By Katherine McIntire
Peters
kpeters@govexec.com Oct. 17, 2007
Defense
Comptroller Tina W. Jonas on Wednesday
defended her department's progress in
improving financial management, despite the
fact the Defense Department and military
services have never been able to produce the
kind of financial reporting statements
required by law.
We know where our
money is. We track our money. We send
accounting reports to Congress and we tell
them by appropriation and line item where
the money went and what it went for," Jonas
said at a breakfast in Washington sponsored
by the Association of Government
Accountants.
The ability to produce
annual consolidated financial statements, as
required by the 1990 Chief Financial
Officers Act, has been the holy grail for
federal finance and accounting staff, and
agencies have in some cases gone to
extraordinary lengths to garner clean audit
opinions from independent accounting firms.
But the Homeland Security and Defense
departments have yet to be able to produce
the statements.
In the case of
Homeland Security, the four-year-old
department is still struggling to merge
multiple entities with separate finance and
accounting systems and procedures.
For Defense, which
accounts for more than half of discretionary
spending, the problems are far more complex.
Every year, Defense disburses $424 billion,
processes 145 million pay transactions, 14
million commercial invoices and 57 million
general ledger transactions.
Reconciling those
activities into a single financial statement
has proved impossible, and Jonas, unlike her
predecessors, won't predict when that will
happen.
Achieving a clean
audit is important, Jonas said, but
resolving other issues, such as material
weaknesses, is even more important. She said
that in 2001, auditors identified 71
material weaknesses; today there are 19,
which the department expects to eliminate in
2008.
While a clean audit
means that an agency has solid internal
controls, which are necessary to prevent
fraud, a clean opinion is important. But a
clean opinion, however, does not mean
department managers have the tools or
information they need to make better
financial decisions.
Relmond P. Van
Daniker, the association's executive
director, agreed that achieving a clean
opinion has limited value: "As
professionals, we say that we exist to
provide information so people can make
decisions. I'm not exactly sure what
decisions people make relative to the
financial statements. They come out after
the fact and they're very thick."
Improving financial
management at Defense hinges on showing
military leaders and managers why it's
important to their mission, Jonas said. "We
have to really sell it internally to our
culture, which is very mission focused --
not so focused all the time on the
efficiency of operations but on the success
of operations, whether it's [in Iraq] or
supporting tsunami victims. We have to
demonstrate the value we bring," she said.
One example she cited
was being able to reduce the number of late
payments to vendors, thereby lowering the
penalties the services paid. Late payments
are one of 39 specific metrics Jonas' office
tracks; as a result, financial managers have
reduced the number of late payments by 61
percent, saving about $151 million annually.
Images from the AGA
Leadership Breakfast Series Event - Oct. 17,
2007