WEBVTT

00:00.159 --> 00:02.270
Subcommittee on Government Operations

00:02.270 --> 00:04.381
will come to order . Welcome everyone

00:04.381 --> 00:06.550
and to our guests who've taken time ,

00:06.849 --> 00:08.960
uh , to be here as well as the , uh ,

00:08.960 --> 00:10.960
members and their staff . Thank you

00:10.960 --> 00:13.270
very much for preparation for today .

00:13.560 --> 00:15.449
Without objection , the chair may

00:15.449 --> 00:17.504
declare a recess at any time , and I

00:17.504 --> 00:19.790
would recognize myself for the purpose

00:19.790 --> 00:23.649
of making an opening statement . I'd

00:23.649 --> 00:25.705
like to welcome everybody to today's

00:25.705 --> 00:27.538
hearing regarding updates to the

00:27.538 --> 00:29.430
Department of Defense's progress

00:29.760 --> 00:33.630
towards achieving a clean audit opinion .

00:33.959 --> 00:36.181
I would like to thank our witnesses for

00:36.181 --> 00:38.403
testifying today on this very important

00:38.403 --> 00:40.360
topic . I would also like to thank

00:40.360 --> 00:43.200
subcommittee members on both sides for

00:43.200 --> 00:45.599
staying committed to shining a light on

00:45.599 --> 00:48.159
financial management issues that the

00:48.159 --> 00:50.900
Department of Defense faces and working

00:50.900 --> 00:53.770
towards a solution together . To that

00:53.770 --> 00:57.169
future . I've said this before , but

00:57.169 --> 00:59.790
financial transparency of the military

00:59.790 --> 01:01.990
is critical . It's critical for the

01:01.990 --> 01:04.370
military , and it's critical for the

01:04.370 --> 01:06.537
American people to know that they have

01:06.537 --> 01:08.426
the confidence that is being well

01:08.426 --> 01:12.150
managed . So the question is , how can

01:12.150 --> 01:14.589
we remain confident in the Department

01:14.589 --> 01:16.367
of Defense's ability to protect

01:16.367 --> 01:18.989
American assets and interest if they

01:18.989 --> 01:21.830
cannot properly manage their expenses

01:21.830 --> 01:24.589
or assets , perhaps not even knowing

01:24.589 --> 01:27.019
where they are . We're here today

01:27.019 --> 01:29.075
because the Department of Defense is

01:29.075 --> 01:31.550
still unable to achieve a clean audit

01:31.550 --> 01:34.099
of their financial statements . In

01:34.099 --> 01:36.750
fiscal year 2024 , the Department of

01:36.750 --> 01:40.550
Defense reported more than $909

01:40.550 --> 01:43.629
billion half the discretionary spending

01:43.629 --> 01:45.796
of the United States , but still holds

01:45.796 --> 01:47.830
the distinction of being the only

01:47.830 --> 01:50.669
federal agency that has never passed a

01:50.669 --> 01:54.220
comprehensive audit . The Department of

01:54.220 --> 01:57.180
Defense has more than 28 components ,

01:57.300 --> 01:59.339
and it's fair to say that some are

01:59.339 --> 02:01.395
doing better at financial management

02:01.395 --> 02:03.860
than others . For this year's past

02:03.860 --> 02:06.082
financial audit , components that could

02:06.082 --> 02:08.860
not be audited accounted for at least

02:08.860 --> 02:12.779
48% of DOD's total assets and

02:12.779 --> 02:16.419
at least 64% of DOD's

02:16.419 --> 02:19.839
budget . It's important to note that

02:19.839 --> 02:22.710
this is more than just a paper exercise .

02:23.039 --> 02:25.440
It is understanding where your assets

02:25.440 --> 02:28.960
are and how much taxpayer funding is

02:28.960 --> 02:31.710
left . It's important that the military

02:31.710 --> 02:34.679
gain a complete picture of military

02:34.679 --> 02:37.559
readiness as well as Congress that

02:37.559 --> 02:40.300
counts on these reports . Even though

02:40.300 --> 02:43.179
roughly half of DOD passed , the

02:43.179 --> 02:45.401
services who receive the most amount of

02:45.401 --> 02:47.820
money and the most assets account for

02:47.820 --> 02:50.389
the areas where they are struggling to

02:50.389 --> 02:53.589
track their spending and assets .

02:54.020 --> 02:56.220
Balancing the checkbook is more than

02:56.220 --> 02:59.979
just military preparedness . I believe

02:59.979 --> 03:01.929
it goes hand in hand , both

03:02.699 --> 03:04.866
understanding where the checkbook is ,

03:04.866 --> 03:06.699
where the assets are in military

03:06.699 --> 03:09.580
preparedness . Financial security is

03:09.580 --> 03:13.050
national security . The Joint Strike

03:13.050 --> 03:15.889
Fighter program is a multi-service ,

03:16.339 --> 03:18.539
multinational program that will cost

03:18.539 --> 03:22.220
more than $2 trillion over the lifetime

03:23.220 --> 03:25.460
its lifetime of service according to

03:25.460 --> 03:28.949
the GAO for fiscal year 2024 ,

03:29.000 --> 03:32.449
auditors found that DOD management did

03:32.449 --> 03:35.710
not account for . Manage

03:36.080 --> 03:38.759
or report Joint Strike Fighter

03:38.759 --> 03:41.720
government property . Not fully

03:41.720 --> 03:44.240
reporting this information resulted in

03:44.240 --> 03:47.559
material misstatements across DOD

03:47.559 --> 03:51.080
assets . Because DOD could not

03:51.080 --> 03:53.800
provide reliable information to verify

03:53.800 --> 03:57.690
the existence . Completeness or

03:57.690 --> 03:59.649
value of the program's government

03:59.649 --> 04:02.809
properties , auditors were unable to

04:02.809 --> 04:05.130
quantify the amount of these

04:05.130 --> 04:07.889
misstatements . This means that there

04:07.889 --> 04:11.529
are monetary and operational gaps .

04:12.639 --> 04:14.806
Last September , the subcommittee with

04:14.806 --> 04:18.040
the help of GAO created a scorecard to

04:18.040 --> 04:20.549
track to track DOD's progress towards

04:20.549 --> 04:22.679
achieving a clean audit opinion .

04:23.660 --> 04:26.540
Rather than continuing to say that DOD

04:26.540 --> 04:29.410
isn't doing a good job making progress

04:29.820 --> 04:32.579
towards achieving a clean audit , we

04:32.579 --> 04:34.899
wanted something that would show that

04:34.899 --> 04:37.850
they were in fact on the road , and I

04:37.850 --> 04:40.859
think we were here today to fixing not

04:40.859 --> 04:43.290
only those things that are internally

04:43.290 --> 04:46.410
uh uh imperative to this , but good

04:46.410 --> 04:49.609
ideas from certain elements within DOD

04:49.820 --> 04:52.579
that are taking the lead . This is

04:52.579 --> 04:54.700
especially important because DOD is

04:54.700 --> 04:57.579
mandated to achieve a clean audit by

04:57.579 --> 05:01.489
2028 . It is and should

05:01.489 --> 05:04.079
remain the goal of this subcommittee

05:04.380 --> 05:07.809
and of Congress to hold DOD accountable .

05:08.500 --> 05:11.140
Today we plan to discuss , discuss the

05:11.140 --> 05:13.540
progress that DOD has made and the

05:13.540 --> 05:16.970
challenges they face . As this new

05:16.970 --> 05:18.914
administration is planning for the

05:18.914 --> 05:20.850
future , it will be imperative to

05:20.850 --> 05:22.850
understand where the department has

05:22.850 --> 05:26.529
been . Where it needs to go and what is

05:26.529 --> 05:29.769
standing in the way today we're also

05:29.769 --> 05:31.491
unveiling a new section of the

05:31.491 --> 05:34.359
scorecard that focuses on fraud

05:34.769 --> 05:37.670
risk management . We've talked about

05:37.670 --> 05:39.837
fraud prevention for many years , so I

05:39.837 --> 05:42.690
am very excited to see a new method to

05:42.690 --> 05:45.130
track progress in preventing fraud in

05:45.130 --> 05:48.170
the areas of procurement and

05:48.170 --> 05:50.519
contracting . Strong financial

05:50.519 --> 05:52.519
management systems are an important

05:52.519 --> 05:55.390
part of fraud prevention . Seeing

05:55.390 --> 05:58.589
inside that is essential . What we've

05:58.589 --> 06:00.820
seen over the years is that DOD has

06:00.820 --> 06:03.989
struggled in maintaining and updating

06:03.989 --> 06:06.470
systems , and these systems are

06:06.470 --> 06:08.829
critical if we're going to get where we

06:08.829 --> 06:11.950
want to go with a clean audit . Last

06:11.950 --> 06:15.670
Congress we were told that DOD had to

06:15.670 --> 06:17.503
achieve a clean audit opinion by

06:17.503 --> 06:20.850
December 2028 . We made that commitment ,

06:20.899 --> 06:22.955
and today I think we will show where

06:22.955 --> 06:26.190
their strong significant progress by

06:26.190 --> 06:29.059
2026 . That's why we're here . We're

06:29.059 --> 06:31.660
having this discussion , but it also is

06:31.660 --> 06:33.859
a commitment by the gentleman , the

06:33.859 --> 06:36.100
ranking member of Mister Infume and

06:36.100 --> 06:38.450
myself to make sure that we go beyond

06:38.450 --> 06:41.059
these hearings and to actually engage

06:41.059 --> 06:42.690
the Department of Defense .

06:43.140 --> 06:45.619
Unfortunately today the office of the

06:45.619 --> 06:47.841
Secretary of Defense will not be a part

06:47.841 --> 06:50.339
of the conversation . They will be

06:50.339 --> 06:52.769
missed , and both Mister Infume and I

06:53.079 --> 06:56.040
plan to visit the Pentagon . To lead

06:56.040 --> 06:58.910
that discussion with the Secretary of

06:58.910 --> 07:01.429
Defense , we hope that they will see

07:01.429 --> 07:04.149
this as an opportunity to listen and

07:04.149 --> 07:06.149
learn to take some of what we're

07:06.149 --> 07:08.309
hearing today , but to move forward

07:08.309 --> 07:10.790
together , and I would now yield for

07:10.790 --> 07:12.734
the gentleman's , uh , time for an

07:12.734 --> 07:14.790
opening statement , Mr . Mfume Jones

07:14.790 --> 07:17.959
recognized . Thank you very much , uh ,

07:18.130 --> 07:20.241
Mr . Chairman , good morning to you .

07:20.241 --> 07:22.408
Good morning to our witnesses and good

07:22.408 --> 07:24.630
morning to those of you in attendance .

07:24.630 --> 07:26.630
I want to particularly thank , uh ,

07:26.630 --> 07:28.970
Chairman Sessions for doggedly

07:28.970 --> 07:31.081
following up on this issue . He and I

07:31.081 --> 07:33.248
feel very , very strongly , as some of

07:33.248 --> 07:35.192
you know , that we just can't keep

07:35.192 --> 07:37.303
going down the street . I wanna thank

07:37.303 --> 07:39.359
Mr . Khan , Mr . Mansfield . Good to

07:39.359 --> 07:41.526
see both of you again . Last September

07:41.526 --> 07:44.649
we held the second hearing to address

07:44.649 --> 07:46.730
financial accountability in the

07:46.730 --> 07:49.049
Department of Defense and so as fate

07:49.049 --> 07:51.290
would have it , we are back here today

07:51.290 --> 07:53.457
to continue that conversation in light

07:53.457 --> 07:55.609
of the Department of Defense's

07:55.609 --> 07:58.359
continued inability to pass a

07:58.359 --> 08:01.250
department wide audit . Uh , it's not

08:01.250 --> 08:03.028
new for the DOD and I share the

08:03.028 --> 08:06.089
chairman's commitment to holding that .

08:06.559 --> 08:09.660
Entire agency accountable for years ,

08:09.670 --> 08:12.390
the Department of Defense has tried but

08:12.390 --> 08:14.549
as we know failed to successfully

08:14.549 --> 08:17.679
complete a clean department wide audit .

08:17.910 --> 08:21.149
A clean audit is not judging the merits

08:21.149 --> 08:23.790
of DOD spending which we do not do in

08:23.790 --> 08:26.420
this committee , but it's asking what

08:26.420 --> 08:28.859
is that spending and how do you explain

08:28.859 --> 08:31.081
that spending and the accountability of

08:31.081 --> 08:35.010
it . DOD has failed uh to meet . This

08:35.010 --> 08:37.210
basic standard to provide proper

08:37.210 --> 08:39.489
evidence to show that they accurately

08:39.489 --> 08:43.338
accounted for their finances . Now let

08:43.338 --> 08:45.449
me be redundant . There have been 7 ,

08:45.658 --> 08:47.991
if you're listening at home or watching ,

08:48.258 --> 08:51.619
7 straight audits that have been failed

08:51.619 --> 08:53.730
by the Department of Defense . I want

08:53.730 --> 08:55.952
to be deliberately redundant about this

08:55.952 --> 08:58.458
because that number every time I say it

08:58.458 --> 09:00.979
continues to strike a great deal of

09:00.979 --> 09:03.138
horror at me that it happens and

09:03.138 --> 09:05.578
continues to happen and and I wanna

09:05.578 --> 09:08.218
underscore that , um , I'm not really

09:08.218 --> 09:10.496
into a lot of graphics , Mr . Chairman ,

09:10.496 --> 09:12.559
but this time . Uh , I want to just

09:12.559 --> 09:15.190
repeat the fact that we have had 7

09:15.190 --> 09:17.479
audits and you can see going back to

09:17.479 --> 09:20.320
2018 . Raise it up , would you ?

09:22.109 --> 09:23.998
Failed , failed , fail , failed ,

09:23.998 --> 09:26.650
failed . That's embarrassing . It's the

09:26.650 --> 09:28.650
greatest country on the face of the

09:28.650 --> 09:31.599
earth and we can't even get an audit

09:31.599 --> 09:34.369
completed . So I hope that if the

09:34.369 --> 09:36.147
leadership of the department is

09:36.147 --> 09:38.419
watching that they understand how

09:38.419 --> 09:41.190
serious this is for those of us who

09:41.190 --> 09:44.030
personally are just offended that this

09:44.030 --> 09:46.197
continues to happen and I can't stress

09:46.197 --> 09:48.609
enough uh my thanks to the chairman for

09:48.609 --> 09:51.359
working on this issue together . So ,

09:51.549 --> 09:53.771
um , while the Department of Defense is

09:53.771 --> 09:55.716
still not produced a clean audit ,

09:55.716 --> 09:57.771
there was significant progress under

09:57.771 --> 09:59.716
the previous administration . that

09:59.716 --> 10:01.882
progress was spurred by Secretary Lord

10:01.882 --> 10:04.429
Austin's focus on modernizing financial

10:04.429 --> 10:06.750
systems , uh , which helped to lead the

10:06.750 --> 10:09.650
US Marine Corps to adopting a two-year

10:09.989 --> 10:12.969
audit approach and achieving a clean

10:13.390 --> 10:16.820
audit opinion for fiscal year 2023 and

10:16.820 --> 10:19.630
2024 . God bless the United States

10:19.630 --> 10:22.440
Marines . That progress is critically

10:22.440 --> 10:24.607
important and so I think it's up to us

10:24.607 --> 10:26.273
to determine how to get other

10:26.273 --> 10:29.429
components at DOD up to the standard

10:29.429 --> 10:32.049
that the Marine Corps is at . Chairman

10:32.049 --> 10:33.827
Sessions and I are dedicated to

10:33.827 --> 10:35.605
ensuring accountability for the

10:35.605 --> 10:37.710
hundreds of billions of dollars in

10:37.710 --> 10:40.830
spending and the $4 trillion in total

10:40.830 --> 10:43.909
assets that make up our defense budget .

10:44.320 --> 10:47.349
In fiscal year 2024 , US taxpayers

10:47.349 --> 10:51.140
entrusted $909 billion

10:51.429 --> 10:53.540
to the Department of Defense , one of

10:53.540 --> 10:55.830
the largest investments in our nation's

10:55.830 --> 10:58.630
history , and while we continue to

10:58.630 --> 11:01.469
provide the DOD with escalating sums of

11:01.469 --> 11:04.909
money , only 11 out of the 24 total

11:04.909 --> 11:07.460
components at DOD were able to achieve

11:07.460 --> 11:09.900
a clean audit . The components that

11:09.900 --> 11:12.169
failed unfortunately include the Army ,

11:12.500 --> 11:15.469
the Navy , and the Air Force . Those

11:15.469 --> 11:18.619
three alone comprised 90% of DOD's

11:18.619 --> 11:21.260
assets by dollar amount . Now standing

11:21.260 --> 11:23.820
in the way of a clean audit is the wide

11:23.820 --> 11:26.042
prevalence of material weaknesses which

11:26.042 --> 11:28.210
we've been told over and over again .

11:28.260 --> 11:30.429
That is an accounting firm term ,

11:30.460 --> 11:33.020
excuse me , for the areas in which the

11:33.020 --> 11:36.030
Department of Defense lacks . Internal

11:36.030 --> 11:38.760
controls over financial reporting

11:38.760 --> 11:41.950
material weaknesses year after year

11:41.950 --> 11:44.006
these material weaknesses caused the

11:44.006 --> 11:46.061
Department of Defense to be the only

11:46.061 --> 11:49.070
major federal agency unable to achieve

11:49.070 --> 11:51.780
a clean audit opinion . This , along

11:51.780 --> 11:53.836
with a number of other long standing

11:53.836 --> 11:56.710
issues serves as a daily reminder of

11:56.710 --> 11:59.710
DOD's history of pervasive deficiencies .

12:00.010 --> 12:02.030
In financial management systems ,

12:02.359 --> 12:05.190
business processes , internal controls ,

12:05.640 --> 12:08.880
and financial reporting , so under

12:08.880 --> 12:11.559
these conditions it makes the

12:11.559 --> 12:13.615
administration's goal of raising the

12:13.615 --> 12:16.659
Pentagon's budget to $1 trillion

12:17.000 --> 12:19.520
particularly puzzling , absolutely

12:19.520 --> 12:22.359
puzzling I should say . Under the

12:22.359 --> 12:24.679
department , uh , we've seen so many

12:24.679 --> 12:26.909
things take place . And I'm convinced

12:26.909 --> 12:29.590
that until the department can restore

12:29.590 --> 12:32.830
full faith and accountability for these

12:32.830 --> 12:34.789
critical dollars , I can't justify

12:34.789 --> 12:36.956
increasing their budget even further ,

12:36.956 --> 12:38.956
especially in light of the pressing

12:38.956 --> 12:41.150
need for funds and so many other areas

12:41.150 --> 12:43.372
of overall spending where we've taken a

12:43.372 --> 12:45.483
chainsaw and cut the hell out of it .

12:45.859 --> 12:48.070
It's even harder for me to justify any

12:48.070 --> 12:50.181
increases in the Pentagon's budget in

12:50.181 --> 12:52.181
the midst of its current leadership

12:52.181 --> 12:54.181
crisis . During our last hearing on

12:54.181 --> 12:56.237
this topic , our witnesses discussed

12:56.237 --> 12:58.348
the importance of leadership from the

12:58.348 --> 13:00.349
top down , and they said that was

13:00.349 --> 13:02.619
important in creating a culture within

13:02.619 --> 13:05.070
the DOD where accountability at long

13:05.070 --> 13:08.390
last really does matter right now we're

13:08.390 --> 13:10.669
seeing a distinct lack of leadership ,

13:11.349 --> 13:12.849
especially in the realm of

13:12.849 --> 13:14.738
accountability , and I joined the

13:14.738 --> 13:16.793
chairman in expressing the hope that

13:16.793 --> 13:18.809
either Secretary Hegseth will come

13:18.809 --> 13:21.250
before this committee . And talk to us

13:21.250 --> 13:23.306
about that accountability and what's

13:23.306 --> 13:25.083
being done or that we will find

13:25.083 --> 13:27.083
ourselves at the Pentagon trying to

13:27.083 --> 13:29.890
again get some real clear information

13:29.890 --> 13:33.489
about the struggles at DOD . Uh , it's

13:33.489 --> 13:35.545
our largest federal agency , as I've

13:35.545 --> 13:37.711
said , employing more than 3.4 million

13:37.711 --> 13:39.619
Americans , including 1.3 million

13:39.619 --> 13:41.969
active duty service members , and in

13:41.969 --> 13:44.619
their efforts to keep our nation safe ,

13:44.690 --> 13:46.960
we must ensure our service members .

13:47.270 --> 13:49.849
Have the most sophisticated modernized

13:49.849 --> 13:52.380
technology and systems to eliminate

13:52.380 --> 13:54.539
financial errors just like we try to

13:54.539 --> 13:56.900
provide that to win wars we need the

13:56.900 --> 13:59.859
best sort of technology that we can

13:59.859 --> 14:02.340
provide to eliminate financial errors

14:02.340 --> 14:05.130
and to streamline data entry and obtain

14:05.130 --> 14:08.179
the most effective national security we

14:08.179 --> 14:11.260
can for the tax dollars we invest . I

14:11.260 --> 14:13.316
think it's fair to say that Congress

14:13.316 --> 14:15.427
can't allow another failed audit . To

14:15.427 --> 14:17.649
go by , don't want to be here next year

14:17.649 --> 14:19.816
talking about the eighth year in a row

14:19.816 --> 14:22.880
as we move toward this 2028 mandate .

14:23.109 --> 14:25.220
It'd be good to see just a little bit

14:25.220 --> 14:27.909
of progress , uh , on that road and

14:27.909 --> 14:29.909
personally I've not seen it , but I

14:29.909 --> 14:32.076
wanna thank all of those who've worked

14:32.076 --> 14:34.298
on this important matter since our last

14:34.298 --> 14:36.309
hearing . I thank you over and over

14:36.309 --> 14:38.349
again for your efforts to give us

14:38.349 --> 14:40.516
direction and understanding on some of

14:40.516 --> 14:43.429
this and to provide real transparency

14:43.429 --> 14:46.549
about where . Really , where all of our

14:46.549 --> 14:49.179
military spending goes with that , Mr .

14:49.270 --> 14:51.326
Chairman , I again want to thank you

14:51.326 --> 14:53.381
and , and I yield back , gentleman ,

14:53.381 --> 14:55.548
yields back his time . I would like to

14:55.548 --> 14:57.603
reinforce for our witnesses that are

14:57.603 --> 14:59.770
today and those of the staffs that are

14:59.770 --> 15:02.630
here to recognize that Mr . Nfume and I .

15:03.989 --> 15:05.767
Or doing this across the entire

15:05.767 --> 15:09.059
government . It is not just the

15:09.059 --> 15:11.739
Department of Defense . It is areas

15:11.739 --> 15:15.539
where some $300 to $500 billion in

15:15.539 --> 15:18.599
our immediate past . Uh , was , uh ,

15:18.609 --> 15:22.000
the guests from , uh , OMB and , uh ,

15:22.010 --> 15:25.479
CBO about the amount of money that went

15:25.479 --> 15:27.979
to misdirected payments and both , both

15:27.979 --> 15:31.080
Mr . Mfume and I are together

15:31.630 --> 15:35.059
on this , him using not just a strong

15:35.059 --> 15:37.969
voice , uh , and working together but

15:37.969 --> 15:40.570
us sincerely wanting to make sure that

15:40.570 --> 15:43.210
the money . Goes to the intended

15:43.210 --> 15:46.000
purpose and not outside of that . So Mr .

15:46.049 --> 15:48.929
Mfume , I wanna thank you and as we

15:48.929 --> 15:51.210
said last year , we would do this year

15:51.210 --> 15:53.409
as we're saying today , we will be

15:53.409 --> 15:55.950
pleased to show up at the Pentagon ,

15:56.130 --> 15:58.359
make those arrangements , and make sure

15:58.770 --> 16:00.826
that , uh , at the highest levels of

16:00.826 --> 16:02.659
the Department of Defense , they

16:02.659 --> 16:04.714
understand the work that has gone on

16:04.714 --> 16:07.330
today must be prepared and continued

16:07.330 --> 16:10.229
for 28 . I'm pleased to welcome our

16:10.229 --> 16:13.229
witnesses for today , representing the

16:13.229 --> 16:15.710
United States Marine Corps , Lieutenant

16:15.710 --> 16:19.140
General James Adams the 3rd . The

16:19.140 --> 16:22.349
gentleman , Mr . Brett Mansfield and Mr .

16:22.450 --> 16:25.570
uh Aslif Khan . Lieutenant General

16:25.570 --> 16:28.219
Adams is deputy command and commandant

16:28.219 --> 16:30.419
for programs and Resources in the

16:30.419 --> 16:33.049
United States Marine Corps . Mr .

16:33.059 --> 16:35.900
Manfield is the deputy inspector for

16:35.900 --> 16:38.419
the government for audit at the US

16:38.419 --> 16:40.460
Department of Defense Office of the

16:40.460 --> 16:43.539
Inspector General . Mr . Conn is the

16:43.539 --> 16:45.409
director of financial management

16:45.409 --> 16:47.131
assurance at the United States

16:47.131 --> 16:50.539
Government Accountability Office GAAO ,

16:50.549 --> 16:52.771
and we look forward to hearing from you

16:52.771 --> 16:54.827
today , and I would ask that each of

16:54.827 --> 16:56.938
you would stand pursuant to committee

16:56.938 --> 16:58.882
Rule 9G . The witnesses will raise

16:58.882 --> 17:02.520
their right hand to be sworn . Do you

17:02.520 --> 17:04.420
solemnly swear or affirm that the

17:04.420 --> 17:07.140
testimony that you're about to give is

17:07.140 --> 17:09.029
the truth , the whole truth , and

17:09.029 --> 17:11.362
nothing but the truth , so help you God .

17:12.369 --> 17:14.591
Let the record reflect that each of the

17:14.591 --> 17:16.925
witness has answered in the affirmative .

17:16.925 --> 17:19.160
We appreciate each of you being here

17:19.160 --> 17:23.040
today and appreciate also that , um ,

17:23.569 --> 17:25.680
what the testimony that you , you may

17:25.680 --> 17:27.791
be seated , thank you . We appreciate

17:27.791 --> 17:29.958
that the , what the testimony you give

17:29.958 --> 17:33.079
today would be along the line of making

17:33.079 --> 17:36.130
sure that this subcommittee hears you

17:36.130 --> 17:37.908
fully . And with that said , we

17:37.908 --> 17:39.741
normally extend 5 minutes . I've

17:39.741 --> 17:41.963
notified each of you . That if it takes

17:41.963 --> 17:44.579
you 6 or 7 minutes , we're all ears .

17:44.790 --> 17:47.229
We want you to make sure you're given

17:47.229 --> 17:50.150
the time so this subcommittee hears

17:50.150 --> 17:52.430
from each of you . As a reminder , the

17:52.430 --> 17:54.652
buttons that are in front of you , uh ,

17:54.652 --> 17:58.150
you would push them , uh , and then we

17:58.150 --> 18:00.206
would , uh , be able to hear you . I

18:00.206 --> 18:01.983
now recognize the distinguished

18:01.983 --> 18:04.039
gentleman , Lieutenant General Adams

18:04.039 --> 18:06.261
for his opening statement . Gentlemen's

18:06.261 --> 18:09.410
recognized . Chairman Sessions ,

18:09.540 --> 18:11.339
ranking member and Fume , and

18:11.339 --> 18:12.950
distinguished members of the

18:12.950 --> 18:14.895
subcommittee . Thank you very much

18:14.895 --> 18:16.895
today for the opportunity to appear

18:16.895 --> 18:19.329
before you . It is an honor to

18:19.329 --> 18:21.273
represent the United States Marine

18:21.273 --> 18:23.385
Corps in my capacity as the service's

18:23.385 --> 18:25.849
chief financial officer and to speak to

18:25.849 --> 18:28.439
our financial management progress and

18:28.439 --> 18:31.319
continued challenges . I am very proud

18:31.589 --> 18:33.367
to report that the Marine Corps

18:33.367 --> 18:35.589
received an unmodified audit opinion on

18:35.589 --> 18:38.829
our fiscal year 2023 full financial

18:38.829 --> 18:40.829
statement audit and maintain that

18:40.829 --> 18:43.859
opinion for the fiscal year 2024 .

18:44.839 --> 18:47.920
These are significant milestones . Not

18:48.140 --> 18:50.084
only for our service , but for the

18:50.084 --> 18:52.260
Department of Defense . They reflect

18:52.260 --> 18:55.439
many years of determined effort . In an

18:55.439 --> 18:57.290
enterprise-wide commitment to

18:57.290 --> 19:00.670
accountability and stewardship . I want

19:00.670 --> 19:02.837
to emphasize that while we're proud of

19:02.837 --> 19:05.003
our achievements , we do not take them

19:05.003 --> 19:07.810
for granted . While an unmodified audit

19:07.810 --> 19:09.921
opinion reinforces the Marine Corps's

19:09.921 --> 19:11.920
reputation of accountability ,

19:12.250 --> 19:14.770
discipline , and leadership , it also

19:14.770 --> 19:16.881
reflects the dedication and hard work

19:16.881 --> 19:19.369
of the entire organization , including

19:19.369 --> 19:21.425
financial management professionals ,

19:21.425 --> 19:23.369
acquisitions and logistics teams .

19:23.979 --> 19:25.646
These teams continued to work

19:25.646 --> 19:28.400
tirelessly . To properly to ensure

19:28.400 --> 19:30.839
proper stewardship of resources and

19:30.839 --> 19:32.895
their commitment remains critical to

19:32.895 --> 19:35.359
achieving and sustaining a clean audit

19:35.359 --> 19:38.290
opinion . But these achievements are

19:38.290 --> 19:41.250
not the end state , they are critical

19:41.250 --> 19:44.130
milestones along a very important

19:44.130 --> 19:46.530
journey , one that demands continued

19:46.530 --> 19:49.650
focus , sustained investment , and

19:49.650 --> 19:51.930
transformation across our financial and

19:51.930 --> 19:54.890
operational systems . Unmodified

19:54.890 --> 19:58.219
opinions are difficult to earn . They

19:58.219 --> 20:00.569
require rigorous internal controls ,

20:00.910 --> 20:03.060
meticulous record keeping , and

20:03.060 --> 20:06.180
transparent financial reporting . We

20:06.180 --> 20:07.969
remain committed to continuous

20:07.969 --> 20:10.191
improvement in our financial management

20:10.191 --> 20:11.969
practices , recognizing that an

20:11.969 --> 20:14.900
unmodified opinion is hard won but

20:14.900 --> 20:18.400
easily lost . Sustaining audit success

20:18.400 --> 20:20.959
within DOD requires recognizing that we

20:20.959 --> 20:24.170
cannot operate in silos . The Defense

20:24.170 --> 20:26.459
Department presents a complex audit

20:26.459 --> 20:28.689
environment characterized by numerous

20:28.689 --> 20:31.079
IT systems , varying operational

20:31.079 --> 20:33.750
procedures , and common deficiencies

20:33.750 --> 20:36.849
across components . To achieve and

20:36.849 --> 20:40.569
maintain DOD wide auditability we must

20:40.569 --> 20:43.359
prioritize streamlining , standardizing ,

20:43.569 --> 20:45.729
and harnessing technology to include

20:45.729 --> 20:47.840
emerging technologies like artificial

20:47.840 --> 20:50.569
intelligence to free up valuable

20:50.569 --> 20:52.770
resources , simplify our business

20:52.770 --> 20:54.992
environment , and ultimately strengthen

20:55.170 --> 20:58.290
our financial management posture . One

20:58.290 --> 21:00.179
of our most persistent challenges

21:00.179 --> 21:02.012
remains the modernization of our

21:02.012 --> 21:05.089
business IT infrastructure . Much of

21:05.089 --> 21:06.867
our financial data continues to

21:06.867 --> 21:09.849
originate in legacy feeder systems that

21:09.849 --> 21:12.170
were never designed to meet audit or

21:12.170 --> 21:15.579
modern data analytic standards . These

21:15.579 --> 21:18.489
antiquated systems , some of which are

21:18.489 --> 21:20.560
decades old , require manual

21:20.560 --> 21:23.250
intervention , reconciliation , and

21:23.250 --> 21:25.170
workarounds that add complexity ,

21:25.770 --> 21:28.170
introduce risk , and slow down decision

21:28.170 --> 21:31.189
making . As the chief financial officer

21:31.189 --> 21:34.000
of the Marine Corps , I see firsthand

21:34.000 --> 21:35.959
how better systems enable better

21:35.959 --> 21:38.959
outcomes , not just for auditors but

21:38.959 --> 21:42.550
for commanders and war fighters . These

21:42.550 --> 21:45.260
individuals rely on accurate , timely

21:45.260 --> 21:47.316
information to make mission critical

21:47.316 --> 21:49.900
decisions . The clean opinion is a

21:49.900 --> 21:51.900
clear sign of progress , but system

21:51.900 --> 21:54.410
modernization is essential to sustain

21:54.410 --> 21:57.290
and build on that progress . The

21:57.290 --> 21:59.346
achievement of audibility across the

21:59.346 --> 22:01.401
military services demands a shift in

22:01.401 --> 22:03.810
how we conduct business within DOD . A

22:03.810 --> 22:06.130
key example is the current data systems

22:06.130 --> 22:08.530
environment , which is not conducive to

22:08.530 --> 22:11.489
finalizing agency financial reports by

22:11.489 --> 22:14.069
the mid November deadline . The Marine

22:14.069 --> 22:16.291
Corps' innovative approach to utilizing

22:16.291 --> 22:18.709
a two-year audit to attain its first

22:18.709 --> 22:21.060
opinion is related to the challenges

22:21.060 --> 22:23.282
with the financial reporting timeline .

22:23.750 --> 22:26.430
Our approach allowed us to bypass

22:26.430 --> 22:28.430
typical mid November audit closeout

22:28.430 --> 22:31.189
activities and dedicate that time to

22:31.189 --> 22:33.599
full quarters of time to completing

22:33.599 --> 22:35.670
comprehensive audit procedures which

22:35.670 --> 22:37.892
would have otherwise been impossible to

22:37.892 --> 22:39.503
accomplish given the current

22:39.503 --> 22:41.392
constraints . Adhering to the mid

22:41.392 --> 22:43.614
November deadline is unrealistic in the

22:43.614 --> 22:45.726
short term and sets us up for failure

22:45.726 --> 22:47.559
until data systems and financial

22:47.559 --> 22:49.670
reporting processes are streamlined .

22:49.729 --> 22:51.729
We need a realistic time frame that

22:51.729 --> 22:53.562
allows for thorough and accurate

22:53.562 --> 22:56.250
financial reporting . As the commandant

22:56.250 --> 22:58.449
of the Marine Corps has stated , these

22:58.449 --> 23:00.671
efforts tell the American people that a

23:00.671 --> 23:02.838
dollar invested in the Marine Corps is

23:02.838 --> 23:05.290
$1 well spent , and it is part of how

23:05.290 --> 23:06.957
we distinguish ourselves as a

23:06.957 --> 23:09.234
professional war fighting organization .

23:09.420 --> 23:11.642
Passing an audit makes us more ready to

23:11.642 --> 23:14.640
fight when our nation calls . Readiness

23:14.640 --> 23:16.362
for the warfighter means being

23:16.362 --> 23:18.418
accountable for our assets , knowing

23:18.418 --> 23:20.584
where they are , and in what condition

23:20.584 --> 23:22.584
they are can be found at a moment's

23:22.584 --> 23:24.862
notice . It also means having accurate ,

23:24.862 --> 23:27.029
timely and relevant information in the

23:27.029 --> 23:29.084
hands of decision makers so that the

23:29.084 --> 23:31.140
widest determinations can be made to

23:31.140 --> 23:33.307
successfully carry out every mission .

23:33.307 --> 23:35.418
We remain committed to transparency ,

23:35.418 --> 23:37.696
to reform . To delivering a more agile ,

23:37.696 --> 23:39.807
accountable financial enterprise that

23:39.807 --> 23:42.029
supports the readiness and lethality of

23:42.029 --> 23:44.196
the Marine Corps . Thank you again for

23:44.196 --> 23:46.418
the opportunity to speak with you , and

23:46.418 --> 23:46.260
I look forward to your questions .

23:47.719 --> 23:49.830
Thank you very much , the gentleman ,

23:49.830 --> 23:53.079
Mr . Mansfield , you're recognized . Uh ,

23:53.160 --> 23:55.327
Chairman Sessions , ranking member MMA

23:55.327 --> 23:57.549
and members of the subcommittee , thank

23:57.549 --> 23:59.493
you for inviting me to discuss the

23:59.493 --> 24:01.549
inspector General's role in auditing

24:01.549 --> 24:03.660
the DOD's financial statements in the

24:03.660 --> 24:05.771
DOD's efforts to obtain a clean audit

24:05.771 --> 24:07.549
opinion . It is my privilege to

24:07.549 --> 24:09.438
represent the dedicated oversight

24:09.438 --> 24:11.327
professionals who make up the DOD

24:11.327 --> 24:13.216
Office of Inspector General . The

24:13.216 --> 24:15.438
financial statement audits performed or

24:15.438 --> 24:17.549
overseen by the inspector general are

24:17.549 --> 24:16.969
critically important for maintaining

24:16.969 --> 24:18.930
the public's trust , ensuring

24:18.930 --> 24:20.652
accountability , and improving

24:20.652 --> 24:22.849
operations . The 2025 financial

24:22.849 --> 24:24.849
statement audits are ongoing , so I

24:24.849 --> 24:27.071
cannot speak to their results . So I'll

24:27.071 --> 24:29.071
focus on 2024 in the previous seven

24:29.071 --> 24:32.040
years of audit . As my prepared

24:32.040 --> 24:34.151
statement today , I provided part one

24:34.151 --> 24:36.262
of our annual report on understanding

24:36.262 --> 24:38.207
the results of the DOD's financial

24:38.207 --> 24:40.207
statement audits . We plan to issue

24:40.207 --> 24:42.207
part two next month . These reports

24:42.207 --> 24:44.207
explain the DOD's responsibility to

24:44.207 --> 24:46.373
prepare audible financial statements ,

24:46.680 --> 24:48.880
and establish internal controls . It

24:48.880 --> 24:50.658
also talks to the links between

24:50.658 --> 24:52.713
financial management and operational

24:52.713 --> 24:54.880
readiness . These reports also explain

24:54.880 --> 24:57.079
the DOD OIG's responsibility to

24:57.079 --> 24:59.301
independently audit the DOD's financial

24:59.301 --> 25:02.770
statements . Fiscal year 24 marked the

25:02.770 --> 25:04.881
seventh full scale audit of the DOD's

25:04.881 --> 25:06.826
financial statements , and for the

25:06.826 --> 25:08.492
seventh year it resulted in a

25:08.492 --> 25:10.826
disclaimer of opinion , uh , or as , um ,

25:10.910 --> 25:12.910
ranking member from information you

25:12.910 --> 25:15.199
referred to a failed opinion , um , but

25:15.369 --> 25:17.810
that does not tell the whole story . Uh ,

25:17.829 --> 25:19.885
the agency-wide financial statements

25:19.885 --> 25:22.107
are a consolidation of audit statements

25:22.107 --> 25:24.218
and information from across the DOD .

25:24.599 --> 25:26.321
In addition to the agency-wide

25:26.321 --> 25:28.488
financial statement opinion , auditors

25:28.488 --> 25:30.710
issues opinions on individual reporting

25:30.710 --> 25:32.869
entities in fiscal year 24 , 11

25:32.869 --> 25:35.036
received clean opinions , one received

25:35.036 --> 25:37.147
a qualified opinion , and 12 received

25:37.147 --> 25:38.869
disclaimers of opinion . These

25:38.869 --> 25:40.813
disclaimers of opinion were issued

25:40.813 --> 25:42.869
because the DUD entities continue to

25:42.869 --> 25:44.980
have unresolved accounting issues and

25:44.980 --> 25:47.202
material weaknesses . When consolidated

25:47.202 --> 25:48.925
into the agency-wide financial

25:48.925 --> 25:50.591
statements , the entity level

25:50.591 --> 25:52.425
deficiencies resulted in the OIG

25:52.425 --> 25:54.859
identifying 28 agency-wide material

25:54.859 --> 25:57.939
weaknesses . However , individual

25:57.939 --> 26:00.180
reporting entities have made progress

26:00.180 --> 26:02.540
towards clean audit opinions . In fact ,

26:02.819 --> 26:05.020
as , as a fellow witness stated , the

26:05.020 --> 26:06.909
Marine Corps maintained its clean

26:06.909 --> 26:09.076
opinion this year . Uh , Ditra and DLA

26:09.076 --> 26:10.979
obtained clean opinions . Uh , in

26:10.979 --> 26:13.459
addition , 14 entities either closed or

26:13.459 --> 26:15.292
downgraded at least one material

26:15.292 --> 26:17.900
weakness in fiscal year 24 . While

26:17.900 --> 26:20.122
these entities , uh , uh , some of them

26:20.122 --> 26:22.689
are not material , but when it comes to

26:22.939 --> 26:25.106
their con their full contribution . To

26:25.106 --> 26:27.272
the agency wide uh financial statement

26:27.272 --> 26:29.854
opinion , it does mark progress and as

26:29.854 --> 26:32.021
individual reporting entities like the

26:32.021 --> 26:34.175
services or defense agencies as they

26:34.175 --> 26:36.231
become better and they reduce , uh ,

26:36.231 --> 26:38.508
material weaknesses and they have more ,

26:38.508 --> 26:40.453
uh , solid controls over financial

26:40.453 --> 26:42.564
reporting , so will the DOD overall .

26:42.680 --> 26:44.847
Today I want to highlight 3 themes the

26:44.847 --> 26:46.902
OIG has identified during the past 7

26:46.902 --> 26:49.449
years of audit . First , the DOD needs

26:49.449 --> 26:51.282
accountability at all levels for

26:51.282 --> 26:53.393
financial management . Senior leaders

26:53.393 --> 26:55.449
have set the right tone at the top .

26:55.449 --> 26:57.449
However , at the individual level ,

26:57.449 --> 26:59.116
personnel do not consistently

26:59.116 --> 27:01.338
understand how the work they do impacts

27:01.338 --> 27:03.671
financial statements . For example , Uh ,

27:03.671 --> 27:05.560
a sergeant in a warehouse who was

27:05.560 --> 27:07.616
focused on the operational readiness

27:07.616 --> 27:09.727
may not grasp the financial impact of

27:09.727 --> 27:11.616
receiving inventory and recording

27:11.616 --> 27:13.727
inventory or tracking customer orders

27:13.727 --> 27:12.810
and maintaining supporting

27:12.810 --> 27:14.921
documentation and how that ultimately

27:14.921 --> 27:17.209
relates to um operational readiness and

27:17.209 --> 27:19.320
knowing what you have , where it is ,

27:19.320 --> 27:21.376
and the condition it's in . Second ,

27:21.376 --> 27:23.319
the DOD has an extremely complex

27:23.319 --> 27:25.760
systems environment with over 4700

27:25.760 --> 27:28.280
systems across the DOD . More than 400

27:28.280 --> 27:30.113
of those systems are relevant to

27:30.113 --> 27:32.169
financial management , which have at

27:32.169 --> 27:34.224
least 2000 interfaces between them .

27:34.400 --> 27:36.567
Some of these systems have been in use

27:36.567 --> 27:38.678
since the 1950s . The systems are not

27:38.678 --> 27:40.678
always interoperable , meaning they

27:40.678 --> 27:42.900
cannot talk to each other , and many of

27:42.900 --> 27:44.956
the systems require manual processes

27:44.956 --> 27:47.011
and do not have effective controls .

27:47.459 --> 27:49.900
Third , the DOD's policies and

27:49.900 --> 27:51.789
procedures for accounting did not

27:51.789 --> 27:53.956
consistently match the capabilities of

27:53.956 --> 27:55.540
the systems they use . When

27:55.540 --> 27:57.262
implementing new systems , DUD

27:57.262 --> 27:59.484
components do not change their policies

27:59.484 --> 28:01.262
or procedures to align with the

28:01.262 --> 28:03.420
system's capabilities . Rather , they

28:03.420 --> 28:05.500
make modifications to the system to

28:05.500 --> 28:07.333
match their current procedures ,

28:07.333 --> 28:09.167
negating the value of the system

28:09.167 --> 28:10.833
investment . Addressing these

28:10.833 --> 28:12.889
weaknesses requires continued effort

28:12.889 --> 28:14.556
and sufficient coordination ,

28:14.556 --> 28:16.556
significant coordination within and

28:16.556 --> 28:18.667
between each DOD entity . The culture

28:18.667 --> 28:20.667
must continue to change so that all

28:20.667 --> 28:22.500
personnel realize that financial

28:22.500 --> 28:24.389
management has a direct impact on

28:24.389 --> 28:26.611
operational readiness and is everyone's

28:26.611 --> 28:28.778
business . The DUD Office of Inspector

28:28.778 --> 28:31.000
General will continue to ensure the DOD

28:31.000 --> 28:33.056
receives full and fair audits of its

28:33.056 --> 28:34.889
financial statements to identify

28:34.889 --> 28:37.000
deficiencies in areas for improvement

28:37.000 --> 28:36.989
and to provide actionable information

28:36.989 --> 28:39.109
and recommendations to the DOD . Our

28:39.109 --> 28:40.998
commitment to enhancing the DOD's

28:40.998 --> 28:43.053
financial health through independent

28:43.053 --> 28:45.387
oversight remains steadfast . Thank you ,

28:45.387 --> 28:47.553
and I look forward to your questions .

28:47.920 --> 28:50.540
Thank you very much , uh , timely , uh ,

28:50.630 --> 28:52.689
in conclusion also , thank you very

28:52.689 --> 28:54.633
much , Mr . Manfield . Mr . Kahn ,

28:54.633 --> 28:58.119
you're recognized . Good morning Jim

28:58.119 --> 29:00.319
Sessions , ranking member Mfume and

29:00.319 --> 29:02.541
members of the subcommittee . Thank you

29:02.541 --> 29:04.430
for the opportunity to once again

29:04.430 --> 29:06.486
testify on the Department of Defense

29:06.486 --> 29:08.640
financial statement audits . As you

29:08.640 --> 29:10.696
heard , there has been some progress

29:10.696 --> 29:13.000
since our last update . The tone at the

29:13.000 --> 29:15.111
top continues to be supportive of the

29:15.111 --> 29:17.333
audit effort with the goal of achieving

29:17.333 --> 29:20.160
an opinion by 2028 . This is one of

29:20.160 --> 29:22.327
Secretary Haskett's three priorities .

29:22.839 --> 29:25.006
The audit uncovers weaknesses and duty

29:25.006 --> 29:26.920
management systems , improves

29:26.920 --> 29:28.969
coordination , and guides better

29:28.969 --> 29:30.969
decision making , and it has led to

29:30.969 --> 29:33.859
positive results , both financial and

29:33.859 --> 29:36.260
operational . It has also identified

29:36.260 --> 29:38.250
vulnerabilities which require

29:38.250 --> 29:40.528
heightened attention by DUD management .

29:41.160 --> 29:43.920
Today I would like to highlight two key

29:43.920 --> 29:47.160
items the expansion of DUD financial

29:47.160 --> 29:49.520
management high risk area to include

29:49.520 --> 29:52.479
ros fraud risk management and then the

29:52.479 --> 29:54.839
next steps in DD's audit approach to

29:54.839 --> 29:57.400
reaching auditability . First ,

29:57.890 --> 29:59.834
effective fraud risk management is

29:59.834 --> 30:01.946
essential to protecting the resources

30:01.946 --> 30:04.112
entrusted to the department . The lack

30:04.112 --> 30:06.223
of an effective fraud risk management

30:06.223 --> 30:08.334
capacity combined with the identified

30:08.334 --> 30:11.189
material weaknesses . Compounds duties

30:11.189 --> 30:13.510
failures to establish a strong

30:13.510 --> 30:15.630
financial management internal control

30:15.630 --> 30:18.890
environment . This condition increases

30:18.890 --> 30:21.189
opportunities for fraud against the

30:21.189 --> 30:24.260
department's vast resources . DUD

30:24.260 --> 30:27.290
spends over $1 trillion annually . It

30:27.290 --> 30:30.979
obligated over $450 billion for

30:30.979 --> 30:33.390
contracting and fiscal year 2023 ,

30:33.699 --> 30:35.588
making it the largest contracting

30:35.588 --> 30:37.819
agency in the federal government . The

30:37.819 --> 30:40.020
scope and scale of Duty's financial

30:40.020 --> 30:41.739
activity makes it inherently

30:41.739 --> 30:44.660
susceptible to fraud for fiscal year

30:44.660 --> 30:48.260
2017 through 24 . Duty themselves

30:48.260 --> 30:50.469
reported over 10 billion in confirmed

30:50.469 --> 30:53.630
fraud . The actual fraud is likely much

30:53.630 --> 30:56.589
higher as the full scale of fraud is

30:56.589 --> 31:00.079
not known . Now to my second point ,

31:00.599 --> 31:02.710
the next steps and duties approach to

31:02.710 --> 31:04.910
auditability . Sound financial

31:04.910 --> 31:06.966
management processes are critical to

31:06.966 --> 31:09.630
supporting DD's mission , ensuring its

31:09.630 --> 31:11.852
financial resources resources are being

31:11.852 --> 31:13.989
spent wisely and that there are

31:13.989 --> 31:16.140
controls in place to minimize fraud ,

31:16.310 --> 31:18.949
waste , and abuse . It also helps

31:18.949 --> 31:21.510
ensure Duty has reliable information on

31:21.510 --> 31:24.430
what supplies and assets it has , where

31:24.430 --> 31:26.790
they're located , so the department can

31:26.790 --> 31:28.790
achieve its mission effectively and

31:28.790 --> 31:31.270
efficiently . As a first step to

31:31.270 --> 31:34.390
auditability, duity will need to have

31:34.390 --> 31:36.229
reliable data for preparing its

31:36.229 --> 31:38.285
financial statements to successfully

31:38.285 --> 31:40.780
pass the audit . The Marine Corps was

31:40.780 --> 31:42.669
able to achieve its first opinion

31:42.819 --> 31:44.875
through effective strategic planning

31:45.099 --> 31:47.569
and managing milestones . They

31:47.569 --> 31:49.900
augmented the capabilities of the new

31:49.900 --> 31:52.660
general ledger system , the DAI , with

31:52.660 --> 31:55.829
manual labor intensive methods with

31:55.829 --> 31:58.339
smaller agencies previously used to

31:58.339 --> 32:00.969
obtain a clean audit opinion . This

32:00.969 --> 32:03.191
strategy involves tracking transactions

32:03.191 --> 32:05.420
piecemeal and relying on manual

32:05.420 --> 32:07.729
workarounds for record keeping . As the

32:07.729 --> 32:09.890
feus systems and underlying controls

32:09.890 --> 32:12.479
are unreliable . The goal of an

32:12.479 --> 32:14.590
effective financial management system

32:14.590 --> 32:16.812
is to provide reliable information on a

32:16.812 --> 32:19.400
timely basis for decision making . It's

32:19.400 --> 32:22.219
yet unclear for other larger DOD

32:22.219 --> 32:24.599
components if they may successfully

32:24.599 --> 32:26.766
employ the Marine Corps approach , but

32:26.766 --> 32:29.400
what is clear in order to succeed , the

32:29.400 --> 32:31.760
department must be realistic of the

32:31.760 --> 32:33.760
resource needs to prepare auditable

32:33.760 --> 32:35.800
financial statements and coordinate

32:35.800 --> 32:38.270
detailed planning , enforced timelines ,

32:38.390 --> 32:41.180
and manage complexity . To reap long

32:41.180 --> 32:43.239
term benefits and meet the intent of

32:43.239 --> 32:45.560
producing financial statements , duty

32:45.560 --> 32:48.239
must also strengthen internal controls

32:48.239 --> 32:50.790
and modernize systems to cut fraud risk

32:50.790 --> 32:53.012
and eliminate inefficient workarounds .

32:53.790 --> 32:56.189
Duty must build a repeatable reliable

32:56.189 --> 32:58.150
financial management process that

32:58.150 --> 33:00.790
consistently generates timely accurate

33:00.790 --> 33:03.349
data to support operations and

33:03.349 --> 33:06.300
strengthen national defense . And if

33:06.300 --> 33:08.449
Congress were to monitor milestones ,

33:08.979 --> 33:11.339
ensure accountability , and adapt where

33:11.339 --> 33:14.339
necessary without affecting the 2028

33:14.339 --> 33:16.660
audit goal , it would go a long way

33:16.660 --> 33:18.827
towards helping the department achieve

33:18.827 --> 33:20.993
auditability and build that repeatable

33:20.993 --> 33:24.079
financial management process . My

33:24.079 --> 33:26.135
written statement provides much more

33:26.135 --> 33:28.400
detail on these matters . I'm able to

33:28.400 --> 33:30.511
address your questions about them and

33:30.511 --> 33:32.319
on the broader subjects of duty

33:32.319 --> 33:34.430
financial management and the benefits

33:34.430 --> 33:36.760
of financial statement auditability .

33:37.079 --> 33:38.690
Thank you once again for the

33:38.690 --> 33:40.880
opportunity to testify . I'll be happy

33:40.880 --> 33:44.170
to answer your questions . Ms . Kahn ,

33:44.209 --> 33:46.487
thank you very much . All three of you ,

33:46.487 --> 33:48.709
uh , completed the task well within the

33:48.709 --> 33:51.140
time frame , and that I appreciate . Uh ,

33:51.170 --> 33:53.226
we have a number of members who were

33:53.226 --> 33:55.569
spread out , not only on the Democratic

33:55.569 --> 33:58.099
side , but the Republican side . And so

33:58.099 --> 34:00.155
today we will attempt to , uh , take

34:00.155 --> 34:02.619
those members , uh , as they appear . I

34:02.619 --> 34:05.930
would first , uh , uh , offer time to

34:05.930 --> 34:07.763
the distinguished gentleman from

34:07.763 --> 34:10.780
Tennessee . Uh , Mr . Burcht ,

34:11.030 --> 34:13.030
gentlemans recognized when you said

34:13.030 --> 34:15.197
distinguished and gentlemen , I didn't

34:15.197 --> 34:17.252
look up , but then when you said yes

34:17.252 --> 34:19.419
sir , I realized you were right , Mr .

34:19.419 --> 34:19.000
Chairman . Thank you , Mr . Chairman ,

34:19.030 --> 34:21.141
and , um , ranking member of Mafumi .

34:21.229 --> 34:23.550
Appreciate y'all being my friend , um .

34:24.209 --> 34:26.159
I have a few questions , uh , Mr .

34:26.250 --> 34:29.879
Mansfield , um , is DOD's fiscal year

34:29.879 --> 34:32.639
26 budget going to be higher than

34:32.639 --> 34:36.319
fiscal year 25's budget ? Uh , that is

34:36.319 --> 34:38.430
my understanding , yes , and how much

34:38.430 --> 34:40.486
of that is spending is mandatory and

34:40.486 --> 34:42.541
how much is discretionary . Uh , the

34:42.541 --> 34:46.429
vast majority is discretionary . Uh ,

34:46.570 --> 34:48.514
the spending has increased , but I

34:48.514 --> 34:50.737
assume that DOD still has not completed

34:50.737 --> 34:52.626
a clean audit . Is that correct ?

34:52.626 --> 34:55.719
Correct . Why is the Marine Corps able

34:55.719 --> 34:57.886
to complete a clean audit , but no one

34:57.886 --> 34:59.330
else at the Pentagon is ?

35:01.679 --> 35:05.209
So I think it goes back to uh some of

35:05.209 --> 35:07.169
uh what my fellow witnesses were

35:07.169 --> 35:11.040
talking about it it was uh a deliberate

35:11.040 --> 35:13.810
and uh long term effort uh to to get to

35:13.810 --> 35:16.010
that point . Uh , get to the point of

35:16.010 --> 35:18.232
not being able to pass an audit , being

35:18.232 --> 35:20.343
able to pass an audit , um , so there

35:20.343 --> 35:22.454
was about a 3 year cycle . It was a 2

35:22.454 --> 35:24.621
year audit , but they capitalized on a

35:24.621 --> 35:26.899
lot of work that was performed in , uh ,

35:26.929 --> 35:28.929
previous , uh , financial statement

35:28.929 --> 35:31.320
audits to look at , uh , accountability

35:31.320 --> 35:33.653
and how testing results were coming out .

35:33.653 --> 35:35.709
Uh , they implemented a new system ,

35:35.709 --> 35:37.764
DAI , which , uh , has some inherent

35:37.764 --> 35:39.830
controls within it . Uh , they , and

35:39.830 --> 35:41.830
then they validated the information

35:41.830 --> 35:43.719
within that through a substantive

35:43.719 --> 35:45.830
testing effort , so it's a very labor

35:45.830 --> 35:48.110
intensive , uh , effort , uh , taking

35:48.110 --> 35:50.332
actually a little over 2 years . It was

35:50.332 --> 35:52.332
actually extended past the November

35:52.332 --> 35:54.443
deadline into I think February , uh ,

35:54.443 --> 35:56.721
in order to actually get the full , uh ,

35:56.721 --> 35:58.554
financial statement , uh , audit

35:58.554 --> 36:00.610
testing completed . Uh , so it was a

36:00.610 --> 36:02.666
deliberate and , and kind of I think

36:02.666 --> 36:04.777
very manual what what I refer to as a

36:04.777 --> 36:06.943
brute force auditing , uh , approach .

36:06.943 --> 36:09.166
Uh , it's not your standard approach of

36:09.166 --> 36:11.388
doing , uh , internal control testing .

36:11.388 --> 36:11.330
I see part of our problem here is we're

36:11.330 --> 36:13.479
preaching to the choir , you know , 8

36:13.479 --> 36:15.590
years they have not passed an audit .

36:16.050 --> 36:18.272
Um , they can't account for over a half

36:18.272 --> 36:20.550
a trillion dollars . It's the Pentagon ,

36:20.550 --> 36:22.494
not the Marine Corps . I mean $0.5

36:22.494 --> 36:24.606
trillion sir , is an aircraft carrier

36:24.810 --> 36:27.032
somewhere in the Pentagon we've lost an

36:27.032 --> 36:28.977
aircraft carrier . And that , that

36:28.977 --> 36:31.199
hurts me because I'm , I come from this

36:31.199 --> 36:33.366
conservative area . My daddy fought in

36:33.366 --> 36:35.588
the First Marine Division . His colonel

36:35.588 --> 36:37.643
was Chesty Puller . My mama lost her

36:37.643 --> 36:39.921
oldest brother fighting the Nazis , um .

36:40.159 --> 36:44.139
Uh , my , my wife is a widow and the

36:44.139 --> 36:46.620
biological father of my child was a

36:46.620 --> 36:49.659
master chief on a Navy sub , so the

36:49.659 --> 36:51.715
military runs very deep in my family

36:51.715 --> 36:54.659
and patriotism does as well , but when

36:54.659 --> 36:56.979
we continue to feed this .

36:57.909 --> 37:01.100
Insatiable diet of waste and abuse .

37:02.000 --> 37:04.830
It continues to , I think , uh , weaken

37:04.830 --> 37:07.250
us . And weaken us from a fiscal

37:07.250 --> 37:09.417
standpoint and a military standpoint .

37:09.417 --> 37:11.820
We continue down this path of an

37:11.830 --> 37:15.409
antiquated system where we vote for

37:15.409 --> 37:17.590
huge bloated budgets for powerful

37:17.590 --> 37:21.199
members of Congress . And we have

37:21.290 --> 37:24.330
programs , apparatus , machinery .

37:25.459 --> 37:27.530
Everything imaginable that gets

37:27.530 --> 37:30.649
mothballed the day we put it out , Mr .

37:30.659 --> 37:32.715
Chairman , that has got to stop . We

37:32.715 --> 37:34.937
have got to educate the public and they

37:34.937 --> 37:37.320
need to be as angry as I am about this

37:37.889 --> 37:40.129
because we cannot continue down this

37:40.129 --> 37:42.570
path . I think we're endangering our

37:42.570 --> 37:44.681
military , we're in dangering our men

37:44.681 --> 37:46.737
and women . Daddy used to say he was

37:46.737 --> 37:49.169
quoting somebody else , but , um , he

37:49.169 --> 37:51.391
said , old men make decisions and young

37:51.391 --> 37:53.510
men die . And when we're sitting here

37:53.510 --> 37:57.419
having . Half a billion dollar aircraft .

37:58.870 --> 38:01.037
Being proposed and we're putting out .

38:01.530 --> 38:03.697
We're allowing the Chinese to make the

38:03.697 --> 38:05.919
microchips for them that could possibly

38:05.919 --> 38:07.697
turn off some of those aircraft

38:07.697 --> 38:09.919
mid-flight , we've been told . It's not

38:09.919 --> 38:11.919
just some conspiracy theory that is

38:11.919 --> 38:15.330
talked about . And We continue down

38:15.330 --> 38:19.250
this path of greed and when

38:19.250 --> 38:22.409
we have members of this body that

38:22.409 --> 38:24.631
profit from this and they're allowed to

38:24.631 --> 38:26.979
do individual stock trades and continue

38:26.979 --> 38:29.090
down this , the public does not trust

38:29.090 --> 38:31.312
us and that government , they ought not

38:31.312 --> 38:33.146
trust us . We have not been good

38:33.146 --> 38:35.368
stewards of their money . This is gonna

38:35.368 --> 38:37.312
continue until we get off our high

38:37.312 --> 38:39.257
horse and realize what the heck is

38:39.257 --> 38:41.489
going on . And what is going on right

38:41.489 --> 38:44.239
now is we're allowing people to steal

38:44.239 --> 38:47.050
from us because we're , we're hogs at

38:47.050 --> 38:49.370
the trough . Congress is hogs at the

38:49.370 --> 38:51.537
trough and I'm convinced of that . You

38:51.537 --> 38:53.648
wanna follow the dadgum money trail ,

38:53.648 --> 38:55.879
it goes right back to Congress . And

38:55.879 --> 38:58.101
someday I hope some members of Congress

38:58.101 --> 38:59.935
are led out of here in handcuffs

38:59.935 --> 39:02.050
because of that , because these men ,

39:02.639 --> 39:04.861
they're the ones having to come out and

39:04.861 --> 39:07.083
defend . The indefensible , and I wanna

39:07.083 --> 39:09.239
salute the Marine Corps and you're

39:09.239 --> 39:12.540
always great heritage and my mama said

39:12.540 --> 39:14.762
after daddy died , if Daddy hadn't been

39:14.762 --> 39:16.540
able go fighting that war , she

39:16.540 --> 39:18.540
probably couldn't have been able to

39:18.540 --> 39:20.540
live with him because he loved this

39:20.540 --> 39:22.540
country and he loved the corps . He

39:22.540 --> 39:22.459
loved Chesty puller as well , but that

39:22.459 --> 39:24.515
goes a lot deeper . So thank y'all .

39:24.659 --> 39:26.548
Sorry , Mr . Chairman , I went to

39:26.548 --> 39:28.826
preaching . I didn't even have an , uh ,

39:28.826 --> 39:31.048
we'll have a special love offering when

39:31.048 --> 39:33.048
this is all over with and we didn't

39:33.048 --> 39:35.270
even have an altar call , but thank you

39:35.270 --> 39:34.929
for allowing me to indulge , Mr .

39:34.939 --> 39:37.219
Chairman . Gentleman yields back his

39:37.219 --> 39:38.830
time . Thank you very much ,

39:38.830 --> 39:41.052
distinguished gentleman from Maryland's

39:41.052 --> 39:42.052
recognized .

39:46.120 --> 39:48.176
Thank you Mr . Chairman . I , I know

39:48.176 --> 39:50.342
there are the members . I'm gonna just

39:50.342 --> 39:52.453
wave my time right now so that uh you

39:52.453 --> 39:54.009
can start the process of uh

39:54.009 --> 39:56.231
acknowledging them . I do wanna thank ,

39:56.231 --> 39:59.070
uh , the gentleman who just spoke , uh ,

39:59.080 --> 40:02.360
for always uh speaking real and from

40:02.360 --> 40:04.800
the heart in a very basic way to

40:04.800 --> 40:07.439
underscore the work of this committee

40:07.439 --> 40:10.320
and the challenge , the challenge to

40:10.320 --> 40:12.439
change the status quo at you back .

40:14.560 --> 40:16.782
Gentleman , yields back his time , uh ,

40:16.782 --> 40:18.838
distinguished gentlewoman from North

40:18.838 --> 40:20.838
Carolina has recognized Mrs . Fox .

40:21.729 --> 40:23.840
Thank you very much , Mr . Chairman ,

40:23.840 --> 40:25.951
and thanks to our witnesses for being

40:25.951 --> 40:29.189
here today . Mr . Mansfield in 2024 ,

40:29.239 --> 40:31.530
the DOD Office of Inspector General

40:31.530 --> 40:34.040
reported that many of DOD's financial

40:34.040 --> 40:36.719
management systems remain noncompliant

40:36.719 --> 40:39.149
with statutory standards for accurate ,

40:39.159 --> 40:41.159
reliable , and timely information .

40:41.439 --> 40:44.239
Although DOD aims to achieve compliance

40:44.239 --> 40:48.159
by fiscal year 2028 , the OIG found its

40:48.159 --> 40:50.050
plans insufficiently aggressive ,

40:50.159 --> 40:52.399
citing delays in retiring outdated

40:52.399 --> 40:55.110
systems . The OIG recommended

40:55.110 --> 40:56.959
expediting the retirement and

40:56.959 --> 40:59.399
replacement of 23 systems , potentially

40:59.399 --> 41:02.919
saving nearly $728 million in future

41:02.919 --> 41:05.360
funding . Mr . Mansfield , in your

41:05.360 --> 41:07.304
opinion , why is the Department of

41:07.304 --> 41:09.360
Defense not being more aggressive in

41:09.360 --> 41:11.879
retiring financial systems that are not

41:11.879 --> 41:13.657
cost effective and that are not

41:13.657 --> 41:15.879
compliant with statutory requirements ?

41:18.889 --> 41:20.945
It , it's a complex , it's a complex

41:20.945 --> 41:23.056
storyline . So if you think about the

41:23.056 --> 41:25.278
number of systems they have simplify it

41:25.278 --> 41:27.278
in our we have short time . No , so

41:27.278 --> 41:29.278
what I'm saying is there's a lot of

41:29.278 --> 41:31.445
systems and in order to replace if you

41:31.445 --> 41:31.409
have 400 systems that you're relying

41:31.409 --> 41:33.409
upon to replace all of those at one

41:33.409 --> 41:35.576
point in time . Uh , is very difficult

41:35.576 --> 41:37.853
and so what the department hasn't done ,

41:37.853 --> 41:39.687
I don't think the best job of is

41:39.687 --> 41:41.798
prioritizing which systems to replace

41:41.798 --> 41:43.798
those systems that have the biggest

41:43.798 --> 41:45.853
impact on the department . So if you

41:45.853 --> 41:48.020
think about the most material portions

41:48.020 --> 41:50.020
of the financial statements and the

41:50.020 --> 41:51.631
systems relied upon for that

41:51.631 --> 41:53.687
prioritizing those , uh , and making

41:53.687 --> 41:55.798
real . Decisions on which systems are

41:55.798 --> 41:57.965
going to be uh used in the long term ,

41:57.965 --> 41:59.919
so identifying those uh enterprise

41:59.919 --> 42:02.030
resource management systems they want

42:02.030 --> 42:04.141
to use across the board and requiring

42:04.141 --> 42:06.169
use of those in in the stop letting

42:06.169 --> 42:08.280
individual entities , uh , make their

42:08.280 --> 42:10.502
own decisions on the systems they use .

42:10.502 --> 42:12.613
There needs to be more of a strategic

42:12.613 --> 42:14.891
approach to that . Thank you very much ,

42:14.891 --> 42:17.739
Mr . Khan . According to GAO , the Navy

42:17.739 --> 42:20.580
identified 14 legacy systems that it

42:20.580 --> 42:22.747
plans to retire , which would save the

42:22.747 --> 42:25.090
department approximately $103 million .

42:25.300 --> 42:27.300
Are the other branches also running

42:27.300 --> 42:29.467
legacy systems that would be more cost

42:29.467 --> 42:31.578
effective to eliminate ? And how many

42:31.578 --> 42:33.467
legacy systems are there that are

42:33.467 --> 42:35.939
costing the branches and the DOD money

42:35.939 --> 42:38.820
to use ? Yes , there are other

42:38.820 --> 42:40.820
components which are running legacy

42:40.820 --> 42:42.598
systems which are not producing

42:42.598 --> 42:45.050
reliable information . Um , I don't

42:45.050 --> 42:47.050
have a number with me right now . I

42:47.050 --> 42:49.161
will get that to you for the record .

42:49.379 --> 42:51.459
OK , what prevents the military

42:51.459 --> 42:53.629
services from using the same financial

42:53.629 --> 42:57.590
systems ? It in part

42:57.590 --> 43:00.060
they've got different requirements . Uh ,

43:00.350 --> 43:02.669
it's big , complex , uh , they have to

43:02.669 --> 43:05.030
do this in stages first they have to do

43:05.030 --> 43:07.469
individual offices components , but

43:07.469 --> 43:09.636
it's the scale and there are different

43:09.636 --> 43:11.750
practices which keeps them using one

43:11.750 --> 43:13.694
system for the entire department .

43:14.159 --> 43:17.060
Another question , Mr . Kahn , a DODIG

43:17.060 --> 43:19.500
audit of financial improvements and

43:19.500 --> 43:21.580
audit remediation contracts for the

43:21.580 --> 43:23.830
military components found that from

43:23.830 --> 43:27.229
fiscal year 2018 to fiscal year 2022 ,

43:27.570 --> 43:31.510
The DOD spent approximately $4

43:31.510 --> 43:34.149
billion on audit remediation and

43:34.149 --> 43:36.205
support with the goal of obtaining a

43:36.205 --> 43:38.316
clean audit , but that the department

43:38.316 --> 43:40.371
made minimal progress to correct its

43:40.371 --> 43:42.469
financial management . What

43:42.469 --> 43:44.790
specifically was the money spent on and

43:44.790 --> 43:48.629
how does $4 billion yield only minimal

43:48.629 --> 43:51.110
progress for achieving a clean audit ?

43:53.780 --> 43:57.169
Most of the money went for uh

43:57.699 --> 44:00.020
the project uh planning and putting in

44:00.020 --> 44:02.689
the basics of a system so they could be

44:03.020 --> 44:06.570
integrated with the existing uh 3D

44:06.570 --> 44:09.300
systems that go into the entire uh

44:09.300 --> 44:12.260
component uh results were achieved but

44:12.260 --> 44:14.699
it's primarily getting the data cleaned

44:14.699 --> 44:18.510
so they can be reliable to . Pass the

44:18.510 --> 44:20.788
test of an audit , and that takes time .

44:20.788 --> 44:23.121
If we get our money's worth , yes or no ?

44:23.580 --> 44:26.879
It's difficult to say . Ms . Fox , I'd

44:26.879 --> 44:28.990
like to submit that since we produced

44:28.990 --> 44:31.212
that report , I would say I don't think

44:31.212 --> 44:30.959
we got our money's worth it's worth .

44:32.290 --> 44:34.770
Thank you . uh , Mr . Conn , I'm very

44:34.770 --> 44:36.714
concerned about the lack of fiscal

44:36.714 --> 44:39.209
responsibility we've historically seen

44:39.209 --> 44:41.320
at the Department of Defense . As you

44:41.320 --> 44:43.153
know , Congress has directed the

44:43.153 --> 44:45.376
department to have a clean audit option

44:45.376 --> 44:47.919
by 2028 . To maintain public trust and

44:47.919 --> 44:50.510
accountability as the administration

44:50.510 --> 44:53.040
continues to cut costs , the department

44:53.040 --> 44:55.429
must ensure the independence of its

44:55.429 --> 44:58.080
outside auditors whose mission is to

44:58.080 --> 45:00.320
objectively evaluate waste , fraud and

45:00.320 --> 45:03.719
abuse . Mr . Conn , what steps is the

45:03.719 --> 45:05.941
department taking to ensure its outside

45:05.941 --> 45:08.919
audits or auditors are able to help the

45:08.919 --> 45:12.080
department achieve a credible , clean

45:12.080 --> 45:16.000
audit . The outside

45:16.000 --> 45:19.360
auditors have been vetted by the DODIG .

45:19.459 --> 45:22.510
There are the companies , uh , which ,

45:22.520 --> 45:24.353
uh , go through a pretty lengthy

45:24.353 --> 45:26.560
procurement process . Uh , the audit

45:26.560 --> 45:29.110
firms , uh , these are CPA firms who

45:29.110 --> 45:32.199
have been , uh , registered as such .

45:32.360 --> 45:34.959
They also go through peer review . Uh ,

45:35.010 --> 45:37.177
so their reports , whether it's in the

45:37.177 --> 45:39.729
federal sector , state and local sector

45:40.010 --> 45:42.330
or private sector , they've been peer

45:42.330 --> 45:45.169
reviewed by other CPA firms to make

45:45.169 --> 45:47.280
sure they meet auditing standards and

45:47.280 --> 45:50.110
professional standards . But they're

45:50.110 --> 45:53.429
not being compromised by the DOT as the

45:53.429 --> 45:56.020
DOD as they do the audits . They're

45:56.020 --> 45:58.590
allowed to complete independence , are

45:58.590 --> 46:02.080
they ? Yes , as far as we can tell ,

46:02.139 --> 46:04.250
they are independent . They are not ,

46:04.399 --> 46:07.120
uh , uh , compromised by management or

46:07.120 --> 46:10.120
um anything uh I can see from where we

46:10.120 --> 46:13.129
are . Thank you very much , Mr .

46:13.139 --> 46:14.750
Chairman , and you're back .

46:15.379 --> 46:17.546
Gentlewoman , yields back the time . I

46:17.546 --> 46:19.768
wanna thank you gentlemen , gentlewoman

46:19.768 --> 46:21.823
for coming back . I know she is busy

46:21.823 --> 46:23.935
and I know we have other members that

46:23.935 --> 46:25.879
are busy too , and I would like to

46:25.879 --> 46:28.101
yield to distinguished young woman from

46:28.101 --> 46:30.379
the state of Washington , Ms . Randall ,

46:30.379 --> 46:32.490
gentleman's recognized . Thank you so

46:32.490 --> 46:34.490
much , uh , Mr . Chair . You know ,

46:34.490 --> 46:36.860
like the gentleman from Tennessee , I

46:36.860 --> 46:39.909
come from a family with a strong

46:39.909 --> 46:41.742
military tradition , including a

46:41.742 --> 46:43.853
grandfather who survived pretty heavy

46:43.853 --> 46:47.010
combat in the Korean War . I also

46:47.010 --> 46:49.979
represent Naval Base Kitsap and the

46:49.979 --> 46:52.100
intermediate maintenance facility and

46:52.419 --> 46:54.729
my neighbors know how important it is

46:54.729 --> 46:56.739
that our Department of Defense is

46:56.739 --> 46:59.889
operating , um . At the highest

46:59.889 --> 47:01.945
possible level that we are efficient

47:01.945 --> 47:05.040
with taxpayer dollars and that we are

47:05.489 --> 47:07.889
effective with our delivery of the

47:07.889 --> 47:09.729
mission . Um .

47:11.560 --> 47:14.679
Mr . Con , GAO has made

47:14.679 --> 47:18.560
many recommendations uh for

47:18.560 --> 47:21.879
DOD on financial management , um , so

47:21.879 --> 47:24.790
that we won't be in this position with

47:24.790 --> 47:28.679
this big graphic that Mr . Mfume had um

47:28.679 --> 47:31.989
in the future . Which of these could

47:31.989 --> 47:33.989
have recommendations could have the

47:33.989 --> 47:36.489
greatest impact on DOD's efforts to

47:36.489 --> 47:39.110
modernize its financial system . Um ,

47:39.610 --> 47:41.277
thank you for that question ,

47:41.277 --> 47:43.889
Congressman Randall . The key that , um ,

47:43.929 --> 47:46.530
that comes to mind is , uh , DOD's

47:46.530 --> 47:48.649
planning and they're managing their

47:48.649 --> 47:51.010
milestones . Those are the key issues

47:51.010 --> 47:53.729
which , uh , keeps DOD having to move

47:53.729 --> 47:56.330
their timelines . Uh , they need to be

47:56.330 --> 47:58.840
more forceful in maintaining , uh ,

47:58.850 --> 48:01.072
their timelines and the way they can do

48:01.072 --> 48:03.128
that is better planning to have more

48:03.128 --> 48:04.961
granular information . Uh , with

48:04.961 --> 48:06.961
interim milestones , so they're not

48:06.961 --> 48:09.017
reaching the end and the end of time

48:09.017 --> 48:11.128
and then realizing that all the steps

48:11.128 --> 48:13.072
have not been completed . Uh , the

48:13.072 --> 48:15.017
other one , if I may touch on very

48:15.017 --> 48:17.183
quickly , is the tone at the top needs

48:17.183 --> 48:19.260
to be continue to be very , very

48:19.260 --> 48:21.149
consistent to make sure that this

48:21.149 --> 48:24.080
remains a focus and just like , uh , Mr .

48:24.090 --> 48:26.312
Mans is saying it has to go through all

48:26.312 --> 48:28.312
the levels , not just the top , but

48:28.312 --> 48:30.646
actually people who are delivering . Uh ,

48:30.646 --> 48:32.423
some of these , um , accounting

48:32.423 --> 48:34.534
information they also have to embrace

48:34.534 --> 48:37.969
the similar mindset . Thank you so much ,

48:38.179 --> 48:42.110
um . And General Adams .

48:42.949 --> 48:45.919
You know , I , we're very grateful for

48:45.919 --> 48:49.709
um the Marine Corps leadership

48:49.709 --> 48:53.379
and um You know , leading , leading

48:53.379 --> 48:55.969
the um the branch through a successful

48:56.419 --> 48:59.310
uh audit . What lessons

48:59.699 --> 49:03.479
from The Marine Corps's work , can

49:03.479 --> 49:06.760
we learn and apply to DOD more broadly

49:06.760 --> 49:10.080
so that um we can help DOD and the Navy

49:10.080 --> 49:12.760
and other service lines achieve a clean

49:12.760 --> 49:15.520
audit by 2028 ? Yes ma'am . I want to

49:15.520 --> 49:18.080
echo my fellow witnesses there at the

49:18.080 --> 49:20.302
end about tone at the top . I will tell

49:20.302 --> 49:22.191
you on the 8th of November 2019 ,

49:22.191 --> 49:24.413
General Berger , who was the commandant

49:24.413 --> 49:26.413
at the time . Put a memo out to the

49:26.413 --> 49:28.413
force all commanding generals , all

49:28.413 --> 49:30.636
commanding officers all the way down to

49:30.636 --> 49:32.691
the lowest level , lowest echelon of

49:32.691 --> 49:34.691
command saying audit is important ,

49:34.691 --> 49:36.858
it's important because we need to know

49:36.858 --> 49:39.024
what we have in what condition it is ,

49:39.024 --> 49:41.600
how much . Uh , money we have been

49:41.600 --> 49:44.159
given by the taxpayers to spend on war

49:44.159 --> 49:46.326
fighting capability and accountability

49:46.326 --> 49:48.381
for every single penny , and so that

49:48.381 --> 49:50.326
tone from the top is actually what

49:50.326 --> 49:52.439
drove us to success and I think I see

49:52.439 --> 49:54.661
that happening in the Department of the

49:54.661 --> 49:57.679
Navy with the uh current uh acting CNO

49:57.679 --> 49:59.790
starting the tone at the top with the

49:59.790 --> 50:01.790
Navy and I , I'm very excited about

50:01.790 --> 50:03.846
their opportunity to be the next one

50:03.846 --> 50:05.901
out of the gate with regards to a uh

50:05.901 --> 50:08.123
clean and unmodified opinion , uh , and

50:08.123 --> 50:10.346
I would say just to echo . Uh , another

50:10.346 --> 50:12.457
part of , uh , what my fellow witness

50:12.457 --> 50:14.179
said was he , he said planning

50:14.179 --> 50:15.850
milestones . I equate that to

50:15.850 --> 50:17.906
accountability and that's , that was

50:17.906 --> 50:19.794
the Marine Corps' critical way of

50:19.794 --> 50:21.739
getting to the clean opinion is it

50:21.739 --> 50:23.906
wasn't just the tone at the top it was

50:23.906 --> 50:25.794
holding people accountable at all

50:25.794 --> 50:28.017
levels of command on a monthly basis by

50:28.017 --> 50:30.017
the assistant command of the Marine

50:30.017 --> 50:32.169
Corps in a public forum as to the .

50:32.820 --> 50:35.340
Achievement of the milestones that were

50:35.340 --> 50:37.820
on the plan and so we continue that to

50:37.820 --> 50:40.219
this day and again I see that reflected

50:40.219 --> 50:43.300
in uh the navy as they go on their

50:43.300 --> 50:45.899
audit uh journey and and track towards

50:45.899 --> 50:48.449
uh a clean opinion here in the future .

50:49.020 --> 50:51.850
Thank you so much , General , and um .

50:52.899 --> 50:55.020
What , I mean , we talked , we're

50:55.020 --> 50:57.060
talking about this audit and as an

50:57.060 --> 50:59.169
important way that we store taxpayer

50:59.169 --> 51:02.020
dollars , but what ways has the Marine

51:02.020 --> 51:04.659
Corps's recent success in financial

51:04.659 --> 51:07.129
management translated into increased

51:07.129 --> 51:10.350
mission readiness ? So , um ,

51:11.620 --> 51:13.953
First of all , and , and foremost , I'm ,

51:13.953 --> 51:16.850
I'm the the CFO , right ? And so I , uh ,

51:16.860 --> 51:19.027
work for the Commmanant to ensure that

51:19.027 --> 51:21.082
those valuable taxpayer dollars that

51:21.082 --> 51:23.138
are provided to the Marine Corps are

51:23.138 --> 51:25.304
spent in the most effective ways . And

51:25.304 --> 51:28.419
so the audit . In the financial lane

51:28.419 --> 51:30.540
allows me to identify where the next

51:30.540 --> 51:32.651
available dollar is spent on the most

51:32.860 --> 51:36.620
uh resultant readiness . 2 , I

51:36.620 --> 51:38.787
mean we talk about the audit as it's ,

51:38.787 --> 51:40.979
it's financial , but it's also

51:40.979 --> 51:43.719
accountability of equipment and knowing ,

51:44.050 --> 51:46.300
uh , as a war fighter assigned a

51:46.300 --> 51:48.411
mission and in the case of the Marine

51:48.411 --> 51:51.010
Corps always having to be ready , uh ,

51:51.020 --> 51:53.187
the mission comes at the middle of the

51:53.187 --> 51:55.298
night like you need to go here and do

51:55.298 --> 51:57.409
that . Uh , the audit framework , the

51:57.409 --> 51:59.760
data that is the byproduct of the audit

51:59.760 --> 52:01.816
allows the commander to know what he

52:01.816 --> 52:05.669
has . Or she has where it is in what

52:05.669 --> 52:07.891
condition it is , and will they be able

52:07.891 --> 52:09.780
to accomplish the mission so that

52:09.780 --> 52:12.002
combat capability that lethality that's

52:12.002 --> 52:14.225
delivered through audit readiness is is

52:14.225 --> 52:16.550
a critical important uh part . It's

52:16.550 --> 52:18.717
also been able to allow us to identify

52:18.717 --> 52:21.070
very clearly how much equipment

52:21.070 --> 52:23.750
actually costs and in the past you may

52:23.750 --> 52:26.280
know what . Was programmed for the

52:26.280 --> 52:28.280
piece of equipment , but in reality

52:28.280 --> 52:30.280
once the equipment is delivered and

52:30.280 --> 52:32.447
then it's enhanced and you put all the

52:32.447 --> 52:34.558
special systems on it , it the actual

52:34.558 --> 52:36.909
true cost of uh of equipment is known

52:37.159 --> 52:40.000
um and then lastly and probably most

52:40.000 --> 52:41.879
importantly it it's a layer of

52:41.879 --> 52:44.669
accountability . That we are

52:44.669 --> 52:46.870
accountable to the US taxpayer to make

52:46.870 --> 52:49.469
the best use of every dollar , every

52:49.469 --> 52:51.469
penny that's provided to the Marine

52:51.469 --> 52:53.636
Corps , and we feel strongly that that

52:53.636 --> 52:56.620
audit allows us to do that . Thank you .

52:57.500 --> 52:59.667
Thank you so much , Mr . Chair , yield

52:59.667 --> 53:02.330
back . Joe Gals back in time . Thank

53:02.330 --> 53:04.800
you for the questions . Uh , the

53:04.800 --> 53:07.133
distinguished gentleman from Texas , Mr .

53:07.133 --> 53:09.560
Gill , you're recognized . Thank you ,

53:09.570 --> 53:11.403
Mr . Chairman , for holding this

53:11.403 --> 53:13.514
hearing . It's nice to be , uh , part

53:13.514 --> 53:15.626
of a bipartisan hearing where I think

53:15.626 --> 53:17.792
we can all agree on , uh , on what our

53:17.792 --> 53:19.959
goals are here , um , and thank you to

53:19.959 --> 53:22.126
the witnesses as well for , for taking

53:22.126 --> 53:24.237
the time here . Uh , Mr . Mansfield ,

53:24.237 --> 53:26.403
can you , can you remind us what the ,

53:26.403 --> 53:28.626
uh , Department of Defense's budget was

53:28.626 --> 53:28.600
in 2017 ?

53:32.510 --> 53:36.300
Um , it was $909

53:36.300 --> 53:40.209
billion . In , in 2017 ? OK , it was ,

53:40.290 --> 53:42.530
it was about $582 billion roughly . Do

53:42.530 --> 53:44.641
you know what , what it was in 2024 ?

53:47.550 --> 53:50.350
910 billion , so it's a pretty , pretty

53:50.350 --> 53:52.294
substantial increase , is it not ?

53:52.294 --> 53:54.517
That's a lot of money . Sorry . Yes , I

53:54.517 --> 53:56.969
have my , my , I apologize . And uh can

53:56.969 --> 53:59.050
you remind us that the , the DOD has

53:59.050 --> 54:01.530
ever passed an audit ? Uh , at the

54:01.530 --> 54:03.850
agency-wide level , no . Got it . And ,

54:03.889 --> 54:06.222
and how many audits has it had recently ?

54:06.222 --> 54:09.090
Uh 7 full , full scale audits and and

54:09.090 --> 54:12.969
how much do those cost ? Um , so this

54:12.969 --> 54:16.159
year , the , the cost of , uh , audit

54:16.159 --> 54:19.760
is right around $211 million .

54:22.540 --> 54:24.979
$211 million this year . I think that's

54:24.979 --> 54:28.860
right . Yes . So it's a lot of money .

54:28.939 --> 54:31.106
That's a pretty substantial audit , is

54:31.106 --> 54:34.389
it not ? It is . Got it . And uh , can ,

54:34.419 --> 54:36.659
can you sort of walk us through some of

54:36.659 --> 54:39.060
the , the high level reasons why the

54:39.060 --> 54:41.004
DOD hasn't been able to to pass an

54:41.004 --> 54:43.479
audit ? Well , it , it goes back to

54:43.479 --> 54:45.535
what we've been talking about here .

54:45.535 --> 54:47.423
Systems , uh , is one of the main

54:47.423 --> 54:49.423
things , right ? Uh , and then more

54:49.423 --> 54:49.360
importantly you can have the best

54:49.360 --> 54:51.471
system in the world , but if the data

54:51.471 --> 54:53.249
that's within that system isn't

54:53.249 --> 54:55.582
accurate , reliable , and supported the ,

54:55.582 --> 54:55.560
the system doesn't matter . So it gets

54:55.560 --> 54:57.671
to the fundamentals of accounting and

54:57.671 --> 55:00.790
and just . Um , uh , operationalizing ,

55:00.929 --> 55:03.969
uh , good controls . So when you're on ,

55:04.090 --> 55:06.146
when you , uh , receive a shipment ,

55:06.146 --> 55:08.257
you count how many things are in it ,

55:08.257 --> 55:10.146
you validate that the cost you're

55:10.146 --> 55:12.368
charged is what you expected . You make

55:12.368 --> 55:12.360
sure you've got the right line of , uh ,

55:12.370 --> 55:14.592
funding to pay for that , then you make

55:14.592 --> 55:16.314
sure it's in your books in the

55:16.314 --> 55:18.537
appropriate in the appropriate place so

55:18.537 --> 55:18.370
you know where it's at and what the

55:18.370 --> 55:20.592
condition is . If , if those pieces are

55:20.592 --> 55:22.814
missing , uh , the systems aren't gonna

55:22.814 --> 55:24.814
matter . And then as , as Mr . Khan

55:24.814 --> 55:27.148
indicated , uh , the other thing is the ,

55:27.148 --> 55:29.370
the planning process for the department

55:29.370 --> 55:31.481
in a way it makes decisions . They're

55:31.481 --> 55:31.379
made piecemeal , they're made , uh ,

55:31.399 --> 55:33.566
throughout the department individually

55:33.566 --> 55:35.788
for the good of the individual entity .

55:35.788 --> 55:37.955
Uh , not always with consideration for

55:37.955 --> 55:40.219
the overall DOD approach , uh , and so

55:40.219 --> 55:42.386
I think that is one of the reasons why

55:42.386 --> 55:44.163
I have so many problems setting

55:44.163 --> 55:46.330
milestones and sticking with them is ,

55:46.330 --> 55:48.497
uh , so many , uh , individuals making

55:48.497 --> 55:50.719
decisions for their own interest versus

55:50.719 --> 55:50.699
stepping back and saying what's the

55:50.699 --> 55:53.459
best system for multiple entities to be

55:53.459 --> 55:55.515
using at the same time . So , so you

55:55.515 --> 55:57.737
have a pretty good idea what what needs

55:57.737 --> 55:59.959
to be done in order to pass an audit at

55:59.959 --> 56:02.181
least at at a high level . Um , can you

56:02.181 --> 56:04.070
help us understand why we haven't

56:04.070 --> 56:06.939
passed an audit recently ? But just uh

56:06.939 --> 56:08.969
lack of execution on the , on the

56:08.969 --> 56:11.136
fundamentals is what I would say . And

56:11.136 --> 56:13.358
who , who's held accountable for that ?

56:14.260 --> 56:16.316
And what , what are the consequences

56:16.316 --> 56:18.371
whenever the DOD fails to to pass an

56:18.371 --> 56:20.850
audit ? Well , the , the real , the

56:20.850 --> 56:23.017
real consequence is lack of confidence

56:23.017 --> 56:25.183
for the taxpayer and the DOD's ability

56:25.183 --> 56:27.270
to account for and , and spend its

56:27.270 --> 56:29.326
money . I , I agree , but within the

56:29.326 --> 56:31.439
DOD , for instance , is there , um ,

56:31.500 --> 56:33.500
somebody who , who gets fired , who

56:33.500 --> 56:35.729
gets demoted , who sees their bonuses

56:35.729 --> 56:38.169
decreased , is there any any actual

56:38.169 --> 56:41.469
action taken . Against any individual

56:41.719 --> 56:43.886
um or group within the DOD for failing

56:43.886 --> 56:46.108
to pass an audit . I , I can't speak to

56:46.108 --> 56:48.219
individual , uh , personnel actions ,

56:48.219 --> 56:50.219
but I , I can say in , in the re in

56:50.219 --> 56:52.441
recent years the DOD has added at least

56:52.441 --> 56:54.552
at the executive level , um , an , an

56:54.552 --> 56:56.775
element in the performance , uh , plans

56:56.775 --> 56:58.552
for their executives related to

56:58.552 --> 57:00.775
financial readiness , uh , getting down

57:00.775 --> 57:02.941
to . The ability to support individual

57:02.941 --> 57:04.552
transactions , so there's an

57:04.552 --> 57:06.719
accountability measure they have now .

57:06.719 --> 57:08.941
Uh , it's , it's up to the department's

57:08.941 --> 57:11.052
management to use that effectively in

57:11.052 --> 57:13.163
order to spur change though , right ?

57:13.163 --> 57:12.145
But , but in other words , we're

57:12.145 --> 57:14.256
talking about a budget of hundreds of

57:14.256 --> 57:16.367
billions of dollars every single year

57:16.367 --> 57:18.564
that and large portions of that are ,

57:18.614 --> 57:20.614
are unaccounted for . We don't know

57:20.614 --> 57:22.725
where this money is going . This is ,

57:22.725 --> 57:24.781
uh , taxing my constituents , all of

57:24.781 --> 57:26.392
our constituents here , um ,

57:26.392 --> 57:28.558
hardworking Americans to . To keep our

57:28.558 --> 57:30.781
country safe , which again is something

57:30.781 --> 57:33.003
we all agree with , and we haven't seen

57:33.003 --> 57:35.281
anybody fired for the what seems to be ,

57:35.281 --> 57:37.639
appears to be a largely a total lack of

57:37.639 --> 57:39.806
accountability . We haven't seen any ,

57:39.806 --> 57:41.917
any punitive measures against anybody

57:41.917 --> 57:45.250
in the DOD . Is that right ? Not that

57:45.250 --> 57:47.610
I'm aware of . Got it . Um , you know ,

57:47.689 --> 57:49.979
I , I think that as we're thinking

57:49.979 --> 57:52.090
about hundreds of billions of dollars

57:52.090 --> 57:54.090
that should be keeping the American

57:54.090 --> 57:56.257
people safe . We , the American people

57:56.257 --> 57:58.146
expect transparency , they expect

57:58.146 --> 58:00.201
accountability , they expect to know

58:00.201 --> 58:02.423
where their hard earned tax dollars are

58:02.423 --> 58:04.590
going , um , and we've got to see some

58:04.590 --> 58:06.757
progress here . So thank you very much

58:06.757 --> 58:09.389
for your time . Gentleman yells back

58:09.389 --> 58:13.139
his time , um . I've just

58:13.139 --> 58:15.860
uh talked to Mr . Nfume , uh , about ,

58:16.090 --> 58:18.750
uh , I'd like for us to approach my

58:18.750 --> 58:22.070
time and his time together here . Uh ,

58:22.139 --> 58:24.419
he did not have an opportunity , as I

58:24.419 --> 58:27.219
did yesterday to spend an extensive

58:27.219 --> 58:30.219
amount of time with each of you on an

58:30.219 --> 58:32.860
individual basis . You came in either

58:32.860 --> 58:35.500
by yourself or with your team , and we

58:35.500 --> 58:37.919
tried to , what I think would be learn

58:37.919 --> 58:40.659
a little bit more and I'd like to go

58:40.659 --> 58:43.939
through some of this not in long

58:43.939 --> 58:46.050
discussions , but just things that we

58:46.050 --> 58:49.360
learned . Uh , and one of them was is

58:49.360 --> 58:52.840
that the Marine Corps counts on the

58:52.840 --> 58:56.199
Navy to look at a huge part of their

58:56.199 --> 58:59.379
assets , and the Marine Corps sent this

58:59.379 --> 59:03.000
message down within their , uh ,

59:03.520 --> 59:06.600
their structure , but the Navy had to

59:06.600 --> 59:09.169
do a lot of the work too , General .

59:10.600 --> 59:12.739
Uh , Mr . Chairman , yeah , that is

59:12.739 --> 59:15.072
accurate and , and the army did as well .

59:15.072 --> 59:17.709
80% of the ammunition that the army

59:17.709 --> 59:20.510
that the Marine Corps owns is stored in

59:20.510 --> 59:23.590
army facilities and so that our audit

59:23.590 --> 59:26.389
involved coordination , detailed

59:26.389 --> 59:28.750
coordination with , uh , multiple

59:28.750 --> 59:30.917
services as well as support from OSD .

59:31.139 --> 59:34.189
And so it was a complimentary uh

59:34.560 --> 59:37.030
exercise that these other . Uh ,

59:37.239 --> 59:39.989
departments of DOD went through to

59:39.989 --> 59:42.800
provide you the information because it

59:42.800 --> 59:45.959
was important for the Marine Corps on

59:45.959 --> 59:48.126
their mission that they had put up and

59:48.126 --> 59:50.550
down their management lines . Uh ,

59:50.639 --> 59:52.750
General Adams , I also spoke with you

59:52.750 --> 59:55.419
yesterday . About something that's been

59:55.419 --> 59:57.586
brought up today and that is how would

59:57.586 --> 59:59.899
a lieutenant general look at this ? How

59:59.899 --> 01:00:01.955
would a major general look at this ,

01:00:01.955 --> 01:00:04.066
how would a brigadier general look at

01:00:04.066 --> 01:00:06.232
this ? How would going up and down the

01:00:06.232 --> 01:00:08.288
line and you indicated to me that it

01:00:08.288 --> 01:00:10.343
could be looked at differently based

01:00:10.343 --> 01:00:12.780
upon . Uh , a , a master sergeant who

01:00:12.780 --> 01:00:14.979
was there who was responsible for

01:00:14.979 --> 01:00:17.201
things . Would you mind going through ,

01:00:17.201 --> 01:00:19.146
if you remember that exercise from

01:00:19.146 --> 01:00:21.257
yesterday , just very quickly so that

01:00:21.257 --> 01:00:24.090
we get a , a heads up on the thinking

01:00:24.419 --> 01:00:27.169
of the , uh , people . Uh , yes , Mr .

01:00:27.179 --> 01:00:30.300
Chairman , um , the , the idea of how

01:00:30.300 --> 01:00:33.300
the audit connects to effects and

01:00:33.300 --> 01:00:35.919
impacts . Um , individual marines at

01:00:35.919 --> 01:00:37.863
different levels is different . If

01:00:37.863 --> 01:00:39.808
you're down at the master sergeant

01:00:39.808 --> 01:00:41.752
level , maybe the captain or major

01:00:41.752 --> 01:00:43.959
level , you're working the systems ,

01:00:44.060 --> 01:00:46.909
you're processing receipt of equipment ,

01:00:47.080 --> 01:00:49.639
you're entering into systems and you .

01:00:49.695 --> 01:00:52.084
May not understand fully how that

01:00:52.084 --> 01:00:55.405
action ties in to the overall audit as

01:00:55.405 --> 01:00:58.004
you move up the echelon and you start

01:00:58.004 --> 01:01:01.205
to look at high levels of command where

01:01:01.205 --> 01:01:03.427
there's large bits of large portions of

01:01:03.427 --> 01:01:06.125
responsibility for formations that have

01:01:06.125 --> 01:01:08.458
missions assigned to them understanding .

01:01:08.659 --> 01:01:11.010
Accountability of of resources and

01:01:11.010 --> 01:01:13.250
understanding status of equipment is

01:01:13.250 --> 01:01:15.472
critically important to knowing whether

01:01:15.472 --> 01:01:17.472
you can accept a mission or not and

01:01:17.472 --> 01:01:19.472
then at the highest levels , the my

01:01:19.472 --> 01:01:21.694
level at the deputy common level or the

01:01:21.694 --> 01:01:23.639
commonant level understanding that

01:01:23.639 --> 01:01:25.861
we're responsible primarily to Congress

01:01:25.861 --> 01:01:28.489
as we engage uh at our level with

01:01:28.489 --> 01:01:30.600
regards to our budget with regards to

01:01:30.600 --> 01:01:32.860
other activities to know that we can

01:01:33.370 --> 01:01:36.530
with full faith . Say we know exactly

01:01:36.530 --> 01:01:38.363
where every dollar that you have

01:01:38.363 --> 01:01:40.419
appropriated to us is spent and it's

01:01:40.419 --> 01:01:42.641
spent on the most important . Yes sir ,

01:01:42.641 --> 01:01:44.752
and , and yet I think there's more to

01:01:44.752 --> 01:01:46.808
the story and that is the higher you

01:01:46.808 --> 01:01:49.739
get up , I will call the organization

01:01:50.010 --> 01:01:52.330
if they were planning a mission , they

01:01:52.330 --> 01:01:54.219
would have to look at the various

01:01:54.219 --> 01:01:57.149
components of . The Marine Corps ,

01:01:57.389 --> 01:01:59.590
perhaps there would be aviation

01:01:59.590 --> 01:02:02.100
involved perhaps there would be , uh ,

01:02:02.110 --> 01:02:05.510
ships involved . They gained a

01:02:05.510 --> 01:02:09.070
foothold of knowing where things are as

01:02:09.070 --> 01:02:11.459
a result of the exercise they've done

01:02:11.709 --> 01:02:14.149
and with great consistency they were

01:02:14.149 --> 01:02:17.149
able to know where those assets are and

01:02:17.149 --> 01:02:19.038
we will go through this in just a

01:02:19.038 --> 01:02:22.189
second , Mr . Mayfield , uh . Uh , Ms .

01:02:22.270 --> 01:02:26.189
Mansfield , tell us about how important

01:02:26.189 --> 01:02:29.780
it is for them to understand

01:02:30.070 --> 01:02:33.350
that what they've gained is now , uh .

01:02:34.060 --> 01:02:38.060
The opportunity At the end of the audit

01:02:38.060 --> 01:02:42.020
to to say this is where we are and it

01:02:42.020 --> 01:02:44.500
begins the process of knowing where all

01:02:44.500 --> 01:02:46.979
these assets are as opposed to just an

01:02:46.979 --> 01:02:49.939
audit but rather where they are , what

01:02:49.939 --> 01:02:52.540
the shape they're in , and to do the

01:02:52.540 --> 01:02:54.540
things that would be necessary that

01:02:54.540 --> 01:02:56.596
they'll move forward on because they

01:02:56.596 --> 01:02:59.840
now have a snapshot of that and then

01:02:59.840 --> 01:03:01.840
they can move forward knowing where

01:03:01.840 --> 01:03:04.062
they are and it will start there . Mr .

01:03:04.062 --> 01:03:06.062
Mansfield , yeah , so as Lieutenant

01:03:06.062 --> 01:03:08.284
General Adams had , uh , kind of talked

01:03:08.284 --> 01:03:11.120
to , uh , earlier , the , the next step

01:03:11.120 --> 01:03:13.342
after kind of where the Marine Corps is

01:03:13.360 --> 01:03:15.582
is developing those internal controls .

01:03:15.582 --> 01:03:17.749
So financial statement audit validates

01:03:17.749 --> 01:03:19.916
the accuracy of information at a point

01:03:19.916 --> 01:03:22.479
in time , to your point . So at , at

01:03:22.479 --> 01:03:24.535
that during that one day we know how

01:03:24.535 --> 01:03:26.535
many assets there are , we know how

01:03:26.535 --> 01:03:28.590
much value they are . We know what's

01:03:28.590 --> 01:03:30.646
left in terms of , uh , fund balance

01:03:30.646 --> 01:03:32.646
with treasury , the amount of money

01:03:32.646 --> 01:03:31.919
that's available left for the

01:03:31.919 --> 01:03:34.350
department to spend . Um , the

01:03:34.350 --> 01:03:36.239
important part then is having the

01:03:36.239 --> 01:03:38.294
controls that throughout the year at

01:03:38.294 --> 01:03:40.406
any point in time throughout the year

01:03:40.406 --> 01:03:42.628
you have the controls and the processes

01:03:42.628 --> 01:03:44.683
in place that you can have that same

01:03:44.683 --> 01:03:46.794
level of confidence , uh , two months

01:03:46.794 --> 01:03:48.906
later that when you look down through

01:03:48.906 --> 01:03:50.961
those financial records and you look

01:03:50.961 --> 01:03:52.850
into those systems supporting the

01:03:52.850 --> 01:03:54.906
financial . Statements you have that

01:03:54.906 --> 01:03:57.072
same level of fidelity as to what what

01:03:57.072 --> 01:03:59.294
you have , where it is , how much money

01:03:59.294 --> 01:04:01.461
you have left , how much it costs that

01:04:01.461 --> 01:04:01.455
you have to have that throughout the

01:04:01.455 --> 01:04:03.511
year and so that's where that second

01:04:03.511 --> 01:04:05.733
part uh that that that was talked about

01:04:05.733 --> 01:04:07.844
earlier really comes into play . It's

01:04:07.844 --> 01:04:09.899
those internal controls , it's those

01:04:09.899 --> 01:04:12.066
repeatable processes . Um , so I'm not

01:04:12.066 --> 01:04:14.370
sure if I've caught for the entire

01:04:14.370 --> 01:04:16.870
organization then to up and down , up

01:04:16.870 --> 01:04:19.159
and down the organization and so this

01:04:19.159 --> 01:04:21.500
is where then and Mr . Cona may have

01:04:21.500 --> 01:04:24.929
been in your conversation with me about

01:04:24.929 --> 01:04:27.850
some of the weaknesses inherent where

01:04:27.850 --> 01:04:31.320
there are organizations that provide a

01:04:31.320 --> 01:04:34.600
support to the military have key data

01:04:34.600 --> 01:04:37.500
that we could not get like the F-35 .

01:04:38.040 --> 01:04:40.909
And so the military actually did not

01:04:40.909 --> 01:04:43.810
have as much visibility . Could you

01:04:43.810 --> 01:04:46.429
talk about or Mr . Mansfield and Mr .

01:04:46.439 --> 01:04:49.790
Khan , your idea about things being

01:04:49.790 --> 01:04:52.989
managed outside of the Department of

01:04:52.989 --> 01:04:55.590
Defense within those agencies of

01:04:55.590 --> 01:04:58.070
knowing the assets , resources and

01:04:58.070 --> 01:05:01.010
things that they have . Thank you , uh ,

01:05:01.090 --> 01:05:03.201
Chairman Sessions . There are several

01:05:03.201 --> 01:05:05.423
examples and uh I think two of the ones

01:05:05.423 --> 01:05:07.757
you mentioned in your opening statement ,

01:05:07.757 --> 01:05:09.701
uh , and they pertain to the joint

01:05:09.701 --> 01:05:12.290
strike , uh , program . Uh , one is the ,

01:05:12.300 --> 01:05:14.290
uh , global spare pool pool that's

01:05:14.290 --> 01:05:17.330
managed by contractors and it's

01:05:17.330 --> 01:05:20.360
uh duty has not been successful in

01:05:20.409 --> 01:05:22.520
getting the information that the data

01:05:22.520 --> 01:05:24.629
they need . Which they can feed into

01:05:24.629 --> 01:05:26.851
the financial system , so that is still

01:05:26.851 --> 01:05:28.989
somewhat unknown as to what the

01:05:28.989 --> 01:05:31.909
accuracy of that information is uh the

01:05:31.909 --> 01:05:34.870
other one is , um , government property

01:05:34.870 --> 01:05:37.600
held by contractors and it happens it's

01:05:37.600 --> 01:05:39.822
not just in the Department of Defense ,

01:05:39.822 --> 01:05:41.933
there are other federal agencies such

01:05:41.933 --> 01:05:44.590
as Department of Energy where uh the

01:05:44.590 --> 01:05:47.350
contractor has complex uh equipment

01:05:47.350 --> 01:05:49.517
they have procured uh on behalf of the

01:05:49.517 --> 01:05:51.406
government and they manage that .

01:05:51.406 --> 01:05:54.590
Similarly , at DOD there is a material

01:05:54.590 --> 01:05:56.812
amount which is held by contractors and

01:05:56.812 --> 01:05:59.034
the information about the location cost

01:05:59.034 --> 01:06:02.060
condition is not known uh for it to be

01:06:02.060 --> 01:06:04.300
reliable to be put into the financial

01:06:04.300 --> 01:06:06.244
statement so those , those are two

01:06:06.244 --> 01:06:08.411
examples . Yeah , I have great respect

01:06:08.411 --> 01:06:10.699
for our contractors , not only that

01:06:10.699 --> 01:06:12.895
they manage this , that . They know

01:06:12.895 --> 01:06:16.304
what they've got , but it is there a ,

01:06:16.334 --> 01:06:20.334
a need , general , to make sure that

01:06:20.334 --> 01:06:22.935
inside you have that necessary

01:06:22.935 --> 01:06:25.534
information to make decisions . For

01:06:25.534 --> 01:06:27.854
instance , uh , F-35s , where they are ,

01:06:28.014 --> 01:06:30.655
how many we've got , what are , was

01:06:30.655 --> 01:06:33.774
operational . Is that entirely held by .

01:06:34.250 --> 01:06:37.120
Uh , a contractor or does the Marine

01:06:37.120 --> 01:06:39.679
Corps or the Navy and perhaps in a

01:06:39.679 --> 01:06:42.399
circumstance have visibility into that ?

01:06:42.469 --> 01:06:44.580
Is it different record keeping , uh ,

01:06:44.719 --> 01:06:46.775
Mr . Chairman , this is an excellent

01:06:46.775 --> 01:06:49.530
question , and I think to . Approach it

01:06:49.530 --> 01:06:52.120
generally that there are some specific

01:06:52.120 --> 01:06:55.050
issues with the F-35 in the way the

01:06:55.050 --> 01:06:56.994
accountability of the funds to the

01:06:56.994 --> 01:06:59.250
actual pieces creates complications

01:06:59.250 --> 01:07:01.028
that we're trying to solve as a

01:07:01.028 --> 01:07:03.139
department and break that thing apart

01:07:03.139 --> 01:07:05.306
so we understand when the Marine Corps

01:07:05.306 --> 01:07:08.770
puts money in as a pro share towards a

01:07:08.770 --> 01:07:11.239
let's say it's a spare pool or maybe

01:07:11.239 --> 01:07:13.461
even uh and I would say on the platform

01:07:13.461 --> 01:07:15.461
side knowledge and understanding of

01:07:15.461 --> 01:07:18.040
platform . ENC existence and

01:07:18.040 --> 01:07:20.389
completeness is very good . It's the

01:07:20.389 --> 01:07:22.500
it's the spare part pool and it's the

01:07:22.500 --> 01:07:24.556
way it's funded with partners and so

01:07:24.556 --> 01:07:26.722
forth . Everyone puts money in and and

01:07:26.722 --> 01:07:28.833
it's not a clean transaction that you

01:07:28.833 --> 01:07:30.889
have otherwise . Now with regards to

01:07:30.889 --> 01:07:33.000
equipment in the hands of contractors

01:07:33.000 --> 01:07:35.222
for both the Marine Corps audit and the

01:07:35.222 --> 01:07:37.445
Navy audit , I will give you a specific

01:07:37.445 --> 01:07:39.500
example . If there's a weapon system

01:07:39.500 --> 01:07:41.111
that requires an interval of

01:07:41.111 --> 01:07:43.333
maintenance and we have to send it from

01:07:43.333 --> 01:07:45.556
our magazine to Lockheed Martin or to .

01:07:45.556 --> 01:07:47.778
Raytheon or to some contractor in order

01:07:47.778 --> 01:07:50.094
to maintain that device we know exactly

01:07:50.094 --> 01:07:52.495
when we send it to them and our

01:07:52.495 --> 01:07:54.606
independent auditors as a part of our

01:07:54.606 --> 01:07:56.439
site visits actually go to those

01:07:56.439 --> 01:07:58.606
contractors locations they can account

01:07:58.606 --> 01:08:00.717
for where all those things are and in

01:08:00.717 --> 01:08:02.662
what condition they are . So I , I

01:08:02.662 --> 01:08:05.054
would say um there are some specific

01:08:05.054 --> 01:08:06.721
examples out there that we've

01:08:06.721 --> 01:08:08.554
highlighted that are adverse and

01:08:08.554 --> 01:08:10.610
negative and we're working on them ,

01:08:10.610 --> 01:08:12.721
but there are many that are very good

01:08:12.721 --> 01:08:14.998
and the accountability with regards to .

01:08:14.998 --> 01:08:16.943
Specific equipment in the hands of

01:08:16.943 --> 01:08:18.998
contractors uh is actually uh really

01:08:18.998 --> 01:08:20.943
well done and it was a part of our

01:08:20.943 --> 01:08:23.165
clean audit opinion , very small part ,

01:08:23.165 --> 01:08:25.054
much bigger than the navies , and

01:08:25.054 --> 01:08:24.870
they're working on that right now .

01:08:25.120 --> 01:08:26.898
Well , I have nothing but great

01:08:26.898 --> 01:08:29.879
confidence in these , uh , contractors

01:08:29.879 --> 01:08:32.350
that have developed these systems ,

01:08:32.359 --> 01:08:34.415
understand the intricacy . of them ,

01:08:34.515 --> 01:08:37.024
the placement of them . What I'm

01:08:37.634 --> 01:08:39.856
specifically saying is , does that come

01:08:39.856 --> 01:08:43.004
up the chain to your leadership has an

01:08:43.004 --> 01:08:45.435
opportunity to know , OK , we , we need

01:08:45.435 --> 01:08:47.544
to order more of these or we're

01:08:47.544 --> 01:08:50.395
planning an exercise perhaps where we

01:08:50.395 --> 01:08:53.455
will need twice the number or , uh , a ,

01:08:53.475 --> 01:08:57.035
a quick , uh , reevaluation as we know

01:08:57.035 --> 01:09:00.634
in the , uh , Ukraine war , a good bit

01:09:00.634 --> 01:09:04.089
of our equipment , uh . was utilized

01:09:04.089 --> 01:09:07.689
there and was that well within the

01:09:07.689 --> 01:09:10.640
leadership of DOD to know if they had

01:09:10.640 --> 01:09:13.169
to plan more , what would be necessary

01:09:13.169 --> 01:09:15.830
for their needs . So that we didn't put

01:09:15.830 --> 01:09:18.052
more out the door than our needs , it's

01:09:18.052 --> 01:09:20.549
those kinds of things that I just wanna

01:09:20.549 --> 01:09:22.771
make sure at the top , forget the clean

01:09:22.771 --> 01:09:26.500
audit or not , the visibility to see

01:09:26.870 --> 01:09:29.709
equipment and how it was managed , is

01:09:29.709 --> 01:09:32.910
that a problem ? It , it is not a

01:09:32.910 --> 01:09:34.799
problem in that there is specific

01:09:34.799 --> 01:09:37.399
accounting . Categories for those types

01:09:37.399 --> 01:09:39.621
of sys systems that are in the hands of

01:09:39.621 --> 01:09:41.232
contractors whether it's for

01:09:41.232 --> 01:09:42.843
maintenance or maybe it's uh

01:09:42.843 --> 01:09:45.066
construction in progress . Knowledge of

01:09:45.066 --> 01:09:47.418
that . System is known . It's in the

01:09:47.418 --> 01:09:50.258
systems reported and it's included as

01:09:50.258 --> 01:09:53.139
we let's say we talk munitions . We

01:09:53.139 --> 01:09:55.499
know how much munitions we have on how

01:09:55.499 --> 01:09:57.555
many munitions we have on hand , and

01:09:57.555 --> 01:09:59.832
then how many are due to come out , uh ,

01:09:59.832 --> 01:10:02.168
as if it's work in progress , uh , or ,

01:10:02.298 --> 01:10:04.298
uh , those that are like not in our

01:10:04.298 --> 01:10:06.729
hands but maybe they need a few months

01:10:06.729 --> 01:10:10.168
of retrofit or upgrades that that whole

01:10:10.539 --> 01:10:14.180
enterprise uh is known . So it kind of

01:10:14.180 --> 01:10:17.830
goes back to my questioning about we

01:10:17.859 --> 01:10:21.290
we talked about a lack of visibility

01:10:21.290 --> 01:10:23.620
into these contractors but really

01:10:23.620 --> 01:10:25.842
there's information that flows back and

01:10:25.842 --> 01:10:29.310
forth on a regular basis . Do you then

01:10:29.310 --> 01:10:32.979
capture that and , and , and I , I

01:10:32.979 --> 01:10:35.090
really wanna make sure here because I

01:10:35.090 --> 01:10:37.930
really think perhaps on the F-35 model

01:10:38.180 --> 01:10:40.291
there was information there that went

01:10:40.291 --> 01:10:42.402
back and forth that maybe someone was

01:10:42.402 --> 01:10:44.490
not capturing . And then someone did

01:10:44.490 --> 01:10:46.770
not have visibility when they went to

01:10:46.770 --> 01:10:48.826
it . Help me understand that General

01:10:48.826 --> 01:10:50.881
and Mr . Mansfield . Let me , let me

01:10:50.881 --> 01:10:52.714
speak to the , uh , Joint Strike

01:10:52.714 --> 01:10:54.937
Fighter a little bit because , uh , you

01:10:54.937 --> 01:10:57.103
know , the Marine Corps experience may

01:10:57.103 --> 01:10:55.890
be a little different than the rest of

01:10:55.890 --> 01:10:58.209
the departments , uh , in that for the

01:10:58.209 --> 01:10:59.876
Joint Strike Fighter there is

01:10:59.876 --> 01:11:01.876
information that's supposed to flow

01:11:01.876 --> 01:11:04.098
back and forth between the contractor ,

01:11:04.098 --> 01:11:06.153
uh , and the DOD . It is not flowing

01:11:06.153 --> 01:11:08.376
back and forth , so within the contract

01:11:08.376 --> 01:11:10.970
does not does not does not , and it

01:11:10.970 --> 01:11:13.137
should and it should be reconcilable .

01:11:13.137 --> 01:11:16.299
So when the DOD provides , um , in , in

01:11:16.299 --> 01:11:18.466
the case of the Joint Strike Fighter ,

01:11:18.466 --> 01:11:20.200
uh , spare parts or the or the

01:11:20.200 --> 01:11:22.799
contractor buys spare parts for use on

01:11:22.799 --> 01:11:24.720
the Joint Strike Fighter , the

01:11:24.720 --> 01:11:26.720
contracts are written in such a way

01:11:26.720 --> 01:11:28.498
that requires the contractor to

01:11:28.498 --> 01:11:30.609
maintain full accountability of those

01:11:30.609 --> 01:11:33.180
value , location , um , condition . And ,

01:11:33.189 --> 01:11:35.870
and when those are then placed onto an

01:11:35.870 --> 01:11:38.037
aircraft , the value of the aircraft ,

01:11:38.037 --> 01:11:40.092
you know , changes because of that .

01:11:40.092 --> 01:11:42.092
But in terms of managing that spare

01:11:42.092 --> 01:11:41.790
parts pool , there's contract

01:11:41.790 --> 01:11:43.846
requirements that require the , uh ,

01:11:43.846 --> 01:11:45.957
the contractor to provide information

01:11:45.957 --> 01:11:48.179
on the amount of property it has in its

01:11:48.179 --> 01:11:50.419
possession that is owned by the DOD .

01:11:50.709 --> 01:11:52.931
That information is not flowing back to

01:11:52.931 --> 01:11:54.653
the DOD and making it onto its

01:11:54.653 --> 01:11:56.709
financial statements . So how do you

01:11:56.709 --> 01:11:59.430
know ? Whether a product was delivered

01:11:59.430 --> 01:12:01.910
or not , and that goes to the point of

01:12:01.910 --> 01:12:05.589
our contracting updating that that

01:12:05.589 --> 01:12:07.709
Mr . Khan's aware of that we're now

01:12:07.709 --> 01:12:09.859
saying we need more contracting

01:12:09.859 --> 01:12:13.140
information . I have a vast

01:12:13.830 --> 01:12:16.930
interest in trusting . Our

01:12:17.629 --> 01:12:20.259
contractors , I support them . I

01:12:20.259 --> 01:12:22.640
believe in them , but how are we gonna

01:12:22.640 --> 01:12:25.899
fix this back and forth if you never

01:12:25.899 --> 01:12:27.979
really ever received it ? How do you

01:12:27.979 --> 01:12:30.549
know what you're paying for ? Yeah , I ,

01:12:30.660 --> 01:12:32.882
I think it goes down to , it comes down

01:12:32.882 --> 01:12:34.993
to clear contract requirements . What

01:12:34.993 --> 01:12:37.049
is expected of the contractor ? Uh ,

01:12:37.049 --> 01:12:39.049
clear and measurable deliverables ,

01:12:39.049 --> 01:12:41.104
right ? So and then there's you have

01:12:41.104 --> 01:12:43.271
oversight on the government side . The

01:12:43.271 --> 01:12:45.382
government has to be able to validate

01:12:45.382 --> 01:12:45.169
that what they've gotten from the

01:12:45.169 --> 01:12:47.336
contractor is what they required , and

01:12:47.336 --> 01:12:49.502
then finally , the DOD has to have the

01:12:49.502 --> 01:12:51.336
wherewithal to hold a contractor

01:12:51.336 --> 01:12:53.502
accountable when it does not deliver .

01:12:53.502 --> 01:12:55.391
I , I think in the case of uh the

01:12:55.391 --> 01:12:57.280
government property , uh , in the

01:12:57.280 --> 01:12:59.391
possession of contractors , uh , both

01:12:59.391 --> 01:13:01.502
Joint Strike Fighter as well as other

01:13:01.502 --> 01:13:03.558
uh other opportunities where I could

01:13:03.558 --> 01:13:05.613
talk about that if you'd like , um ,

01:13:05.613 --> 01:13:05.580
other entities having similar issues

01:13:05.580 --> 01:13:07.469
there's no accountability for the

01:13:07.469 --> 01:13:09.636
contractor , um , you know , I'm not ,

01:13:09.636 --> 01:13:11.413
I'm not seeing them , uh , have

01:13:11.413 --> 01:13:14.120
significant that deliberate . On what

01:13:14.120 --> 01:13:16.990
might be the Marine Corps , uh , issues

01:13:16.990 --> 01:13:20.000
or how do we get at this ? I know we're

01:13:20.000 --> 01:13:22.759
gonna put a scorecard on it , but how

01:13:22.759 --> 01:13:26.540
do we then properly professionally

01:13:27.000 --> 01:13:30.319
acknowledging the contractor's role but

01:13:30.319 --> 01:13:33.919
put DOD where they've got to be

01:13:33.919 --> 01:13:37.399
aware of what came in to update their

01:13:37.399 --> 01:13:41.100
systems . If for their

01:13:41.100 --> 01:13:44.950
needs . Is that a a a black hole ,

01:13:45.120 --> 01:13:47.342
so to speak , is that something we just

01:13:47.342 --> 01:13:49.231
haven't figured out ? I think the

01:13:49.231 --> 01:13:51.453
department's aware of it . No , I , I ,

01:13:51.453 --> 01:13:53.509
I let me state that the department's

01:13:53.509 --> 01:13:53.120
well aware of the issue . They're

01:13:53.120 --> 01:13:56.129
working on solutions . They have , um ,

01:13:56.160 --> 01:13:59.990
working on plans to do counts of the ,

01:14:00.000 --> 01:14:02.056
uh . Especially for the Joint Strike

01:14:02.056 --> 01:14:04.278
Fighter specifically they're working on

01:14:04.278 --> 01:14:06.278
doing counts uh of the Joint Strike

01:14:06.278 --> 01:14:08.389
Fighter spare parts pool so that they

01:14:08.389 --> 01:14:10.609
can have a good starting point to then

01:14:10.609 --> 01:14:13.759
hopefully follow on with uh clear

01:14:13.759 --> 01:14:15.926
contract requirements and deliverables

01:14:15.926 --> 01:14:17.870
that they can hold the contractors

01:14:17.870 --> 01:14:19.926
accountable for going forward . Um ,

01:14:19.926 --> 01:14:21.815
for our role here at the OIG , we

01:14:21.815 --> 01:14:23.981
actually have an ongoing audit looking

01:14:23.981 --> 01:14:23.959
at the broader issue of government

01:14:23.959 --> 01:14:26.237
property and possession of contractors .

01:14:26.237 --> 01:14:28.459
Uh , when that's released , I'd be more

01:14:28.459 --> 01:14:28.359
than happy to come up and talk to you

01:14:28.359 --> 01:14:30.303
about it , let you know what we're

01:14:30.303 --> 01:14:31.915
looking at it from a broader

01:14:31.915 --> 01:14:33.970
perspective across the DD outside of

01:14:33.970 --> 01:14:36.137
just the Joint Strike Fighter though ,

01:14:36.137 --> 01:14:38.839
General Adams , uh , you , uh , we're

01:14:38.839 --> 01:14:41.799
very proud of , as we are of the

01:14:41.799 --> 01:14:43.855
initiative that the Marine Corps has

01:14:43.855 --> 01:14:46.490
taken . You acknowledged , I think ,

01:14:46.500 --> 01:14:48.722
respectfully the help that you received

01:14:48.722 --> 01:14:50.611
from the United States Army , the

01:14:50.611 --> 01:14:52.939
United States Navy , uh , did they

01:14:52.939 --> 01:14:56.259
learn a lesson in that process where

01:14:56.259 --> 01:14:59.459
they now have a baseline of what they

01:14:59.459 --> 01:15:02.299
have and did they extend that to more

01:15:02.299 --> 01:15:05.790
than just your assets ? Mr .

01:15:05.799 --> 01:15:07.910
Chairman , uh , to answer this , uh ,

01:15:07.910 --> 01:15:10.132
there , there are multiple lessons that

01:15:10.132 --> 01:15:12.243
were learned as a part of our audit .

01:15:12.600 --> 01:15:16.339
By the army and the navy , um , one of

01:15:16.339 --> 01:15:18.899
those lessons had to do with the

01:15:18.899 --> 01:15:21.121
material weakness that all services had

01:15:21.220 --> 01:15:23.331
with regards to its fund balance with

01:15:23.331 --> 01:15:26.899
treasury , and it was a , I would call

01:15:26.899 --> 01:15:30.819
it a an uh um an issue that it it was .

01:15:31.750 --> 01:15:34.669
Prevalent for for many decades that the

01:15:34.669 --> 01:15:36.950
fund balance of Treasury beginning

01:15:36.950 --> 01:15:39.009
balance in the trial balance of the

01:15:39.009 --> 01:15:41.870
services it it could never balance and

01:15:41.870 --> 01:15:43.981
think of the fund balance of Treasury

01:15:43.981 --> 01:15:46.092
as that's the checkbook that the bank

01:15:46.092 --> 01:15:48.148
has and can you write checks against

01:15:48.148 --> 01:15:50.990
that amount and through our audit

01:15:50.990 --> 01:15:53.390
process and quite frankly some of our

01:15:53.390 --> 01:15:56.029
really really sharp accountants that

01:15:56.029 --> 01:15:58.919
were assigned to the project . Uh ,

01:15:58.979 --> 01:16:02.549
figured out a way of , of adjusting one

01:16:03.919 --> 01:16:05.808
accounting for the , the previous

01:16:05.808 --> 01:16:07.919
balances that were just continuing to

01:16:07.919 --> 01:16:09.975
roll over year after year , actually

01:16:09.975 --> 01:16:12.141
nailing them down , figuring out where

01:16:12.141 --> 01:16:14.086
they were settling them , and then

01:16:14.086 --> 01:16:15.975
changing the actual way that they

01:16:15.975 --> 01:16:18.141
accounted , uh , the fund balance with

01:16:18.141 --> 01:16:20.109
treasury , um . in a in a very

01:16:20.109 --> 01:16:22.549
technical accounting way uh that was

01:16:22.549 --> 01:16:24.790
shared with the Air Force , shared with

01:16:24.790 --> 01:16:27.012
the army and shared with the navy , and

01:16:27.012 --> 01:16:28.790
they were able to mitigate that

01:16:28.790 --> 01:16:30.901
material weakness across all the , so

01:16:30.901 --> 01:16:33.012
it really was a game changer in terms

01:16:33.012 --> 01:16:35.629
of overall DOD progress towards um uh a

01:16:35.629 --> 01:16:37.740
clean opinion . And as you alluded to

01:16:37.740 --> 01:16:41.470
yesterday , a lot of internal work that

01:16:41.470 --> 01:16:44.709
went on with that meticulous work that

01:16:44.709 --> 01:16:48.339
was there because the systems . an

01:16:49.450 --> 01:16:52.279
antiquated system , it took a lot of

01:16:52.279 --> 01:16:54.501
work around . It , it did , yes , sir ,

01:16:54.600 --> 01:16:57.620
but it's really important . We took 2

01:16:57.620 --> 01:16:59.660
years to get our initial opinion

01:17:00.069 --> 01:17:01.847
because we had to establish our

01:17:01.847 --> 01:17:04.189
baseline and go and account for , you

01:17:04.189 --> 01:17:06.245
know , the Marine Corps is this year

01:17:06.245 --> 01:17:08.540
250 years old and we have some stuff

01:17:08.540 --> 01:17:10.707
out there that is almost that old that

01:17:11.049 --> 01:17:13.209
everything has to be accounted for in

01:17:13.209 --> 01:17:16.750
existence and in condition and so it

01:17:16.750 --> 01:17:19.069
took that long to get there but once

01:17:19.069 --> 01:17:22.359
you establish that position . And you

01:17:22.359 --> 01:17:25.000
follow the processes , procedures and

01:17:25.000 --> 01:17:27.056
controls that you do have , we would

01:17:27.056 --> 01:17:29.680
like to have more advanced integrated

01:17:29.680 --> 01:17:31.847
systems that are connected and talking

01:17:31.847 --> 01:17:33.847
digitally , but we don't , but that

01:17:33.847 --> 01:17:36.439
doesn't stop us from continuing to

01:17:36.439 --> 01:17:39.279
maintain visibility very accurately on

01:17:39.279 --> 01:17:42.899
our position . Data , uh , access is a

01:17:42.899 --> 01:17:44.899
byproduct of the audit process that

01:17:44.899 --> 01:17:46.955
really helps me and other commanders

01:17:46.955 --> 01:17:49.010
make decisions every day because you

01:17:49.010 --> 01:17:51.121
have immediate access to whether it's

01:17:51.121 --> 01:17:53.177
financial data or it's uh data about

01:17:53.177 --> 01:17:55.259
readiness or personnel all of that

01:17:55.259 --> 01:17:57.629
information is available as a byproduct

01:17:57.629 --> 01:18:01.549
of the audit and so . I want

01:18:01.549 --> 01:18:03.509
to go back to Mr . Khan and Mr .

01:18:03.549 --> 01:18:06.299
Mansfield briefly . Gentlemen , is it

01:18:06.299 --> 01:18:09.270
true that DOD

01:18:10.020 --> 01:18:13.540
Um , has no one in place to serve as

01:18:13.540 --> 01:18:15.140
the CFO .

01:18:18.390 --> 01:18:20.669
Uh , there's , uh , an acting CFO at

01:18:20.669 --> 01:18:22.891
the , at the moment , and no one's been

01:18:22.891 --> 01:18:25.002
nominated , is that correct ? I don't

01:18:25.002 --> 01:18:26.891
believe so . So we're just flying

01:18:26.891 --> 01:18:30.319
around in limbo at DOD with no real

01:18:30.319 --> 01:18:32.375
person to give direction that people

01:18:32.375 --> 01:18:34.597
are respecting . One of the things that

01:18:34.597 --> 01:18:37.839
I listened to , uh , with Lieutenant

01:18:37.839 --> 01:18:41.319
General Adams was his comment about how

01:18:41.319 --> 01:18:45.189
the commandant looked at this , gave a

01:18:45.189 --> 01:18:47.770
direct order through the ranks . This

01:18:47.770 --> 01:18:49.659
is where we're going , ladies and

01:18:49.659 --> 01:18:51.881
gentlemen , and this is how we're gonna

01:18:51.881 --> 01:18:54.214
get there and everybody understood that .

01:18:54.214 --> 01:18:56.381
And they were able to stand up a model

01:18:56.381 --> 01:18:58.214
after establishing for 2 years a

01:18:58.214 --> 01:19:00.529
baseline and then follow through . I ,

01:19:00.580 --> 01:19:02.580
I think the difference here is that

01:19:02.660 --> 01:19:06.229
there was a clear , dogged deliberate ,

01:19:06.580 --> 01:19:10.049
determined and designed order to get

01:19:10.049 --> 01:19:12.779
this done , to not have the Marine

01:19:12.779 --> 01:19:15.189
Corps reflected like all these other

01:19:15.189 --> 01:19:17.609
agencies again and again and again

01:19:17.609 --> 01:19:19.387
that's the real difference it's

01:19:19.387 --> 01:19:22.200
leadership . It is leadership , so I

01:19:22.200 --> 01:19:25.509
find it absolutely stunning . That

01:19:26.330 --> 01:19:29.649
The Air Force General CQ Brown Jr . was

01:19:29.649 --> 01:19:32.879
fired within the last 100 days ,

01:19:33.410 --> 01:19:37.009
that Admiral Linda Fagan , uh , was

01:19:37.009 --> 01:19:39.720
fired the day after she was sworn in .

01:19:40.729 --> 01:19:44.299
I , I don't understand that . And that

01:19:44.589 --> 01:19:46.790
Navy Admiral Lisa Franchetti , the

01:19:46.790 --> 01:19:49.850
highest ranking officer in the Navy .

01:19:50.450 --> 01:19:53.399
Was fired also so if we're firing these

01:19:53.399 --> 01:19:55.890
people and we may have somebody acting

01:19:55.890 --> 01:19:58.410
here or not acting there , how in the

01:19:58.410 --> 01:20:02.250
hell are we gonna expect that by 2028 ,

01:20:02.370 --> 01:20:04.520
not even to mention next year , that

01:20:04.520 --> 01:20:08.100
we're gonna have an audit , uh , that

01:20:08.169 --> 01:20:10.490
can be stood up and talked about like

01:20:10.490 --> 01:20:12.657
we talk about the Marine Corps model .

01:20:12.729 --> 01:20:15.129
This is a shame . This is the this is

01:20:15.129 --> 01:20:17.439
the United States we're better than

01:20:17.439 --> 01:20:19.919
that . We just can't keep making these

01:20:19.919 --> 01:20:22.200
excuses , which is why I wanna see

01:20:22.200 --> 01:20:24.839
Secretary Hex , and the chairman has

01:20:24.839 --> 01:20:27.319
also indicated we need answers . We

01:20:27.319 --> 01:20:29.720
need to know what's going on . We just

01:20:29.720 --> 01:20:32.120
can't keep doing this , and it's

01:20:32.120 --> 01:20:34.799
amazing to me now , and correct me if

01:20:34.799 --> 01:20:37.439
I'm wrong , that no other leader of any

01:20:37.439 --> 01:20:39.959
other , uh , entity has said the same

01:20:39.959 --> 01:20:42.181
thing the same way as the commandant of

01:20:42.181 --> 01:20:44.348
the Marine Corps and by the way , give

01:20:44.348 --> 01:20:46.515
him my appreciation if , if you will .

01:20:46.700 --> 01:20:49.540
Um , it's just sad , it's sad . Maybe

01:20:49.540 --> 01:20:51.762
that's why they say send in the Marines

01:20:51.762 --> 01:20:53.929
or the Marines will lead the way , and

01:20:53.929 --> 01:20:55.929
I'm not being funny here , but I am

01:20:55.929 --> 01:20:57.984
being funny in some respects because

01:20:57.984 --> 01:21:00.207
this does not have to happen . We don't

01:21:00.207 --> 01:21:02.318
have to hold up the sign again to see

01:21:02.318 --> 01:21:04.540
how many failed marks there are . These

01:21:04.540 --> 01:21:07.490
are dollars that people pay every year

01:21:07.490 --> 01:21:10.399
in taxes . Taxpayers have a right

01:21:10.399 --> 01:21:12.510
whether they're black , white , Jew ,

01:21:12.510 --> 01:21:14.479
Gentile , Asian , Latino , Native

01:21:14.479 --> 01:21:16.646
American , male or female . It doesn't

01:21:16.646 --> 01:21:18.689
matter . To believe that their tax

01:21:18.689 --> 01:21:21.000
dollar is going to be spent in a way

01:21:21.000 --> 01:21:23.049
that it can be accounted for , we

01:21:23.049 --> 01:21:24.771
cannot account for what's been

01:21:24.771 --> 01:21:26.938
happening , and this has been going on

01:21:26.938 --> 01:21:29.049
since 2018 . This is really a shame .

01:21:29.049 --> 01:21:31.271
It's an embarrassment , quite frankly ,

01:21:31.271 --> 01:21:33.438
and I would hope that DOD sees it that

01:21:33.438 --> 01:21:35.660
way . Uh , I'd like to think that we're

01:21:35.660 --> 01:21:37.771
gonna have a CFO over there , but God

01:21:37.771 --> 01:21:39.993
knows since there's no nominee even out

01:21:39.993 --> 01:21:42.410
there to be the CFO , how that's gonna

01:21:42.410 --> 01:21:45.660
happen and um . Lieutenant General

01:21:45.660 --> 01:21:47.604
Adams , you were very kind in your

01:21:47.604 --> 01:21:49.779
remarks and yes there were some things

01:21:49.779 --> 01:21:52.500
that were learned by the other branches ,

01:21:52.620 --> 01:21:54.787
but I don't think they have taken them

01:21:54.787 --> 01:21:56.676
to heart , and I would love to be

01:21:56.676 --> 01:21:58.787
proved wrong , but something tells me

01:21:58.787 --> 01:22:00.842
that the chairman and I will be here

01:22:00.842 --> 01:22:03.009
next year if we're not careful talking

01:22:03.009 --> 01:22:05.020
about 8 straight going on 9 failed

01:22:05.020 --> 01:22:07.740
audits . And it's just it gets to me so

01:22:07.740 --> 01:22:09.907
when the gentleman from Tennessee says

01:22:09.907 --> 01:22:11.979
he hopes that some of us will be let

01:22:11.979 --> 01:22:14.146
out of here in handcuffs because we're

01:22:14.146 --> 01:22:16.312
part of this crazy notion that we just

01:22:16.312 --> 01:22:18.312
keep feeding this beast and feeding

01:22:18.312 --> 01:22:20.201
this beast , it will take care of

01:22:20.201 --> 01:22:22.257
itself , it will not . It will not ,

01:22:22.330 --> 01:22:24.274
and there are too many games being

01:22:24.274 --> 01:22:26.970
played by members of Congress , by

01:22:26.970 --> 01:22:28.930
private contractors , and to some

01:22:28.930 --> 01:22:31.370
extent by these divisions of the armed

01:22:31.370 --> 01:22:34.169
services that allows us to go on . I

01:22:34.169 --> 01:22:36.225
don't know how anybody can come here

01:22:36.225 --> 01:22:39.009
and say this is the United States and

01:22:39.009 --> 01:22:41.450
this is why we are great . And this is

01:22:41.450 --> 01:22:43.729
why we care about tax dollars . You can

01:22:43.729 --> 01:22:46.770
take a buzza and a chainsaw and go

01:22:46.770 --> 01:22:49.479
through agencies , but you can't find a

01:22:49.479 --> 01:22:52.830
way to force DOD to come up with an

01:22:52.830 --> 01:22:54.941
audit . I don't understand that . And

01:22:54.941 --> 01:22:58.569
so my , my anger here is real . Life is

01:22:58.569 --> 01:23:00.680
too short to play these games and the

01:23:00.680 --> 01:23:03.529
American public deserves more . We all

01:23:03.529 --> 01:23:06.290
deserve more than this , so I'm done .

01:23:07.430 --> 01:23:09.652
Mr . Chairman , which is probably why I

01:23:09.652 --> 01:23:11.874
didn't have a whole lot to say a minute

01:23:11.874 --> 01:23:14.430
ago because it just bubbles over in me

01:23:14.430 --> 01:23:17.669
over and over and over again and um I

01:23:17.669 --> 01:23:20.589
just wanna again as I said , thank the

01:23:20.589 --> 01:23:23.310
Marine Corps for setting the model of

01:23:23.310 --> 01:23:25.421
how to get something done when it has

01:23:25.421 --> 01:23:28.109
to be done from the top straight down

01:23:28.109 --> 01:23:30.680
to the bottom and I would hope and pray

01:23:30.680 --> 01:23:33.270
that both the Secretary of Defense and

01:23:33.270 --> 01:23:35.620
the other . Uh , branches of the armed

01:23:35.620 --> 01:23:38.299
services learn from this , but also be

01:23:38.299 --> 01:23:40.540
prepared to talk to us about what's

01:23:40.540 --> 01:23:42.762
going on and , and why we can't seem to

01:23:42.762 --> 01:23:45.220
move this 800 pound gorilla Iy back ,

01:23:45.390 --> 01:23:47.950
gentleman , yields back his time . I ,

01:23:48.029 --> 01:23:50.339
I would like for those that are , are ,

01:23:50.379 --> 01:23:53.580
are witnesses today to understand that

01:23:53.580 --> 01:23:56.839
Mr . Mfume and I still do work together .

01:23:57.339 --> 01:24:01.140
We see a common goal . Uh , we

01:24:01.140 --> 01:24:04.410
will be together . Engage in the

01:24:04.410 --> 01:24:06.466
Department of Defense at the highest

01:24:06.466 --> 01:24:10.009
level . We also recognize that the

01:24:10.009 --> 01:24:12.450
changes that have been made in these uh

01:24:12.450 --> 01:24:15.950
areas . Right , wrong or indifferent

01:24:15.950 --> 01:24:19.379
were made , and it will be important

01:24:19.379 --> 01:24:21.546
for us to have a commitment from those

01:24:21.546 --> 01:24:23.939
who are replacing them and are a part

01:24:23.939 --> 01:24:26.390
of that moving forward team to be

01:24:26.390 --> 01:24:29.069
prepared for 2028 . I think you've

01:24:29.069 --> 01:24:32.109
given us a model . You've showed us how

01:24:32.109 --> 01:24:34.669
uh a baseline is important and the

01:24:34.669 --> 01:24:37.879
attributes of success , not just to the

01:24:37.879 --> 01:24:40.720
management of the organization but to

01:24:40.720 --> 01:24:42.776
where all the way up and down people

01:24:42.776 --> 01:24:45.839
have an idea about their preparedness .

01:24:46.339 --> 01:24:49.339
With lethality , uh , as General Adams ,

01:24:49.660 --> 01:24:52.220
General Adams spoke about , but perhaps

01:24:52.220 --> 01:24:54.387
more to the point and to make sure the

01:24:54.387 --> 01:24:56.387
confidence that the American people

01:24:56.387 --> 01:24:58.580
have in that , uh , both the gentleman

01:24:58.580 --> 01:25:01.979
and I , Mr . Nfume , represent , uh , a

01:25:01.979 --> 01:25:04.419
thinking that we are not going to give

01:25:04.419 --> 01:25:07.459
up . I will say to the Department of

01:25:07.459 --> 01:25:10.899
events , uh , I encourage you to have a

01:25:10.899 --> 01:25:13.689
great attitude about us approaching you .

01:25:13.939 --> 01:25:16.620
I would say to the . Uh , leaders of

01:25:16.620 --> 01:25:18.740
each of these areas that we will be

01:25:18.740 --> 01:25:22.649
engaging you , uh , we do expect you to ,

01:25:22.779 --> 01:25:25.259
uh , take the time and to listen , and

01:25:25.259 --> 01:25:27.315
we do expect to hear back from you ,

01:25:27.315 --> 01:25:30.140
but we will not , uh , give up on this

01:25:30.140 --> 01:25:32.251
effort and we will do this together .

01:25:32.251 --> 01:25:34.500
So to each of our witnesses , I wanna

01:25:34.500 --> 01:25:36.667
thank you for being here today . Today

01:25:36.667 --> 01:25:39.580
you've seen what I consider to be a a

01:25:39.580 --> 01:25:43.009
bipartisan subcommittee hearing . Uh ,

01:25:43.180 --> 01:25:45.649
that we believe we listen to you , we

01:25:45.649 --> 01:25:47.816
believe that we appreciate and respect

01:25:47.816 --> 01:25:50.729
you , um , but it is , uh , a task that

01:25:50.729 --> 01:25:54.259
is still left for us to , to complete

01:25:54.259 --> 01:25:57.290
as we prepare for 2028 . With that said ,

01:25:57.370 --> 01:25:59.481
I want to thank each of our witnesses

01:25:59.481 --> 01:26:03.009
and this now , uh . Oh , we got to do

01:26:03.009 --> 01:26:05.629
the 5 days , yeah . So with that and

01:26:05.629 --> 01:26:08.029
without objection , all members of this

01:26:08.029 --> 01:26:10.390
subcommittee have 5 legislative days

01:26:10.390 --> 01:26:13.500
within to which submit material and

01:26:13.500 --> 01:26:15.556
additional written questions for the

01:26:15.556 --> 01:26:17.870
witnesses , which will be forwarded to

01:26:17.870 --> 01:26:20.089
the witnesses from the committee if

01:26:20.089 --> 01:26:22.509
there's no further business objection

01:26:22.509 --> 01:26:26.180
subcommittee stands adjourned . want to

01:26:26.180 --> 01:26:26.540
come down .