Interview of Mr. Mark Easton and Ms. Alaleh Jenkins.

Author:Placek, Terry
Position:Interview
 
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On January 23rd, Terry Placek, Chair of the AFC Editorial Board, and Kathryn Grandstaff-Bradford met with Mr. Mark Easton, DoD Deputy Chief Financial Officer and Ms. Alaleh Jenkins, Assistant Deputy Chief Financial Officer to discuss DoD financial management goals and operations.

Interviewer: There's so much going on in the DoD financial management community. As the Deputy Chief Financial Officer working directly to operationalize the DoD Chief Financial Officer's strategy, goals, and objectives, what are your major priorities, initiatives, and desired outcomes for DoD financial operations?

Mr. Easton: First of all, thank you for providing the opportunity to chat today. In reading Secretary Norquist's October 2017 interview, we have a tough act to follow. In that interview, he clearly identified his priority of increasing our capability in terms of data analytics. It occurs to me that his thinking is in direct concert with the spirit and intent of the Chief Financial Officers Act of 1990.I participated in a 20th anniversary retrospective forum on the CFO Act back in 2010. When you talk to people from the Government Accountability Office and on the Hill, what they really had in mind when drafting the CFO Act was an increased ability to use financial information to inform decision-making. While the reason for collecting information may initially be to feed our financial statements, the potential analytical power of that same information is a gold mine, if harnessed correctly and used smartly.

Some of the successor pieces of legislation that were associated with the Federal Financial Management Improvement Act are along those same lines. In other words, these laws all push to improve the quality and timeliness of financial information for decision-making. Again, data analytics is one of Mr. Norquist's strategic goals regarding where he wants to take the DoD financial management community. How do we get there? I'm going to bring it back to the audit. We're starting with an annual audit regimen that focuses on compliance. It will increase our level of business discipline, and also result in more timely and accurate financial information.

A financial audit distinguishes itself from a program or compliance audit that you may see from the DoD Office of Inspector General or GAO. In a program or compliance audit, auditors only look at a given program in a very focused way, every two to three years. However, a financial statement audit occurs yearly, basically forcing us to increase the rigor in our standardization, consistency, and discipline, associated with documentation. On a year-in and year-out basis, that level of compliance will provide the foundation we need to improve the quality and usefulness of financial information. That will set us up for what I would characterize as higher order tasks, using data analytics. The financial audit is a big part of getting us there.

Interviewer: Audit has a lot of stakeholders. How would you describe the Department's current relationship with Congress regarding audit and financial operations? What activities are you involved in, as DCFO, to strengthen that relationship and the results derived from it?

Mr. Easton: We meet regularly with our stakeholders. Alaleh Jenkins, who is my Assistant DCFO, and our teams and I meet with the DoD OIG and GAO staffs on a recurring monthly basis. Of course, when we think of GAO, we think of its primary customer--Congress. Congress knows that DoD financial management has been on the high-risk list since 1995. We are the only cabinet level CFO Act agency that has never completed a full financial audit.

That status is certainly something we seek to change. We want to move out of that category, so we also meet regularly with congressional staff members on audit. Just last week, we were with Senate Armed Services Committee staff members. Their feedback indicated we're in a good place right now. On the 10th of January, Secretary Norquist completed what I'd call a very successful hearing on audit before the House Armed Services Committee.

Two issues came out of that session with the staffers. One involved accountability and progress, but the other is cost. Our communication strategy highlights how much we spent and how much it will cost on a yearly basis. The large cost catches our stakeholders by surprise. When you put it within the context of the size of DoD--what we need to do and the nature of our business environment--it's understandable. However, people would still prefer not to pay for it. I don't know if they associate the number of auditors involved with how much it costs, but we're actually going to have to write a check and we're going to have to spend money to be audited.

I know that, all things considered, Congress would like us to move faster. They'd like us to have a clean opinion tomorrow. There are a lot of reasons why it will take time relative to being in a position to begin an audit and then to get value from that audit.

Interviewer: What are the major challenges or barriers to obtaining a clean audit opinion and how are you dealing with them?

Mr. Easton: My initial thought, and this comes from my 40 years of experience in the Department at various levels, is that we have a culture that makes audit very difficult. Our culture is extremely mission oriented. We often think, "Let's just get the job done," and then only focus on the outcome. Normally we would say that's great and that's the kind of "can do" attitude we want. If you're in a forward operating base in Afghanistan, for example, you want that kind of decentralized environment where people totally understand and exercise their commander's intent to support the mission. Unfortunately, in a financial audit, that type of culture is not your friend. It might generate shortcuts or different ways of doing things. However, for auditors to have confidence in a financial statement, they need to have confidence in the consistency of how you do what you do. That's one thing.

In addition to that cultural factor, I would list cultural resistance to change as a related issue. It's sort of somewhere between human nature and the fact that with an organization as large as DoD and its 200-plus years of traditions, sometimes change is difficult.

Ms. Jenkins: I just want to add that we continuously talk about the need for a strong "tone from the top" and leadership commitment, which we currently have. This is going to be a long journey. It's not going to be something that we can resolve over the next couple of years. Truthfully, part of the challenge is keeping that momentum going and keeping the leadership commitment going. As audits continue and we're expected to demonstrate progress, this progress is going to require difficult decisions and major changes. I think we know what needs to happen. When we overlay our innate resistance to change, it makes changes in practices, processes, and organizational policies tougher to implement. People don't like to have "their cheese moved," so it's a challenge.

Mr. Easton: That's right. People are also very busy, and know that it requires energy and time to begin something new. All of those things combined, are probably one of our larger challenges. There are also a whole host of business environment challenges that are related to the culture. The bottom line is that our cultural shift to an audited minded population and a tone from the top derived from demonstrated leadership commitment--something we've made significant progress on--will need sustained focus and attention, year after year.

Ms. Jenkins: One other thing we keep talking about as part of the culture change required for success, is that audit and audit remediation have to be seen as an "enterprise" priority, not just an FM-driven requirement regarding a bunch of financial statements and numbers. We're getting folks to embrace this idea and see its benefits. As Deputy Secretary Shanahan wrote in a letter to all members of the Department, financial audits are not about paperwork. They're about doing our job correctly. For the audit...

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