over there, but
God knows, since there is no nominee even out there to be the
CFO, how that is going to happen.
And, Lieutenant General Adams, you are very kind in your
remarks, and yes, there were some things that were learned by
the other branches, but I do not think they have taken them to
heart. And I would love to be proved wrong. But something tells
me that the Chairman and I will be here next year, if we are
not careful, talking about eight straight, going on nine,
failed audits, and it is just--it gets to me.
So, when the gentleman from Tennessee says he hopes that
some of us will be led out of here in handcuffs because we are
part of this crazy notion that we just keep feeding this beast
and feeding this beast, it will take care of itself, it will
not. It will not. And there are too many games being played by
Members of Congress, by private contractors and, to some
extent, by these divisions of the armed services that allow
this to go on.
I do not know how anybody can come here and say this is the
United States and this is why we are great and this is why we
care about tax dollars. You can take a buzz saw and a chain saw
and go through agencies, but you cannot find a way to force DoD
to come up with an audit. I do not understand that. And so, my
anger here is real. Life is too short to play these games. The
American public deserves more. We all deserve more than this.
So, I am done, Mr. Chairman, which is probably why I did
not have a whole lot to say a minute ago, because it just
bubbles over in me over and over and over again. And I just
want to, again, as I said, thank the Marine Corps for setting
the model of how to get something done when it has to be done
from the top straight down to the bottom. And I would hope and
pray that both the Secretary of Defense and the other branches
of the armed services learn from this. But also, be prepared to
talk to us about what is going on and why we cannot seem to
move this 800-pound gorilla.
I yield back.
Mr. Sessions. The gentleman yields back his time.
I would like for those that are witnesses today to
understand that Mr. Mfume and I still do work together. We see
a common goal. We will be, together, engaging the Department of
Defense at the highest level. We also recognize that the
changes that have been made in these areas--right, wrong, or
indifferent--were made, and it will be important for us to have
a commitment from those who are replacing them and are a part
of that moving forward team to be prepared for 2028.
I think you have given us a model. You have showed us how a
baseline is important and the attributes of success, not just
to the management of the organization, but to where all the way
up and down people have an idea about their preparedness with
lethality, as General Adams spoke about, but perhaps more to
the point and to make sure the confidence that the American
people have in that.
Both the gentleman and I, Mr. Mfume, represent a thinking
that we are not going to give up. I will say to the Department
of Defense, I encourage you to have a great attitude about us
approaching you. I would say to the leaders of each of these
areas that we will be engaging you. We do expect you to take
the time and to listen, and we do expect to hear back from you.
But we will not give up on this effort and we will do this
together.
So, to each of our witnesses, I want to thank you for being
here today. Today you have seen what I consider to be a
bipartisan subcommittee hearing that we believe we listened to
you. We believe that we appreciate and respect you. But it is a
task that is still left for us to complete as we prepare for
2028.
With that said, I want to thank each of our witnesses. And
this now--oh, we have got to do the 5 days.
So, with that, and without objection, all Members of this
Subcommittee have 5 legislative days within which to submit
material and additional written questions for the witnesses
which will be forwarded to the witnesses from the Committee.
If there is no further business, without objection, the
Subcommittee stands adjourned.
[Whereupon, at 11:46 a.m., the Subcommittee was adjourned.]
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