▶ 0:27:24Mic check. One, two, one, two. Mic check. One, two, one, two.
▶ 0:28:37Subcommittee on government operations will come to order. Welcome everyone and to our guests who have taken time to be here as well as the uh 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 statement.
▶ 0:29:00Like to welcome everybody to today's hearing regarding updates to the Department of Defense's progress towards achieving a clean audit opinion. I would like to thank our witnesses for testifying today on this very important topic.
▶ 0:29:16I 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 fa faces and working towards a solution together to future. I've said this before, but financial transparency of the military is critical.
▶ 0:29:38It's critical for the military and it's 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 comp confident in the Department of Defense's ability to protect American assets and interest if they cannot properly manage their expenses or assets perhaps not even knowing where they are.
▶ 0:30:03We're 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 billion, half the discretionary spending of the United States, but still holds the distinction of being the only federal agency that has never passed a comp comprehensive audit.
▶ 0:30:30The Department of Defense has more than 28 components, and it's 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% of DoD's total assets and at least 64% of DoD's budget. It's important to note that this is more than just a paper exercise.
▶ 0:31:00It is understanding where your assets are and how m much taxpayer funding is left. It's 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 receive the most amount of money and their the most assets account for the areas where they are struggling to track their spending and assets.
▶ 0:31:31Balancing the checkbook is more than just military preparedness. I believe it goes handinand both understanding where the checkbook is, where the assets are and military preparedness. Financial security is national security.
▶ 0:31:49The joint strike fighter program is a multi-service multinational program that will cost more than two trillion dollars over the lifetime according 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.
▶ 0:32:18Not 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 w were unable to quantify the amount of these misstatements.
▶ 0:32:44This means that there are monetary and gaps. Last September, the subcommittee with the help of GAO created a scorecard to track to track DoD's progress towards achieving a clean audit opinion.
▶ 0:33:01Rather than continuing to say that DoD isn't doing a good job making progress towards achieving a clean audit, we wanted something that would show that they were in fact on the road and I think we were here today to fixing not only those things that are internally uh imperative to this, but good ideas from certain elements within DoD that are taking the lead.
▶ 0:33:29This 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 discuss the progress that DoD has made and the challenges they face.
▶ 0:33:53As 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 a new section of the scorecard that focuses on fraud risk management. We've talked about fraud prevention for many years.
▶ 0:34:16So 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 important part of fraud prevention. Seeing inside that is essential. What we've seen over the years is that DoD has struggled in maintaining and updating systems.
▶ 0:34:42And these systems are critical if we're 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's strong significant progress by 2026. That's why we're here. We're having this discussion. But it also is a commitment by the gentleman, the ranking member, Mr.
▶ 0:35:12Infume, 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. Fume and I plan to visit the Pentagon to lead that discussion with the Secretary of Defense.
▶ 0:35:37We hope that they will see this as an opportunity to listen and learn to take some of what we're hearing today, but to move forward together. And I would now yield for the gentleman's time for an opening statement. Mr. Infume, gentleman's Thank you very much. U 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 uh Chairman Sessions for doggedly following up on this issue.
▶ 0:36:07He and I feel very very strongly as some of you know that we just can't keep going down this street. I want to thank Mr. Khan, Mr. Mansfield. Good to see both of you again. Last September, we held uh the second hearing to address financial accountability in the Department of Defense. And 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 departmentwide audit.
▶ 0:36:37Uh, it's 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 departmentwide audit.
▶ 0:36:55A clean audit is not judging the merits of DoD spending, which we do not do at this committee, but it's asking what is that spending and how do you explain that spending and the accountability of it. DoD has failed uh to meet this basic standard to provide proper evidence to show that they accurately accounted for their finances. Now, let me be redundant.
▶ 0:37:21There have been seven, if you're 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 at me that it happens and continues to happen and and I want to underscore that. Um I'm not really into a lot of graphics, Mr.
▶ 0:37:46Chairman, but this time uh 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's embarrassing. It's the greatest country on the face of the earth and we can't even get an audit completed.
▶ 0:38:10So, 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. And I can't stress enough u my thanks to the chairman for working on this issue together. So um while the department of defense has still not produced a clean audit, there was significant progress under the previous administration.
▶ 0:38:36That progress was spurred by Secretary Lord Austin's focus on modernizing financial systems uh which helped to lead the US Marine Corps to adopting a two-year audit approach and a achieving a clean audit opinion for fiscal year 2023 and 2024. God bless the United States Marines. That progress is critically important.
▶ 0:39:00And so I think it's 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 four trillion dollar in total assets that make up our defense budget.
▶ 0:39:21In fiscal year 2024, US taxpayers entrusted $99 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.
▶ 0:39:52Those three alone comprise 90% 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've been told over and over again. That is a an accounting firm term, excuse me, for the areas in which the Department of Defense lacks internal controls over financial reporting.
▶ 0:40:16Material weaknesses year after year, these material weaknesses cause 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.
▶ 0:40:45So, 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'm convinced that until the department can restore full faith and accountability for these critical dollars, I can't justify increasing their budget even further, especially in light of the pressing need
▶ 0:41:15for funds and so many other areas of overall spending where we've taken a chainsaw and cut the hell out of it. It's 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.
▶ 0:41:44Right now, we're seeing a distinct lack of leadership, especially in the realm of accountability. And I join the chairman in expressing the hope that either Secretary Hegsth will come before this committee and talk to us about that accountability and what's being done or that we will find ourselves at the Pentagon trying to again get some real clear information about the struggles at DoD.
▶ 0:42:10Uh it's our largest federal agency, as I've said, employing more than 3.4 million Americans, including 1.3 million active duty service members. And in their efforts to keep our nation safe, we must ensure our service members have the most sophisticated modernized technology and systems to eliminate financial er errors.
▶ 0:42:30Just like we try 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's fair to say that Congress can't allow another failed audit to go by. Don't want to be here next year talking about the eighth year in a row as we move toward this 2028 mandate.
▶ 0:43:00It'd be good to see just a little bit of progress uh on that road. And personally, I've not seen it. But I want to thank all of those who've 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 and I yield back.
▶ 0:43:29Gentlemen yields back his time. I would like to reinforce for our witnesses that are today and those of the staffs that are here to recognize that Mr. Fume and I are doing this across the entire government. It is not just the department of defense.
▶ 0:43:48It is areas where some 300 to500 billion dollars in our immediate past uh was the guess from uh OM and CBO about the amount of money that went to misdirected payments and both both Mr.
▶ 0:44:05Fume and I are together on this him using not just a strong voice uh 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.
▶ 0:44:23Fume, I want to thank you and as we said last year, we would do this year, as we're saying today, we will be pleased to show up at the Pentagon, make those arrangements, and make sure that uh at the highest levels of the Department of Defense. They understand the work that has gone on today must be prepared and continued for 28.
▶ 0:44:46I'm pleased to welcome our witnesses for today representing the United States Marine Corps, Lieutenant General James III, the gentleman, Mr. Brett Mansfield, and Mr. As Leaf Khan. Lieutenant General Adams is deputy command commandant for programs and resources in the United States Marine Corps. Mr.
▶ 0:45:10Manfield is the deputy inspector for the government for audit at the US Department of Defense Office of the Inspector General. Mr. Khan is the director of financial management assurance at the United States 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 9G. The witnesses will raise their right hand to be sworn.
▶ 0:45:39Do you solemnly swear or affirm that the testimony that you're about to give is the truth, the whole truth, and nothing but the truth? So help you, God. Let the record reflect that each of the witness has answered in the affirmative. We appreciate each of you being here today and appreciate also that um what the testimony that you're you may be seated. Thank you.
▶ 0:46:03We appreciate that the what the testimony you're give today would be along the line of making sure that this subcommittee hears you fully. With that said, we normally extend five minutes. I've notified each of you that if it takes you six or seven minutes, we're all ears. We want you to make sure you're given the time so this subcommittee hears from each of you. As a reminder, the buttons that are in front of you, uh you would push them.
▶ 0:46:33uh and then we would uh be able to hear you. I now recognize the distinguished gentleman, Lieutenant General Adams for his opening statement. Gentleman's recognized. Chairman Sessions, Ranking Member Infume, and distinguished members of the subcommittee. Thank you very much today for the opportunity to appear before you.
▶ 0:46:55It is an honor to represent the United States Marine Corps in my capacity as the services 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 maintain that opinion for the fiscal year 2024.
▶ 0:47:22These are significant milestones not only for our service but for the Department of Defense. They reflect many years of determined effort in an enterprisewide commitment to accountability and stewardship. I want to emphasize that while we're proud of our achievements, we do not take them for granted.
▶ 0:47:43While an unmodified audit opinion reinforces the Marine Corps's 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.
▶ 0:48:01These teams continue to work tirelessly to properly 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.
▶ 0:48:31Unmodified 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 one but easily lost. Sustaining audit success within DoD requires recognizing that we cannot operate in silos.
▶ 0:49:00The defense department presents a complex audit environment characterized by numerous IT systems, varying operational procedures, and common deficiencies across components. To achieve and maintain DoDwide 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
▶ 0:49:31ultimately 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 data analytic standards.
▶ 0:49:52These antiquated systems, some of which are decades old, require manual intervention, reconciliation, and workarounds that add complexity, introduce risk, and slow down 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 war fighters.
▶ 0:50:19These individuals rely on accurate, timely information to make missionritical 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 audibility across the military services demands a shift in how we conduct business within DoD.
▶ 0:50:40A 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's innovative approach to utilizing a two-year audit to attain its first opinion is related to the challenges with the financial reporting timeline.
▶ 0:51:01Our 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.
▶ 0:51:26We need a realistic time frame that allows for thorough and accurate financial reporting. As the commonant 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.
▶ 0:51:51Readiness for the war fighter means being accountable for our assets, knowing where they are and in what condition they are 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.
▶ 0:52:19Thank you again for the opportunity to speak with you and I look forward to your Thank you very much the gentleman, Mr. Mansfield. You're recognized. Chairman Sessions, ranking member MMA 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.
▶ 0:52:49The 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'll focus on 2024 in the previous seven years of audit. As my prepared statement today, I provided part one of our annual report on understanding the results of the DoD's financial statement audits. We plan to issue part two next month.
▶ 0:53:17These reports explain the DoD's responsibility to prepare audible financial statements estab and establish internal controls. It also talks to the links between financial management and operational readiness. These reports also explain the DoD's responsibility to independently audit the DoD's financial Fiscal year 24 marked the seventh full-scale audit of the DoD's financial statements and for the seventh year it resulted in a disclaimer of opinion uh or as
▶ 0:53:47um rank member referred to a failed opinion. Um but that does not tell the whole story. Uh the agencywide financial statements are a consolidation of audit statements and information from across the DoD. In addition to the agencywide financial statement opinion, auditors issues opinions on individual reporting entities. In fiscal year 24, 11 received clean opinions, one received a qualified opinion, and 12 received disclaimers of opinion.
▶ 0:54:15These disclaimers of opinion were issued because the DoD entities continue to have unresolved accounting issues and material weaknesses. When consolidated into the agencywide financial statements, the entity level deficiencies resulted in the OIG identifying 28 agencywide material weaknesses. However, individual reporting entities have made progress towards clean audit opinions. In fact, as as uh a fellow witness stated, the Marine Corps maintained its clean opinion this year.
▶ 0:54:44Uh Ditra and DA obtained clean opinions. Uh in addition 14 entities either closed or downgraded at least one material weakness in fiscal year 24. While these entities uh some of them are not material when it comes to their con their full contribution to the agencywide uh 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
▶ 0:55:15uh solid controls over financial reporting, so will the DoD overall. Today I want to highlight three themes the OIG has identified during the past seven 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.
▶ 0:55:39For example, uh a sergeant in a warehouse who is focused on the operational readiness may not grasp the financial impact of receiving inventory and recording inventory or tracking customer orders and maintaining supporting documentation and how that ultimately relates to um operational readiness and knowing what you have, where it is, and the condition it's in. Second, the DoD has an extremely complex systems environment with over 4,700 systems across the DoD.
▶ 0:56:04More 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 1950s. 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 controls. Third, the DoD's policies and procedures for accounting do not consistently match the capabilities of the systems they use.
▶ 0:56:32When implementing new systems, DoD components do not change their policies or procedures to align with the systems 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 sufficient coordination, significant coordination within and between each DoD entity.
▶ 0:56:55The culture must continue to change so that all personnel realize that financial management has a direct impact on operational readiness and is business. The DoD office of inspector general will continue to ensure the DoD receives full and fair audits of its financial statements to identify deficiencies and 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.
▶ 0:57:25Thank you very much. Uh timely uh in conclusion also. Thank you very much Mr. Manfield, Mr. Khan, you're recognized. Good morning, Chairman Sessions, Ranking Member Mumi, 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.
▶ 0:57:49The 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 Hescott's three priorities. The audit uncovers weaknesses and 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.
▶ 0:58:18Today I would like to highlight two key items. The expansion of DoD financial management high-risk area to include frost fraud risk management and then the next steps in DoD's audit approach to auditability. First, effective fraud risk management is essential to protecting the resources entrusted to the department.
▶ 0:58:41The lack of an effective fraud risk management capacity combined with the identified material weaknesses compounds DD'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 dollar annually.
▶ 0:59:04It 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 24, DoD themselves reported over 10 billion in confirmed fraud.
▶ 0:59:28the 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. Sound financial management processes are critical to supporting DoD's mission. Ensuring its financial resources resources are being spent wisely and that there are controls in place to minimize fraud, waste, and abuse.
▶ 0:59:55It also helps ensure DoD has reliable information on what supplies and assets it has, where they're 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.
▶ 1:00:24They augmented the capabilities of the new general ledger system, the DAI, with manual laborintensive methods, which smaller agencies previously used to obtain a clean audit opinion. This strategy involves tracking transactions peacemeal and relying on manual workarounds for recordkeeping as the freed systems and underlying controls are unreliable.
▶ 1:00:49The goal of an effective financial management system is to provide reliable information on a timely basis for decision-making. It's yet unclear for other larger DoD components if they may successfully employ the Marine Corps approach.
▶ 1:01:03But 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. Duty must also strengthen internal controls and modernize systems to cut fraud risk and eliminate inefficient workarounds.
▶ 1:01:31Duty 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 towards helping the department achieve auditability and build that repeatable financial management process.
▶ 1:02:01My written statement provides much more detail on these matters. I'm 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'll be happy to answer your questions. Mr. Khan, thank you very much. All three of you uh completed the task well within the time frame and that I appreciate.
▶ 1:02:28uh 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 uh take those members uh as they appear. I would first uh offer time to the distinguished gentleman from Tennessee uh Mr. Merchant gentleman's recognized when you said distinguished and gentleman I didn't look up but then when you said Tennessee yes sir I realized you were Mr. Chairman thank you Mr. chairman and um ranking member Mafumi.
▶ 1:02:58Appreciate y'all being my friend. Um have a few questions. Um Mr. Mansfield, um is DoD's fiscal year 26 budget going to be higher than fiscal year 25's Uh that is my understanding. Yes. And how much of that is spending is mandatory and how much is discretionary? Uh the vast majority is discretionary. Uh, the spending has increased, but I assume that DoD still has not completed a clean audit.
▶ 1:03:28Is that correct? Correct. Why is the Marine Corps able to complete a clean audit, but no one else at the Pentagon is? So, I think it goes back to uh some of uh what my fellow witnesses were talking about. It is it was a a deliberate and uh long-term effort uh to to get to that point uh to get to the point of not being able to pass an audit of being able to pass an audit. Um so there was about a three-year cycle.
▶ 1:03:58It was a two-year audit, but they capitalized on a lot of work that was performed in uh previous uh financial statement audits to look at uh accountability and how testing results were coming out. uh they implemented a new system DAI which uh has some inherent controls within it. Uh they and then they validated the information within that through a substantive testing effort. So it's a very labor intensive uh effort uh taking actually a little over two years.
▶ 1:04:26It was actually extended past the November deadline into I think February uh in order to actually get the full uh financial statement uh audit testing completed. Uh so it was a deliberate and and kind of I think very manual what what I refer to as a brute force auditing approach. Uh it's not your standard approach of doing uh internal control testing. I see part of our problem here is we're preaching to the choir. You know eight years they have not passed an audit. Um they can't account for over a half a trillion dollars.
▶ 1:04:56It's the Pentagon, not the Marine Corps. I mean a half a trillion dollars, sir, as an aircraft carrier. Somewhere in the Pentagon, we've lost an aircraft carrier. And that that hurts me because I'm I come from this conservative area. My daddy fought in the first marine division. His colonel was Chesty Puller. My mama lost her oldest brother fighting the Nazis. Um uh my my wife is a widow and the biological father of my child was a master chief on a Navy sub.
▶ 1:05:26So 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, uh, weaken us and weaken us from a fiscal standpoint and a military standpoint.
▶ 1:05:46We 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 mothballled the day we put it out. And Mr. Chairman, that has got to stop.
▶ 1:06:09We 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're endangering our military. We're endangering our men and women.
▶ 1:06:22Daddy used to say, he was quoting somebody else, but um he said, "Old men make decisions and young men die." And when we're sitting here having half a billion dollar aircraft being proposed and we're putting out, we're allowing the Chinese to make the microchips for them that could possibly turn off some of those aircraft mid-flight. We've been told this is not just some conspiracy theory that is talked about.
▶ 1:06:50And 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 dad gamut, 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.
▶ 1:07:17And what is going on right now is we're allowing people to steal from us because we're we're hogs at the trough. Congress is hogs at the trough. And I'm convinced of that. You want to follow the dad 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're the ones having to come out and defend the indefensible. And I want to salute the Marine Corps and your all's great heritage.
▶ 1:07:48And my mama said after daddy died, if daddy hadn't been able to go fight in that war, she probably couldn't have been able to live with him because he loved this country and he loved the core. He loved Chesty Puller as well, but that goes a lot deeper. So, thank y'all. Sorry, Mr. Chairman. I went to preaching. I didn't even have an We'll have a special love offering when this is all over with. We didn't even have an altar call, but thank you for allowing me to indulge, Mr. Chairman, gentleman yields back his time. Thank you very much. Distinguished gentleman from Maryland's recognized.
▶ 1:08:23Thank you, Mr. Chairman. I I know there are other members. I'm going to just wave my time right now so that uh you can start the process of uh acknowledging them. I do want to thank uh the gentleman who just spoke uh for always uh 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. Gentleman yields back his time.
▶ 1:08:53The distinguished gentleoman from North Carolina is recognized Mrs. Fox. 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 re remain non-compliant with statutory standards for accurate, reliable, and timely information.
▶ 1:09:18Although 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 ex expediting the retirement and replacement of 23 systems, potentially saving nearly $728 million in future funding. Mr.
▶ 1:09:41Mansfield, 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? It's a complex it's a complex storyline. So if you think about the number of systems they have as simplify in our we have short time. No.
▶ 1:10:03So what I'm saying is there's a lot of systems and in order to replace if you have 400 systems that you're relying upon to replace all of those at one point in time uh is very difficult and so what the department hasn't done I don't think the best job of is prioritizing which systems to replace those systems that have the biggest impact on the department.
▶ 1:10:21And so if you think about the most material portions of the financial statements and the systems relied upon for that prioritizing those uh and making real decisions on which systems are going to be uh used in the long term. So identifying those uh enterprise resource management systems they want to use across the board and requiring use of those and and stop letting individual entities uh make their own decisions on the systems they use. There needs to be more of a strategic approach to that.
▶ 1:10:50Thank you very much, Mr. Khan. According to GAO, the Navy identified 14 legacy systems that it plans to retire, which would save the department approximately 103 million. Are the other branches also running legacy systems that would be more coste effective to eliminate? And how many legacy systems are there that are costing the branches and the DoD money to use?
▶ 1:11:15Yes, there are other components which are running legacy systems which are not producing reliable information. Um, I don't have a number with me right now. I will get that to you for the record. Okay. What prevents the military services from using the same financial In part, they've got different requirements. Uh, it's big complex. Uh, they have to do this in stages.
▶ 1:11:41First they have to do individual offices components but it's the scale and their different practices which keeps them using one system for the entire department. Another question Mr. Con a DoD 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 and
▶ 1:12:11support 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?
▶ 1:12:31Mo most of the money went for uh the project uh planning and putting in the basics of a system so they could be integrated with the existing uh freed systems that go into the entire uh component. uh results were achieved but it's primarily getting the data clean so they can be reliable to uh pass the test of an audit and that takes time. Did we get our money's worth? Yes or no?
▶ 1:13:00Uh it's difficult to say. Miss Fox, I'd like to submit that since we produced that report. I would say I don't think we got our money's worth. Thank you. Thank you. Uh Mr. Khan, I'm very concerned about the lack of fiscal responsibility we've historically seen at the Department of Defense. As you know, Congress has directed the department to have a clean audit option by 2028.
▶ 1:13:23To 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.
▶ 1:13:39Con what steps is the department taking to ensure its outside audits are auditors are able to help the department achieve a credible clean The outside auditors have been vetted by the DODIG. There are the companies uh which uh go through a pretty lengthy procurement process.
▶ 1:14:03uh the audit firms uh these are CPA firms who have been uh registered as such they also go through peer review uh so their reports whether it's in the federal sector state and local sector or private sector they've been peer reviewed by other CPA firms to make sure they meet auditing standards and professional standards but they're not being compromised by the DOT as the DoD as they do the audits.
▶ 1:14:32They're allowed to complete independence. Are they? Yes. As far as we can tell, they are independent. They are not uh compromised by management or um anything uh I can see from where we are. Thank you very much, Mr. Chairman. I yield back. Gentlewoman yields back her time. I want to thank the gentleman gentle woman for coming back. I know she is busy and I know we have other members that are busy too.
▶ 1:15:01Now I would like to yield to distinguished gentleoman from the state of Washington, Miss Randall. Gentleman's recognized. Thank you so much uh Mr. Chair. You know, like the gentleman from Tennessee, I come from a family with strong a strong military tradition, including a grandfather who survived pretty heavy combat in the Korean War.
▶ 1:15:23I also represent Naval Base KidsPap and the intermediate maintenance facility and my neighbors know how important it is that our Department of Defense is operating um at the highest possible level, that we are efficient with taxpayer dollars and that we are effective with our delivery of the Um Mr.
▶ 1:15:49Cono has made many recommendations uh for DoD on financial management um so that we won't be in this position with this big graphic that Mr. Enfume had um in the future. Which of these could h recommendations could have the greatest impact on DoD's efforts to modernize its financial system? Um, thank you for that question, Congressman Randall.
▶ 1:16:19The key that um that comes to mind is uh DoD's planning and their managing their milestones. Those are the key issues which uh keeps DoD having to move their timelines. uh they need to be more forceful in maintaining uh their timelines and the way they can do that is better planning to have more granular information uh with intram milestones so they're not reaching the end and the end of time and then realizing that all the steps have not been completed.
▶ 1:16:49Uh 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 uh Mr. me was saying it has to go through all the levels not just the top but actually people who are delivering uh some of these um accounting information they also have to embrace the similar mindset thank you so much um and General Adams
▶ 1:17:20you know I we're very grateful for um the Marine Corps's leadership and um you know leading leading the um the branch through a successful uh audit.
▶ 1:17:35What lessons from the Marine Corps's work can we learn and apply to DoD more broadly so that um we can help DoD and the Navy and other service lines achieve a clean audit by 2028? Yes, ma'am. I I want to echo my fellow witnesses comment there at the end about tone at the top.
▶ 1:17:56I will tell you on the 8th of November 2019, General Burgerer who was the common 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's important because we need to know what we have in what condition it is, how much uh money we have been given by the taxpayers to spend on war fighting capability and accountability for every single penny.
▶ 1:18:24And 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 uh current acting CNO starting the tone at the top with the Navy. And I I'm very excited about their opportunity to be the next one out of the gate with regards to a clean an unmodified opinion. Uh and I would say just to echo uh another part of uh what my fellow witness said was he he said planning milestones. I equate that to accountability.
▶ 1:18:53And that's that was the Marine Corps's critical way of getting to the clean opinion is it wasn't just the tone at the top. It was holding people accountable at all levels of command on a monthly basis by the assistant comment 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.
▶ 1:19:15And again, I see that reflected in uh the Navy as they go on their audit uh journey and and track towards a clean opinion here in the future. Thank you so much, General. And um what I mean, we talked we're talking about this audit and as an important uh way that we steward taxpayer dollars.
▶ 1:19:37But what ways has the Marine Corps's recent success in financial management translated into increased mission um first of all and and foremost I'm I'm the the CFO, right? And so I uh work for the commonant to ensure that those valuable taxpayer dollars that are provided to the Marine Corps are spent in the most effective ways.
▶ 1:20:02And so the audit in the financial lane allows me to identify where the next available dollar is spent on the most uh resultant readiness. Two, I mean, we talk about the audit as it's it's financial, but it's also accountability of equipment and knowing uh as a war fighter 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.
▶ 1:20:32Uh 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's delivered through audit readiness is is a crit critical important uh part. It's also been able to allow us to identify very clearly how much equipment actually costs.
▶ 1:20:59And in the past, you maybe know what was programmed for the a piece of equipment, but in reality, once the equipment is delivered and then it's enhanced and you put all the special systems on it, it the actual true cost of uh of equipment is known.
▶ 1:21:14Um, and then lastly, and probably most importantly, it it's a layer of accountability that we are accountable to the US taxpayer to make the best use of every dollar, every penny that's provided to the Marine Corps and we feel strongly that that audit allows us to do that. Thank you. Thank you so much, Mr. Cherry. Yield Gentle woman yields back her time. Thank you for the questions. uh the distinguished gentleman from Texas, Mr.
▶ 1:21:44Gil, you're recognized. Thank you, Mr. Chairman, for holding this hearing. It's nice to be part of a bipartisan hearing where I think we can all agree on uh on what our goals are here. Um and thank you to the witnesses as well for for taking the time here. Uh Mr. Mansfield, can can you remind us what the uh Department of Defense's budget was in 2017?
▶ 1:22:09Um, it was 9 billion in in 2017. Okay. It was it was about 582 billion roughly. Do you know what what it was in 910 billion. So, it's a pretty pretty substantial increase, is it not? That's a lot of money. Sorry. Yes, I have my mic on. I apologize. And uh can you remind us if the the DoD has ever passed an audit uh at the agencywide level? No.
▶ 1:22:40Got it. And and how many audits has it had recently? Uh seven full full scale audits. And and how much do those cost? Um so this year the the cost of uh audit is right around 211 million. $211 million this year. I think that's Yes. So, it's a lot of money. That's a pretty substantial audit, is it not? It is. Got it.
▶ 1:23:10And uh can can you sort of walk us through some of the the highlevel reasons why the DoD hasn't been able to to pass an audit? Well, it it goes back to what we've been talking about here. Systems uh is one of the main things, right? Uh and then more importantly, you can have the best system in the world, but if the data that's within that system isn't accurate, reliable, and supported, the system doesn't matter. So, it gets to the fundamentals of accounting and and just um operationalizing uh good controls.
▶ 1:23:39So, when you're when you uh receive a shipment, you count how many things are in it. You validate that the cost you're charged is what you expected. You make sure you've got the right line of funding to pay for that. Then you make sure it's in your books in the appropriate in the appropriate place so you know where it's at and what the condition is. If if those pieces are missing, uh the systems aren't going to matter. And then as as Mr. Khan indicated, uh the other thing is the the planning process for the department and the way it makes decisions. They're made peacemail.
▶ 1:24:07They're made uh throughout the department individually for the good of the individual entity. Uh not always with consideration for the overall DoD approach. uh and so I think that is one of the reasons I have so many problems setting milestones and sticking with them is uh so many uh individuals making decisions for their own interest versus stepping back and saying what's the best system for multiple entities to be using at the same time. So so you have a pretty good idea what what needs to be done in order to pass an audit at least at at a high level.
▶ 1:24:38Um can you help us understand why we haven't passed an audit recently? But lack of execution on the on the fundamentals is what I would say. And who who's held accountable for that? And what what are the consequences whenever the DoD fails to to pass an audit? Well, the the real the real consequence is lack of confidence for the taxpayer in the DoD's ability to account for and and spend it money. I I agree.
▶ 1:25:05But w within the DoD, for instance, is there um somebody who who gets fired, who gets demoted, who sees their bonuses decreased? Is there any any actual action taken against any individual um or group within the DoD for failing to pass an audit?
▶ 1:25:22I I can't speak to individual uh personnel actions, but I I can say in in the rec in recent years, the DoD has added at least at the executive level um an an element in the performance uh plans for their executives related to financial readiness. Uh getting down to the ability to support individual transactions. So, there's an accountability measure they have now. Uh it's it's up to the department's management to use that effectively in order to spur change, though, right?
▶ 1:25:48But but in other words, we're talking about a budget of hundreds of billions of dollars every single year that and large portions of that are are unaccounted for. We don't know where this money is going. This is uh taxing my constituents, all of our constituents here, um hardworking Americans to to keep our country safe, which again is something we all agree with. And we haven't seen anybody fired for the what seems to be appears to be a largely a total lack of accountability.
▶ 1:26:15We haven't seen any any punitive measures against anybody in the DoD. Is that right? Not that I'm aware of. Got it. Um, you know, I I think that as we're 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. Um, and we've got to see some progress here. So, thank you very much for your time.
▶ 1:26:45gentleman yields back his time. Um, I've just talked to Mr. Infume about I'd like for us to approach my time and his time together here. Uh, 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.
▶ 1:27:09you 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'd like to go through some of this not in long discussions but just things that we learned uh and one of them was 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 in their
▶ 1:27:39u their structure, but the Navy had to do a lot of the work too. General uh Mr. Chairman, yeah, that is accurate. And and the Army did as well. 80% of the ammunition that the Army that the Marine Corps owns is stored in Army facilities. And so the our audit involved coordination detailed coordination with u multiple services as well as support from OSD.
▶ 1:28:08And so it was a complimentary uh exercise that these other uh departments of DoD went through to provide you the information because it was important for the Marine Corps on their mission that they had put up and down their management lines. Uh, General Adams, I also spoke with you yesterday about something that's been brought up today, and that is how would a lieutenant general look at this?
▶ 1:28:37How 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 uh 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 a heads up on the thinking of the of people? Uh yes, Mr. Chairman.
▶ 1:29:04Um the the idea of how the audit connects to affects and impacts um individual Marines at different levels is different. If you're down at the master sergeant level, maybe the captain or major level, you're working the systems. You're processing receipt of equipment, you're entering into systems, and you may not understand fully how that action ties in to the overall audit.
▶ 1:29:32As you move up the echelon and you start to look at high levels of command where there's large bits of large portions of responsibility for formations that have missions assigned to them. Understanding accountability of of resources and understanding status of equipment is critically important to knowing whether you can accept a mission or not.
▶ 1:29:53And then at the highest levels, the my level, at the deputy commonant level or the commonant level, understanding that we're responsible primarily to Congress as we engage uh 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's spent on the most important. Yes, sir.
▶ 1:30:19And and yet I think there's 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 uh ships involved. They gained a foothold off knowing where things are as a result of the exercise they've done.
▶ 1:30:49And with great consistency, they were able to know where those assets are. And we we'll go through this in just a second. Mr. Mayfield, uh, Mr. Mansfield tell us about how important it is for them them to understand that what they've gained is now uh the opportunity at the end of the audit to to say this is where we are and it
▶ 1:31:19begins the process of knowing where all these assets are as opposed to just an audit but rather where they are what the shape they're in and to do the things that would be necessary that they'll 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. Yeah.
▶ 1:31:42So, as Lieutenant General Adams had uh kind of talked to uh earlier, the 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 at at that one during that one date, we know how many assets there are. We know how much value they are. We know what's left in terms of fund balance with Treasury, the amount of money that's available left for the department to spend.
▶ 1:32:10Um the important part then is having the controls that 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 uh two 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 in as to what 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.
▶ 1:32:39And so that's where that second part uh that that was talked about earlier really comes into play. It's those internal controls. It's those repeatable processes. Um so I'm not sure if I've caught for the entire organization then to up and down the organization up and down the organization. And so this is where then and Mr.
▶ 1:32:58Con 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 or Mr. Mansfield and Mr.
▶ 1:33:24your idea about things being managed outside of the Department of Defense within those agencies of knowing the assets, resources, and things they have. Thank you, uh, Chairman Sessions. There are several examples and I think two of the ones you mentioned in your opening statement, uh, and they pertain to the joint strike, uh, program.
▶ 1:33:48uh one is the uh global spare po pool pool that's managed by contractors and it's um DD has not been successful in getting the information that 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.
▶ 1:34:08Uh the other one is um government property held by contractors and it happens it's not just in the department of defense there other federal agencies such as department of energy where uh the contractor has complex uh equipment they have procured uh on behalf of the government and they manage that.
▶ 1:34:28Similarly at DoD there is a material amount which is held by contractors and the information about the location cost condition is not known uh for it to be reliable to be put into the financial statement. So those those are two examples. Yeah. I have great respect for our contractors.
▶ 1:34:47Not only that they manage this, that they know what they've got, but it is there a 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've got, what are was operational?
▶ 1:35:08Is 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? Mr. Mr.
▶ 1:35:22Chairman, this is an excellent question and I think to approach it gen generally that there are some specific issues spec with the F-35 in the way the accountability of the funds to the actual pieces creates complications that we're trying to solve as a department and break that thing apart so we understand when the Marine Corps puts money in as a proshare towards a let's say it's a spare pool or maybe even uh and I would say on the platform side knowledge and understanding of
▶ 1:35:52platform exist ENC existence and completeness is very good. It's the it's the spare part pool and it's the way it's funded with partners and so forth. Everyone puts money in and and it's 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.
▶ 1:36:13If there's a weapon system that requires an interval of maintenance and we have to send it from our magazine to Loheed Martin or to Rathon or to some contractor in order to maintain that device, it 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.
▶ 1:36:38So I I would say um there are some specific examples out there that we've highlighted that are adverse and negative and we're working on them, but there are many that are very good and the accountability with regards to specific equipment in the hands of contractors uh is is actually uh really well done and it was a part of our clean audit opinion. Very small part much bigger in the navies and they're working on that right now.
▶ 1:37:02Well, I have nothing but great confidence in these uh contractors that have developed these systems, understand the intricacies of them, the placement of them. What I'm specifically saying is does that come up the chain to where your leadership has an opportunity to know, okay, we've we need to order more of these or we're planning an exercise perhaps where we will need twice the number or uh a a quick uh re-evaluation.
▶ 1:37:33As we know in the uh Ukraine war, a good bit of our equipment uh 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 didn't put more out the door than our needs.
▶ 1:37:54It's 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? It it is not a problem in that there are specific accounting categories for those types of systems that are in the hands of contractors. Whether it's for maintenance or maybe it's uh construction in progress, knowledge of that system is known.
▶ 1:38:24It's in the systems reported and it's included as we let's say we talk munitions. We know how much munitions we have on how many munitions we have on hand and then how many are due to come out uh as if it's work in progress uh or uh those that are like not in our hands but maybe they need a few months of retrofit or upgrades that that whole enterprise uh no is known.
▶ 1:38:50So, it kind of goes back to my questioning about we we talked about a lack of visibility into these contractors, but really there's information that flows back and forth on a regular basis. Do you then capture that? there.
▶ 1:39:09And 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.
▶ 1:39:26Let let me let me speak to the uh joint strike fighter a little bit because uh you know the Marine Corps experience may be a little different than the rest of the departments uh in that for the joint strike fighter there is information that's supposed to flow back and forth between the contractor uh and the DoD. It is not flowing back and forth. So within the contract structure it does not and it should and it should be reconcilable.
▶ 1:39:50So when the DoD provides um in in the case of the joint strike fighter uh spare parts or the or if the contractor buys spare parts for use on the joint strike fighter, the contracts are written in such a way that requires the contractor to maintain full accountability of those value, location, um condition and and when those are then placed onto an aircraft, the value of the aircraft, you know, changes because of that.
▶ 1:40:15But in terms of managing that spare parts pool, there's contract requirements that require the uh 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. So, how do you know whether a product was delivered or not? And that goes to the point of our contracting updating that that Mr. is aware of that.
▶ 1:40:44We're 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're paying for? Yeah, I think it goes down to it comes down to clear contract requirements.
▶ 1:41:11what is expected of the contractor uh clear and measurable deliverables right so and then there's you have oversight on the government side the government has to be able to validate that what they've 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 I think in the case of uh the government property uh in the possession of contractors uh both joint strike fighter as well as other I have other opportunities where I could talk about that if you'd um other
▶ 1:41:41entities having similar issues. There's no accountability for the contractor. Um you know, I'm not I'm not seeing them have significant. Is that deliberate on what might be the Marine Corps uh issues or how do we get at this?
▶ 1:41:56I know we're going to put a scorecard on it, but how do we then professionally acknowledging the contractor's role, but put DoD where they've got to be aware of what came in to update their systems if for their needs. Is that a black hole, so to speak? Is that something we just haven't figured out? I think the department's aware of it.
▶ 1:42:26No, I let me restate that the department's well aware of the issue. They are working on solutions. They have um working on plans to do counts of the uh pro especially for the joint strike fighter specifically. We're working on doing counts uh of the joint strike fighter spare parts pool so that they can have a good starting point uh to then hopefully follow on with uh clear contract requirements and deliverables that they can hold the contractors accountable for going forward.
▶ 1:42:55Um for our role here at the OIG, we actually have an ongoing audit looking at the broader issue of government property and procession of contractors. uh when that's released, I'd be more than happy to come up and talk to you about it, let you know what we're looking at from a broader perspective across the DoD outside of just the joint strike fighter. Though, General Adams, uh you uh were very proud of, as we are, of the initiative that the Marine Corps has taken.
▶ 1:43:22You acknowledged, I think respectfully, the help that you received from the United States Army, the United States Navy. uh 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? Mr. Chairman to answer this there there are multiple lessons that were learned as a part of our audit by the Army and the Navy.
▶ 1:43:52Um, 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 a um an issue that it it was prevalent for for many decades that the fund balance with Treasury beginning balance and the trial balance of the services it it could never balance balance.
▶ 1:44:18and think of the fund balance of treasury as that's 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 uh figured out a way of of adjusting one um accounting for the the previous balances that were just continuing to roll over year after year actually nailing them down figuring out where they settling
▶ 1:44:49them and then changing the actual way that they accounted uh the fund balance with Treasury um in a in a very technical accounting way uh 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 gamecher in terms of overall DoD progress towards um uh a clean opinion and as you alluded to yesterday a lot of internal work that went on with
▶ 1:45:19that meticulous work that was very because the systems an antiquated system it took a lot of workarounds it it did yes sir but it's really important we took two 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 that everything has to be accounted
▶ 1:45:49for 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 don't. But that doesn't stop us from continuing to maintain visibility very accurately on our position.
▶ 1:46:17Data uh 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's financial data or it's uh data of about readiness or personnel. All of that information is available as a byproduct of the audit. May I want to go back to Mr. Khan and Mr. Mansfield briefly.
▶ 1:46:42Gentlemen, is it true that DoD um has no one in place to serve as the Uh there's uh an acting CFO at the at the moment and no one's been nominated. Is that correct? I don't believe so. So, we're just flying around in limbo at DoD with no real person to give direction that people are respecting.
▶ 1:47:10One of the things that I listened to uh 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're going, ladies and gentlemen, and this is how we're going to get there. and everybody understood that and they were able to stand up a model after establishing for two years a baseline and then follow through.
▶ 1:47:37I 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's the real difference. It's leadership. It is leadership. So I find it absolutely stunning that the Air Force general CQ Brown Jr.
▶ 1:48:06was fired within the last 100 days. That Admiral Linda Fagan uh was fired the day after she was sworn in. I I don't understand that. and that Navy Admiral Lisa Franchetti, the highest ranking uh officer in the Navy, was fired also.
▶ 1:48:29So, if we're 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're going to have a audit uh that can be stood up and talked about like we talk about the Marine Corps model. This is a damn shame. This is the This is the United States. We're better than that. We just can't keep making these excuses.
▶ 1:48:57Which is why I want to see Secretary Hexath and the chairman has also indicated we need answers. We need to know what's going on. We just can't keep doing this. And it's amazing to me now, and correct me if I'm wrong, that no other leader of any other uh entity has said the same thing the same way as the comedant of the Marine Corps. And by the way, give him my appreciation if if you will. Um, it's just sad. It's sad.
▶ 1:49:26Maybe that's why they say send in the Marines or the Marines will lead the way. And I'm not being funny here, but I am being funny in some respects because this does not have to happen. We don't have to hold up this sign again to see how many failed marks there are. These are dollars that people pay every year in taxes. Taxpayers have a right.
▶ 1:49:47whether they're black, white, Jew, gentile, Asian, Latino, Native American, male or female, it doesn't 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's been happening. And this has been going on since 2018. This is really a shame. It's an embarrassment, quite frankly. And I would hope that DoD sees it that way.
▶ 1:50:11Uh, I'd like to think that we're going to have a CFO over there, but God knows since there's no nominee even out there to be the CFO, how that's going to happen. And um, Lieutenant General Adams, you were very kind in your remarks, and yes, there were some things that were learned by the other branches, but I don't think they have taken them to heart.
▶ 1:50:32And I would love to be proved wrong, but something tells me that the chairman and I will be here next year if we're not careful, talking about eight straight going on nine failed audits. And it's just it gets to me. So when the gentleman from Tennessee says he hopes that some of us will be let out of here in handcuffs because we're part of this crazy notion that if we just keep feeding this beast and feeding this beast, it will take care of itself. It will not. It will not.
▶ 1:50:59And there are too many games being played by members of Congress, by private contractors, and to some extent by these divisions of armed services that allows us to go on. I don't 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.
▶ 1:51:20You can take a buzzsaw and a chainsaw and go through agencies, but you can't find a way to force DoD to come up with an audit. I don't understand that. And so my my anger here is real. Life is too short to play these games and the American public deserves more. We all deserve more than this. So, I'm done, Mr.
▶ 1:51:45chairman, which is probably why I didn't have a whole lot to say a minute ago because it just bubbles over in me over and over and over again. And um 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.
▶ 1:52:06And I would hope and pray that both the Secretary of Defense and the other uh branches of the armed services learn from this, but also be prepared to talk to us about what's going on and why we can't seem to move this 800 pound gorilla. I yield back. Gentleman yields back his time. I I would like for those that are are witnesses today to understand that Mr. Infume and I still do work together.
▶ 1:52:34We see a common goal. Uh 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 uh areas right, wrong or indifferent were made.
▶ 1:52:54And 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've given us a model.
▶ 1:53:08You've 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 uh as General Adams general Adams spoke about but perhaps more to the point and to make sure the confidence that the American people have in that uh both the gentleman and I Mr.
▶ 1:53:36and fume represent a thinking that we are not going to give up. I will te say to the department of defense uh I encourage you to have a great attitude about us approaching you. I would say to the uh leaders of each of these areas that we will be engaging you.
▶ 1:53:57uh we do expect you to uh take the time and to listen and we do expect to hear back from you, but we will not uh 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've seen what I consider to be a bipartisan subcommittee hearing uh that we believe we listen to you. We believe that we appreciate and respect you.
▶ 1:54:25uh but it is a task that is still left for us to to complete as we prepare for 2028. With that said, I want to thank each of our witnesses and this now uh oh, we got to do the five days. Yeah.
▶ 1:54:42So with that and without objection, all members of this subcommittee have five legislative days within to which submit material and additional written questions for the witnesses which will be forwarded to the witnesses from the committee. If there's no further business without objection, subcommittee stands adjourned.