National Defense Authorization Act for Fiscal Year 2018, Motion to Proceed, Continued

Floor Speech

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Mr. President, I come to the floor today to question the plan for auditing the Department of Defense. The new Chief Financial Officer, Mr. David Norquist, presented a plan to the Armed Services Committee on May 9. It appears flawed, like a lot of other such plans. The Department may be audit ready by the September 30 deadline, but the goal--and the goal ought to be a clean opinion--isn't in the mix. In its place, we get another lame excuse: ``I recognize it will take time to go from being audited to passing an audit.''

We have heard this story over and over for 26 years. When will it come to an end?

I don't think the Pentagon has a clue if the Department is truly audit ready. Then, why is the Chief Financial Officer predicting failure before the audit even starts?

Doubletalk is necessary to accomplish that goal. A monster is lurking in the weeds, and nobody wants to talk about it. It is the ``deal- breakers.'' That is a term that is often used in audit reports. They are red-flagged accounting issues listed in Department of Defense reports for years and years. They are prefaced by this warning: ``The deal-breakers prevent clean opinions.''

If Mr. Norquist wants to win this war, he had better get on top of the ``deal-breakers.'' But he ignored them in testimony, focusing instead on this apparent distraction: DOD has spent too much time ``preparing for full-scope audit without starting it.''

We need to pinpoint ``vulnerabilities''--those are his words, and he went on--``to drive change to a clean opinion.'' Suggesting that the Department of Defense lags behind on audit starts or needs more audits to spot weaknesses seems very wrongheaded. The Department has conducted nonstop audits since 1991--294 financial audits, to be exact--and 90 percent were failures, but a few were full-scope audits with clean opinions. Together, the Corps of Engineers and the Military Retirement Fund earned 28 clean opinions out of 43 starts. In the case of the Corps of Engineers, auditors relied on unorthodox procedures known as ``manual workarounds'' or ``audit trail reconstruction work.'' Highly paid auditors scramble around searching for missing records. These procedures work on small jobs, but the point is that they are an inefficient substitute for a modern accounting system.

Now, I have talked about small jobs. To the contrary, on big jobs this approach is a nonstarter. Yet, that is exactly where Mr. Norquist intends to go--the toughest, the unauditable: the Army, the Navy, the Marine Corps, the Air Force, and the rest of the Defense Department.

This is where auditing hits the wall--over 200 starts without a successful finish.

If these audits begin before the accounting house is in order, the Norquist plan may be swallowed up by the swamp. The destructive power of the deal-breakers was hammered home by the most important audit so far--the Marine Corps audit. Their impact was exposed in a first-rate report issued by the Government Accountability Office. I spoke at length about that report on the Marines on August 4, 2015. Today, I will touch on it just briefly. This background is very, very important.

Back in September 2008, the Marine Corps, the smallest of the big ones, stepped up to the plate. The Marine Corps boldly declared that it was audit ready. As a pilot project, the Marine Corps would lead the way. High hopes for a breakthrough were not to be. Ten years and five audits later, the Marine Corps is still stuck on square one. The inspector general and the Government Accountability Office determined that it was never ready for audit. It failed for the same reasons as all the other audits failed, going back to the term ``deal breakers.'' To make matters worse, there was an attempt to cover up these shortcomings. Initially, a clean opinion was issued. The then-Secretary of Defense, Chuck Hagel, gave the Marine Corps an award for being the first service to earn a clean opinion. The opinion did not stand up to scrutiny. The evidence did not meet ``professional auditing standards.'' So the inspector general had to withdraw, leaving Mr. Hagel with egg all over his face.

The deputy inspector general for audit was removed and reassigned, and the accounting firm involved lost the contract to Kearney & Company, where the now Chief Financial Officer, Mr. Norquist, was a partner.
Without strong leadership, the Marine Corps could be the Norquist template. This is where we have been before: audit ready but light years away from a clean opinion. So that takes you to nowheresville.
Why go there when you know what you are going to find? Although lessons were learned, the end result was mostly waste--$32 million for five premature audits. DOD is big, big business for these auditing firms, and what do we get? No clean opinion.

The deal-breakers, which doomed the Marine Corps audit and all the others, are alive and well. They are still driving the freight train with no fix in sight. Yet, in spite of these formidable barriers, the Marine Corps is once again shooting for the moon. It jumped out in front of all the other military services by starting a full financial audit, which the press calls a ``mammoth task.'' Why would the outcome be any different this time around, when we just exposed within the last 2 years that what they thought was a clean audit was not such a clean audit.

The government's expert on accounting--and I call him the expert on government accounting because he is Comptroller General Gene Dodaro-- understands the dilemma. The $10 billion spent annually on fixing the accounting system, he says, ``has not yielded positive results.'' Money is being spent in the wrong places. Mr. Dodaro wonders if the Department of Defense has the talent to get it right, and that is his word--``talent.''
With his plan resting on shaky ground, Mr. Norquist may need to shift gears. For starters, the cost of the full financial audits, which are touted as the largest ever undertaken, could top $200 million. Spending so much money on audits doomed to failure would be a gross waste of tax dollars.

Now, I am not suggesting that Mr. Norquist back off. Mr. Norquist just needs to get a handle on the root cause of the problem, and the feeder systems are that root cause. As a main source of unreliable transaction data, the feeder systems are the driver behind the deal- breakers. Fix them, and then the rest should be just a piece of cake.

Department of Defense reports have repeatedly called for ``testing the feeder systems.'' However, according to the Government Accountability Office, those tests were never, never performed.

So the aggressive testing and aggressive verification of transactions are the right places to start. Senators Johnson, Ernst, Paul, and this Senator are sponsoring an amendment to make that happen.

Once all of the tricky technical issues are ironed out and testing provides confidence that the system is reliable, the plan will gel.

Audit readiness will be self-evident, not contrived. Full financial accounting could begin. Clean opinions should follow, and those clean opinions should be our goal.

There has been 26 years of hard-core foot-dragging that shows that internal resistance to auditing the books runs very, very deep. It will take strong, confident leadership and strong determination to root out that internal resistance to auditing the books. I am counting on Secretary Mattis and Chief Financial Officer Norquist to get the job done in the shortest time possible.

I yield the floor.

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