DoW Financial Management: Examining Progress and New Audit Approaches

testing one two three testing one two three nothing Testing one two three, four five six, seven eight nine. Thank you. Testing one two three, four five six, seven eight nine. Thank you. The uh subcommittee on government operations will come to order and I'd like to welcome everyone uh without objection uh the chair may declare a recess at any time and I recognize myself for the purpose of making an opening statement. The first opening statement I'd like to make is I'm sorry for the lay our awesome stenographers needed to be able to hear what we are saying today and so we're rather new, in this room and learning how to work with the equipment. So, welcome to today's hearing. Uh, this is an a hearing on an update of the Department of War's progress towards achieving a clean audit and the new audit approach which they're going to speak about in great specificity today. As you know, the Department of War is statutorily mandated to achieve a clean audit opinion by December thirty first, twenty twenty eight. In September of twenty twenty four we developed a scorecard to track the Department of War's progress towards achieving that clean audit opinion. With each iteration of the scorecard, the results remained the same. That is, that the Department of War was making progress, and we are thankful for that, but not enough to move the needle to meet the statutory goal. Progress has been made, but not enough, meaning that full financial uh transparency and accountability is not yet present. Financial transparency and audit uh uh auditability are core principles of good government. And as each of us will hear today, something that the Department of War really does want. It will help them achieve their mission, not just meet the m- merits of the law. Department of War is responsible for nearly half the federal government's discretionary spending so it's especially important that they demonstrate financial transparency, accountability, and to meet the standards of this subcommittee, the committee, and the law. With that said, the audit isn't just a financial exercise. There are real, positive, operational impacts that can be realized once sound financial management practices are in place. And yesterday in extensive meetings that I held with each of our witnesses today, uh, I was told that an audit that we understand and knowing where we have and where we get it is indirectly in front of them and they're showing measurable progress to achieve that. Last year, we heard that the Marine Corps from the Marine Corps about how they achieved their success, As a matter of fact, the Marine Corps did pass the audit. Achieving a clean audit opinion for a third time demonstrates that at least, and we commend them, but achieving this for a third time uh means that they have learned valuable lessons, they have learned not only how to do that, but they have given their colleagues in the Department of War uh the the the uh operational uh excellence that's that they should. across the board. So, uh, kudos to the United States Marine Corps. But I think the Department of War has caught on, including uh our young secretary of of war, Pete Hexef, who uh is uh very excited about uh demonstrating to his management team the leadership of the uh of the uh departments, uh as well as the men and women that serve in the Department of War, are military an excitement that he holds very dear to that achievement. In March of twenty twenty six the Department of War uh War unveiled a new refined audit approach aimed at achieving a clean opinion by December twenty twenty eight. So, just two months ago, as a result of not re-scrapping but re-looking at the uh the ability to get there and how they would do that has been and today, Mister Harker will talk about that in specifics because he enunciated his desire and belief that we will achieve this. The approach will use similar hands-on strategy that provides success for the Marine Corps. I was pleased to see the leadership commitment of the Department of War from the very top all the way down to the men and women who serve, understand why a clean audit is important and the advantages that will serve them. I think this shows that the department is taking seriously what Mister Mfume and I for a number of years have talked about through hearings, through opportunities of discussions, and I'm pleased to see that today will be a uh public announcement of how important this progress is. And I'm encouraged, I'm encouraged to not only know that we're gonna get there, but that the men and women of the department feel like it's in their best interest. The goal shouldn't be just to achieve an audit clean audit by twenty twenty eight it should be to implement strong financial management the understanding of the needs of not just the department of war but where material is where assets are and how they can be counted on uh to help the joint chiefs in their effort in particularly at this time of conflict so i'm looking forward to uh hearing today. uh public Uh, I appreciate each of our four witnesses for being here and I will tell you what I told them, and that is I want them to come and uh gladly offer their feedback, their support to help this subcommittee. Both mi- both Mister Mfume and I want this to happen, but more than wanting it to happen, we believe that you see firsthand the advantages that will be accrued to the Department of War and the Secretary of So, with that said, I'd like to yield to the distinguished gentleman from Maryland, my dear friend, Mister Nfume, and the gentlemen's recognized.

Thank you very much, Chairman Sessions. Thank you for your continued leadership on this. We've tried to do this in a very bipartisan way, deliberately. Um, and thank you for your patience. In fact, you may be more patient than than I am. Um, but I will try to let Good good afternoon uh everyone, the guests who are here, the witnesses. We appreciate your time, your effort, your energy. Um I think you may have gleaned from the Chairman's statement that we've been at this for some time and that many people across this nation can't really put their arms around it because of not the enormity but the inability to come up with a a audit I'm gonna talk a little bit at some point history of all this and then I will yield back. Um. Mister Busby, we're looking forward to hearing your plans on how the Army can finally achieve a complete and clean audit. Mister Harker, we're happy that uh the Department of Defense was willing to send someone to testify for this checkpoint in our ongoing work and it has been ongoing for a while. Last April, uh, we held the third in a series of hearings to address financial accountability in the Department of Defense. And we're back today to continue that conversation, particularly in light of the department's continued inability, I want to stress that word again, inability, to pass a department-wide audit. Uh, I think it's past time that we really saw some progress toward accountability and transparency that's demonstrable and measurable. Demonstrable and measurable. because what we've gotten up to this point has really been, quite frankly, a lot of promises, uh, about good attempts to do just that and we haven't really gotten very far. And give an example, for years the Department of Defense has tried and failed to complete a clean department-wide audit. Now that's a standard that every other large agency meets and that they meet regularly. Congress, historically, first mandated this basic requirement in nineteen ninety-three. I was a very, very young man at that time, sitting here, uh, trying to understand and get my hand around what the problem was. Nineteen ninety-three. But the department, as some of you may know, could not even attempt to perform an audit until twenty eighteen, which I find to be absolutely amazing. And so from nineteen ninety three to twenty eighteen to twenty twenty six for me it's being right where I started at in nineteen ninety three as a young member of a congress trying to figure out and how to ask myself how do we get our arms around this massive massive agency um i wanna make sure everyone also knows that we really do mean it when we talk about a financial audit this is not just a two word phrase that gets And my real fear here is that eventually members of the American public are gonna start asking, if not demanding, that there be an explanation for them as to why this particular agency, this department, cannot do that after all these many, many, many years. I mention the years because if this were any other agency, I think the Congress, in a very bipartisan manner, would ready uh to bring about real change. I think because it is DOD and because we understand and know that our nation's strength depends on uh the Pentagon and how we assist the Pentagon and all of the branches of military service that there's been a reluctance just to jump into this head-on and to start making real demands, or passing legislation that would bring demands with it. So a clean audit does not mean and should not be interpreted to mean that we are judging the merits of DOD's spending. We are not doing that. We simply want to know what DOD currently owns and where is it and what's the current value. Uh, and more importantly, we want to know that DOD knows that its time has come to defend this nation and its interests as it often does come around in cycles, basically. on what's happening in the world uh that it is important to have accountability for those assets and the DOD again hate to be deliberately redundant but I have to say it has again failed to clear even a simple bar like that. Telling us what you own, where it is, what's the current value. And I don't want to imply in any way whatsoever that this is an easy task. I mean, it's clearly not something that's so demonstrable. You can go out tomorrow and get it done. This is a huge, huge task because DOD has a balance sheet of over four trillion dollars in assets spread across the entire globe. The Department of Defense is one of the world's largest and most complex organizations. The Pentagon has continued with enormous scale, antiquated systems and dangerous environments, all while at the same time maintaining operational security. It's not an excuse uh to be careless with taxpayers' dollars. It's a recognition that there is so much going on, that there's gotta be a defining starting point and some real demonstrable, again, effort to show that step A, B, and C is taking place. Now, we've sat through so many of these hearings and we've heard so much about what is in practice, But what what we never hear are endpoints. You know, members of the agencies will say, Congressman, we're doing this, we're doing that, we just implemented this, we're trying that, we know this works, so we're gonna do that, we're gonna make sure we're across talking with other agencies. Yeah. But in the three, four years or so that we've been at this, I've not seen an endpoint that has been talked about yet, where something has been achieved Couple of other quick things. Um, I thought the Biden-Harris administration committed to working toward the legal mandate to produce a clean department audit. Former Secretary Lloyd Austin, before this committee and other committees, focused on sustainable resolutions to achieve the goal and to ensure the accountability that we all want well into the future. The initiative helped uh the Marine Corps adopt a two-year audit approach, which was, as you heard, from the chairman very successful. And I've said over and over again, what makes the Marine Corps so different from the other branches in being able to get an audit done? And I have surmised on my own repeatedly that there from on high, there was a clear directive, A, to get this done, B, to do it the right way, and to C, get it behind us. And so I imagine, even though I don't that the commandant of the Marine Corps said, " Look, this is what I wanna have done, this is what we have to do for our nation, this is what Congress has mandated since nineteen ninety-three, find a way to get it done." And they did. Uh, they did, and they're the only branch that has done that to this point. So, um, I'm proud of the work that this committee has done in trying to put guidelines, guardrails and flashlights up so that we can all see in the dark. But this is really not moving, not moving the ball forward. I even suspect that many of us may not even be around years later when in fact uh we're all called home or somewhere else. And that many of our successors will be sitting here asking the same questions, like we're doing with many of those that came before us. President has already proposed a eye-popping increase in the overall budget uh for the upcoming fiscal year. It's a lot of lot of money. And that will bring the already well-funded agency to an eye-popping one point five trillion dollars in defense spending for FY twenty-seven. In all good consciousness, I can't vote for that. knowing we've gone seven straight years without an audit. And in good conscience, we owe the men and women in uniform a better system that we than what we have now. That's, we ought to just admit that. We owe them. And it's not because any of you sitting here failed to do your job. I'm just saying that this has gone on and on and on. So if you hear the uh frustration and the angst in my

Wanna thank the gentleman for his comments. Uh, it is my hope that today we'll offer both you and I

Mm.

some refreshing outlook uh of the work that is taking place, of the challenge that the uh Department of War has accepted, uh and leadership changes that have brought forth top to bottom uh inclusion, of accepting the effort. I would add to the gentleman's comments that he very graciously spoke of, it's also the law. And this is the guiding point that it It's not a congressional mandate. It's not something that just these guys in Congress want. It's the law. And they recognize how important this will be to them, the efficiency. But now, at the time where we are, it also means that the Joint Chiefs have at their fingertips factual data information that will allow them to move forward. Uh, without objection, I would like to advise uh Congressman Walkinshaw of Virginia is to be waived on to the subcommittee for the purposes of questioning witnesses at today's hearing. Today, I am pleased to acknowledge that we will have four witnesses before us. These four witnesses, Mister Thomas Hawker, sir Hawker serves as the Deputy Chief Financial Officer for the Department of War. In his role, he is responsible for improving and sustaining the Department of War's financial policies. systems audit and reporting am I must and I must admit he believes this is an important undertaking for him as a result of his commitment as an American citizen in working for the department which was very important for me to hear thank you. Mister Ryan Busby serves as Deputy Assistant Secretary of the Army for Financial Operations in his role he is responsible for oversight and integration of the Army financial operations. Mister Brett Mansfield is the Deputy Inspector General for Audit. Prior to his role, he served as the Senior Advisor to the Inspector General advising on matters affect affecting the mission and operations of the Department of the Office of Inspector General. Uh, Mister Alif Khan is the Director in the Financial Management and Assurance Team at the Government Accounting Office since two thousand nine. He's focused his work on financial management audit audit readiness at the Department of Defense. And he is a regular visitor as a result of this important role that he plays to this subcommittee. I want to thank each of you four. Thank you very much. Pursuant to committee rule nine G, I would ask that the witnesses now rise and raise their right hand to accept the oath of witnesses. Do you solemnly swear or affirm that the testimony you're to give is the truth, the whole truth and nothing but the truth, so help you God. Let the record reflect the witnesses each answered in the affirming. Thank you very much. You may now take a seat. Gentlemen, I covered with you yesterday not just the uh rules of engagement here today, but the need to make sure that each of you as professionals providing testimony before this subcommittee complete not only your sentence but your thoughts. That I want to make sure that we clearly from you without uh any way that we have to guess of the things you're trying to tell us, the information we need, because as you've heard from the distinguished ranking member, we need to have the confidence that you get it and that we understand that. So, uh, I would just remind the witnesses that they have, uh, generally speaking, a clock in front of them that will give them some operating, uh, guidelines and would now ask that we recognize Mister Har- Harker for his time the gentleman is now recognized.

Chairman Sessions, Ranking Member of the FMA, and distinguished members, I appreciate the opportunity to testify about the Department of War plan to get a clean opinion on the FY two thousand twenty-eight agency-wide financial statement audit. Thank you for the opportunity to appear before you today. I've been in this job for six months and have been fixing federal financial audit problems for more than twenty years starting at DHS when I was on active duty in the Coast Guard and DHS underwent their first ten audits before getting a clean opinion. I've also audited financial statements while working at a large public accounting firm and have led efforts that resolved audit issues at multiple cabinet agencies. Getting a clean opinion for the Department of War isn't just my job, it's something I'm passionate about. So much so that I came out of a comfortable quasi-retirement to take this job. The leadership tone at the top of the department is unprecedented, with the secretary and deputy secretary both making it clear that passing an audit is a condition of employment for departmental leaders. They have both issued written guidance on the audit, and if you haven't seen the secretary's recent video, I highly recommend it. We are finally being honest with ourselves. The department's financial reporting has lagged behind every major every other major federal agency. We are fixing that using the authority provided in Secretary Hegseth's recent memo standing up joint task force audit JTF audit is a unified team of service members civilians and private sector experts led by the Undersecretary of War Koptseler. The mission is clear work with the services and defense agencies to execute the corrective actions required to get a clean up on the FY twenty-eight financial statements, elevating bureaucratic barriers to senior leadership for immediate action. The JTF will provide a common operating picture to SecWar and other senior leaders that will provide them with visibility not previously seen in the audit space and enable them to take action when things stall. One of my favorite bosses, Admiral Thad Allen, said transparency breeds self-correcting behavior. And the knowledge that they're performance is being seen and judged by the secretary will motivate military and civilian leaders to ensure that they have full accountability for their assets. In addition to stand-up of JTF audit, we are partnering with the OIG as they hire an independent public accounting firm to perform the consolidated audit. We are also ending the inefficient process of dozens of disjointed stand-alone audits and focusing our remediation efforts on getting a clean opinion on the agency-wide financial statements, just like every other CFO act agency. We're using a hybrid strategy, where we rely on internal controls where they exist, maximize the use of artificial intelligence and automation wherever we can, and have the auditors perform substantive testing where they must. Much work has been done in putting internal controls in place across the department's processes over many years. But the proliferation of legacy system and the decentralized nature of funds execution means that it would take too much time for us to be able to rely solely on controls. Fortunately, the advent of AI in automation and the funds we received in the reconciliation bill allow us to use those tools to compensate for our antiquated and disconnected systems. Where we can't use AI or automation, we will have to rely on a great deal of substantive testing, similar to what the Marine Corps did, so that the auditors can get statistically valid information that would allow us to adjust our In addition, we are focusing our efforts on the line items and processes that have a major impact on our ability to get a clean opinion, accountability for our assets, accurate accounting for our liabilities, revenues, and expenses, and working to clear the material weaknesses and NFRs that matter. The entire Department of War will be under audit, and we will present our financial statements at the consolidated agency-wide level as required by law.

Thank you.

the Marine Corps, Navy, and Air Force will continue stand-alone audits as they either have clean opinions, or are close to attaining them and the best path forward for the department is to continue their efforts. I want to recognize the leaders and teams who have already set the standard for excellence. The Marine Corps became the first military service to achieve a clean audit opinion and has sustained one for three s- consecutive years. Many other defense agencies have also achieved clean opinions, starting with the Army Corps of Engineers over twenty years ago. These teams are the vanguard and we expect every branch to match their urgency and commitment to financial discipline. Our next milestones are clear, a clean opinion on the FY twenty-six Navy Working Capital Fund, that's this year, a clean opinion on the entire fiscal year twenty-seven Defense Working Capital Fund, and a clean opinion on the FY twenty-eight agency-wide audit. These are ambitious targets, but we are determined to provide the American taxpayer with the highest standard of fiscal accountability and to assure

Mr. O'Rourke, thank you very much. Mr. Bespie, you're now recognized.

All right. Chairman,

uh, Ranking Member Mfume and distinguished members. Thank you for the opportunity to test to to speak today uh on the Army's role and plan to support the department's cons- consolidated financial statement audit. The Army remains committed to strengthening accountability, transparency, and stewardship of taxpayer resources while advancing auditability and improving financial accountability across the department. Army leadership is fully aligned with the enterprise audit strategy and continues to prioritize remediation efforts, focused on improving financial data reliability, strengthening internal controls, and supporting operational readiness. Through this integrated approach, the Army will help drive measurable progress and help sustain or help achieve and sustain a clean audit-wide opinion. To support the audit the department-wide audit, Army has identified the highest risk process areas uh imbalances material to the consolidated financial statements and developed remediation plans focused on improving the financial accuracy and internal controls for these areas. The Army utilizes both internal testing and independent validation to assess the accuracy and completeness of financial information and identify areas requiring additional information. To strengthen accountability, Army leadership identified metrics and governance to track progress across major major remediation areas. The outcomes of these metrics and governance processes will be shared regularly with the Office of the Secretary of War Comptroller and the JTF audit to support enterprise-wide oversight and consistency in audit remediation efforts. These actions improve visibility into the enterprise risk and ensure the Army is held accountable to achieving the department's goals. While financial statement audits' priorities areas based on materiality and enterprise risk at a point in time, the Army's oversight and internal control activities extend across the entire Army each and every day. Remediation efforts are focused on balances material to the department-wide consolidated financial statement audit, while the Army continues to maintain a comprehensive list of internal controls, Army-wide monitoring activities, and independent oversight across the Army. These activities include supply discipline Risk Management and and Con- Internal Control programs, a continuous monitoring program, command directed reviews, and independent oversight conducted by the United States Army Audit Agency, and the Department of War Office of the Inspector General. These efforts drive process improvements across the Army and strengthen the Army's ability to identify risks, reduce improper payments, and improve accountability. These improvements directly support the Army and the Joint Chiefs' priorities operational readiness and effectiveness. Our audit remediation efforts are tested every day as we support global operations. Years of focused remediation efforts resulted in army ammunition, inventories passing audit testing, this past year at a at a rate exceeding ninety-nine percent. While work remains, these results demonstrate progress and reinforce the value of disciplined enterprise-wide remediation efforts. For nearly a decade, the Army underwent a stand-alone financial statement audit that provided actionable findings, helped us stre- strengthen our internal controls, and and focused remediation efforts on the the department's highest risk areas. As the department's audit effort has matured, the office the Army and the Office of the Secretary of War identified i- opportunities to further align component audit activities within a consolidated framework. The department's financial operations and business processes are highly interconnected, making a more integrated approach critical to improving consistency in the application of audit standards, reducing duplicative efforts, and better aligning remediation activities to balances and process material to the consolidated department-wide financial statements. This transition does not reduce oversight or accountability, but instead improves department-wide alignment and prioritization for the Department of War's highest risk areas. The most material items remain the most material items, and this consolidated approach allows the Army, in coordination with the Department of War, to focus our efforts on addressing the items that matter most, and deliver results for the American taxpayer. Since undergoing our first full financial statement audit in fiscal year eighteen, the Army has made measurable progress in strengthening financial accountability and auditability. The Army has remediated more than ten material weaknesses. This includes closing, uh, the material weakness related to fund balance with treasury or the army's checkbook. These improvements demonstrate increased accountability and visibility into the single largest item on the army general fund balance sheet, representing fifty percent of the balance. In addition to fund balance with treasury, the army working capital fund also closed material weaknesses related to property, demonstrating improved ability to accurately account for army assets and maintain visibility to where they are located. We are confident in our our ability to do the work necessary to achieve a working capital fund clean audit opinion in twenty seven and a consolidated general fund clean opinion in twenty eight and are excited to support the department wide approach. As I've highlighted today, the army remains committed to transparency, accountability and continuous improvement as we work with Congress, the Office of the Secretary of War and our independent auditors to support continued progress towards the department wide clean audit opinions. Thank you for the opportunity to share the Army's perspective today.

Mr. Busby, thank you very much. Mr. Bansfield, we're delighted that you're with us. Gentlemen is recognized.

Chairman Sessions, Ranking Member, MFMA, and members of the subcommittee, thank you for the opportunity to discuss the department's fiscal year twenty-five audit results, and key changes planned for future audits. Your oversight is essential to strengthening federal financial management and ensuring accountability of taxpayer resources. In December of twenty-five, the office The Office of Inspector General issued a disclaimer of opinion on the department's fiscal year twenty-five agency-wide financial statements. As in prior years, we issued a disclaimer because the department could not provide sufficient reliable evidence to show its statements were fairly presented. While the opinion was the same as prior years, the department made measurable progress in twenty twenty-five. Material weaknesses decreased from twenty-eight to twenty-six, and auditors issued four hundred and twenty-seven fewer notices of findings and recommendations across the department. Remediation efforts are taking hold. The department closed a long-standing material weakness related to security assistance accounts, expanded its use of automation tools to detect and correct errors, and modernized controls across more than thirty uh systems. These positive outcomes are important. The department con- the but the department continues to face three major obstacles, management responsibility for and accountability of more than four point Information technology weaknesses, including hundreds of aging and non-compliant systems. And accounting weaknesses, such as unsupported adjustments, over uh eight hundred and fifty billion in the last two quarters of fiscal twenty-five, fiscal year twenty-five. I want to emphasize at this time an important distinction that is often misunderstood. Department of War Management, not the Office of Inspector General, is responsible for complete, accurate and reliable financial statements. The Office of Director General, as the independent auditor, evaluates whether the information presented by the department meets accounting standards and is supported by sufficient evidence. This separation of duties reflects a cornerstone of federal audit practice. Management owns the data. The auditors evaluate the data. When information is missing or unreliable, auditors cannot fix it. We can, however, report it and make recommendations to management on how to address those issues. The department's fiscal year, twenty six, And it reflects a shift to a substantive testing approach. Instead of relying on internal controls, many of which remain ineffective, as uh highlighted by Mister Harker, uh auditors are uh directly testing transactions, balances, and supporting documentation. This requires more site visits, more document production on the part of the department, and more coordination between auditors and across the department. But it also provides a path to validating account balances while material internal control weaknesses persist. The department also established a joint task force audit to direct corrective actions and focus remediation on issues that drive the agency-wide opinion such as uh counting assets and intergovernmental transactions. The OIG will be providing an advisory role uh to to the task force. Looking ahead to fiscal year twenty-seven, the department will implement one of the most significant changes in its financial reporting structure since the full audits began. In twenty twenty-seven, the number of reporting entities will drop from twenty-two to focusing the department's efforts on the big rocks. Also in fiscal year twenty-seven, the Office of Inspector General plans to transition the group auditor role to an independent public accounting firm. This change mirrors other large federal audits and will capitalize on industry best practices from across the private sector. Under this model, the independence of the audit function remains intact. The OIG remains responsible for ensuring the department undergoes an audit and retains responsibility for overseeing the audit by monitoring the IP. These changes do not impact the fundamental requirement. The department must produce reliable, supportable financial information. Substantive testing can validate balances, but it cannot replace strong internal controls, which remain essential for long-term auditability and reliable, reliable information uh for which um which is needed for operational decisions. I apologize. The department's financial management weaknesses are significant. However, fiscal year twenty-five showed progress,

Mr. Bainesville, thank you very much. Mr. Bainesville, thank you very much. Mister Khan, you're now recognized. Mr. Khan, you're now recognized.

Chairman Sessions, Ranking Member Umfume, and members of the subcommittee, thank you for the opportunity to discuss the Department of Defense's financial management auditability and its new approach to achieving a clean opinion. DOD is the only major federal agency that has never been able to receive a clean audit opinion on its financial statements. A clean audit opinion is when auditors find that the statements are presented fairly and consistent with accounting principles. Over the In the next couple of years, DOD plans to take a top-down approach, focused on validating accounting balances. This is a significant departure from its current decentralized bottom-up approach from the component level it used since twenty eighteen. This new approach will not be focused on improving internal controls, and instead will focus more on bookkeeping. This will mean less emphasis on making the kind of improvements that we expect to see from a more typical financial audit. Even if under the new approach DOD achieves a clean audit opinion by the end of twenty twenty eight the department's financial management will likely still be on the GAO's high-risk list and the department will still need to turn its attention back towards improving systems, internal controls, and business processes and operations throughout the department after twenty twenty eight DOD has not reported any estimates of how this approach when it's fully outlined will affect the Based on what we know so far, this new audit approach has many opportunity costs and risks. It prioritizes account balances over addressing internal controls, which provide them a foundation for future audits. This might postpone DOD's ability to improve to achieve improvements to operations and enhancements to operational readiness. It likely will be labor and resource intensive, which could affect sustainability. and it may result in limited progress for addressing fraud risk, which is particularly important given fiscal year twenty-seven budget request. There may also be benefits under this new approach. The clean opinion would be a major milestone that can give the department an important starting point for future audit efforts. It would also be a major victory for the department's financial management workforce which has been seeking to achieve this goal for many years. A clean opinion would provide greater level of accountability over the department's use of its resources, even if it's a point-in-time opinion that reflects a booking approach to the audit over improvements to internal controls. Finally, DOD's new approach could benefit the department by establishing lessons learned that otherwise might not have been available under the current approach. We don't have enough information about the department's new approach to say if the will be able to achieve a clean opinion by the end of twenty twenty eight. However, it will require significant efforts and resources. In addition, that opinion will only be a first step, although a very important one. After that time, the department will need to refocus on addressing material weaknesses, so it can sustain this opinion and continue to improve its financial management and operations. We also haven't addressed assessed DOD's new approach to determine if it's more

Ms. Khan, thank you very much. Ms. Khan, thank you very much, Uh, uh, the esteemed gentleman in the ranking, this esteemed gentleman, the ranking member, member, Mister Mfume, Mister Mfume, uh, uh, was required to go to have votes in another committee and so I know that he will was required to go to have votes in another committee and so I know that he will We would now like to move instead of to my opening questions, we will move to Miss Norton, the gentleman who's recognized for five minutes.

Thank you. Uh, since last August, National Guard troops from the District of Columbia and States have been d- deployed in DC. Mister Hawker, to date, how much has this deployment cost? the federal government.

Ma'am, I don't work in the budget area for the department, I do the uh accounting and financial systems piece, so I would hesitate to give you numbers that might be inaccurate, but I will take that for the record and we will get you a response to that question within the end of before the end of this week if that's okay.

Thank you. Mister Hawker, uh what is the average daily cost this year of this deployment?

ma'am again i'll have to take that one for the record but i will talk to our budget people and make sure we get you an answer before the end of this week

thank you the president's militarization of the streets of d. c. violates d. c.'s right to self-government is based on a lie that is un-american authoritarian ineffective unlawful unnecessary wasteful and unfair to the members of the national guard and their family Congress should pass my DC National Guard Home Rule Act, which would give the DC Mayor control over the DC National Guard in the same manner that governors of the states and territories control their National Guards. In addition,

Mm-hmm.

Congress should pass a bill to prohibit a governor from deploying the National Guard to another state or territory, or DC. without consent of the chief executive of that jurisdiction. For over two decades, the Government Accountability Office has maintained a high risk list to identify critical government programs most vulnerable to war-fraid war-st- frayed fraud and abuse. The Government Accountability Office added Department of Defense Financial Management to that list in nineteen ninety five and it has remained there ever since. Yet, the Trump administration has proposed a forty-two percent increase in defense spending in one and one half trillion, that is, trillion dollars. Uh, Mister Mansfield, as an Inspector General,

Um as in the Specter general remember the Specter general community what I would say is anytime there is an influx of cash or funds into any organization uh the likelihood of uh increased risk of fraud waste and abuse uh it coincides with that, so there's a one for one or no I'm not sure if it's one for one, there's definitely a positive uh relationship between influx of funds and the increased risks.

Thank you. The Pentagon has not proven that it can pass an audit, nor has it managed to address its decades-long risk uh of waste, fraud and abuse. The Department of Defense's high risk challenges are complicated. The department needs skilled, seasoned, focused,

Joe Malman yields back her time. Uh we now recognize this distinguished gentleman from Alabama, Chairman Palmer. Gentleman is recognized.

Thank you, Mr. Chairman. Mister Harker, the Pentagon filled its eighth annual audit. announced in December of last year uh for the fiscal year twenty-five confirming that it it remains the only major federal agency never to pass one. Uh this is not a a marginal error or one one-off failure, but a consistent structural problem. When asked to account for fiscal year twenty-three share of of nearly four trillion in assets, eighteen of twenty-nine Pentagon components could not do so. So what drastic change have the services integrated to ensure that by twenty twenty seven, the Department of War has both the capabilities and the political will to successfully track its expenditures and assets in a satisfactory measurable way for both the executive and legislative branches. Mister Harker.

So the department is focused on getting a clean opinion and we anticipate getting one on the F five twenty eight statements.

How long have you been focused on getting a clean,

Pardon me, sir?

How long have you been focused on getting a clean audit?

A lot of the groundwork has been laid over the last ten,

Uh I I that's a specific question.

fifteen, twenty years.

How many years have you been focused on getting a clean audit?

The CFL act of nineteen ninety is the one that required us to get one.

And you've never had one.

The the entire department has not, no, sir, but we are working towards it.

Yeah, but that's what you've been doing for twenty-six years. Uh thirty-six if it's nineteen ninety, it's thirty-six years. And you you haven't had one.

We have increased the number of

Mm-hmm.

The Navy is going to get a clean opinion on their working capital fund this year, and we anticipate getting a clean one on the entire working capital fund in twenty-seven and the department-wide on twenty-eight.

Mr. Kahn, the Department of War Financial Management has remained on the Government Accountability Office's high risk list for twenty-eight years. Um, in your view, what are the root causes and why this is

Well thank you for that question. I think in part uh one can recognize the size and complexity of the department, uh and along with that uh they have large and complex systems as well. Many of

Yeah. One of the things that concerns me about the ability to manage the finances of the of the Pentagon and the Department of War overall is the concern that's often

Mm.

has been whenever Congress appropriates money or or uh for a a defense platform or systems, whatever, they're so concerned that the next Congress might not follow through that they they generally start projects before they're ready, before the design is right. Uh, Mister Mansfield uh David Zweiker uh had the legislation directing the Secretary of War to use artificial intelligence technology, to audit the Pentagon's financial statements. Uh, the le legislation was ultimately included in the

Uh, the short answer is yes, sir. What I would say is there's a combination of efforts ongoing, uh, both from an audit perspective using, uh, the tools that the d- the department has in terms of, uh, uh, using AI and other, uh, large language models to do data matching between, say, like transactions, re-

So do you think utilization of AI will get us to a clean audit?

Uh, by itself, no, sir. It is an it is a tool that it will be very useful. It is useful, but

Mister Harker, when can we anticipate a clean audit?

Sir, we will get a clean audit opinion on the FY twenty eight agency-wide financial statements.

And if you don't, well, what do we do then?

Pardon me, sir, if we don't

If if if you don't, I mean, you we've been hearing this for thirty six years, so I want I want you to be able to get the resources

Chairman, I mean, he yields back his time. Uh, the witnesses, uh, I'm asking to please stay.

Uh.

I'm asking to please stay. we will be uh moving to the capital for votes. There are five votes that are necessary, and I would anticipate that the total time would be about forty-five more minutes, until we will return. But the answer for members is ten minutes after the last vote we will uh form back up here in the committee and I will open it back up. So, until that time, the committee is now in recess. mike check for the reporter mike check one two perfect

And now we're back and I'd like to recognize uh Mister Frost for five minutes.

Thank you so much, Mister Chairman. Thanks everyone for being here. Um, look, I mean, this is a hearing we have every year, um, sometimes multiple times a year. Congress requires that major agencies pass an audit. The Department of Defense is the only major agency to have never achieved a clean audit. In fact, Department of Defense has failed its audit, all eight attempts. I, to be honest, don't have faith that the ninth is gonna be the one. I hope it is, but I don't really have much faith in it. We're here again because the current process is fatally flawed in undermining Congress's ability to conduct proper oversight, and ultimately determining the Department of Defense's own mission to protect the American people. Mister Khan, what what can we as members of the oversight committee do to ensure the Department of Defense complies with with the law?

Oversight hearings such as this are a very important mechanism for continuing to have an oversight, to send the message to the department that this is an important area, uh that you're focused on um how their progress is um folding. Um so I think that's uh this is a very important mechanism.

I mean it is important, but like I said we have a ton of these, right? We're w- w- w- we we'll hear from you all get important information doing the oversight but the point of us doing the oversight is to get information and then do something with it i mean what i don't know do you have any thoughts recommendations on things we should do should we be incorporating penalties should we be segmenting parts off of the like what what do you think needs to happen or if you have any thoughts on this