DOD Official Briefs Lawmakers on Financial Management Progress, Path Forward

A senior Pentagon official briefed lawmakers yesterday on the Defense Department's progress with improving and modernizing its financial management systems and strengthening the integrity and transparency in its financial reporting.

Thomas C. Steffens, the senior assistant to the DOD's comptroller provided testimony before the House Oversight and Accountability Subcommittee on Government Operations and the Federal Workforce, outlining the Defense Department's recent financial management success and its path toward receiving an unmodified audit opinion by 2028.

Meeting that objective, Steffens said, remains a top priority for senior DOD leaders, including Secretary of Defense Lloyd J. Austin III and Deputy Defense Secretary Kathleen Hicks.

He said the Defense Department's focus on financial management, modernization and improvement have improved audit results, noting that in fiscal year 2023, the Marine Corps became the first branch to post an unmodified, or "clean," opinion indicating that a third-party auditor found no material errors or misstatements in financial statements.

Each year, the department-wide audit, comprised of dozens of standalone audits of the services and other components, marks a significant undertaking for the Pentagon.

DOD is one of the largest organizations in the world, accounting for $3.8 trillion in assets and $4 trillion in liabilities in fiscal year 2023.

Steffens said at the start of the fiscal year 2024 audit, unmodified and unqualified audit opinions together covered 51% or $1.9 trillion of DOD's total assets. He said that figure will continue to increase in coming years.

He added that investing in key financial management technologies will be critical to achieving the congressionally mandated timeline for a clean audit.

In fiscal year 2023, DOD invested $991 million in audit remediation including investments in key technologies to accelerate audit progress and improve controls.

"This investment focuses heavily on tackling the root cause of systemic, long-standing issues that impede success," Steffens said.

He added that the Defense Department has also partnered with Congress to improve financial management by reforming the planning, program, budgeting and execution process.

"The PPBE process is a fundamental strategic decision support mechanism for our leadership," Steffens said.

This year, the commission on PPBE reform released 28 recommendations that were parceled into 35 recommendations. Hicks later endorsed 26 of those recommendations for implementation across the Defense Department.

"The timeline for PPBE reform relies on outcomes from complex, multiorganizational discussions and legislative actions and success depends on sustained cooperation and transparency," Steffens said. "We appreciate congressional support for the National Defense Strategy and the [Defense] Department's financial management improvement efforts."

He said Congress' continued support is critical for the Defense Department's ability to continue to make strides.

That support, he said, includes passing full and on-time appropriations. He noted that over the last 15 fiscal years, the Defense Department has operated under 48 stop-gap funding measures, or continuing resolutions, lasting 1,794 days or nearly five calendar years.

The unpredictability of funding, Steffens said, has compounding effects on the DOD's ability to make critical investments needed to accomplish its mission.

Congress is expected to enact another short-term continuing resolution as fiscal year 2024 funding expires later this month.

"Without a timely budget, we are challenged in investing in new technologies, equipment and training," Steffens said. "This has a profound impact 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 join Secretary Austin in urging Congress to act urgently," he added.