Officials at the Defense Department and the Department of Veterans Affairs are in very different places historically when it comes to audit readiness, but both agencies face similar challenges with legacy systems and data compatibility as they modernize their financial management processes.

The Pentagon has famously never passed an annual audit. DoD said it made incremental progress toward that goal last year. The Marine Corps made history as the first military branch to receive an unmodified audit opinion earlier this year.

Meanwhile, the VA last year achieved its 25^th clean audit in a row. Edward Murray, the principal deputy assistant secretary for management at the VA, said agency officials have that record in mind as they carry out its large-scale financial system modernization program.

“When we did our major system migration, we felt we had a lot of turf to protect,” Murray said on Federal News Network. “We were told, ‘Be successful with your new system implementation, and don’t lose our clean audit opinion.’”

But Murray said the VA isn’t just trying to maintain its previous success. He said the modernization effort is also attempting to build on previous audit findings to address some of the agency’s longstanding gaps and weaknesses.

One of the VA’s biggest gaps, Murray said, has been the lack of integration between acquisition and financial systems, respectively. The new system will integrate those two areas, such that auditors will be able to clearly link financial transactions back to procurement data and contracting actions.

The VA’s National Cemetery Administration recently became the first agency component to adopt that integrated system, Murray said.

“We’re looking to elevate where we were and streamline processes, prove internal controls, all those good things that you would expect once you’ve achieved a clean audit opinion level for some time,” Murray said. “Preserve it and grow it.”

Marine Corps audit success

The Navy and DoD as a whole, meanwhile, are taking a lot of lessons forward from the successful Marine Corps audit.

“It really highlighted some of the enterprise policy changes that we have to make to enable this,” Alaleh Jenkins, the principal deputy and assistant secretary of the Navy for finance management and comptroller at the Department of the Navy, said during the webinar.

“There are things that we do just because we have been always doing it,” she added.

A major factor is “change management,” Jenkins continued. The Navy is attempting to bring together several systems and processes under its Enterprise Resource Planning program. It’s a massive undertaking with numerous data and system integration challenges.

“The more interfaces we have with the legacy system, the more it complicates our situation for data quality,” Jenkins said. “It brought in a different level of attention to use of data analytics.”

DoD’s ADVANA big data analytics platform has been instrumental in helping military components bring their data together into one system, she said, including helping the Marine Corps address its audit issues.

“But it really came down to every chief warrant officer and the civilians in the Marine Corps and the leadership at all levels of the organization to get after it,” Jenkins said.

Financial data and digitization challenges

As DoD officials look to build on the Marine Corps’ success, they will have to address a long-standing challenge: the myriad IT systems across the department.

A recent DoD inspector general audit found the department operates at least 4,500 unclassified IT systems. The IG reports that DoD does not have a “complete or accurate” inventory of systems relevant to financial reporting.

Shawn Lennon, the finance deputy director and deputy chief financial officer at the Defense Logistics Agency, said managing data flows between disparate systems remains a major challenge for audit readiness.

“When you look at it from a financial reporting perspective, every time you transmit data between systems, there’s a risk that exists, that that data is not transmitted accurately, completely and timely between those two systems,” Lennon said.

Lennon also serves as director of DLA’s Finance Improvement Audit Remediation effort. He said the logistics agency is undertaking several “digital business transformation” initiatives, including upgrading the warehouse management system used to track parts and materiel across the military services.

“That’s a really key part of it — doing that true business process reengineering, challenging your assumptions, looking for more efficient ways to go to standard, and working with your customers,” Lennon said. “We work every day with the military services in one way or another to try to find solutions that’ll work for them. And for us, number one: to drive cost down. And number two: to improve financial reporting outcomes to drive audit opinions.”

DLA is also implementing a new identity, credential and access management system. And its in the process of adopting the Treasury Department’s “Government Invoicing” or “G-Invoicing” system.

The adoption of the Treasury Department service will be crucial, Lennon said, to addressing a major financial management challenge across the federal government: unsupported intergovernmental account balances.

“DLA sells a lot of materials — from clothing and construction, to weapons system parts, to fuel — to the military services and others throughout the federal government,” Lennon said. “In the future, all of those transactions will flow through that system to ensure that both trading partners, the buyer and the seller, have the same information and that we stay in sync.”

Similarly, as the Navy migrates data into its new ERP system, Jenkins said the department is working to ensure it has access to consolidated and timely data across functions like acquisition, HR and logistics. The Navy has created a special enclave of the DoD-wide ADVANA platform called “Jupiter” where a lot of those applications are becoming available. She said the Navy is spending a lot of time on “data cleansing” and ensuring the information is complete.

“Our data by itself, the finance data, it’s meaningless,” Jenkins said. “It is powerful when it’s connected with the rest of the data.”

One of the applications the Navy recently established is called the “Commanders Enterprise Resource Management Council.” The goal is to teach commanders how to use data analytics to improve budget execution and increase the department’s buying power, Jenkins said.

“Our data and analytics platform and automation is becoming part of our day to day journey,” she said. “And the more and more we can train our people to use that on a day to day basis, it helps us as a as a community and as an organization.”

Learning objectives:

• Modernizing financial management systems for enhanced efficiency
• Roadmaps and timelines for financial management systems transformation
• Achieving and sustaining audit-readiness through system collaboration and automation