[House Hearing, 118 Congress]
[From the U.S. Government Publishing Office]


                      TRACKING PROGRESS: EXAMINING
                      THE DEPARTMENT OF DEFENSE'S
                     FINANCIAL MANAGEMENT PRACTICES

=======================================================================

                                HEARING

                               BEFORE THE

    SUBCOMMITTEE ON GOVERNMENT OPERATIONS AND THE FEDERAL WORKFORCE

                                 OF THE

                         COMMITTEE ON OVERSIGHT
                           AND ACCOUNTABILITY

                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED EIGHTEENTH CONGRESS

                             SECOND SESSION

                               __________

                           SEPTEMBER 24, 2024

                               __________

                           Serial No. 118-132

                               __________

  Printed for the use of the Committee on Oversight and Accountability
  
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]  


                       Available on: govinfo.gov
                         oversight.house.gov or
                             docs.house.gov
                             
                              __________

                   U.S. GOVERNMENT PUBLISHING OFFICE                    
56-965 PDF                  WASHINGTON : 2024                    
          
-----------------------------------------------------------------------------------                                 
                            
               COMMITTEE ON OVERSIGHT AND ACCOUNTABILITY

                    JAMES COMER, Kentucky, Chairman

Jim Jordan, Ohio                     Jamie Raskin, Maryland, Ranking 
Mike Turner, Ohio                        Minority Member
Paul Gosar, Arizona                  Eleanor Holmes Norton, District of 
Virginia Foxx, North Carolina            Columbia
Glenn Grothman, Wisconsin            Stephen F. Lynch, Massachusetts
Michael Cloud, Texas                 Gerald E. Connolly, Virginia
Gary Palmer, Alabama                 Raja Krishnamoorthi, Illinois
Clay Higgins, Louisiana              Ro Khanna, California
Pete Sessions, Texas                 Kweisi Mfume, Maryland
Andy Biggs, Arizona                  Alexandria Ocasio-Cortez, New York
Nancy Mace, South Carolina           Katie Porter, California
Jake LaTurner, Kansas                Cori Bush, Missouri
Pat Fallon, Texas                    Shontel Brown, Ohio
Byron Donalds, Florida               Melanie Stansbury, New Mexico
Scott Perry, Pennsylvania            Robert Garcia, California
William Timmons, South Carolina      Maxwell Frost, Florida
Tim Burchett, Tennessee              Summer Lee, Pennsylvania
Marjorie Taylor Greene, Georgia      Greg Casar, Texas
Lisa McClain, Michigan               Jasmine Crockett, Texas
Lauren Boebert, Colorado             Dan Goldman, New York
Russell Fry, South Carolina          Jared Moskowitz, Florida
Anna Paulina Luna, Florida           Rashida Tlaib, Michigan
Nick Langworthy, New York            Ayanna Pressley, Massachusetts
Eric Burlison, Missouri
Mike Waltz, Florida

                                 ------                                
                       Mark Marin, Staff Director
       Jessica Donlon, Deputy Staff Director and General Counsel
                      Bill Womack, Senior Advisor
      Mallory Cogar, Deputy Director of Operations and Chief Clerk

                      Contact Number: 202-225-5074

                  Julie Tagen, Minority Staff Director
                      Contact Number: 202-225-5051
                                 ------                                

    Subcommittee on Government Operations and the Federal Workforce

                     Pete Sessions, Texas, Chairman
Gary Palmer, Alabama                 Kweisi Mfume, Maryland Ranking 
Clay Higgins, Louisiana                  Minority Member
Andy Biggs, Arizona                  Eleanor Holmes Norton, District of 
Byron Donalds, Florida                   Columbia
William Timmons, South Carolina      Maxwell Frost, Florida
Tim Burchett, Tennessee              Greg Casar, Texas
Marjorie Taylor Greene, Georgia      Gerald E. Connolly, Virginia
Lauren Boebert, Colorado             Melanie Stansbury, New Mexico
Russell Fry, South Carolina          Robert Garcia, California
Eric Burlison, Missouri              Summer Lee, Pennsylvania
Vacancy                              Jasmine Crockett, Texas
                                     Rashida Tlaib, Michigan
                         
                         
                         C  O  N  T  E  N  T  S

                              ----------                              

                                                                   Page

Hearing held on September 24, 2024...............................     1

                               Witnesses

                              ----------                              
Mr. Tom Steffens, Senior Assistant to the Comptroller, U.S. 
  Department of Defense
Oral Statement...................................................     5
Mr. Brett Mansfield, Deputy Inspector General for Audit, U.S. 
  Department of Defense Office of the Inspector General
Oral Statement...................................................     7
Mr. Asif Khan, Director, Financial Management Assurance, U.S. 
  Government Accountability Office
Oral Statement...................................................     8

Written opening statements and statements for the witnesses are 
  available on the U.S. House of Representatives Document 
  Repository at: docs.house.gov.

                           Index of Documents

                              ----------                              

  * Statement for the Record; submitted by Rep. Connolly.

  * Article, Washington Post, ``Forbidden Russian Oil Flows Into 
  Pentagon Supply Chain''; submitted by Rep. Biggs.

  * Article, Reuters, ``Pentagon Buried Study that Found $125 
  Billion in Wasteful Spending''; submitted by Rep. Biggs.

  * Article, Fairfield Sun Times, ``Waste of the Day, Pentagon is 
  $50 Billion Behind on Building Repairs''; submitted by Rep. 
  Biggs.

  * Article, Quincy Institute, ``What a Waste, $778 Billion for 
  the Pentagon and Still Counting''; submitted by Rep. Biggs.

  * Press Release, COA, ``Committee Requests Information on 
  Pentagon's $125 Billion in Waste''; submitted by Rep. Biggs.

  * Statement for the Record, POGO; submitted by Rep. Mfume.

  * Report, DoD OIG, June 2024; submitted by Rep. Lee.

Documents are available at: docs.house.gov.

 
                           TRACKING PROGRESS:
                 EXAMINING THE DEPARTMENT OF DEFENSE'S
                     FINANCIAL MANAGEMENT PRACTICES

                              ----------                              


                      Tuesday, September 24, 2024

                     U.S. House of Representatives

               Committee on Oversight and Accountability

               Subcommittee on Government Operations and

                         the Federal Workforce

                                           Washington, D.C.

    The Subcommittee met, pursuant to notice, at 2:36 p.m., in 
room 2154, Rayburn House Office Building, Hon. Pete Sessions 
[Chairman of the Subcommittee] presiding.
    Present: Representatives Sessions, Palmer, Higgins, Biggs, 
Burchett, Burlison, Mfume, Norton, Lee, Crockett, and Tlaib.
    Mr. Sessions. This hearing on the Subcommittee on 
Government Operations and Federal Workforce will come to order, 
and I would like to welcome everybody.
    Without objection, the Chair may declare a recess at any 
time.
    I would like to recognize myself for an opening statement 
right now.
    I want to welcome each of you and the witnesses who are 
here today to take part in what I believe will be a very 
important hearing on a bipartisan basis. My partner here, the 
Ranking Member, Mr. Mfume, and I are deeply committed to 
understanding how we are going to get more money to the reason 
why it was given by the taxpayer. More money and efficiency 
from a congressional perspective when we provide agencies with 
money, and, in this case, the Department of Defense with the 
money that it is given for lethality and for the war fighter 
effort. I want to thank our witnesses for taking time with me 
to discuss and make sure that they knew that today would be 
very important to us and them as we really want to hear from 
them about their ideas. They are people that are on the front 
lines that are day-to-day engaged in the same business that we 
intend to engage them on.
    Financial transparency of the military is perhaps the most 
critical dollar that is spent. To remain confident in DoD's 
ability to protect American interest at home and abroad, we 
need to be able to properly monitor their financial 
performance. I think more than that, that Congress has been 
engaged for a number of years in trying to make sure that DoD 
was not only efficient but effective, and the efficiency is 
where this falls today. In Fiscal Year 2023, DoD received just 
over $850 billion, half the Federal discretionary funding. 
Also, during that same year, they reported $3.8 trillion in 
assets, a whopping 70 percent of the Federal Government's 
assets. Last year, we held a hearing asking basic questions 
such as how tax dollars are spent, how existing assets are 
managed, and which business systems track the flow of funds 
through the Department, and today, we still have not completed 
that exercise. Some could say we do not have those answers.
    DoD failed its sixth consecutive audit and holds the 
distinction of being the only Federal Agency that has never 
passed a comprehensive audit. I get that, and we are not 
jumping up and down upset about it. What we are is here to make 
sure that we are on a road to recovery, that we are on a road 
to understand that the basic elements that must be understood 
in the effectiveness by not only DoD, but by Congress to look 
at what needs to be accomplished, it requires us to do it 
together. A financial statement audit is not just simply an 
exercise. It is an important exercise. It is a purpose of 
Congress in our oversight capacity and responsibility. We need 
to know where we stand, and we need to hear from the people who 
are on the front line.
    As required by Fiscal Year 2024 National Defense 
Authorization Act, DoD must achieve a clean audit opinion by 
December 28, 2028. It is right around the corner. To meet this 
goal, DoD has established audit priorities and developed 
corrective action plans. However, GAO noted that DoD's 
remediation plans were not sufficient and detailed enough to 
achieve this clean audit. In other words, not sure that we are 
on that path after all. So, instead of focusing on high-level 
financial management priorities, instead of the steps needed to 
achieve a clean audit, we necessarily are here today to make 
sure that that is the pathway. GAO also found that DoD had 
consistently missed remediation deadlines established in the 
Department's own financial roadmap. Clearly, more work is 
needed.
    We are not here to point fingers. We are not here to fail. 
We are here to effectively work together. Just as Mr. Mfume and 
I see this as an issue, I am convinced DoD does, too. I am 
convinced that there are people within DoD who see how 
important this is. I am convinced that DoD, and we will hear 
today, has certain parts of the military that have very 
adequately accepted that rigor that would be required for 
financial integrity. But it is bigger than that, and we are 
going to hear today from this panel to describe to us about how 
we can continue to work together, where those distinctions may 
be, and how we can work to make sure that they are encouraged 
to make this work. Today's hearing, I think is important also 
from understanding the scorecard, the scorecard that I think 
has been passed out to everybody. Today could be seen as 
negative, or it could be seen as a work in progress. I believe 
it is a work in progress.
    So, we have got questions that we are going to ask about 
the major problems. What is preventing progress? Is DoD trying 
to remedy its financial management shortcomings? How is DoD 
learning from each attempted audit? We see the Marine Corps 
has. Can we extend that to other piece parts of DoD, and what 
can Congress do, and how can we work together?
    So, today we have three distinguished people who will be 
with us, who I am going to highlight in just a minute. But 
first I want to move to my distinguished Ranking Member, the 
gentleman, Ranking Member, Mr. Mfume, for any opening 
statements the gentleman choose to make. The gentleman is 
recognized.
    Mr. Mfume. Thank you very much, Chairman Sessions. I want 
to also thank the witnesses for being here today. This is going 
to be an interesting hearing, and I hope it is, in fact, the 
beginning of a process that gets us to greater financial 
efficiency. Last July, we gathered in this Committee room and 
held a hearing to address financial accountability in the 
Department of Defense. And just like magic, we are back here 
again today to continue that conversation and to continue it in 
light of the Department of Defense's recent inability to pass a 
clean audit for Fiscal Year 2023. Unfortunately, and sadly, 
this is not a new phenomenon, as we all know, at the Department 
of Defense.
    In Fiscal Year 2018, DoD began its efforts to successfully 
complete a Department-wide audit. The Fiscal Year 2018 audit 
covering $2.7 trillion in assets and $2.6 trillion in 
liabilities was likely and probably the largest audit any of us 
had ever conceptualized. As expected for such a large 
organization, the first audit attempt revealed severe material 
weaknesses where DoD could not provide an accurate accounting 
of their finances. There have been five, as we know, five 
additional audit attempts after the 2018 audit, and yet, most 
of the Department of Defense still has not produced a clean 
audit.
    So, to be clear, like most of us in this room, I support 
our troops. I know, like many of you, that Congress has a duty 
to ensure our Nation is protected from a growing number of 
threats, both at home and abroad. I also know we have a duty, 
however, to maintain accountability for the billions of dollars 
that make up defense spending, dollars that total about half of 
the Federal Government's total discretionary spending and 
nearly $3.8 trillion in total assets. In Fiscal Year 2024 
alone, U.S. taxpayers turned over $851 billion to the 
Department of Defense. That figure represents one of the 
largest investments in the DoD budget in our Nation's history. 
And while we continue to provide the Department of Defense with 
escalating sums of money, only 11 of the 29 components achieved 
clean audits. The 18 components that failed, including the 
Army, the Navy and the Air Force, comprise about 90 percent of 
DoD's assets by dollar amount.
    I want to go back to what the Chairman said about the 
Marine Corps. Maybe there is something to be learned there by 
the other departments, but clearly, they seem to be on the 
right path. So, standing in the way of a clean audit for these 
components is the wide prevalence of material weaknesses, in 
other words, areas in which the Department of Defense lacks 
internal controls over financial reporting. We have heard a lot 
about that in the previous hearing, we are hearing it again 
now, and I am sure as you all testify, that will continue to be 
a term that makes its way into this conversation.
    So, I am gratified and quite appreciative of the sacrifice 
that so many hardworking Americans make to keep our Nation 
safe. This Committee believes, however, we must ensure that our 
service members have the most sophisticated, modernized 
technology systems to eliminate the threats that exist, but 
also that the Department has the most modern and efficient way 
of doing its accounting. I look forward to discussing how this 
Committee and, indeed, the entire Congress can work with the 
Department of Defense in modernizing its financial management 
systems, and how we can actually incentivize DoD to improve the 
acquisition and management practices that it employs every day. 
The security of the Nation remains of paramount concern, and 
accountability measures across the Department of Defense must 
be efficient, they must be effective, and they must be 
informative.
    So, I look forward, Mr. Chairman, to hearing the 
testimoneys of the witnesses before us. I would be remiss if I 
did not say that patience is running thin. And I do not know 
how to say it any other way, but we expect more, and that is 
why we are pushing for more in a bipartisan way to bring about 
the change that we know is so desperately needed. And with 
that, Mr. Chairman, I would yield back any time.
    Mr. Sessions. Thank you very much. I concur with the 
distinguished gentleman. And so that the panel knows this, and 
our friends that are with us today, Mr. Mfume and I deeply 
believe in the United States military, their mission, and the 
men and women and the families, but we also believe we have an 
obligation to continue working with DoD on this.
    I am pleased today to welcome our witnesses. Tom Steffens 
is the Senior Advisor to the Comptroller, previously served as 
Deputy Chief Financial Officer, advising the Comptroller and 
defense senior leaders on all financial matters and management 
and reforms, and our conversation yesterday was very 
enlightening. And Tom, I am delighted that you decided to show 
today. I know you said you would, but thank you. I think you 
have a lot to add today. Brett Mansfield is Deputy Inspector 
General for audit. Prior to this role, he served as Senior 
Advisor to the Inspector General, advisor on matters affecting 
the mission operations of Department of Defense Office of 
Inspector General. Brett, welcome. We are delighted that you 
are here also. And Mr. Asif Khan is Director of the Financial 
Management and Assurance team at the GAO, the Government 
Accounting Office [sic]. Since 2009, he has focused his work on 
financial management and audit readiness for the Department of 
Defense. I must say, if I can, to my dear friend, I think today 
will be an enlightening hearing for each of us, and I know our 
witnesses are up to that task.
    I would now ask if each of our witnesses would rise and 
raise their right hand.
    And pursuant to Committee Rule 9(g) the witnesses will 
raise their right hand.
    Do you solemnly swear or affirm that the testimony that you 
are about to give is the truth, the whole truth, and nothing 
but the truth, so help you God?
    [A chorus of ayes.]
    Mr. Sessions. Thank you. Please let the record reflect that 
the witnesses have answered in the affirmative, and I ask that 
they please take their seat.
    We are delighted that you are here. I did not get a chance 
yesterday to personally describe this to each of you, but you 
are here for a reason, and we really might want you to complete 
your answer, give your testimony. People on this side are very 
interested in hearing from you, and we have got a lot of 
questions, but we are going to try and stick to a time format. 
It does not have to be 5 minutes, it can be a little bit over, 
but please make sure your point is well made, and I would say 
to Members, I will give them that latitude also. So, I am 
delighted you are here, Mr. Steffens. We are going to have you 
go ahead and first start your testimony.
    The gentleman is recognized for 5 minutes.

                       STATEMENT OF TOM STEFFENS

                  SENIOR ASSISTANT TO THE COMPTROLLER

                       U.S. DEPARTMENT OF DEFENSE

    Mr. Steffens. Chairman Sessions, Ranking Member Mfume, 
Members, thank you for the opportunity to address the 
Committee. I am Tom Steffens, Senior Advisor and former Deputy 
Chief Financial Officer for the Undersecretary of Defense 
Comptroller. First, I would like to thank Secretary Austin and 
Deputy Secretary Hicks for their unwavering commitment and tone 
at the top leading our financial management improvement 
efforts. This has been a key to our acceleration of audit 
progress, as evidenced in our financial modernization efforts 
and most recent audit results. Today, I will cover the status 
of audit within the Department, our need for continued open 
dialog with those entrusted with our oversight, and I will 
share my thoughts on PPBE reform.
    In Fiscal Year 2023, the Marine Corps was the first 
military service to receive an unmodified audit opinion. This 
was achieved by using a systemic, cultural, and analytical 
approach imposed by an engagement from senior leaders like the 
Commandant of the Marine Corps, General Eric Smith. Audit 
success was a priority across all fields, like acquisition, 
human resources, and logistics within the Marine Corps. The 
Department is replicating this success, implementing lessons 
learned from the Marines.
    At the start of our Fiscal Year 2024 audit, unmodified and 
qualified audit opinions together covered 51 percent, or $1.9 
trillion, of the Department's total assets, a number that will 
increase in the coming years. The Fiscal Year 2024 National 
Defense Authorization Act mandated an unmodified audit opinion 
on the DoD-wide financial statements by December 31, 2028. This 
is also now the Department's audit goal. It demands a fresh 
look at our timelines, risks, dependencies and measures of 
progress, and is evidenced in our revised audit roadmaps.
    We look at five areas when measuring audit outcomes and 
benefits: workforce modernization, business operations, quality 
decision-making, reliable networks, and finally, enhanced 
public confidence. In Fiscal Year 2023, the Department invested 
$991 million for audit remediation. This investment focuses 
heavily on tackling the root cause of systemic, longstanding 
issues that impede success. The Secretary's audit priorities, 
revised annually, are an essential part of our audit strategy. 
For each audit priority, we establish quantitative goals and 
report on progress to the Deputy Secretary of Defense 
quarterly.
    In Fiscal Year 2023, the Air Force General Fund closed its 
fund balance with Treasury material weakness as an audit 
priority. Army Working Capital Fund and Navy General Fund and 
Marine Corps all improved on fund balance with Treasury 
material weaknesses as well. Combined, these results encompass 
$423 billion, or 55 percent, of our Fiscal Year 2023 ending 
balance of $768 billion in fund balance with Treasury, 
validating that addressing this key material weakness as an 
audit priority has been effective.
    The Comptroller General, Mr. Dodaro, has advised us to 
simplify our financial system environment. We continue to 
assess, upgrade, consolidate, and retire systems that are 
impacting our ability to financially report successfully. 
Congress' support is critical to our success, as demonstrated 
in the Fiscal Year 2024 NDA inclusion of beginning balance 
certification for the Defense Logistics Agency's National 
Stockpile Transactions Fund, and we appreciate the support and 
the partnership there. We will continue to seek congressional 
support when addressing our most difficult systemic issues and 
providing adequate and consistent funding and staffing for our 
financial modernization efforts. Adequate and consistent 
funding is paramount to financial modernization, not to mention 
our military's overall readiness.
    Over the course of the last 15 fiscal years, there have 
been 48 continuing resolutions lasting for 1,794 days, or 
nearly 5 calendar years. In a letter to the House Committee on 
Appropriations, Secretary Austin detailed to Chairman Cole the 
negative impact of a 6-month continuing resolution. As noted in 
the letter, our budget is aligned to the National Defense 
Strategy. Without a timely budget, we are challenged in 
investing in new technologies, equipment, and training. This 
has a profound effect on the quality of life of our service 
members, damages military hiring, and delays vital investments 
in capacity such as submarine and shipbuilding. Undersecretary 
of Defense Comptroller, Michael McCord, and I joined Secretary 
Austin in urging Congress to act urgently.
    Congress and the Department have consistently collaborated 
on critical financial management improvements, including 
reforming the planning, programming, budgeting, and execution 
process. The PPBE process is a fundamental strategic decision 
support mechanism for our leadership. The report from the 
Commission on PPBE reform, released in March, included 28 
recommendations parceled into 35 initiatives. The Deputy 
Secretary of Defense endorsed 26 PPBE reform initiatives for 
implementation across the Department. The timeline for PPBE 
reform relies on outcomes from complex, multi-organizational 
discussions and legislative actions, and success depends on 
sustained cooperation and transparency.
    We appreciate congressional support for the National 
Defense Strategy and the Department's financial management 
improvement efforts. We are thankful for our interagency 
partners' assistance in broadening information sharing. We 
value the independent assessments coming from Government 
Accountability Office and the Department of Defense Office of 
Inspector General, and we will continue to listen to their 
recommendations to achieve future success. I welcome any 
questions you may have.
    Mr. Sessions. Thank you very much. The gentleman yields 
back his time. Mr. Mansfield, you are recognized for 5 minutes.

                    STATEMENT OF BRETT A. MANSFIELD

                   DEPUTY INSPECTOR GENERAL FOR AUDIT

       U.S. DEPARTMENT OF DEFENSE OFFICE OF THE INSPECTOR GENERAL

    Mr. Mansfield. Chairman Sessions, Ranking Member Mfume, and 
Members of the Subcommittee on Government Operations and 
Federal Workforce, thank you for inviting me to discuss the 
Office of Inspector General's role in auditing the DoD's 
financial statements and oversighting the DoD's efforts to 
obtain a clean audit opinion. I am Brett Mansfield, the Deputy 
Inspector General for Audit at the DoD Office of Inspector 
General, and it is my privilege to be here today to represent 
the dedicated oversight professionals that make up the DoD 
Office of Inspector General.
    The financial statement audits performed or overseen by the 
DoD Office of Inspector General are critically important for 
maintaining the public's trust, ensuring accountability, and 
improving DoD operations. The 2024 financial statement audits 
are ongoing now, so I cannot speak to their results today. 
However, in Fiscal Year 2023, as you mentioned, Chairman, the 
DoD reported discretionary appropriations of just over $850 
billion which comprised half the discretionary spending of the 
United States. The DoD also reported nearly $3.8 trillion in 
assets, which is approximately 70 percent of the government's 
total assets. Because of its size and financial reporting 
deficiencies, the DoD is limiting the Federal Government's 
ability to obtain a clean audit opinion on its financial 
statements.
    Fiscal year 2023 marked the sixth full-scale audit of the 
DoD's financial statements, and for the sixth year, it resulted 
in a disclaimer of opinion on the DoD's Agency-wide financial 
statements. In addition, of the 29 reporting entities that 
underwent standalone audits, 10 received clean opinions, one 
received a qualified opinion, and 18 received disclaimers of 
opinion. The disclaimers of opinion were issued because the DoD 
entities continue to have unresolved accounting issues and 
material weaknesses. Fiscal year 2023 also included a major 
development with the Marine Corps reaching an unmodified 
opinion. However, this only came after substantial effort in 
completing an unconventional 2-year audit. Sustaining this 
opinion will require significant effort going forward.
    As my prepared statement today, I provided a recently 
released Office of Inspector General report, ``Understanding 
the Results of the Fiscal Year 2023 Financial Statement 
Audits.'' There are three key themes discussed in this report, 
which I will highlight today.
    First, the Comptroller and financial management community 
cannot do it alone. Leadership involvement from the commanders 
and operators is imperative. The Comptroller does not have 
command and control of operators, yet the information and 
systems relied upon for financial reporting are often 
controlled by soldiers, sailors, marines, airmen, and 
guardians. Every time a bomb is released from a plane, a 
submarine undergoes maintenance, or a radar system is fielded, 
service members are inputting information into DoD management 
systems, which ultimately results in a financial transaction 
and have a direct impact on the reliability of the DoD's 
financial statements.
    Second, the inability to support its financial statements 
is inherently an operational risk for the DoD. Financial 
statements reflect, in part, the assets, such as munitions, 
equipment, and spare parts the DoD has on hand. This 
information comes from logistics and inventory systems that the 
operators rely on to have the right equipment to train, fight, 
and win. If the DoD cannot support the information required for 
financial statement auditing, such as cost, location, and 
condition of these items, it stands to bear that the operators 
cannot rely on those same systems to make informed decisions 
regarding the availability, location, and condition of supplies 
and equipment.
    Third, material weaknesses are longstanding and persistent. 
While the DoD makes progress each year in addressing material 
weaknesses, we still consider 17 of them, of the 28 material 
weaknesses, to be scope limiting, meaning the DoD OIG cannot 
perform the necessary procedures to draw a conclusion on the 
financial statements. These weaknesses cover topics, including 
information technology, inventory, and government property in 
the possession of contractors. Scope-limiting material 
weaknesses stop audit work. In other words, we cannot do our 
job until the DoD fully addresses these weaknesses.
    Achieving a clean financial statement opinion is a long-
term effort for the DoD. The Office of Inspector General 
believes that leaders outside of the Comptroller's office must 
continue to focus on material weaknesses. Addressing these 
weaknesses requires sustained leadership, focus, and 
significant coordination within and between each entity within 
the DoD. As for my office, the Office of Inspector General, we 
will continue to fully and fairly audit the DoD's financial 
statements to identify deficiencies and areas for improvement 
and to provide actionable information and recommendations to 
the DoD. Our commitment to enhancing the financial health of 
the DoD through independent oversight remains steadfast in this 
crucial long-term endeavor. Thank you, and I look forward to 
your questions.
    Mr. Sessions. Thank you very much. The gentleman yields 
back his time.
    Mr. Khan, you are recognized for 5 minutes.

                         STATEMENT OF ASIF KHAN

                DIRECTOR, FINANCIAL MANAGEMENT ASSURANCE

                 U.S. GOVERNMENT ACCOUNTABILITY OFFICE

    Mr. Khan. Chairman Sessions, Ranking Member Mfume, and 
Members of the Subcommittee, thank you for the opportunity to 
testify on the benefits of financial statement audits for the 
Department of Defense.
    The DoD is an immense and complex organization responsible 
for half the Federal Government's discretionary spending, 
overseeing millions of service members and civilian employees 
across the globe. At this scale, ensuring sound financial 
management and transparency is not just a necessity. It is 
crucial for our national security and operational 
effectiveness, but just as the size and scope of the Department 
is something hard to grasp, so are the benefits of financial 
statement audits. An analogy might help provide some insight.
    Imagine a professional football team, each game has high 
stakes with a lot riding on each play. The team wants to do as 
well as possible in every aspect, from training camp all the 
way through--each hopes to a Super Bowl victory. Amongst the 
tools available to today's professional teams is advanced video 
analysis to meticulously review game footage. This is more than 
just simply watching highlights. It is about examining every 
play, every movement, every strategy. Coaches and players 
analyze this footage to analyze strategies and weaknesses, 
correct mistakes, optimize performance, and make sure each 
player follows the best practices. Errors get corrected, plays 
get improved, controls on who does what and how and when get 
tightened. This detailed analysis provides important 
information to help coaches make best strategic decisions and 
players make best choices in both preparation and the moment. 
It produces a more successful and cohesive team and more 
effective and efficient play and management. It is crucial to 
the team's success.
    Now let us draw a parallel to the financial statement 
audit. Just as a team reviews game footage to improve, auditors 
review DoD's financial statements and processes identifying 
weaknesses and improving strategies. Video analysis help 
coaches to spot inefficiencies in place and areas where players 
will need additional training, ensuring the team makes informed 
decision to improve performance. Similarly, financial statement 
audits identify material weaknesses in internal controls and 
processes. By remediating these weaknesses, DoD can improve its 
accuracy and reliability of its financial information, leading 
to better decision-making and resource management.
    Tighter coordination and execution. By reviewing game 
footage, teams ensure that every player understands their role 
and executes each play correctly. Financial statement audits 
identify internal controls that need to be present are 
strengthened, ensuring that all financial operations are 
executed efficiently and effectively, leading to greater 
accountability and transparency vital to managing DoD's vast 
resources.
    Enhanced decision-making. Insights gained from game film 
analysis help coaches make strategic decision about player 
positions, game plans, and training focuses. Audit results 
provide critical data that help DoD leaders make informed 
decision about budgeting, resource allocation, process 
improvement, systems development, and strategic planning, 
ensuring the Department uses funds effectively and efficiently 
to support their mission and improve operational readiness.
    Long-term benefits. Regular video analysis leads to 
continuous improvement, allowing teams to refine their 
strategies and enhance performance game after game, season 
after season, as they move closer to achieving their Super Bowl 
success. Annual financial statements auditing leads to strong 
long-term benefits, including better data reliability, improved 
financial visibility, and the identification of previously 
unknown assets. These improvements support ongoing efforts to 
achieve a clean audit opinion and improve on overall 
performance.
    DoD's financial statement audits, like game film analysis, 
provides invaluable insights and benefits. They identify 
weaknesses, enhance coordination, improve decision-making, and 
can lead to long-term improvements. They are fundamental 
building blocks of sound policy and effectively managing our 
Nation's defense resources. Your continued interest and 
oversights are essential as DoD strives to achieve these goals.
    Thank you once again for the opportunity to testify on this 
important subject. Now I will be happy to answer your 
questions. Thank you.
    Mr. Sessions. Mr. Khan, thank you very much yielding back 
your time. Mr. Khan, if you could take a look up, we should 
have our scorecard up there in just a second, and that is the 
main thesis of what we are attempting to accomplish today.
    [Chart]
    Do you mind taking a minute and just in an overview process 
tell us the good and tell us where we ought to aim of what we 
need to make it better?
    Mr. Khan. Thank you, Congressman Sessions. Thank you for 
that question. The scorecard is a snapshot of the DoD status. 
That is what the bottom line is. It tracks five key performance 
measures which are necessary for any Federal agencies to get to 
auditability. In this case, this has been applied. How the 
scores had been developed, this is specific to the DoD's 
circumstances. The key categories are financial statement 
reliability, the progress that DoD is making in addressing the 
issues that have been identified during the financial statement 
audit. Then it also highlights the planning, the oversight, and 
then, finally, it focuses on the systems. The systems are 
critical to driving financial statement auditability at the 
Department of Defense, specifically for the military 
departments, the large components.
    Their audit is only possible if DoD has sound financial 
management systems with operating effectiveness, operating 
effectively. The key measure for that effectiveness is what we 
have toward the bottom, systems compliant with FFMIA. That is 
critical for DoD to comply. Without that, it will be very 
difficult. The military departments will be challenged to 
attain auditability. It may be possible for smaller entities to 
be able to do that through manual workarounds, but the size of 
the Army, Navy, and the Air Force is immense, so it is critical 
for systems to be sound and comply with FFMIA. Thank you.
    Mr. Sessions. Earlier in the hearing, we had noted that the 
United States Marine Corps discovered that they could get 
things done by working hard. Many times, it takes a team 
effort, and I think that that is what the Marine Corps has 
done. I note that they came across with an overall grade that 
was not just passing, but really, for the first time ever in 
DoD, they passed the audit. When we look at this, I notice 
there are F's on system compliance with financial management 
requirements--F, F, F, F. Take a minute and tell me how we make 
that better.
    Mr. Khan. This grade is, in part, self-reported by the 
military services, and, in part, it is also because of a lack 
of reporting by the IPAs. Federal Financial Management 
Information Act requires compliance with three specific 
categories. It is compliance with Federal financial management 
systems requirements, it is compliance with Federal financial 
accounting standards, and it is also compliance with the U.S. 
Standard General Ledger.
    Mr. Sessions. Is it fair that we have that as a question, 
because I think it is completely within any audit management 
system that would be required. Are we asking the right thing of 
them?
    Mr. Khan. Yes, sir.
    Mr. Sessions. OK.
    Mr. Khan. It is essential because of the size and 
complexity of the military departments that this compliance be 
attained.
    Mr. Sessions. Mr. Steffens, welcome. You are an Eagle 
Scout. You like to leave your campsite better than the way you 
found it. Are we fair? Is this grade fair that has been placed 
upon this DoD organization?
    Mr. Steffens. Mr. Chairman, I believe it is fair. I respect 
the grade. I respect the process that was gone through, and the 
intent here to try to get to a baseline here of how the 
departments are doing. What I would offer, though, as 
supplemental to the report card here, the scorecard that was 
given, is there are other ways that we are looking 
foundationally to try to assist the military departments to 
getting there as well.
    So, we have a number of metrics that we look at. We have 
our own individual roadmaps, as Mr. Khan and Mr. Mansfield are 
aware, to get to some foundational things. One of the things we 
have learned, sir, particularly I have learned over the past 2 
years, is you saw some F grades there, obviously, but there are 
a lot of dependencies that those military departments have on 
either the DoD enterprise, some of the service providers, some 
things perhaps they need at the enterprise level from the Chief 
Information Officer to get their F grade to a higher level. And 
I understand the need to try to give that baseline grade, but I 
also want to stress the interdependency that is required here 
amongst the services and the DoD enterprise to improve that 
grade. And that is what we are trying to do a lot of focus here 
at the DoD level and to providing assistance to those military 
departments so they have the tools to improve.
    Mr. Sessions. I think Mr. Mansfield very clearly made us 
all aware again, downrange you are doing your job. It is hard 
to get the widgets done also, and I think that that was what 
you tried to get me to understand yesterday. It is not a lack 
of effort. It is just as hard getting it done. Thank you very 
much.
    I would now like to go to the distinguished gentleman from 
Maryland. The gentleman is recognized for 5 minutes.
    Mr. Mfume. Thank you, Mr. Chairman. Couple of quick things. 
Mr. Steffens, I understand you are leaving service after 39 
years.
    Mr. Steffens. Mr. Ranking Member, that is correct. I am 
retiring here next month after 39 years.
    Mr. Mfume. Well, congratulations and God bless. That is a 
long haul, and oftentimes people in the government do not 
always say to those who are leaving, ``job well done,'' but 
from everything I have seen, you have had a job very well done 
and we wish you well. I know I speak on behalf of the Chairman 
when I say that.
    Mr. Kahn, when we met for the briefing session, I guess it 
was last week, the Chairman and myself, it was very interesting 
and informative, particularly the notion about the scorecard. 
And I said to you then that my real concern, in addition to 
making sure we do what we ought to do when we ought to do it in 
terms of an audit, is the other side of that and what happens 
when we do not capture the dollars we should capture, when 
money is going through a sieve, when people are complaining. 
And the other side of that is the human side.
    I think I may have said then that whether we are talking 
about undergirding the Social Security system, or Medicare for 
our seniors, or women, infant and children programs that are in 
desperate need of funding, or dollars that get lost that cannot 
go to small business loans or development, none of those 
dollars can we recapture and replace, they are out of the 
window, which is why so many people have a dire and terrible 
assessment of the Department of Defense's ability and 
capability to manage its finances. So, that human side always 
gnaws at me, I mean, every audit, every budget, every year. And 
I think more than anything else when I noticed the scoring of 
the Marine Corps in various categories, and I think the only 
one that it did not do as good in was material weakness 
downgrades.
    What is so magic about the role of the Marine Corps in this 
audit that you can share with us that ought to be a guidepost 
to the other areas and other agencies within Department of 
Defense that could give some hope?
    Mr. Khan. Right. Thank you, Congressman Mfume. The Marine 
Corps, like Mr. Mansfield was saying, went through this unusual 
timeframe, 2 years, so, I mean, that is something which has to 
be considered. The lessons learned are the tone at the top. The 
Marine Commandant made this a directive that every person 
within the Marine Corps is going to be all hands on deck to 
support this audit effort, and they fell in line, and everyone 
helped to pull the information together to support the audit. 
That was critical.
    In addition to that, there was a directive from the 
Secretary of Defense and the Deputy Secretary of Defense to the 
other business provider, and that is the interdependency that 
Mr. Steffens was talking about. That really promoted a lot of 
interagency cooperation. It does happen, but they made it a 
priority to help the Marine Corps audit effort. And the other 
one is that they implemented a new system before the audit 
period started. So, when they entered the audit period, the new 
system was operating somewhat effectively, but still, it was in 
place. That made the path toward auditability that much clearer 
and easier to obtain.
    Mr. Mfume. Do you see that same kind of leadership, 
accountability, and directive taking place in the Army and the 
Navy?
    Mr. Khan. That will be essential. Whether it happens or 
not, I cannot say that. It is yet to be seen. But that sort of 
leadership tone at the top, at that level, is essential. In 
financial management high risk, we consider leadership to have 
been met. There is tone at the top, but it has to happen at 
different levels, and we have to see that at the Army, the 
Navy, at the Air Force so they undergo the same level of effort 
to really be able to move a large amount of data to be able to 
reach auditability. And the window is closing down pretty 
quickly before that time runs out to reach auditability by 
2028.
    Mr. Mfume. And I am going to ask you to go out on a limb. 
Why do you think that has not been the case at the Army, the 
Navy, the Air Force?
    Mr. Khan. In large part because of the size and complexity, 
the communication lines are somewhat strained. Marine Corps, 
like Congressman Sessions has mentioned, is only 2 percent of 
DoD. Now, we are talking about the other military departments, 
they are 90 percent, so they have to have clearer 
communication, and I think that is where the focus should be so 
there is no ambiguity as to what is needed to be able to get to 
the finish line.
    Mr. Mfume. OK. And I think I heard both you and Mr. 
Mansfield in your testimony refer to the fact that some of the 
financial accounting systems being used date back to the 
1980's. Can you talk about that for a minute?
    Mr. Mansfield. Sure, I would be happy to talk a little 
about that. We issued a report back in January on legacy 
systems within the Department of Defense, and what we 
determined is that within the DoD, they have identified 
internally about 232 systems that they consider to be relevant 
to financial statement reporting. We determined that not only 
is that list maybe insufficient, so it does not contain or 
capture the full amount of systems that the Department actually 
uses or relies upon, but also the definition that the DoD 
applied at the time that information was collected, in terms of 
what a legacy system is, was a little short-sighted in that it 
only identified systems that would be retired within the next 3 
years.
    However, when we looked, for example, the DoD had 
identified specifically, I think, 23 systems that they had 
reported to Congress that needed to be retired, of those 23 
systems, 14 of them were not scheduled to retire until 2029 or 
later, so some are going out to 2031. I apologize, 2019 and on. 
So, some of these systems, like you said, date back to the 
1970's. So, a specific one I can talk to is the Standard Army 
Finance Information System. It has a retirement date of 2031. 
It is non-U.S. General Ledger compliant. It was created in the 
1970's. At the time we did our review, there was no 
modernization plan, and that system is not necessarily 
considered to be a legacy system because it is not planned to 
be retired until 2031.
    So that really is, in a nutshell, kind of the issue the DoD 
faces. There are a lot of systems that they are using and they 
rely upon for operations, so they cannot just turn the systems 
off. They have to make determinations on how to replace those 
systems. And what we recommended is not to just make 
recommendations on each system individually, but to look across 
the operational-like responsibilities across the Department and 
try and make decisions so you are replacing multiple systems 
with one new system to simplify the Department's information 
systems, like programs to make it just easier to oversight, 
easier to maintain, easier to modernize in the future so you 
are only doing a few systems versus a few hundred systems.
    Mr. Mfume. So, I am just amazed--my time is up, maybe we 
can come back to it--how we all can sit here and see clearly 
what has to be done, but the persons running the show cannot 
seem to figure it out. It is almost like many of the 
inefficiencies are built in. I am not a paranoid person, but I 
do not believe Humpty Dumpty just fell. I think he was pushed, 
and I think some of these inefficiencies are in place to keep a 
good thing going. And in the meantime, it does a disservice to 
our troops, it does a disservice to our Nation, and the other 
face, which I talked about earlier, the face of all those 
Americans that are not getting the benefits they should get 
because so much money is lost in this deep, dark hole that we 
call DoD. I yield back, Mr. Chairman.
    Mr. Sessions. The gentleman yields back his time. Thank you 
very much. I would like to yield to the distinguished gentleman 
from Louisiana, Mr. Higgins, 5 minutes.
    Mr. Higgins. Yes, Mr. Chairman, and thank you, Mr. 
Chairman. I am going to be moving fast, which is rare for me. 
Mr. Chairman, Federal agencies are required to conduct annual 
audits under the Chief Financial Officer's Act of 1990. The 
Department of Defense receives more funding than any other 
Federal agency. More than half of Federal discretionary 
spending goes to DoD, yet it is the only Federal agency not to 
achieve a clean audit opinion.
    Mr. Mansfield, I am going to be directing my question at 
you, so I am going to ask you to tune in with me. Let me ask 
you up front. You are the Deputy Inspector General for Audit 
under the U.S. Department of Defense Office of the Inspector 
General. Is that correct? So, you are like a financial law 
enforcement officer. Is that correct?
    Mr. Mansfield. I would not go quite that far.
    Mr. Higgins. You look at it like that? So, you are familiar 
with the term.
    Mr. Mansfield. We call the balls and strike----
    Mr. Higgins. You are familiar with the term ``reasonable 
suspicion?''
    Mr. Mansfield. Yes.
    Mr. Higgins. So, in looking through money, would you be 
able to recognize something that looks suspicious?
    Mr. Mansfield. I would like to think so.
    Mr. Higgins. Most probably.
    Mr. Mansfield. Yes.
    Mr. Higgins. Mr. Chairman, may I suggest to you that you 
are not going to have clean audits out of the DoD until we 
address the culture within the DoD of confounding and even 
suspicious decisions out of the Department of Defense regarding 
programs costing billions and billions and billions of dollars. 
How can you possibly have a clean audit when you have 
mysterious things going on? So, I am going to drive into one 
example. I am going to give one particularly egregious example. 
If you will direct your attention to the screen. Thank you.
    [Chart]
    Mr. Higgins. Let us just go through the timeline here. This 
is one large interaction between Austal shipyards and the DoD, 
United States Navy, has been going on for a long time. February 
2017, wide media reports highlight concerns about China's 
frigate design resembling the United States Navy's littoral 
combat ship, the LCS. That coincides with, also, USA's joint 
venture with a Chinese shipbuilder. June 2020, Austal gets $50 
million. The DoD invests $50 million in a grant to Austal to 
establish steel shipbuilding capabilities funded by the DPA and 
the CARES Act. They have never built a steel ship, but they got 
$50 million American treasure to set up the capability to do 
so.
    2022, September, myself and Congressman Dunn expressed 
national security concerns officially to DHS and Navy 
secretaries about Austal USA's OPC contract amidst the LCS 
program scrutiny. In 2023, a Federal grand jury indicts three 
individuals with accounting fraud at Austal USA related to LCS 
contracts. July 2023, myself and Congressman Dunn sent a letter 
to the Navy OIG requesting an investigation into Austal USA 
regarding connections to China and this ongoing mystery of 
money and contracts being awarded for steel vessels when they 
had never built a steel vessel.
    It continues. May 2024, the DoD IG meets with me after it 
had been confirmed to me from the DoD IG that the DoJ was now 
involved investigating Austal and things that I had put on the 
table. DoD IG meets with me and acknowledges ongoing 
investigations in response to concerns, but they refuse to 
provide any further details because it is an ongoing DoD IG and 
DoJ investigation. June 2024, the former Secretary of the Navy 
becomes the Chairman of Austal Limited. You cannot make this 
stuff up, America. How are you going to possibly get a clean 
audit when this is the culture that we are dealing with?
    August 2024, Austal agrees to settle accounting fraud and 
false claims with the DoJ by paying a $25 million fine. The 
fine was supposed to be $71 million, but they reduced it 
because Austal said they did not have the money. September 
2024, Austal receives another $450 million contract to expand 
their submarine module production in Mobile, Alabama, basically 
building them a shipyard with American money. September 2024, 
just the other day, Austal gets another $152 million Navy 
contract to build infrastructure for the Columbia-class and 
Virginia-class submarine modules. That is $600 million that 
they have been given just this year, this month. The former 
Secretary of the Navy is the CEO of the company, an Australian 
company.
    Mr. Mansfield, does this rise to the level of reasonable 
suspicion in the financial realm, sir?
    Mr. Mansfield. I have not looked into----
    Mr. Higgins. Are you familiar with any of these 
investigations that allegedly have taken place within the IG's 
office?
    Mr. Mansfield. Sir, so I focus on audits, not criminal 
investigations, but I am familiar with the public disclosures 
and discussions regarding the settlements reached by DoJ.
    Mr. Higgins. That is encouraging. So, you are familiar with 
what I am discussing here. The bigger picture here, Mr. 
Steffens, Mr. Mansfield, Mr. Kahn, is that the Department of 
Defense returns to Congress every year and asks for hundreds 
and hundreds of billions of dollars. I am on the Armed Services 
Committee. We are responsible for funding, and I am honored to 
fund the Department of Defense, but we cannot continue to 
operate without some degree of accountability for this money. 
It is almost a trillion dollars a year now. When you have 
things like this going on, it just blows the minds of Americans 
that witness it.
    Mr. Chairman, my time has expired, but my passion for this 
topic has not. I thank you for having this hearing today, and I 
yield.
    Mr. Sessions. I thank the gentleman. I now move to the 
gentlewoman, Ms. Norton, recognized for 5 minutes.
    Ms. Norton. Thank you, Mr. Chairman. For over 3 decades, 
the Government Accountability Office has maintained a High Risk 
List, as it is called, to identify serious weaknesses in 
critical government programs and services. The Government 
Accountability Office added Defense Department financial 
management to that list in 1995, and it has remained there ever 
since. Mr. Khan, briefly, why is the Defense Department 
financial management on the High Risk List?
    Mr. Khan. DoD has got problems with its internal controls. 
They are unable to track the money that they have been given, 
primarily because of weak systems which were implemented 
decades ago, and those problems continue to persist. We have 
made recommendations. DoD could help themselves by implementing 
the recommendations we have made in the area of financial 
management as well as business system modernization.
    Ms. Norton. Well, Mr. Khan, the Defense Department has two 
other items of critical concern to the High Risk List: the 
business systems modernization and weapons systems acquisition. 
Beyond financial management, the Defense Department has 
longstanding problems with effectively procuring and overseeing 
the products and services it spent more than $456 billion in 
Fiscal Year 2023. So, Mr. Khan and Mr. Mansfield, can you 
quantify the impact of the Defense Department's ineffective 
procurement processes?
    Mr. Mansfield. I do not know that I can quantify it, but 
what I would say in terms of moving forward, there are, like, 
three elements to really solid acquisition, right? The first is 
clear requirements. Oftentimes, the DoD's requirements at first 
take are not as clear as they could be, and it ends up with 
modifications to acquisition programs, right? Because they 
adjust the requirements often after they are set up. The second 
thing is a clear and measurable oversight plan by the Federal 
Government. So, the contracting officers have to have a clear 
way of doing quality assurance and quality assessments, 
surveillance plans, and making sure that they are getting what 
they pay for. So, those two elements are critical. The third 
element that is even more critical is the wherewithal within 
the Department to actually hold contractors accountable for 
failure to meet those contract requirements.
    I think if you look through our history of oversight and 
acquisition programs, those are the three areas that stick out 
the most for us: unclear requirements that are modified, the 
Department not having quality oversight of the Department, and 
then even when it does its oversight, it does not consistently 
hold contractors accountable for not meeting expectations set 
out in the contracts.
    Ms. Norton. Mr. Khan?
    Mr. Khan. The commonality, the common thread between the 
three high-risk areas you mentioned are it is tracking the 
money, whether it is acquisition, or it is financial 
management, or business system modernization. Business system 
modernization is really the infrastructure to be able to enable 
tracking the money from the budget when it is appropriated to 
when the purchase orders goes out, and then when you receive 
the goods and services, that has to be tracked. So, that is one 
important control DoD needs to have, that they are receiving 
goods and services, including large contracts and weapons 
systems, for what they have paid for and those goods and 
services have been accounted for, and especially if it is 
goods, the location, quantity, count, and condition is known.
    Ms. Norton. Well, Mr. Khan and Mr. Mansfield, how could 
this Subcommittee help the Defense Department improve its 
procurement of business and weapons systems? Mr. Khan and Mr. 
Mansfield?
    Mr. Khan. By continuing to hold DoD accountable through 
various means that you have, hearings such as this, is 
important, and then asking for additional briefings and 
information when you have any questions. We will be more than 
happy to meet with you and your staff.
    Ms. Norton. Mr. Mansfield?
    Mr. Mansfield. Yes. I think transparency is key to the 
Department being successful in this area. So, whether it be 
through congressional oversight and sharing the information 
that you glean from the Department publicly, or oversight like 
GAO and the DoD IG do, we provide our findings publicly as 
well. And so, sharing that information when we find 
deficiencies and we can make recommendations that are 
actionable by the Department, the fact that those are known by 
the public, that can create additional pressure on the 
government to take action in a more responsive, more timely 
manner. Not to say that the government and the DoD is generally 
responsive to our recommendations, agreeing with us, or working 
through alternate approaches, but it is that sunshine that is 
placed on that through transparency, through reporting, and 
venues like this that actually help, I think, apply that 
pressure in a more consistent manner.
    Ms. Norton. My time has expired.
    Mr. Sessions. I would like Mr. Steffens to, if he could, to 
answer this because yesterday, I asked exactly the same thing, 
and today is today. It is not yesterday, so we will see what he 
says today, but----
    Mr. Steffens. Mr. Chairman, to provide some context to the 
high-risk list----
    Mr. Sessions. Well, essentially what you said is, it was 
made important to general officers that they were going to 
follow through on this stuff.
    Mr. Steffens. Yes. Absolutely.
    Mr. Sessions. That is what you said yesterday.
    Mr. Steffens. No. Absolutely. The two documents released 
within the last year from the Undersecretary for personnel and 
readiness, one was for the senior executives to have this 
codified in their performance standards for audit.
    Mr. Sessions. Right.
    Mr. Steffens. Very important. The second thing, just 
released within the last month from the Under Secretary for 
Personnel and Readiness, was for the general officer and flag 
officers to also be held to accountable. This is 
groundbreaking. This guidance went out to the military 
departments in August, and they have to report back to the 
Undersecretary on their plan to achieve this, so I believe this 
is a thing that we are tracking very closely. We find this will 
be very helpful to us in getting to that tone at the top.
    I just wanted to highlight for a second to provide some 
context for Mr. Khan's comment about the high-risk areas. We 
have been working very diligently in the financial management 
arena. I think Mr. Khan will agree we have made progress here. 
Yes, since 1995, we have been on the High-Risk List, but since 
2017, of the five criteria, we have gone from not met at all to 
partially met for most of them, and one for fully met. And we 
have closed, out of 52 recommendations, we have closed 15 of 
them in the past year, year and a half, so we are moving toward 
that. We take it very seriously. We think that the High-Risk 
Program is very complementary to the audit as well. A lot of 
those things that we get after here in the High-Risk Program 
are going to benefit us in terms of getting a clean audit 
opinion, sir.
    Mr. Sessions. I found your question enlightening, and I 
hope you got a good answer.
    Ms. Norton. I think so.
    Mr. Sessions. Yes, ma'am. Thank you. I would like to move 
now to the gentleman, Mr. Biggs. Mr. Biggs is recognized for 5 
minutes.
    Mr. Biggs. Thank you, Mr. Chairman. I am just going to 
change my order of questioning that I had planned because I 
thought I just heard you all say to get accountability, we 
should do some more hearings, and we should do some more 
briefings, and that would help us get accountability for 15 
years of failed audits, right? I mean, I find that really 
unsatisfactory for me, and I am hoping that maybe you can 
dispel some of this.
    So, Mr. Mansfield, you talked about some of the problems. 
In the acquisition program, I thought I heard you say something 
like the requirements are vague, they are indefinite, and then 
in oversight, there are problems with oversight, and then there 
is a problem with accountability. And I cannot help think but 
what Mr. Mfume said, and he said that this money is going down 
to a dark hole. And so, I guess, I am finding myself absolutely 
apoplectic here in some ways because I am thinking of the F-35 
program. When you look at the F-35 program, when you guys are 
conducting your audit, Mr. Mansfield, do you take into account 
performance of production by the contractors or the program 
itself?
    Mr. Mansfield. Yes.
    Mr. Biggs. And so, about a year and a half ago, the high-
water mark, you had about 55 percent of delivered F-35s were 
operable. I am going to put that word in there, ``operable.'' 
The word I got today, well it is really closer to 29 percent 
today. How bad does a program have to be before somebody is 
held accountable, Mr. Mansfield? I mean, I am just dying to 
know that question. How bad does a program have to be? Because 
two aspects of this--this is a program that is supposed to go 
through 2088 or something like that, and it is going to cost us 
about $2 trillion, and the CBO said 2 years ago that over the 
next 10 years, DoD is going to receive $7.1 trillion from the 
Federal Government, and I think that is low based on just the 
trends that we are taking.
    So, I am curious, how do we get accountability besides a 
hearing and briefings? And I know that there have been hearings 
in HASC about this very program. I know we have had them. We 
have had briefings, I have sat in SCIFs, but we are still 
looking at a totally failed program. So, what really does get 
us accountability?
    Mr. Mansfield. So, like I said, one of the roles of the DoD 
OIG, is oversight, right? So, we do not take specific action on 
a program. We make recommendations to the Department who 
ultimately has to take action on those programs. Oftentimes, 
our recommendations relate to holding individuals accountable 
to stopping programs depending on the scope of the work that we 
have conducted. So, I think it really falls to the Department 
to take action on the recommendations when we identify those 
issues and call them out for them.
    Mr. Biggs. I mean, when we have oversight in Congress, we 
have you all come in and testify, and you answer our questions, 
and this is not the most ideal format, although I will say Mr. 
Sessions does a pretty good job because he gives us a little 
bit extra time. But in the end, it is like 5 minutes here, 5 
minutes there, and it is not the most ideal way. And so, we get 
these private briefings, and then the public does not know, but 
we are ticked off after the private briefings. But the founders 
of this country in the Constitution gave this body the best and 
strongest check against this type of mal-administration, and it 
is the purse strings. And so, when you see a program where only 
21 percent or 29 percent, whatever it is, today, of F-35s in a 
multitrillion-dollar program are even operable, maybe this 
body, us, this body, this dais, should really be looking into a 
different kind of accountability.
    You can see that I am frustrated here because this is not 
the first one we have done of this, and I appreciate you all 
being here to talk about this. But I wanted to just ask one 
last area here. Is there a comprehensive audit that is done 
over the spare parts suppliers to DoD?
    Mr. Mansfield. So, I would say we have not conducted a 
comprehensive audit over all of the suppliers, but we have 
looked at specific spare parts supplies, streams, or certain 
providers of that. Yes, sir.
    Mr. Biggs. And over the course of time, when you go back to 
the, what, $800 toilets and $600 hammers--there was one DoD 
Inspector General who found one supplier was charging 3,800 
percent, just a couple years ago, above the contracted amount. 
So, my question is, how do we get hold of that end of the 
misspend?
    Mr. Mansfield. Yes. So, I think we have made some 
recommendations related to two sides of that. The first is, 
sometimes the contracting officers, when negotiating prices 
with a contractor, especially if it is a sole-source provider, 
they do not necessarily have the information they need to make 
good decisions for the Department, and that comes down to cost 
data, right? Usually, they are relying on historical pricing, 
or, in other words, last year I paid $100 for that, so this 
year they are charging me $101, so that is a fair price. Now, I 
do not think you and I would do that, we do a little more 
research. How much does it actually cost to produce that item? 
What is going into that? So maybe that item actually costs you 
$50 to produce. Am I going to pay $101 this year because I paid 
$100 last year? Hopefully, I am not.
    The problem is the way that the acquisition regulations are 
established. It sets contracting officers up to use that 
historical pricing data versus the no-kidding-hard-facts of 
what the costs are, and that is difficult. It puts the 
contracting officer in very difficult position in terms of 
making informed decisions.
    Mr. Biggs. So, there may be something statutorily needs to 
be changed to modify that language. Is that right?
    Mr. Mansfield. Yes, and we made recommendation. A couple 
years ago, the DoD submitted two legislative requests or 
proposals. I do not think they made it into the NDAA. Two years 
ago, there was another one for Fiscal Year 2024 that was 
submitted. Actually, that one went through OMB and made it up. 
I do not believe that is in the current version of the NDAA, 
but----
    Mr. Biggs. And it is a crying shame, Mr. Mansfield.
    Mr. Mansfield. There is some stuff out there, though, to 
look at, sir.
    Mr. Biggs. Thank you so much, and, Mr. Chairman, thank you, 
and I have some documents I would like to include in the 
record.
    Mr. Sessions. Without objection, so ordered.
    Mr. Biggs. Yes, a piece called, ``What a Waste: $778 
billion for the Pentagon and Still Counting;'' another one 
entitled, ``Waste of the Day: Pentagon $50 Billion Behind in 
Building Repairs;'' another one, ``Committee Requests 
Information on Pentagon's $125 billion in Waste;'' another one, 
``Pentagon Buried Study That Found $125 Billion in Wasteful 
Spending;'' and then this one, which I did not get a chance to 
ask about. I would like to know what is really going on with 
this one as well: ``Forbidden Russian Oil Flows into Pentagon 
Supply Chain,'' and I yield. Thank you.
    Mr. Sessions. Without objection, we will include those in 
the record.
    And I would encourage the gentleman, if he would choose to 
have additional questions for our witnesses, our witnesses will 
find out at the end we are asking them to please answer those 
for us, and thank you very much, the gentleman from Arizona. 
Ms. Lee, you are recognized for 5 minutes.
    Ms. Lee. Thank you, Mr. Chair.
    Mr. Sessions. Yes, ma'am.
    Ms. Lee. I do thank you all for joining us today, again, as 
we continue along on this series of exploring why Congress 
continues to funnel hundreds of billions of dollars to an 
organization that cannot even keep track of how they spend the 
money. I am sorry or I apologize if I do not take or I cannot 
take as patient a tone as some of my other colleagues because I 
think about how even just a small percentage of that money that 
cannot be accounted for could fund things like universal school 
meals, or needed infrastructure projects in my district, or 
childcare, but instead we do not even know where it is. So, Mr. 
Khan, if Congress gave DoD unlimited resources to upgrade 
systems and hire people, how long would it take for the DoD to 
pass a clean audit?
    Mr. Khan. It is a very good question, Congresswoman Lee. I 
mean, just laying out their timelines, what DoD is looking 
toward is 2028. They have the resources. They are working 
toward that timeline. But, you know, whether they need that 
data or not, it is difficult to predict because they have huge 
challenges before them, as depicted on the scorecard, so it is 
difficult to answer that question, Congresswoman.
    Ms. Lee. Thank you. So, it is more than just getting the 
right computer systems and staff in place?
    Mr. Khan. Correct. Yes.
    Ms. Lee. OK. Mr. Mansfield, would you agree that unless 
DoD's leadership makes this a priority, we are not going to get 
a successful audit?
    Mr. Mansfield. I would agree with that, yes.
    Ms. Lee. Thank you. Auditing DoD is expensive for 
taxpayers, and it is lucrative for the corporations that profit 
from the military industrial complex.
    Mr. Chairman, I would like to ask unanimous consent to 
enter into the record a June 2024 report from the DoD OIG 
showing how between Fiscal Year 2018 and Fiscal Year 2022, DoD 
spent more than $4 billion in government and contract costs 
related to finding solutions to help it achieve a clean audit.
    Mr. Sessions. Without objection, we will enter that into 
the record.
    Ms. Lee. Thank you. So much money for zero results. I think 
just about anyone else would get fired for that type of 
failure, yet the DoD faces no consequences. Mr. Mansfield, can 
you explain some of the management issues that the OIG 
discovered in reviewing this $4 billion failure to improve its 
auditability?
    Mr. Mansfield. Yes. I appreciate you bringing that report 
up. That is, we looked at the Department's efforts to contract 
for remediation efforts in support for the financial statement 
audits. And so, some of the things we found in terms of that 
was the DoD does not have clear definitions of what should be 
contracted for, for remediation efforts. And so, when trying to 
compile the amount of effort or to take the amount of effort 
and put a dollar figure to it that is spent on remediation 
efforts, it was a little difficult to do because different 
parts of the Department are using different definitions for 
what is considered remediation.
    We also went in and looked at some of the contract 
requirements, and we found that they were not as clear as they 
could be. There were not specific deliverables within some of 
those remediation contracts, which makes it very difficult for 
the Department to know it got exactly what it paid for. We also 
found that a number of the efforts underneath those contracts, 
while they were value-added efforts, were not clearly linked to 
the Department's remediation goals. And so, if the Department 
is saying these are our priorities for remediation, but then 
they are putting money into things that are not directly 
aligned to that, it does not feel like they are really kind of 
having a consolidated focused approach at the remediation.
    Ms. Lee. Thank you, and I thank you for your very 
thoughtful answer. But the fact remains that the DoD can waste 
$4 billion on a failure and barely bat an eye. It just shows 
how much of an over-inflated tick the Agency is. It is sucking 
the resources and money from our Federal Government. No 
government agency should be held above accountability and now 
we must ask ourselves, at what point do we stop using the 
carrot approach and start using the stick? The solution is 
clearly not giving DoD more resources and money for passing 
their audit. That has failed over and over again. They have 
shown that even with their seemingly unlimited resources, they 
do not care to work to improve. Maybe what we need are real 
consequences.
    Their budget is already over inflated and should be cut 
regardless of their ability to give a clean audit. So, how 
about slashing their budget every year they fail to deliver a 
clean audit? Regardless, this is not a new problem. This has 
been going on for decades, and their financial mismanagement is 
the reason they have been on GAO's High-Risk List since 1995, 
meaning, it is among the Federal Government programs and 
operations most likely to commit waste, fraud, abuse, or 
mismanagement. The Pentagon must rethink this culture that 
enables unchecked and unfettered spending at every level and 
prioritize its financial duty. Failing to do so harms our 
national security. I do thank you for your time, and with that, 
I yield back.
    Mr. Sessions. The gentlewoman yields back her time. Now I 
yield 5 minutes to the distinguished gentleman from Alabama.
    Mr. Palmer. I want to raise some questions, Mr. Chairman, 
about what the GAO has tried to do in terms of getting more 
accuracy from the Department of Defense. And despite the 
massive spending, the only Federal agency in the country that 
has failed to pass an independent audit, they remain on the 
GAO's High-Risk List for waste, fraud, and abuse for 34 years. 
Last year, the Department of Defense failed at six consecutive 
audits, was unable to fully account for 63 percent of the $3.8 
billion of its assets. A Navy audit found $4.4 billion of 
previously untracked inventory. Air Force identified $5.2 
billion worth of variances in its general ledger. Reports found 
defense contractors routinely overcharged the Pentagon, and, I 
would add, the American taxpayer, by nearly 40 or 50 percent.
    There is a significant amount of money, Mr. Steffens, being 
spent every year, approximately a billion dollars being spent 
on projects around getting the DoD to a clean audit. So, about 
15 percent of the amount is spent on audit services, but the 
rest is spent on building new systems and all kinds of 
contracts under the umbrella of audit readiness. That is a lot 
of money. How much insight and influence do you have into 
ensuring that the money is being well spent?
    Mr. Steffens. I appreciate the question on that. I believe, 
sir, that we are getting, definitely instilling, more 
accountability from the Secretary and Deputy Secretary on this.
    Mr. Palmer. But how do you account for the fact that you 
cannot pass an audit? I mean, are the systems being modernized? 
Are new systems being built? I mean, what improvements are you 
making?
    Mr. Steffens. So, we have to approach it from about four or 
five different fronts. Mr. Khan came to the House Armed 
Services Committee, I think, about 13 years ago, with six 
imperatives, I think, that need to be, and all of them are 
important, not just systems, but he----
    Mr. Palmer. But you never implement them.
    Mr. Steffens. Well, we are working on each one of them. We 
hold, you know, trained and ready workforce, a good defined 
business architecture. Business process architecture needs to 
be in place as well.
    Mr. Palmer. I understand that you need to maintain a 
certain level of secrecy in some of the things that you do, 
that money is fungible, but the fact that you have not had a 
successful audit in 34 years and the fact that you have not 
implemented much of what the GAO has recommended is 
problematic. I mean, it is important that the American public 
have confidence in the Department of Defense. I want to bring 
up something else because we keep hearing about massive 
overruns in defense systems or weapons platforms as an issue of 
change orders. Does the Department of Defense authorize the 
construction and manufacture of systems before the design is 
final? Does that ever happen?
    Mr. Steffens. It would not surprise me that it has happened 
before.
    Mr. Palmer. Why would that happen? I worked for two 
international engineering companies, and we typically did not 
start building something until we had a final design.
    Mr. Steffens. What I could offer, sir, is there is a delay, 
there is a push----
    Mr. Palmer. A delay is something different. Not having a 
final design but starting the development of a weapon system or 
constructing a facility is different. If you start before the 
design is final, you are almost guaranteeing that you are going 
to have massive numbers of change orders. Would that have 
anything to do with the way Congress appropriates funds for the 
Department of Defense? Are you starting projects before they 
are ready because you are afraid Congress will not put the 
money there in the next appropriation? Would that be a problem?
    Mr. Steffens. It would absolutely be a problem, yes.
    Mr. Palmer. Is that why you do it?
    Mr. Steffens. I do not----
    Mr. Palmer. Is that why you had such massive overruns on 
the F-35? You are afraid that Congress would pull the program? 
I mean, there was a project that I worked on in engineering 
where we were supposed to be retrofitting rockets, and I think 
we had already spent nearly a billion dollars and they pulled 
the project. Is that part of what is happening here?
    Mr. Steffens. I cannot speak to the F-35 or the project 
management piece, but, you know, in----
    Mr. Palmer. Mr. Mansfield, can you speak to that?
    Mr. Mansfield. So, I can say some of the oversight work 
that we have done, some of the things that we have identified 
is similar to your point. It really gets to the test and 
evaluation process, where throughout the test and evaluation 
process for an acquisition program, so looking at a system, the 
DoD will do some testing, or----
    Mr. Palmer. But that is different from starting before the 
design is ripe.
    Mr. Mansfield. No. But so, they will identify that there 
are deficiencies, and they will still move forward with the 
manufacturing process before addressing all those deficiencies, 
knowing they are going to have to retrofit down the road 
incurring additional cost.
    Mr. Palmer. Yes, I understand that because that is an 
evolving system. But when you are building a facility or some 
other things where you develop a design, and then you build to 
the design, from my observation, you are starting work on 
projects and facilities before the design is ripe. And I just 
wonder, Mr. Chairman, if it is because they are concerned the 
money will not be there, so they go ahead and start, and we 
wind up spending 30, 40, 50 percent more on these weapon 
systems and these facilities than we should, and then you are 
not doing adequate audits, oversight of these projects. So, Mr. 
Chairman, I do not think we are done with this. I would like 
for us to continue to try to exercise oversight and do some 
additional followup. I yield back.
    Mr. Sessions. Thank you very much. Let me agree with the 
gentleman and also agree with the panelist who do not think our 
work is done because they do not think we have always made sure 
at the highest levels of DoD how important this is. And they 
want a clean audit, and they want these things, so I think your 
point is well made.
    Mr. Palmer. I am not sure they are taking us seriously.
    Mr. Sessions. Well, you know, I certainly think that what 
this Subcommittee should do is walk a mile in their sandals, so 
to speak, and there are a number of things about F-35, A-22, a 
lot of these things that became abject failures because someone 
thought they were going to use it one way and was used another. 
There are hundreds, if not thousands, of people who are 
suppliers to F-35, and they may be in other countries and 
trying to get those piece parts together and trying to get 
that. So, I do agree with you because we all talk about the 
billions, not the thousands, and I think that is the point that 
the distinguished gentleman has made that I do take at hand, 
and we do need to be concerned about that.
    Mr. Palmer. Thank you, Mr. Chairman.
    Mr. Sessions. Yes, sir. Thank you, sir. Now I would like to 
move to the gentlewoman, Ms. Tlaib, for 5 minutes.
    Ms. Tlaib. Thank you, Chairman. Mr. Steffens, you know, 
just bear with me here. So, they say that, you know, the 
Department of Defense failed its sixth audit. How many audits 
have they had?
    Mr. Steffens. So, ma'am, since Fiscal Year 2018, we have 
gone under full financial statement audit, so that has been 6 
consecutive years. The first time we ever went under a full 
financial statement was 2018, so----
    Ms. Tlaib. We never did a full audit before that?
    Mr. Steffens. Before that? No, ma'am.
    Ms. Tlaib. OK. And so, what is the percentage because I 
read that they could not account for half of its assets. You 
probably heard a lot of my colleagues talk about it. It is, 
what, $3.1 trillion? How much of that is the entire Federal 
budget, percentage-wise?
    Mr. Steffens. Both asset-wise, I do not have the exact 
percentages, but in terms of the budget, we are roughly half 
the discretionary spending for the U.S. Government.
    Ms. Tlaib. So, it is actually 78 percent of the entire 
Federal budget, the excess of $3.1 trillion,----
    Mr. Steffens. Yes, that is right.
    Ms. Tlaib [continuing]. Seventy-eight percent of the entire 
Federal budget. You know, I know my colleagues talk to you all 
about this, but I started the Get The Lead Out Caucus, and we 
got tremendous bipartisan support. Of course, I think all of us 
agree no amount of lead in water is safe anymore, and it never 
really was. I mean, $60 billion just to start putting a dent 
into removing lead pipes, and just thinking about the fact that 
I am always being told, how are we going to pay for it, and you 
see this kind of waste. And I really commend my colleagues to 
bring this forward because, I kid you not, I could be in a room 
in a town hall in Detroit--and I do not just represent the city 
of Detroit, I represent some of the suburban communities--this 
is one of the consistent things they will agree with me on, 
even if politically we do not agree on a lot of other issues.
    So, Mr. Khan, one of the things that I was reading in 
regard to the clean audit, specifically, I did not understand 
what this meant: it said, ``Since 1995, the GAO has designated 
DoD financial management as a high-risk area due to 
longstanding issues, including ineffective processing 
systems.'' What does that really mean? What does it mean to say 
that they are designated as a high-risk area?
    Mr. Khan. So, it would be similar to any Federal program. 
It needs to have systems and processes, especially when a large 
amount of assets and money is involved in there. DoD was set up 
to support the war-fighting missions. They did not have systems 
and control to do financial management. They were to process 
logistics. Because of that, they were not able to account for 
the money that was given to them in the annual appropriations. 
They were not properly----
    Ms. Tlaib. So, it is about waste. High-risk is, like, oh, 
are they wasting money, right?
    Mr. Khan. It leads to waste. It does, yes. It is about 
transparency and accountability. If you do not have that, then 
it can lead to waste, fraud, and abuse, correct.
    Ms. Tlaib. OK. Yes. Mr. Mansfield, and I am, like, 
generally, is it only war manufacturing in the Pentagon budget? 
What else is in there?
    Mr. Mansfield. I am sorry. Can you repeat that?
    Ms. Tlaib. In the Pentagon budget, is it just war 
manufacturing? Like, if I was to go to my community, and I know 
kind of the answer, and I would explain this to them, what else 
is in there? Give me something that would blow my mind.
    Mr. Mansfield. So, it is like any organization, although I 
would say the duty is like a strange microcosmos of society, 
right? So, there are grocery stores or healthcare, there are 
school systems, there is manufacturing, there are people, 
right? You got to pay for all the individuals in addition to 
the acquisition program. So, there are a lot of things we----
    Ms. Tlaib. So, it is not just war manufacturing like 
everybody thinks?
    Mr. Mansfield. No, by no means.
    Ms. Tlaib. Yes. No, I know that. Chairman, I wish people 
would understand that, though. When you were looking at it, Mr. 
Mansfield, and I believe you are the Inspector General, 
correct?
    Mr. Mansfield. I am the Deputy Inspector General for audit.
    Ms. Tlaib. Deputy, yes. Sorry.
    Mr. Mansfield. Yes. Rob Storch is our Inspector General.
    Ms. Tlaib. Yes, of course. I apologize.
    Mr. Mansfield. That is OK.
    Ms. Tlaib. Even with the work that you are doing, what 
stood out to you the most, kind of in line with what Mr. Khan 
talked about of high-risk?
    Mr. Mansfield. Yes. So, I believe Mr. Khan hit the nail on 
the head. It is about systems. So, you know, when we do the 
financial statement audit, the auditors issue what are called 
notices of findings and recommendations. Those are, as you look 
at each individual kind of system or process, you make 
recommendations on how to improve those. You know, in 2023----
    Ms. Tlaib. So, you guys have been doing that for years now?
    Mr. Mansfield. Yes.
    Ms. Tlaib. Any of them get implemented?
    Mr. Mansfield. Yes. So, in 2023 the DoD closed just over 
thousands, almost 1,500, of the NFRs that we had--that is our 
kind of lingo--that we had issued in previous years, so they do 
make progress every year. But as in any improvement process, as 
you fix one thing, that leads to us to be able to look at a 
little deeper, dig a little more, and we do identify additional 
issues. What I was going to say, though, is about 50 percent, 
maybe a little more than 50 percent, of the notices and 
findings and recommendations that we issue are related to 
information technology, whether that is system security or 
controls over system upgrades, system interfaces, those types 
of things, so----
    Ms. Tlaib. How much of the budget? And I am sorry, Mr. 
Chair, but how much of the budget are contractors?
    Mr. Mansfield. I do not have an answer for that with me 
today. I apologize.
    Ms. Tlaib. Do you know what I mean by that? Like, are they, 
like, separately done? Like, not outside of the Federal? Like, 
they are contracted out?
    Mr. Mansfield. Tom, if you have an answer for that? I am 
not sure.
    Ms. Tlaib. I actually do not know the answer to this, this 
is----
    Mr. Mansfield. I can take it for the record, though, and 
try and get something for you.
    Mr. Steffens. Well, you know, budgets are broken down by 
program, but each part of that program, as Mr. Mansfield 
mentioned, a large part of it is to pay people, both civilians 
and military. Some of it is used for, you know, things like 
travel and other areas. But, you know, contracting is a large 
piece, but a lot of that contracting is----
    Ms. Tlaib. I think over 50 percent of the Pentagon budget 
is contractors.
    Mr. Steffens. I believe it is less than that.
    Ms. Tlaib. It is less, OK. Less, OK. Yes. No, I know you 
hear this a lot, but 78 percent is a lot. I mean, of the whole 
Federal budget, you think about everything, healthcare, Social 
Security, everything, and 78 percent of it. And just to think 
that I am begging just for $60 billion to actually try to get 
clean water across our country. But with that, I mean, I really 
commend you, Chairman, for doing this. This is incredibly 
important. I hear this question all the time, why can't they 
pass an audit? What is going on, you know, and Americans of all 
different political backgrounds really do not like wasteful 
spending, especially when they are still struggling and they 
cannot figure out why they are still struggling, while again, 
watching kind of wasteful spending or, as Mr. Khan calls it, a 
high-risk area within it. So, thank you so much, Mr. Chair.
    Mr. Sessions. The gentlewoman yields back her time. I would 
like to now move to the distinguished gentleman who has taken 
his time be here. The gentleman is recognized, Mr. Burlison, 
for 5 minutes.
    Mr. Burlison. Thank you, Mr. Chairman. You know, I think 
that I try to treat this role as to try to be the best steward 
of the taxpayer dollars that I could possibly be. When I think 
about the families of my district and how hard they work and 
then their taxpayer dollars are sent here, and the American 
people in my district, they are frustrated. The question is, 
who is to be accountable for this, right? The concern that I 
have is that by having all this uncertainty, we cannot pass an 
audit, then all of the conspiracy theories, when people talk 
about military industrial complex, all of these things start, 
it becomes more prevalent because there is nothing that you can 
point to. So, my question is, you know, we have not passed a 
clean audit ever. The Department of Defense is the only Agency 
that has not done so. Congress has mandated that DoD achieve a 
clean audit by December 28, 2028. So, my question to each one 
of you on the panel is, do you think that that will happen?
    Mr. Steffens. It is a great question. I know there is a lot 
of concern expressed about that date and can we meet that date. 
It will definitely be a challenge, but I believe if we have a 
couple of key elements in place, I think we can do it. 
Leadership commitment is first and foremost. More important, 
even than the resources is the sense of priority that our 
leadership has to have on this. I do feel comforted over the 
last 2 years, the last 3 years, really, Secretary Austin and 
Secretary Hicks take this very seriously. They have issued, and 
I have introduced, I think I have shared some correspondence 
with both the Chairman and the Ranking Member's team on some of 
the things that they have done in getting, not just the 
financial management folks like myself that are here today, but 
it is going to require effort from all of the functional areas, 
the acquisition functional area, the Chief Information Officer, 
folks from human resources.
    It is an all-hands-on-deck, just like we gave the example 
the Marine Corps and the great success they had this year, very 
hard work. But the Commandant and the ACMC for the Marine 
Corps, the Assistant Commandant, had required everybody to be a 
part of everybody's business. It was that profound, and he was 
very, very adamant about that. We will require that same tone 
at the top at the Department level. So that, the resources.
    The other thing I am excited about, too, recently is 
technology. We have not talked much about it today, but ADVANA 
is an example. It is a platform, a data base, a data platform 
that helps us better remediate, identify where our problem 
areas are, the areas that need reconciliation, and to remediate 
those things, and so we are utilizing some of that. With that 
advanced technology to do better data analytics, is we need 
personnel to also be trained to do that data analytics, and we 
are working on that very much. Workforce. In addition to the 
systems, in addition to the tone at the top, is we have to have 
quality professional people to do this. And we are working 
toward that, making sure we are developing professional 
competencies within our financial management workforce, but 
also logistics and acquisition as well. So, they are all 
trained on the importance of audit.
    Mr. Burlison. Mr. Mansfield, do you believe that there will 
be a clean audit by 2028?
    Mr. Mansfield. So, you know, our role as the Inspector 
General is to perform the audit, and so I am very hesitant to 
make any predictions before we have actually done the work, so 
I am going to kind of refrain from saying whether they will 
pass or not. What I would echo is what Mr. Steffens said. There 
is a lot of work to do before they get there. And I would also 
add the Department, as much as it is making progress and has, I 
think, a solid tone at the top at this point, does have a 
history of sliding expectation of goals to the right. And so, 
it will be a difficult and uphill battle for the Department, 
although I think they are committed to it, but it still waits 
to be seen, and we will have to do the actual audit work before 
I can give you an opinion on whether they will pass or not.
    Mr. Burlison. OK. Mr. Khan?
    Mr. Khan. I think there will be early indicators whether or 
not they can meet that timeline. The system is going to drive 
that. Having a compliance system across the Department. They 
have to be in place, in our view, by the end of Fiscal Year 
2026 so that they can begin to process transactions in 2027 and 
2028 to be able to reach an opinion by that date, so we will 
know. We perform oversight of the DoD. So, as we do our work, 
we will have good indication as to how the progress is going 
and what the path to auditability looks like and if those 
timelines can be met.
    Mr. Burlison. OK. So, Mr. Steffens--is Steffens or 
Steffens? Sorry. You said that it is going to take a commitment 
from leadership, and then you said, you know, the current 
leadership is committed. If they are committed, why are we not 
there yet?
    Mr. Steffens. I think we are making progress, and obviously 
we have been under full financial statement audit for over 6 
years into our----
    Mr. Burlison. I think, like, the American people who are 
listening, they would wonder, it has been 6 years. That shows 
there has not been any commitment.
    Mr. Steffens. I do believe we are at an inflection point, 
though. I believe over this last 2 years we have been in an 
inflection point. The one thing, too, that was pointed out, 
which I think has actually energized the leadership, is the 
NDAA 2024 that came out with the mandate for 2028. Initially we 
saw that, you know, a lot of folks will look that as a threat, 
you know, this is challenging, but I have to report to you that 
this has created an enormous amount of energy in the 
Department. Every functional meeting that we have that 
addresses audit and financial audit remediation starts out 
with, `team, we have a mandate from Congress for 2028,' so that 
has been very helpful.
    Mr. Burlison. Sorry, Mr. Chairman. Can I ask one more? Is 
this an organizational behavior issue? Is that, is what I am 
reading into this is that you have got a cultural resistance to 
a lot of this?
    Mr. Steffens. But I believe that is changing. I believe 
that is changing. You know, the old Army's motto was to fight 
and win our Nation's wars, right? I will take the Army's 
examples because I spent a lot of time in the Army. They 
developed a process, but we have to be accountable as well, and 
we have to have sound business operations. That will only help 
our readiness. And I think we have to instill that in our 
leadership--our senior leadership, operational leadership--
that, hey, doing this, getting better business operations, 
getting more sound, getting auditable will actually help 
readiness in the long term. That has got to be the message, and 
that is what I think is being received now better than it has 
before.
    Mr. Burlison. Thank you. I yield back.
    Mr. Sessions. The gentlemen yields back his time. Does 
gentlewoman seek time?
    Ms. Crockett. Yes.
    Chairman Session. The gentlewoman, Ms. Crockett, is 
recognized for 5 minutes.
    Ms. Crockett. Thank you, Mr. Chair. I will be honest and 
tell you that most of my constituents are not particularly 
interested in the finer points of Federal financial auditing. 
But what they do care about is whether their taxpayer dollars 
are being wasted, whether our military is ready to take on the 
next threat, and whether our military can continue to keep us 
and our allies safe. Unfortunately, we are seeing right now 
what happens when DoD fails to maintain good accounting of its 
Federal funds and government-funded property.
    A few weeks ago, the DoD Office of Inspector General issued 
a report claiming that ``DoD did not effectively or efficiently 
implement accountability controls for items delivered to Taiwan 
from November 2023 through March 2024.'' It continued noting 
that ``2.7 million rounds of ammunition from the DoD, including 
some that was expired in a mix of original, loose, and 
incorrect packaging.'' This is to say nothing of more than 340 
of 504, or 67 percent of the total pallets sent over were water 
damaged, resulting, in other things, including moldy body 
armor.
    And I am going to just pause here really quick because we 
just had a larger hearing earlier today that was talking about 
the threats of the PRC and the idea that we continue to say 
that we support Taiwan and we stand with them. And then because 
of our own failures, we are unable to support those that we are 
trying to help, at the same time that we are casting 
dispersions on this real threat that China presents is 
problematic. Not to mention these are items that, essentially, 
could have been necessary for our own protection. These are 
items that came out of our own stores, and so it does not 
instill the most confidence, but also just the amount of money 
that was lost.
    My district, 20 percent live at or below poverty, so when 
they are paying taxes that a lot of them really cannot afford 
in the first place because they need every single dime, it is 
hard to hear numbers like this and know that, literally, the 
amount of money that we send over to DoD are amounts of money 
that most of us will never see in our bank accounts in a 
lifetime. It is a problem, but we also know that there are real 
threats, as we know, that the temperature around the world is a 
little high right now, and as we are attempting to be good 
allies, we need to do just that and be good allies. And this is 
one of the easiest ways we can start, is by making sure that we 
are holding ourselves accountable for the money that we are 
spending.
    DoD's failure to account for and properly oversee its 
weapons and property funded by taxpayers in my district and 
across the country is an understatement. National and 
international security today increasingly relies on good 
technology, solid record keeping, and cutting-edge data 
analytics, and every dollar lost to fraud, waste, or abuse, 
means the American people get a less efficient and effective 
military.
    Mr. Khan, yes or no? From your experience, can better 
financial management at DoD improve Agency decision-making to 
better protect our national security and the security of our 
allies?
    Mr. Khan. Yes.
    Ms. Crockett. Now, going back to the DoD report, the 
Inspector General stated that because of DoD's failures, our 
government ended up spending an additional ``$618,000 in labor 
and materials to clean and dry wet and moldy body armor, and 
$113,000 to replace damaged body armor delivered to Taiwan.'' 
This is to say nothing of the additional costs incurred to 
replace the unusable munitions sent over which again was sent 
over an incorrect packaging. How is DoD supposed to pass an 
audit if it is supposedly sending arms and weapons to our 
friends and allies with the wrong label?
    A sixth of our total Federal budget goes to DoD, and to be 
clear, I am not underestimating the vital work of the 
Department's mission in protecting our national security and 
the security of our allies, but it is because of the vital role 
DoD plays in our lives that Americans demand accountability. 
The people need to know that if a crisis happens, DoD can 
protect us and our allies in worst-case scenarios, and to do 
this, DoD must have a successful audit.
    Mr. Khan, how long has the Department of Defense's 
financial management been on GAO's High-Risk List?
    Mr. Khan. It has been around 30 years.
    Ms. Crockett. And why is DoD's financial management of 
GAO's High-Risk List? Why is it on the list? Sorry.
    Mr. Khan. Because of pervasive internal control weaknesses 
that prevent accountability of their assets and the budget they 
have been provided by the Congress.
    Ms. Crockett. Thank you. Has DoD's leadership improved the 
Department's financial management in ways that could get it off 
of the GAO High-Risk List?
    Mr. Khan. Yes. I mean, the High-Risk List has got five 
criteria. Probably the most important is leadership. That is 
where they have met the criteria. Tone at the top is very 
important for remediating the other four areas.
    Ms. Crockett. Thank you. Although DoD as a whole has yet to 
achieve a clean audit, 10 of its 29 components passed their 
audits with clean opinions in Fiscal Year 2023. While this is 
nowhere near where DoD needs to be, the progress is promising. 
DoD must use the success in these components for the remaining 
areas needing improvement. Can I ask one last question, Mr. 
Chair?
    Mr. Sessions. Yes, of course..
    Ms. Crockett. OK. In fact, Mr. Steffens, just so we have it 
on record, what are some of the lessons or best practices from 
the 10 successful components at DoD that can be shared Agency-
wide?
    Mr. Steffens. Sure. Thank you for the question. I believe 
there are a number of lessons learned that we have, most 
recently, obviously from the Marine Corps. We just talked about 
this, tone at the top, the example that General Smith, at the 
time was the Assistant Commandant, set, holding his leaders 
accountable is vitally important, and we talked about through 
several of you today. Second, the important thing in the Marine 
Corps, too, is breaking down the stovepipes amongst systems, 
the acquisition systems and our financial systems. Making sure 
there is free flow of data, the correct data, and the exact 
data in the right configuration so a transaction can flow 
through the purchasing system, through the financial system is 
very important. We learned from that.
    But aside from the Marine Corps, and also, I think, the 
Marine Corps, too, is having a very modern, capable enterprise 
resource planning system or ERP, in the form of the Defense 
Agency's initiative system, which they adopted here several 
years ago, just recently, and it shows that the systems matter, 
right? So, aside from the Marine Corps, I will go to the Army 
Corps of Engineers only because I served as their CFO there for 
6 years, and we have had clean audit opinions, to your point. 
Standardization is so important, standardization among 
entities. So, let us, you know, establish the policy and have 
all those organizations do it correctly.
    Now, I will tell you in the Corps, maybe it was a little 
bit easier with 44 districts that could operate the same way. 
It is a little more challenging in the military departments 
because you have such a differentiation in missions amongst 
those various commands, but nonetheless, the standardization 
has to be important. It has to be enforced. So, those are a 
couple examples of things that we have learned from Marine 
Corps, Army Corps of Engineers, and then working closely with 
your service provider. I think we have learned here recently 
from organizations that the working capital funds from Defense 
Information Systems Agency, the partnership you have with the 
service provider, being vocal, good exchange on what they can 
provide for you, and DFAS has done, that is also a good 
example, ma'am.
    Ms. Crockett. Thank you so much. With that, I will yield.
    Mr. Sessions. The gentlewoman yields back her time. Mr. 
Mfume asked me to please provide on his behalf unanimous 
consent to enter to the record the statement from Greg 
Williams, Director of the Center for Defense Information at the 
Project on Government Oversight, that offers specific 
recommendations to increase the accountability and transparency 
in DoD's acquisition and procurement programs. Without 
objection, we will enter that into the record.
    Gentlemen, thank you very much. I had an opportunity over 
the last few days as we were preparing this--Mr. Mfume did 
also--to draw some conclusions that some of our Members may 
have gotten at, some of our Members may not have gotten at. We 
have new Members. I confess, I have been around for a while. I 
have not gotten to where I am going to make any excuses for 
anybody, but we have to be able to understand where we are, 
just as you have understood where you are in that process.
    One of the things I would say is, is that one of the most 
interesting parts is that at least the Marine Corps, maybe some 
of the others, hold their general officers accountable for 
this. No. 2, the Marine Corps did make progress. There is a 
specific example of someone who did pass an audit as opposed to 
the years where no one did. I think that organizations can see 
across themselves specific examples, and I think we ought to 
give the Marine Corps a pat on the back. When I was at AT&T for 
a number of years, we tried to celebrate victories, good 
behavior, encourage things that would organizationally be 
beneficial to employees as well as the bottom line of running 
the business. I think the Marines Corps should get a pat on the 
back, be told that they did the right thing. Mr. Mfume and I 
decided today that we are going to go and try and do that, try 
and say thank you. I think success needs to be encouraged.
    Other things which I learned, which I had known for quite 
some time, we are also not actively in a full-time war posture. 
There is less movement of issues and ideas, and organizations 
can focus, perhaps better, on what their mission is, but less 
movement of equipment, less movement necessarily required even 
though we are supporting, as has been noted here, a number of 
our allies, and not all those things, excuse me, have been done 
correctly. But I believe that I could successfully say that 
each of you, while you answer the question that all of us had, 
I did, over the last couple days, are we going to make it? And 
the answer is, we can. There is a model for it, but we are 
going to have to keep working together.
    So, this Subcommittee has a lot of work. This Subcommittee 
has more work than just DoD. It has the rest of the government 
to be concerned with. And last week, we held a number of 
hearings that were stunning in the testimony about the 
inefficiency of agencies. Part of it we want to say we can fix, 
must fix in the next few days, but they also, when those 
participants came forth, they said we have got to fix it. We 
cannot continue to bleed not just the taxpayer, but the 
intended purpose of why the money was given in a program.
    So, our process is laid out. For Mr. Mfume and I, I will 
tell you, I am delighted with the Subcommittee Members, like 
Ms. Tlaib and others who showed up, Mr. Palmer, Mr. Higgins, 
who, I think, are really dedicated to work with you. Each of 
you have distinguished yourself. We appreciate what you do, and 
your teams. Mr. Steffens brought a young man with him yesterday 
from Georgia, strong colonel who supported him yesterday, and 
others. So, it is not just each of you. I know that you have a 
team. I know that you have got hundreds of people that go into 
this work every day. I hope you will pat them on the back and 
tell them somebody does care.
    So, this now gets to the end of our hearing. Sorry, I have 
got to read a little closing script here. I now recognize that 
we are at the end of this, and so, without objection, all 
Members will have 5 legislative days within which to submit 
additional written questions for each of you as witnesses, and 
we will be forwarding these to you, would expect an answer 
back.
    And with that said, this closes the hearing, and I want to 
thank each of you for being here.
    [Whereupon, at 4:26 p.m., the Subcommittee was adjourned.]

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