A new report by a special panel of the House Armed Services Committee finds the Defense Department has come up with a solid plan for meeting its deadlines to become auditable, though meeting the goals will take sustained commitment by the military services and continued leadership from the secretary of defense.

It’s becoming a familiar storyline: the findings are strikingly similar to earlier opinions offered by the Government Accountability Office, and to the Pentagon comptroller’s own assessment of DoD’s path toward auditability.

“Although DoD has taken positive steps toward improving financial management and achieving audit readiness, more work must be done for the department to achieve this goal,” said Rep. Mike Conaway (R-Texas). “The strategy needs more detail and refinement in certain areas, but the department has a reasonable strategy and methodology.”

DoD is required by law to get its books ready for a full financial audit by 2017 and a partial audit by 2014.

To get there, Conaway’s panel found DoD’s components would have to demonstrate commitment to the department’s financial improvement plan, the Pentagon would have to have sustained leadership commitment, oversight and improved internal controls, and it would have to overcome the longstanding management challenges of geographic dispersion, workforce competency and implementing a new breed of enterprise resource planning systems.

As to the point of leadership commitment, it’s something Conaway said DoD now has.

“Leon Panetta is unprecedented,” he said. “It’s the first time ever for the secretary of defense to step into this arena and bring the full power and imprimatur of his office, and I don’t think you can overstate that. And then as that emphasis begins to percolate down into various levels, we have to make sure that this committee gets the same level of commitment from the next secretary. Part of this is momentum. I sense a momentum now that, even if we some changes in leadership, it’ll be easier to sustain that momentum.”

Panetta got the ball rolling on DoD’s accelerated audit deadline. He administratively imposed the interim 2014 date for an auditable statement of budgetary resources last year, which has since been written into law. He also ordered up a new audit strategy for meeting that deadline, which he signed off on in December.

DoD’s Chief Financial Officer and Comptroller Robert Hale, who is in charge of the Pentagon’s path toward auditability, said he found the panel’s report to be balanced and constructive. He also echoed the importance of leadership commitment to audits.

“But it’s critical that it also be shared by the service secretaries and chiefs,” he said. “They’ve got a lot of the effort to do. It’s got to be shared by the comptroller and the deputy chief management officer. Frankly, most comptrollers are budget junkies, and I am too. It’s very, very important, but budgets can push out everything else, because it can be so all-consuming.”

Responsibility of entire DoD workforce

But Hale said one of his biggest challenges is making sure DoD’s managers and workforce embrace the idea that audits are their responsibility too. DoD has just started developing auditability related evaluation criteria for members of its Senior Executive Service. Conaway said Congress needs to make sure those evaluations are taken seriously.

“At this time next year, we need to be asking whether people were held accountable,” he said. “Was their compensation adjusted one way or the other? If they got something done, it should be reflected in compensation. If they didn’t, they need to be held accountable.”

The department also is trying to make sure its SESers and rank-and-file workforce know what they need to know about audit readiness. Congress gave DoD some new authorities in the 2012 National Defense Authorization Act to create a course-based certification program for its financial management workforce, something Hale thinks would help a lot.

“We’ve already got a lot of training, but what we don’t have is a framework for that training,” Hale said. “Senior leaders need to be able to say, in a given job, you need to have certain courses, and one of them is audit readiness.”

Uncertain budgets a challenge in audit readiness

Hale said he’s grateful for that added training authority, but added that there’s another thing Congress could do to help DoD with audits: telling the department what it’s budget will actually be during the next year. The turbulence the entire government saw in 2011 was a huge distraction for financial managers, he said.

“In the past year, we’ve had no fewer than four threats of a government shutdown that required enormous planning efforts,” he said. “We were on a six-month continuing resolution which also required a great deal of management attention. And now the prospect of sequester is hanging over us.”

Rep. Adam Smith (D-Wash.), the House Armed Services Committee’s ranking member, made the point a bit more strongly.

“It is devastating when this body is unable to pass the normal appropriations and authorizing bills in some sort of regular order,” he said. “We’ve gotten to the point in the past couple years where that’s the norm. We can’t get an agreement, so we do a continuing resolution and then maybe that leads to a threatened shutdown, and that’s just the way things go. But it is horrific in terms of its impact upon the ability of the government to do its job. While we’re out there wrestling with constituents who are deeply dissatisfied with government, we need to understand that we’re just feeding into that by not being able to give the departments some predictability about when they’re going to get their money, whatever that amount of money is.”

This story is part of Federal News Radio’s daily DoD Report. For more defense news, click here.

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