WASHINGTON — The Pentagon is on a bumpy road to audit readiness in 2017, a deadline codified in the 2010 defense authorization law that is spurring the services' efforts to clean up their books.
In 2004, Robert Speer was tapped to establish financial controls in Iraq for $18.6 billion appropriated for reconstruction projects. Last year, he returned to the Army after four years in the private sector to helm its vast auditability efforts.
"I felt the audit is important, building of the new financial systems are important," Speer said. "The American public, I think, deserves to know where the funding is going and why they spend so much money, and why it costs to operate the Army the way it does. So we and the Department of Defense are making tremendous progress together."
Q. DoD is said to spend more than $2 billion every day. Why is it important to the DoD, the Army, and the public that the Army be auditable?
A. I think it is key to what we do. I have always said at the end of every single dollar that we spend is a soldier and his family. [We] need to make sure that we are getting the most that we can for it. But we need to make sure it is used effectively.
The mission is to build the budget, garner the dollars from Congress, and then provide those funds for execution, monitor execution across the Army, and make sure it is done in a cost-effective manner. We then report what we do and make sure that what we are reporting accurately reflects what the outcomes were. I think the value of doing the audit is better information for decisions, but also better use of the resources and better outcomes.
Q. What is the Army doing, and how does it fit into DoD's plans?
A. We are committed to meet the legislative requirement of being auditable by 2018. We have to have a certain auditable readiness by September of 2017. So we have a financial improvement plan that fits into the Department of Defense financial improvement audit readiness plan. Along that way, each service is doing it a little differently, but according to that same plan.
So the Army is going through a series of mock audits, which is really simulating what a true audit would be like but specifying the particular outcomes that we want.
Q, It sounds like a fire drill. What is it revealing?
A. Absolutely. It is much like a soldier training. When a soldier goes out in training, you want to see what the soldier does and how well they perform their individual task. You do after-action reviews to correct and make sure that collectively, when they perform a mission, they are able to do it better and better. The audit is the same way. We have gone through these mock audits and found deficiencies and highlighted those deficiencies openly, and then identified the corrective actions that are needed.
Q. How large are the deficiencies that we are talking about?
A. Some of them are minor, which in our terminology would be a minor correction that we have to do across the Army. Others are what are called material deficiencies, which are significant. An example would be an environment where people are just not doing things properly. You just have to highlight in standard operating procedures the right way to do it and correct that. Others are enforcement compliance folks who did not know the right way.
So for instance, in our systems, you may find a deficiency inside one of our financial systems that we need to correct in the system. Others are process, done by the soldiers or the civilians that do it, and you correct those. I have 28 years in the military, and what you find that you do best is what the commander checks. It is the same way in the audit.
Q. Was the Army ever auditable, and did something change over time? Were there higher standards at one point?
A. No, I do not think we were ever auditable. We have been driving toward it since the Chief Financial Officer Act came out. But we never had the right systems. So I think we did not have the systems that could record to a standard. Not to get too technical on it, but there are standards that the federal government puts out, the federal audit advisory boards and stuff, we were not able to meet those. So we have now established the systems to do that.
Q. You mean computer systems for recording this stuff? And is there a different one now?
A. Oh, absolutely it is different. It is a combination of the manual systems but mostly the old automated system we had prior to our full fielding of new enterprise resource planning systems. We had antiquated COBOL systems built in the early '70s.
Q. Did you find disparate systems that didn't communicate with one another?
A. That is absolutely true. A lot of people think it is just the financial managers. But it is the whole end-to-end processes. It brings in the human resources. It brings in the commander on the ground. You have to be able to properly record what the soldier has for their equipment onto the financial resource, which says how much property we have total and what is the status of that property. What is the maintenance value of it? For instance, a logistician stovepipe would be concerned about the maintenance of his equipment; does he have his equipment on hand? If that is not properly on those books and properly recorded into the financial systems, we cannot exactly tell how much is out there, how much is sustained, and how much resources they ask for to sustain it.
Q. Is equipment part of this as well? I know that the DoD inspector general had a fairly critical report of the Army's accountability of equipment retrograding from Afghanistan.
A. That is part of this. We have improved a lot of the issues that you will find inside that report. Part of what is important to a commander and a soldier is knowing what equipment they have on hand, how many they have, and what is the status and where is that equipment. So you can reduce the cost of ordering new equipment or having it available for the next deployment. So as we retrograde, we brought in all those times our systems that were not as robust as they are now. And they are still improving. We are still fielding our enterprise resource planning system called Global Combat Service Support System, GCCS Army, which is federated. It works in hand with our financial systems. So as we go through and improve that, we will be able to see greater visibility of the property.
Q. Was it a problem with systems, or was is a mindset where we have to be totally accountable for this?
A. I think it is a mixture, but I think also the commanders on the ground, the soldiers on the ground, for the most part they are doing what is right. They think they are doing it properly but the systems are not fixed to communicate together, nor are there the right processes and training to go with it. So I think that is where we have made tremendous, significant improvements.
Q. Where is the Army in relation to some of the other services?
A. There is almost a healthy competitiveness to what we are doing right now. We are following the same plan — the Financial Improvement Audit Readiness Plan the DoD and we put into. We have our financial improvement plan, which is part of that fire plan. I always like to say that the Army Corps of Engineers led the way. It is actually the largest single full-scope audit of an entity in the Department of Defense that was successful.
Q. Will the Army be 100 percent ready to be audited by the deadline?
A. I do not think you will ever be 100 percent. I think we will be fairly confident that we are doing the right things and that we have identified the actions that we need to take. I believe that with the current leadership commitment, the resources we have put against it, the involvement of commanders throughout the Army, that we will meet the goal of saying that we are ready to audit in 2017.
Q. Why should the Army, the public or the defense industry care about this?
A. It is for them, it is for the industry, it is for the American public, the taxpayer, [to show] that the money is being used properly. If you can accurately ensure that part of what is auditable is something that has been properly recorded, it is accurate, it is timely — so I think any of our contractors in the defense industries would want to make sure that they are being paid right, they are being paid on time, and it is accurate. We have spent a lot of time and effort trying to make sure that there are proper controls within the system to be able to show that.
Q. How big of a cultural shift is this?
A. Part of it was not that anyone was doing anything wrong before. We just did not have a culture of understanding what was right. It was a budget culture versus a cost culture. So it was a culture of "get the money executed" versus "what is the outcome for the dollars that you execute."
So the real outcome of the Army financial management optimization is an auditable world that provides better financial data for the decision-maker, for the commander, and ensures that the outcomes of where we spend our money for our soldiers, our civilians, and our leaders is what we expected and asked Congress for the money for.