tv Pentagon Audit and Business Operations CSPAN March 7, 2018 10:32am-12:01pm EST
several of them serve on the digit committee. members of this committee know the cost matters too. the defense department audit will cost almost $1 billion this fiscal year alone. i did ask some questions and i want to thank the department and particularly mr. norquist for a speedy response, we're not used to that. but really appreciate it. and i did, was interested even in the cost of the audit and noticed in the explanation that $918 million-- the being spent on it, $368 million are for remediation, for solving the problems that are in it. and there's also $135 million for financial system fixes and another $48 million for internal control which is all important.
so actually many in my opinion the audit is $367 million. the rest is benefits that we get out of it by doing the fixes that are necessary. but that's why congress needed a full breakdown of the projected audit cost the department also should provide an explanation of how it's ensuring the independence of its contracted audtors and we need to know how the department plans to remedy any problems they find. gaining insight into which problems the pentagon is fixing and why will motivate congress to continue supporting the audit. there may also be instances in which additional funding up front can avoid the increased costs later on and we need to plan accordingly. ultimately reforming the pentagon requires more than an audit. defense spending is now higher than hat the height of ronald reagan's presidency but we aren't seing the same value for each defense dollar spent today.
ineffective business processes may be a big reason. the pentagon will never operate like a business. but it still must reform its business operations. the cull chur that's taken hold frustrating everyone, including employees and senior leaders. notably the department has yet to implement a modern work forest management system and i share thinkmy colleague's, senator john mccain's, on fwoing concern over the department's inability to tell us how many contractors work there. even more troubling, the department does not process adequate reporting systems to measure the impact of on going reforms from work force changes to the adoption of shared services and cloud-based inch t. systems. i am pleased, however that the deputy secretary of defense has built a reform management group that oversee development of such issues. mr. gibson is the department's first chief management officer,
will have the unique opportunity to lead in this area. it's my hope that we can build mutually beneficial working relationship to help you achieve your goals. managing the pentagon is a difficult task but it is crucial to our nation's testifies and tone suring that we spend america's tax dollars wisely. mr. gibson and mr. norquist thank you for joining us today and for your service. i look forward to continuing the discussion. senator sanders. senator sanders: thank you, mr. chairman. we thank our guests for being with us. the chairman and i don't agree on a whole lot of issues and i think on this one we probably do. the department of defense receives far more money than -- from taxpayers than any other governmental agency. we now as a nation, as you know, spend about, we spend more money than the next 10, 12 nations in
the world combined and the congress against my vote decided to add another $165 billion to the pentagon over the next two years. and yet alone among all agencies of government, the pentagon has to been able to perform perform an agency-wide audit. you may recall, the day before 9/11, the day before 9/11 , in 2001, secretary of defense donald rumsfeld remarked that the pentagon could not properly account for some $2.3 trillion in transactions. needless to say, his remarks did not get a lot of attention given what happened the following day. but that was back in 2001. rumsfeld talking about $2.3 trillion in transactions that could not be properly accounted for.
and we have seen some recent audits that tell us interesting things. the commission on wartime contracting in iraq and afghanistan concluded in 2011 that $31 billion to $60 billion spent in those two wars had been lost to fraud and waste. similarly in 2015, the special inspector general for afghanistan reconstruction reported that the pentagon could not account for $45 billion in funding for reconstruction projects and more recently an audit conducted bierness and yuck for the defense logistics agency fouvend it could not account for some $0000 million in construction projects. i want to thank chairman hensarling for your letter to secretary mattis last month when you said, and i quote, taxpayers must have trust and confidence that their hard-earned dollars are being spent wisely.
if such trust and confidence cannot be built and justified, it will be difficult to achieve the 3% to 5% real growth in spending you have identified as necessary to meet mission requirements. end of quote. i agree with ethis chairman that's it's essential the pentagon demonstrate it's trustworthy and accountable with taxpayer dollars and that's not been the case. that's why i was disappointed to reed that the pentagon buried a report from 2015 that recommended ways to eliminate $125 billion in bureaucratic waste. i don't think there's any debate among anybody here that we want to be able to defend our country, that we want to make sure the men and women of the armed forces have all the equipment they need to protect their lives but i hope nobody believes that just because this is the department of defense we'll defend an enormous amount of bureaucratic waste.
one-half, i think the chairman touched on, one-half of the pentagon's budget goes directly into the hands of contractors. and of that amount, one third or about $100 billion, goes to the top five defense contractors in the united states. all of which, by the way, have been convicted or settled, lawsuits, relating to fraud or misconduct against the federal government. we're dealing with huge defense contractors who have been involved in fraud against the federal government. also, i might add, and later on i'm going to have to, i apologize, i have to run out, i will come back, i would like to get a response from our guests today about the fact that the c.e.o.'s of the top five defense contractors in the united states made a cumulative $96 million in compensation. five c.e.o.'s whose agencies are significantly funded by the federal government, the c.e.o.'s
of those defense contract -- defense companies made $96 million in compensation. back in 2011, i requested a report from the pentagon which detailed how the department paid $573 billion over 10 years to more than 300 contractors involved in civil fraud cases gainst the federal government. there are a lot of issues here. your job is not easy. aside from the pentagon, the complexity of the budget is enormous. nobody thinks you'll solve the problem immediately. but your job is to tell the american people how our tax dollars are being spent, to tell us in fact where the money is going. i'm not quite sure we know where the money is going. to tell us why it is that we continue to do business with defense contractors who give us cost overrun, cost overrun, cost
overrun. are we negotiating effectively? are defense contractors simply saying, we'll do it for x and it ends up being 3x and nobody cares? i look forward to the question period but at this moment i have to run out. but thank you very much for being here. senator enzi: thank you, senator sanders. i'll now introduce witnesses. our first witness is david norquist, the director of defense comptroller and chief fbsrble officer, under secretary norquist has been in office since may of 2018 and leads the department's efforts on budget -- since may of 2016 and leads the department's efforts on budget matters. he has led the budget and awe did process under d.h.s. under the bush administration. our second is mr. john gibson,
department of defense chief management officer who was reconfirmed as chief management officer only weeks ago after serving as deputy chief management officer since last november. prior to his service at the department of defense, mr. gibson led several aerospace companies and previously served in a management prere-form position at the pentagon during the george w. bush administration. for information on our colleagues, each witness will take up to five minutes to consolidate his opening remarks, all of which will be part of the record. followed by questions. we look forward to receiving your testimony. mr. norquist, you can begin first. mr. norquist: thank you, mr. chairman. chairman enzi, ranking member sanders and members of the committee, thank you for an opportunity to provide an overview of the department's audit prorkgress, and plans. i'd like to thank you for the
bipartisan budget agroment of 2018. the agreement raised the caps for fiscal year 2018 and 2019 on defense spending to a level that will support the national defense strategy and allow us to restore and rebuild our military. the agreement is a two-year deal so we'll need kuok's support of again for sequestration -- or sequestration will return in 2020. when secretary mattis released the national defense strategy , he descroibed three distinct lines of effort, building a more lethal, resilient and agile joint force, strengthening alliances as we attract new partners, and reforming business practices for greater accountability. the third line of effort relates directly to the audit. it's an important component in improvement of our business operations. we anticipate auditor findings in many areas. that is why we're doing these audits, to find the problems and fix the root causes. i appreciate your interest in the audit of the department of defense. it is a long-term, meaningful,
necessary undertaking that encompasses the whole of the department and its success depends on sustained congressional support. the personal interest of chairman enzi and others on this committee have shown in this issue are part of the reason d.o.d. has at long last begun the audit. although audits are not new to the department of defense, this is the first time the department has undergone a full financial statement audit. a financial statement audit is comprehensive. it occurs annually and covers more than financial management. financial statement audits include verifying count, location, and condition of our military equipment, real property, and inventory. it involves testing security vulnerabilities in our business systems. it tests system compliance with accounting standards and validates the accuracy of our personnel records and actions such as promotions and separations. the department anticipates having approximately 1,200 financial statement auditors
assessing whether our books and records present a true and accurate picture of our financial conditions and results of our operations in accordance with accounting standards. based on my experience at the department of homeland security, it will take time to implement the changes necessary to pass the audit. it took homeland security a relatively new an much smaller enterprise, about 10 years to get its first clean opinion. however we won't have to wait for a clean opinion to derive benefits if the audit. the financial statement audit helps drive enterprise-wide improvements to standardize our business processes and improve the quality of our data. deform o.d. owes accountability to the american people. transparency, accountability and business process reform are some of the benefits of the financial statement audit. regarding transparency, the audit improves the quality of our financial statements and underlying data available to the public including a reliable picture of our assets, liabilities, and spending.
the audit will highlight areas where we need to improve accountability by fixing property records we can demonstrate full accountability of our assets. the combination of better data resulting from audit remediation and the use of modern analytics supports the efforts to bring business reform to its operations. audit is an enabler that will drive more opportunities for reform. the d.o.d. consolidated audit is likely to be the largest audit ever undertaken and come prizes more than 24 standalone audits an an overarching consolidated audit. during an audit, auditors select line items paced on -- based on materiality and risk and ask for a list of items or trands actions that make up the total amount of on the financial statement to put the scope of this task in perspective, the army has over 15 billion transactions that the auditors will select from. the auditors will then pick samples from the listing for testing which can include physically verifying that the
property exists and is accurately recorded. once the auditors completed the testing they'll evaluate the results and report any problems they find and re-evaluate the status of corrective actions each year. going forward, we will measure and report progress toward achieving a positive opinion on the audit using the number of audit findings resolved. in closing i want to thank this committee for its interest in and focus on the department of defense's audit. i anticipate the audit process will uncover many problems smotch which will be frustratingly difficult to fission. the alternative is to operate in ignorance an these -- of these problems and miss the opportunity to reform. we are committed to the audit and implementing the necessary reforms to be good stewards of the taxpayers' dollars. i appreciate your support. thank you, mr. chairman. senator enzi: thank you for that and for overseeing it.
>> thank you for this opportunity to testify today. any organization which receives capital for its business has a fundamental response to believe the execute in the most effectule matter -- manner. given the american taxpayer has given the capitol to fund our mission we have the highest responsibility to continuously execute our operations in the most effective and efficient manner. the two-year budget deal has worked hard to establish its great support to a predictable funding stream and very helpful all our work in the reform area. thank you for the committee's hard work to establish this deal. secretary mattis outlined three main rains of effort for the department of defense. build a more lethal force. strengthen traditional allies while building new partnerships, and reform the department's business practices for performance and affordability.
it is the responsibility of the chef finance officer to execute the third effort. gaining full benefit from every dollar spent. looking forward, the department is not anticipating funding above the out-year levels of the fiscal 2019 budget. in order to fund incremental resources the military needs to achee its mission requirement, we must lower our cost of operations to yield these resources. the global challenges to our military remain significant and the -- to best equip our men and women in uniform to meet their mission we must consider significant reforms in the department. foundational to our vision of success in this area is the establishment of culture or performance and productivity on an enduring institutionalized basis. the work we are all doing today becomes a benefit for the next generation of leadership and war fighters to come.
we are generating additional resources through efficiency by focusing on three main areas. shared or common services, enterprise-wide data and cost information, and the efficient and effective alignment of the enterprise. we have begun the effort and shared services by forming i want grailted subject-specific teams to identify that -- identify, vet and implement immediate opportunities in their respective areas. knowing the challenges to any significant reforms, we are constantly fostering a sense of urgency, maintaining leadership alignment at all levels, communicating the consistent message, proactively removing obstacles, driving immediate wins, and working to anchor all of this in long-term behavior and culture. as we implement the reform efforts we are incorporating the fly test fly operational tempo to allow us to pilot, learn and scale in heach of these areas. fundamental to
institutionalizing this effort is governance and management. we have formed the reform management group to guide multiple efforts. this integrated cross functional group leads dedicated teams an fosters ongoing working relationships, aligning all the stake holders involved in the reform efforts. as our processes mature we will form an integrated management board this board will utilize relevant standards measures and goals, coupled with the authorities to manage and force and institutionalize a culture of productivity all with the goal of continuous improvement in our business operations. the reward process is essential to success and the primary ensentiv to change behavior. typically in the department, efficiency efforts are stimulated by need to backfill budget cuts. our current approach is to drive and incentivize performance and operating financial efficiencies by measuring, tracking and reporting performance and
outcomes. we will then return savings generated to the military departments to reinvest in higher priorities and hold those people and organizations accountable. we will immediate need your input and assistance in refining, implementing, and executing as we further define the mechanics of the reward process. quality data is essential to good decision making and we are working to improve the infrastructure to host and make available timely, accurate, and relevant data across the enterprise. additionally, we are constructing a consistent framework that reflects cost data and analytical tools to support efficiency driven decisions throughout the departments. in both efforts we are working closely with the undersecretary of defense and comp troller to achieve success. the financial audit the department is undertaking is a tremendous tool an serves as a valuable piece otour reform efforts. it will improve the quality of our organizational data, which
is essential to good business decision making this eaudit will also reveal business systems and processes which need to be reformed and can be incorporated into our ongoing reform efforts. by improving these business processes we drive improved operational measures such as timeliness, productivity and simplification. many of these processes -- processes will have direct, positive impacts on lethality. the third line of effort is align ofment the department. many of the defense agecies and field activities have been in place for decades. we have the opportunity to look at the end-to-end processes and major areas of operation and align all the participants in the most efficient manner. we intend to include and leverage leadership from the military departments and major missionaries such as acquisition , personnel readiness, financial resources as part of this process. a basis for evaluation for all
our projects is establishing benchmark private sector measures, setting goals, tracking and reporting in addressing our reform projects we are also looking outside of the department for further economies by incorporating the whole of government. as our efforts progress, we will be looking to congress as a source of support. justice -- just as with any board of director well, believe congress is our partner, understanding the shared risks in this incredibly robust and effective work. we intend to keep an ongoing dialogue with you of our plans and processes and will seek your feedback and assistance as some of our objectives will require mutual actions to achieve our goals. as the chief management officer of the department of defense i consider congress to be my board of directors, therefore i welcome the opportunity to continue our dialogue on the substantial efficiency efforts we are making in the department. thank you. >> thank you. as an accountant i can't tell
you how exciting it is for me to have the numbers management team before us. senator enzi: your testimony is music to my ears. i want to thank you, particularly mr. norquist, for your prompt letter. had i gotten it a week from now i would have considered it prompt. [laughter] that's actually when i was expecting it. i'll be sharing that with the members of the committee because there's a lot of good information in the answers that you gave me. we'll now turn to questions and i don't think i probably need to explain how the sound of the gavel and alternating back and forth works. every member will have five minutes for questions, i'll begin with myself and then begin the alternation process. i'll begin with my first question then for mr. norquist. the metrics used to measure the department's readiness for an jaw ah did were often difficult
to understand -- for an audit were often difficult to understand. now that the consolidated audit has begun how will the department help congress understand how much progress is being made? will the pentagon provide regular interim updates on both the findings and your remediation efforts? mr. norquist: yes, sir, mr. chairman. the way we'll measure progress going forward is by looking at the number of n.f.r.'s closed. when the auditor has a finding, they'll write it up. we'll tack the numb of findings, track who they've been assigned for fixing them so we cab say, this materiel command has been assigned to 20 findings, of which they closed five. this organization was assigned seven of which they closed seven. part of the interest in the audit is the level of accountability so you can talk about specific challenges. the issue with the systems. is the issue with fund balance
to the treasury. from our perspective we'll do a couple of things. auditors will publish their statements, it starts about november 15. those are available to the public. they'll look like the same type of financial statement reports that go out for companies. we will twice a year both in january and june provide updates to the committee. summarizing those in easy to understand formats as well as providing tracking on the n.f.r.'s. the advantage, i think, of this one is we will not be self-reporting our progress. i'll be telling you what the auditors have said. if they didn't say we close it, we didn't close it. the issue will be, i think that independence allows you a greater level of confidence in the data you receive on the status of the audit and allows us to track it. this is how we did it at homeland security and it was a very effective way of measuring progress. senator enzi: thank you. mr. gibson, i want to ask you about measurements and baselines
a little bit. last year the g.a.o. reported that billions of claimed savings were unsupportable. similarly the department of defense budget requests this year claims further billions in savings from the ongoing and new reforms but doesn't provide much specificity. can the department provide a more detailed breakdown of these savings and what baselines are being used to construct them? mr. gibson: the way we intend to execute this is we begin at the very working level. we have teams that are subject matter experts in nine particular areas. out of that, they'll then pick specific projects to go out that we find are efficiency projects. within each of those there will be an intended outcome, operational and financial goals, that will be based on real data. they will have a project schedule. we will be able to track and measure how they're doing doing on that we can then compile all
of those into groups and report those out. so we intend this to be very, very specifically driven by data that we're tracking and reporting on, and then all of that will build out to a total of what we can account for, reform savings that we'll be getting. also, i think it's important to measure -- to mention that in addition to financial savings, it's very, very important that we discuss that we are going after operational improvements as well. . it could be productivity, simplification, they don't have a financial outcome but a beneficial outcome to the overall business operations. we will be measuring and tracking and reporting on those as well. le chairman enzi: question, mr. norquist, as i read a number of stories lately about how the
pentagon can't responsibly spend the extra fiscal year 2018 funding from the recent budget deal before the end of the current fiscal year. marine corps general walter said we have a year's worth of money, and 2018, five months to spend it. i understand there are proposals to give more flexibility in spending this money, including changing fiscal 2018 operations and maintenance fund interesting one year to two year funding. beyond this current issue, are there other changes in the budget process such as biennial appropriations for certain defense accounts that could result in greater stability and efficiency in in military spending? secretary norquist: i think there's two types of challenges that we look at as you look over time. let me look at the 2018 and then the longer period. in 2018 there is a series of rules designed to encourage people to spend their money earlier in the year and not hold
it until the en. one's called the 80-20 rule. you can only spend 20% of your money at the end of the year. when you get the bulk of your money late in the year, that makes it harder. then your deadline isn't one october, it's two months earlier. all of these relate to wanting to spend the money where the highest priority is. and as you get closer to the end of the year, you don't have the time to go out for the contract with the competition and award with the amount of time left. if you put something into a shipyard for maintenance and the cost of fixing it is less than thought, they give you the money back, you may be too late in the year to put it against your next highest, so you put it to the next one available. we'd like to discourage that sort of use it or lose it view people to put it
on the highest priority and when necessary look at what type of flexibility is required. either being able to move money between accounts with prior notification. some of molest flexibilities help. i think that was -- -- some of those flexibilities help. i think that was needed. you need to put it against heighter party. chairman enzi: senator whitehouse. senator whitehouse: g.a.o. reported that nearly a third of the roughly $1.5 trillion cost of current defense acquisition programs is a product of cost growth over initial estimates. which suggests the department has trouble either estimating costs or holding contractors to original estimates. now we are looking at a proposal to spend something on the order f $1.7 trillion on nuclear modendization, including the development of new weapons,
platforms, and warheads there. have been warnings issued that if we were to do that, those modernization plans would wipe out other defense programs. so i guess there are two problems that i ask you to comment on. one, what's the plan for funding that without canalizing other programs? is it just put it on the credit card? we seem to be getting expert around that here. nd two, are there additional controls that we should put in place over this nuclear program to make sure that the $1.7 trillion doesn't have the same fate befall it that befelled the other defense acquisition programs of these massive cost overruns? secretary norquist: in the area of contracting, the particulars
we're focusing on is the common purchase of goods and services. mr. gibson: doing that in a more efficient manner. that is an area i'm specifically focusing on. and what this does is this takes a look at contracts from -- what's called a clean sheeting, very common private sector practice, to set the requirements and set the terms and conditions and look across the market to best derive value. we're also looking at setting requirements, and again common service contracts, so that it's the same across -- senator whitehouse: what i was trying to get at is does a massive oncoming expenditure like the $social security 7 trillion for the nuclear modendization program, give us occasion to look at new and different checks and controls specific to that program to see if we can learn something from it and have it not fall to the same fate as the existing acquisitions of massive cost
overruns? mr. gibson: the unit to look across the -- all phases. we need to do it it's good fundamentals and business. senator whitehouse: we look forward to this nukear modernization program and look to additional ways to make sure the estimation and accounting was done better than has been. mr. gibson: i think that's foundational to doing things right. senator whitehouse: one last question. d.o.d. contract management has been on g.a.o.'s high-risk report list for almost 25 years. and there are obvious concerns about the relationship between the defense department, defense contractors, defense contractors' role in congress. a loop that can exist there. and in addition there is the revolving door problem between the department of defense and these contractors with a view
that some of the contracts may not be managed as scrupulously as ideal. are there things that we should be doing to improve the revolving door issue between the department of defense and these contractors to make sure that relationship with these contractors remains healthy for the taxpayer? mr. gibson: senator, just my specific area of expertise is not contractingle and acquisitions. i will say it's my understanding withintween the policies contracting as well as our ethics, those are in place. i think it's always our responsibility to follow those to ep sure we truly get to the best place from -- to ensure we truly get to the best place from a conflict of interest standpoint. senator whitehouse: you agree
the contractor should serve the defense department and not vice versa. mr. gibson: i think leveraging the private sector is invaluable to us. and that we're the customer and they are the supplier. senator whitehouse: my time is up. chairman enzi: senator corker. senator corker: thank you for coming. i don't think any of us respect more, could respect more our men and women in uniform. i know you work on their behalf. we could not respect them more. i just -- we all watch us kill people remotely in mosul and other places with people from far away commanding drones and it's remarkable we're able to do things like that. d.o.d. has the capacity to turn entire countries into craters. has all kind of
cybercapabilities. just again you're here, you are the messengers, we're not speaking necessarily to you at all, how in the world is it, then, 2018, with all the massive capabilities that the pentagon as, this is the first time the pentagon is able to conduct an audit? what is going on with the culture at the pentagon? mr. norquist. secretary norquist: i share your concern. when this administration came in, we made starting the audit right away critical. so in the very first year we have begun it. when i was -- senator corker: how in the world can it be the greatest, big gratest, fighting entity in the world can -- the biggest, greatest, fighting entity in the world cannot audit itself until 2018. what's wrong? secretary norquist: there is a sense on some of the mission
focus is not as focused on the back office as you would see in a private company. i think that there's an essential value to the taxpayer in making sure the rest of these operations go well. part of the messaging that the secretary has made internally is to make sure folks understand this is much broader than financial management. if you want to make sure your inventory of spare parts is correct, munitions, this is part of what the audit recovers. part that have culture comes from change of two things. one is leadership at the top. secretary mattis and the deputy secretary have made this a top priority. i think that's helped to turn the ship. the others, the emphasis from congress. i have found it very helpful in meeting with folks. senator corker: i don't care about congress. the fact is we probably wasted hundreds of billions of dollars at the benning benning through the years -- pentagon through the years through poor management, is that correct? that would be a low estimate, would it not?
secretary norquist: i wouldn't be able to speak to that number. senator corker: mr. gibson, thank you for giving credit to this committee for passing the caps. we had nothing to do with it. we had four people in the room that bid each other up. this cap deal is going to raise spending over the next 10 years by a minimum of $2 trillion. $2 trillion. $2 trillion. what we're likely seeing in this omnibus coming before us in a few weeks is some of the most god awful taxpayer abuses that we have ever seen because things are being plused up so quickly. on the domestic side, nondefense, so much money is being pumped in that there is going to be some of the most, again, god awful taxpayer abuses we have ever seen. some of that could take place at the pentagon. 're raising the cap by $80 billion. it wasn't good enough. we had to go $30, $35 billion
above that. the same thing on the domestic side, not quite that level. how is it possible with six months remaining in the year for you to possibly spend the additional cap, additional amount of money, the $80 billion you're getting, plus $71 billion in observingo spending. how is it -- oco spending. how is it possible to spend that wisely? secretary norquist: when you look at the inyou'll find the vast majority of that occurs in procurement and r&d which are two and three year money. when you are talking about buying additional munitions, planes, ships, you have to time to negotiate the prices with the contractors and make the awards. the challenge will be in operation and maintenance account. and the difference between had we stayed under see questions tration and upped the number that the congress is looking at, is in the order of about $13 billion. some of that increase the
president had requested. we had plans for in the budget. so the a adjustment you are making is more modest than the number are you seeing. observe the o.p.m. piece has to be executed by year-end. senator corker: we thank you and others for what you are doing. i'm happy in 2018 we're finally going to have an audit. that's good for taxpayers. i cherish the men and women in uniform like senator kaine's son and others who serve. i am distressed that for all these years we know there's been massive amounts of wasted money because you can't even audit. i'm glad you are on a path to do something good about t i do fear, i hope we have a chance, mr. chairman, to see this omnibus a few days in advance because i got a feeling taxpayers are going to be shocked at what is in it with the massive increases taking place in one year. thank you so much.
hairman enzi: thank you. senator. senator sanders: thanks very much. i agree with senator corker, this is an enormously important issue. d the d.o.d. must be run cost-effectively and efficiently. let me ask you -- follow up with a simple question. about half of the d.o.d. budget goes to defense contractors, is hat roughly right? mr. gibson: that sounds about right. senator sanders: the top of the list is lockheed. secretary norquist: absolutely. senator sanders: answer me this one.
as i understand t. i'm looking at the revenue, 2016 defense revenues that went to lockheed martin is roughly $43 billion. i'm curious, the c.e.o. of that scorpgs receive, $20 million? -- corporation, received, 20 million? $20 million in compensation. over 90% of the business was department of defense. in other words, we have given this guy roughly an $18 million salary from the taxpayers of this country. does that sound right to you? is that something that we might want to look at and say when we give -- i don't know what the salary is of the secretary of defense, what is it $150,000, $200,000, does it make sense we pay the secretary of defense $200,000 or less and we have a contractor who gets 92% of his revenue from the taxpayers of this money, $18 million of
taxpayer money. is that something you might want to look at? secretary norquist: i can't speak how the company compensates their executives. there may be rules on those but outside my expertise. i can speak we do have inside the office of c.f.o. we have an organization that audits the contractors. when they send us invoices and payments, we go through those in order to arm the contracting officers to make sure -- senator sanders: if i am right, over 90% of the revenue for a company comes from the taxpayers of this country, here's a guy making $20 million a year when the secretary of defense makes less than $200,000, i think that might be an issue you might want to raise. it essentially for all intent and purposes lockheed martin is a government agency, if you like. private, but a government agency. virtually fully funded by the united states government. is it reasonable to say that they keep their c.e.o. salaries in check? or should the taxpayers being
paying exorbitant salaries? secretary norquist: the taxpayers should be paying for the service we received. senator sanders: it's an issue worth looking at. secretary norquist: i don't know whether executive salary falls within that scope. senator sanders: i think they might. let me ask a dumb bunny question if i might. the truth is everybody supports the department of defense. we all support the men and women in the armed forces. as i mentioned earlier, we're now spending more than the next 12 countries combined in defense. against my vote, congress has voted another $165 billion to go to the military. here's the question. who is our enemy? who are we spending -- we know there are threats out there. we're all aware of terrorism. but i think the amount of money we're spending fighting isis, for example, is relatively
small. who are we preparing to go to war against or defend ourselves from? secretary norquist: the secretary of defense outlined in the national defense strategy the challenges that we nays -- that we face. part is a shift from the focus on terrorism to great power of competition with a particular emphasis on the long-term challenges of china and russia. it refers to both of those as opportunities for peaceful competition, deterrence, and ability to prevail in a conflict should we have to. the strategies of a classified and unclassified option, but it lays out and goes through the challenges we face. senator sanders: we're spending hundreds of billions of dollars defending ourselves from china while corporation after major corporation are shutting down the united states of america and moving to china. any in about that? secretary norquist: the president and others have talked about the competition, expanding beyond defense. my expertise is more on the
defense side. senator sanders: thank you very much. chairman enzi: thank you, senator sanders. senator kennedy. senator kennedy: thank you, mr. chairman. has the audit begun? mr. gibson: yes. senator kennedy: i want to thank both of you and thank president trump for doing what the law directs you to do. der the 1990 statute, what position, not what person, but what position at the department of defense was responsible for initiating the audit? secretary norquist: the audit -- not sure how the language is. the audit is conducted by the i.g. -- senator kennedy: who is esponsible at d.o.d. under the 1990 statute for saying i have read the law, we're going to start this audit. what position? secretary norquist: my belief
since it's called the c.f.o. act, the c.f. or secretary depending on the language. senator kennedy: would you get me the name of every c.f.o. who has served at the department of defense since this statute was passed. secretary norquist: can i do that, senator. senator kennedy: ok. -- i can do that, senator. senator kennedy: ok. i don't know where to begin. senator corker is kind of the conscience of the senate on our deficits. and i first heard him speak about the fact that the department of defense had never been audited at a meeting, and frankly i thought he misspoke. i couldn't believe it. i can't explain this to my people back home. every single one of whom
supports a strong defense. but when i tell them that every other agency in the federal government undergoes an audit but the department of defense, it was required to do it 18 years ago and still hasn't done it, they think i belong in a straitjacket. i just find this -- how did it go on 18 years? didn't somebody ever call the c.f.o. and say, have you started the audit yet? secretary norquist: i will try to attempt to answer the question, though i come from your perspective, which is i view the audit as essential. something we needed to start. and my prior experience at d.h.s. that's what we d we had an audit from moment d.h.s. was created. the types of answers you'll hear is it's large, complex, it will
take longer than the tenure of the person there. in my mind those are arguments to start not wait. there are some mechanical things you had to put in place to make it worth starting the audit. if you are not even able to answer the sample requirements of the auditor, they can't begin. the department having not been set up that way needed time to do that. i say this not to explain t. but because i recognize in my perspective is we ought to start and i'm glad in the transition of the administrations the contracts were set in place that allowed us to begin now rather than sueding putting out contracts and not getting the benefit of the audit for a few years. senator kennedy: i have read that the department of defense has more federal contracts than all the other agencies in the united states federal government put together. is that right? secretary norquist: i don't know. i don't foe if that includes grants or not. it might be. senator kennedy: do we have -- if i ask you for a list of all
the contracts and the amount, could you give it to me? secretary norquist: that is something that we're building called the universal transaction -- senator kennedy: you couldn't give it to me? secretary norquist: not easily. senator kennedy: we don't know how many contractors we have? secretary norquist: there is a requirement that the congress has put on the department and others to publish at usaspending.gov that type of information. you'll be seeing -- that's part of the emphasis on the audit to put that out there. senator kennedy: i see where you expect to spend $367 million this year to conduct the audit and an additional $551 million to fix the problems. how do you know it's knot -- going to cost to fix the problems if you don't know what the problems are? secretary norquist: i know how much the services have setaside to take the problem on. so we have been able to break it out according to how much the army, navy, and others are going to be spending on fixing
problems. how long it takes them remains to be seen. senator kennedy: we've got clearly some people who have -- some hogs who have all four feet in their snout in the trough. we got to find out who they are, gentlemen. if we need to pass legislation and uire this to be done say make it criminal, if it's not done somebody goes to jail or at least somebody's fired, i would appreciate your advice on that. i can't explain this to my people i can't. sorry i went over. chairman enzi: senator kaine. senator kaine: i associate myself with most of the comments that have been made. senator corker's sense of what is wrong with the culture. i have the same feeling. i'm an armed services member.
i joined the committee in january of 2015. senator mccain joined me. i think senator graham was on the committee at the time. i'm a numbers geek. i was a mayor and governor. was used to audits and financial statements. we were stunned to get on the committee and find that the 1990 statute notwithstanding that the pentagon had not made greater progress. they were trying to become audit ready at the time, but there wasn't a meaningful calendar in terms of auditibility. we passed this as part of the defense authorizing act that year. it was the 2014 ndaa we worked on in committee. the timetable you are now on to require the audit to be done under this timetable, we shouldn't have to do t should have been long before. it is good to see you making the progress you are making. i think the written testimony is very helpful. you, mr. norquist, talked about the scope of this audit. it is a beginning audit. it's going to find a lot of
things wrong. it's not as broad as subsequent audits may be. the 24 audits and then the single sort of consolidated audit, they are all under way right now. i would encourage you -- did you not do this in your verbal testimony, i encourage colleagues to look at the chart on page 6 of mr. norquist's testimony which sets out the timeline what's to be expected over the next few months. there was one item i didn't understand. i'm sure there is a simple explanation. march, 2018 on minimum wage 6, submit ndaa ranking report to congress. obviously armed services we're working on the ndaa right now. i assume it's some report that's coming out of the audit work that could be helpful to us as ndaa?working on f.y. 2019 secretary norquist: what the committee asked us to do was rank the components by the progress they have made. of those 24 agencies, eight already have a clean opinion.
they went under audit early on and did it. those are ranked at the top. senator kaine: i thought it was nine. secretary norquist: and some have modified opinions. then a range of them that have been audited for a couple years but not a clean opinion. the largest army, navy, and air force this is the year they start. what we have been asked to do by the committee is to rank progress. and we will do that every year so you can start to see any idea the chairman mentioned, easy to see format who is making the most progress on closing those open findings. senator kaine: i think that's very pofrpblt this will be the first ndaa where we'll be able to take in this audit work that's being done functionally and use them as part of the ndaa that we write. that will be enormously helpful. the one point of disagreement hi with my colleague, senator cork e., is when he said i don't care about congress, i want to ask about the pentagon. we haven't insisted on it with
the pentagon. the pentagon every year under presidents of both parties will submit a budget request and congress gives them more than they ask for. i think it's the same phenomenon here. we have insisted upon it with others but not until the ndaa really put it on the calendar in 2014, which was 24 years after the 1990 act, have we started to insist on it. i think that's obviously important that we continue to insist. i think you are hearing a bipartisan agreement around the table we should. quickly to conclude, i think that timeline is helpful. your conclusion is important. i anticipate the audit process will uncover many places where our controls or processes are broken. there will be unpleasant surprises. the d.l.a. audit showed some. some of the problems may prove frustratingly difficult to fix. i think all -- i think we have to be prepared for all that. we're going to get a lot of bad news out of these audits if we do them right. if we don't do them right, maybe
it will be nice news. if we do them right it will be bad news. that's posh for us to get the bad news -- that's important for us to get the bad news -- your answer to senator kennedy's question. how did you know the fixes will cost $530 million? you don't. there's enormous upside opportunity in here for us if you spend money on the wrong things, you may be underfunding the right things. or you may be using tax dollars you shouldn't be using. that should go to some other purpose for the taxpayer. this is an important thing. do i want to close -- i do want to close on this. it's not just about cost it's about operations. if i might, audit -- an audit is not the same thing as effectiveness. we had a hearing yesterday about airpower on the navy side. in the sea power subcommittee of armed services. we talked about lessons learned on the f-35, we asked the head of naval airpower, has it been worth it?
fantastic capacity. he growned, we should have had it 10 years ago. what are the lessons learned? the cost overrun and delay. he say part of it was putting in new technological requirements on the software 35 has proven difficult. the other is we tried to do something creative. let's build a platform that can be used by the air force, marines, navy, and army and take all their specifications into account and cost spread by trying to build one we can sell to nato allies to. what that ended up doing was create a decisionmaking progress which that was a complete morass. when you are trying to satisfy four service branches and allies. it turned it into a decision making nightmare. do we get some economies of scale? maybe. we-d we get interopprablet? yes. the -- interop prohibit? yes. the we need to have realistic
expectation of what it will show and won't show. it's necessary. thank you, mr. chairman. chairman enzi: senator purdue. senator perdue: i echo and support most of what's been discussed today. i'm chagrined it's taken us this long to get to this point. how long will it take us to get a clean opinion and identify material weaknesses, defish yield back the balance of my imecies -- deficiencies? secretary norquist: i don't know. senator perdue: what will? secretary norquist: it took them 10 years. the numbers, the weaknesses came down steadily so you could see the progress. there were typically one or two at the end -- senator perdue: we'll have an estimate of number of weaknesses, deficiencies, etc., that the remediation you are talking about could take 10 years. how long will it take us to
determine what work we have to do to remediate? secretary norquist: you'll know the bulk of that this fall when the auditors finish the first audit. in the sec year they'll be able to go deeper and may uncover more things. i think over the first two years we'll see the vast majority of the findings they'll have. senator perdue: the d.o.d. is not that much bigger than our largest public corporations. i can't imagine wal-mart calling the i.r.s. and saying the court quarterly statements aren't going to be in. 10 years is too long. we have to find a way to close that. there is no public corporation in the world that would be allowed by this government 10 years to remediate t wouldn't happen. it's not necessary. i want us to address that in future conversation, mr. chairman. second, i want to talk about congress. there is one easy reason to explain why it's taken 28 years. congress didn't do its job. it passed a law. then didn't do anything to enforce t all the excuses used from systems inadequacies to no
chart accounts, were unacceptable and never should have been accepted. that's water under the bridge. i want to talk about going forward. what we have learned -- senator whitehouse talks about $1.7 trillion being spent. in the last decade about a third, little more -- just a little less than a third of what we spend as a federal government has been borrowed money. in the next 10 years with the current forecast if we continue to add that the way we have the last 10 years and what occurred, about a third of what we spend will be borrowed. if the first dollar goes to mandatory expenses, it does, every dollar we spend in discretionary spending, d.o.d., v.a., and $350 billion of total other discretionary and domestic spending is all borrowed money. every dime we spend on d.o.d. we have to go to china and borrow. we have the situations around the world, bilateral agreements like taiwan, to defend taiwan against china we have to go to china to borrow money to do
that. this is how serious this is. my question is when we talk about procurement, a lot of these contracting relationships are dealing with procurement, i believe that the procurement process and the c.r. impact, the c.r. reality of a broken budget process, adds when you do these audits, are you going to measure the impact, or continuing resolutions, on procurement process and the billions of dollars waste found there? secretary norquist: the audit itself does not do that. what it allows us to do because of the type of information we get out of the audit is drill down into those types of questions. you'll have the transaction level data that will let you ook at the effect. senator perdue: that will take a while to develop that. and the systems inadequacies that don't allow different parts of the d.o.d. to talk to you is a hindrens. i get that. we want to know if you run into those problems, or obstacles, we
need to know those on the front end. we have to -- 10 years is too long. i want to talk about the see querser -- see quester and also the fundamental -- sequester and the fundamental measure of the capital budget. you answered the question earlier about normal operation produrement, i get that. -- procurement. i get that. in these big-ticket -- we're going to spend $26 billion a year for 10 years to basically recap the navy. my concern is, if that $26 billion goes to four x or five x like the past decade did, we're talking about numbers that will unattainable. my concern is, are we in this audit looking at the procurement process and finding the inadequacies in there to recommend chapings in the way congress deals with funding of the defense department. there is no capital budget, therefore we do it on a cash flow basis which nobody else
does. that adds billions and billions and billions of dollars to our procurement process. over and above design and design creep. those are real. no question. the one thing i think as a business guy looking at this, the bigger contributions we don't deal with this in a capital budget foremet and limitations from the federal government create this tremendous opportunity to waste money on the procurement process. would you respond to that. secretary norquist: senator, the way that information is currently stored you don't have what you need for a capital budget. when you look at what the audit standards require, valuing your assets, depreciating, that gives you the basis. one of the questions for congress becomes when you have that type of information, do you want to change the way that you manage the funds? you wouldn't have that to do today. over the audit you'll build up that information. chairman enzi: thank you. >> thank you, mr. chairman. welcome both witnesses. i want to asocial yeat myself
with comments made by my colleagues. my question relates to the overseas contingency operations account, o c.o. as you know we have funding in the base defense budget for ongoing operations, which we expect to go on for the indefinite future. senator van hollen: we have the overseas contingency account, o.c.o. there's been great concern on a bipartisan basis that o.c.o. over the years has been used as a slush fund because o.c.o. has not been subject to the budget caps placed on both defense spending and nondefense spending. when i was in the house of representatives, i teamed up with economic mulvaney, conservative member of the house, now director of o.m.b., and we put language in the 2016 defense authorization bill asking the defense department to standards at that
time for what constitutes o.c.o. funding and what's overseas funding. since then in january, 2017, g.a.o. issued a report recommending that the department of defense work with o.m.b. to develop criteria. and since then in 2018, in the defense authorization bill we passed, the congress instructed the defense department to develop these criteria by september of this year. are you on target for providing those criteria to the congress? secretary norquist: we have developed criteria we worked with at o.m.b. to go through the o.c.o. consistent with your previous discussions with director mulvaney, you wouldn't be surprised to know in the out years he would like to us shift those categories so even fewer count as o.c.o. and more is in base. and only the most incremental of the cost shows up. yes, we have worked with o.m.b. senator van hollen: once you develop this criteria, would you have any objection to the congress codifying those criteria so we can avoid any sort of moppingy business and
slush funds in the future? secretary norquist: i have to defer to o.m.b. in trying to turn that into legislation. senator van hollen: let me talk about the whole overseas funding effort. we all wake up to tweets these days from the president of the united states. a few weeks ago he tweeted this, quote, this will be a big week for infrastructure. after so stupidly spending $7 trillion in the middle east, it is now time to start investing it in our country. that was the president's tweet. are you aware of how much the trump budget calls for in overseas contingency account spending for the next 10 years both on the defense side and smaller portion of the state department? secretary norquist: i'm familiar ith the defense numbers. $671 billion in the 2018 and similar number in 2019. then they shift to move the
sustainable cost, the things not incremental into the base, then it's about $20 billion a year for the next five years after that. those are place holders because you don't know where the conflict is headed. senator van hollen: a certain amount of that spend something based on strategy over the next years? i hope someone will point out to the president of the united states that when i add it up it comes to $447 billion over those 10 years. which is more than twice as much as he asked for in his infrastructure plan. he asked for $200 billion a year. for our country. he's asking twice as much for what he referred to in the tweet as stupid overseas operations. i hope someone will bring that to the attention of the president the next time he decides to tweet. let me ask you about the out years. because you have as you indicated the o.c.o. funded at $66 billion through fiscal year
2022, i believe. and then after that as i see it it goes to $20 billion. excuse me, $10 billion per year after that. as you say it's a placeholder. is there any basis for choosing $10 billion? senator corker said, these numbers quickly add up over time. much more than anticipated. you are dropping it from $66 billion in fiscal year 2022 to 23. billion in fiscal year 20 over a 10-year budget window that's a savings of $560 billion. if we drop back. my question is, what is the criteria used to come up with the $10 billion as you look forward and mention the strategic plan with respect to china, russia, and the other threats that may be out there. secretary norquist: our budget looks out through the 2023, and
is based off more or less a static projection. requirementsas the change on what is required. i believe beyond the five-year window is an o.m.b. estimate based on where they think the direction is heading. to clarify, on the original submission we built for the budget, the expectation was around $69 going out. that's the next five years. o.m.b. wants to shift more to base and leave 20 in o.c.o. there is less in that contingency fund. senator van hollen: i think it's a good idea to put more in base. the net effect of that is to obviously reduce the overseas contingency. i just wonder if there was any strategic basis for that big drop. thank you. chairman enzi: senator cotton. senator cotton: thank you, mr. chairman. a lot of the questions and answers today have focused on
the past and what's happened in the past and why we're where we're today in 2018 without an audit. but if you're relatively new to your positions, and we appreciate your commitment to completing that audit. let's look forward. can you tell us, mr. norquist, the simplest terms, what do you hope to accomplish with the completion of this audit? secretary norquist: i hope to politician three things. first, to put morel vant and timely information in front of senior decisionmakers so when they are trying to make decisions about the organization they have relevant data. the second is to provide insights into the reform efforts where we discovered broken processes or things where we can save money by changing the way we operate. and the third is to be able to make greater use of data analytics because we'll be able to rely on the underlying data. the underlying transparencycy -- transparency requirement to the
american people and congress. senator cotton: mr. gibson? mr. gibson: i find the audit incredibly beneficial. mr. norquist said, the data is incredibly valuable. we're looking at putting in cost analysis tools so that once you have the good data, that whatever the user and the operator is can have good cost assessments so they can then place assets where they need to be and manage those that don't fit within the zone. the second is the systems themselves, what we find is they have often contributing to some of the weaknesses or core systems. this fits right into one of our significant areas of reform, which is i.t. i think we can contribute there. again that contributes overall to good business processes. and last is the ability through this process to discover areas
that the weaknesses translate into truly discovery of good information. already we have had discussions about how the spares are managed in the navy. you look at ammunition in the army. just two good examples of once we have better clarity there, we can then better manage each of a financial om standpoint but also readiness. senator coton: -- senator cotton: is that what it means to a private in afghanistan or iraq that he's going to have more training, faster access to parts or ammunition? mr. gibson: i think the answer is definitely yes. all of this contributes really to the secretary's first priority which is lethality. senator cotton: mr. norquist? you are nodding your head. secretary norquist: you know it's in inventory, you know when you're going to get t you are
able to keep your maintenance up. senator cotton: what do we think is the potential magnitude of the savings this could ultimately yield for the department? secretary norquist: i think you'll see savings in three times. for the middle section i'll defer to mr. gibson. in the financial side when we automate things currently manual, he streamline the accuracy, reduce the cost. those will not be enormous numbers but valuable and sustained numbers. they'll be efforts that drive reform. i think the third one, which is understated value of the audit is congress passed a law on information security standards. the auditors check those. they do cybersecurity testing of each of our business systems. when they find weaknesses, that's not -- it's enormous cost avoidance if somebody isn't able to break into your system. let me refer to mr. gibson. senator cotton: let me put two numbers on the table. the 2019 budget request
suggested that internal business reforms could save a little over $6 billion. 2015 defense business report, which simply said if you ran the department like a business, and that would mean eliminating virtually all of the civil service work rules, which i don't think many members of this committee or this congress would support, but eliminate all those legal requirements, you could save about $25 billion a year. i'll put those numbers on the table. mr. gibson, turn to you. also like to get a chance to get the results of this audit. yield savings of that magnitude or larger, $6 billion according to the department's request. $25 billion according to the 2015 defense business board. mr. gibson: senator, let me attack a couple pieces separately. one, we have laid in $6 billion and then o.m. $46 billion. we're comfortable that we will meet or exceed those numbers.
then directly as to the audit, the audit is, as i mentioned earlier, a great tool to help us get there. but is in addition to other reform initiatives. and then lastly on the d.v.b., i can tell you i fully embrace what they have suggested. we actually took some of the specifics there where they said focus on what is known shared services areas, put teams in place and go after that. we have done just that. we actually added three additional areas to what they suggested. and then the last part of that i think that while we go after shared and common corporate type services, we always have to remember our main mission is the lethality of who we're. we also have to incorporate the fact that security of what we do and that impacts inventories and supply chain and logistics.
then lastly, very simply, we are a more regulated environment than the private sector. it should not be lost that the spirit of what that report did we fully embrace. i think it has great value to us. senator cotton: thank you for those answers. $6 billion year. $46 billion over the five-year defense plan would be great. i point out we just increased the defense budget by $85 billion in one year. that's the result of seven years of living under the deeply flawed budget control act. i admire you for taking a very, very big task, but it's congress' responsibility here to ix this problem. senator wyden: let me ask you a question if i could, commissioner norquist. this issue of auditing the pentagon is the longest running battle since the trojan war. it has gone on and on. it comes now in the context
senator cotton made, $85 billion more for the pentagon, and we got a budget that's going to cut medicare and medicaid. you have to put this in that perspective. as you face these issues. and when i was reviewing your testimony, one sentence really leaped out at me. you said in your testimony that it's going to take time, your words, to move from qualified audits to clean audits. i'd like to know, are you telling the american people request that statement that maybe it's going to take another 20 years to move from failed audit to clean audit? how would you explain this to the american people? how long is this going to take? secretary norquist: not knowing the findings, don't know how long it's going to take. i can give you -- senator wyden: how about an estimate? the public at least deserves some kind of estimate.
secretary norquist: the he only benchmark i can use is homeland security took 10 years. and part of the reason that makes it a challenge is when you think about the money the auditors are talking about, they are not talking just about the money congress appropriated in 2017. the procurement money that congress awarded eight years ago was available for the first three years to obligate and five years to disburse. the auditors are welcomed to take any transaction over those years and support those transactions. when you look at the old military equipment, the ability to provide valuation and historical records, my concern as the c.f.o., is there are some of these choices that i don't know that the information that we will get is worth the expense. i would come back to you and say this piece equipment is going to gout as inventory in three years. do you want me to spend time valuing it or let it roll out of our inventory, it's materiality is going to define.
senator wyden: at my town hall meetings this weekend where people ask about waste and compare as i have done with various items in the budget, i think based on your answer i ave to tell orr gonians -- oregonians that it will take more than 10 years based on the fact you compared it to something else to move from failed audit to clean audit. that's a yes or no answer. secretary norquist: to get all the way to the clean opinion which requires fixing virtually everything, that may well be true. but the benefit of the audit we'll start to get right away. senator wyden: i'm going to take that as a yes. it's going to take more than 10 years to get to a clean audit. i'd really like a yes or no answer because the public, it seems to me, deserves that at this point. secretary norquist: absolutely, senator. senator wyden: ok. let me ask you one other issue. we have had several policy analysts over the years tell us
that they don't think the auditors are going to uncover w inefeshencies -- inefficiencies after great amount. they aren't going to find many things that are that inefficient, why is it going to take by vare ue -- virtue of your last answer, more than 10 years to get a clean audit? do you agree not very many inefficiencies will be found? secretary norquist: we haven't had the results -- senator wyden: what's your opinion now based on the fact you worked in the field for quite some time. what's your opinion today? secretary norquist: that you will find places for savings. that you will find things that you can automate to improve the accuracy of the datea. you will find chances to improve inventory that will save you -- senator wyden: a lot or small number? secretary norquist: i wouldn't have a way of saying. senator wyden: i'm going to hold the record open because i would like your best estimate on that
because obviously that goes to the question of, again, trying to explain to people why this is taking so long. everybody else in government gets audited. businesses get audited. this really is the longest running battle since the trojan war. by the way, i want it understand you are walking into this. this is not your doing. you are going to be the point person on this. that's why i'm asking -- i think little bit more pointed questions because the public frustration on this point is enormous. thank you, mr. chairman. hairman enzi: senator boozman. senator boozman: thank you, mr. chairman and for being here. we appreciate you taking this on. this is a huge task. it's so, so very important. appreciate the emphasis on the business practice reform approach that you're taking. and certainly your work on the audit is going to be so, so
vitally important. the key enabler to ensure discipline, metrics, that we need to enact reform. i appreciated the three things that you were going to get done. on the other hand, you're going to hold people accountable and i know our chairman and ranking member very, very well. and i think i can speak for them and the committee that we're going thold you accountable. in the -- accountable. in the sense you have take -- that we're going to hold you accountable. in the sense you have taken this on. there is a lot of frustration in this area, not only this committee but throughout congress. we're going to get this done in a timely fashion. the services had an audit and i don't think they have been completed for various reasons or whatever. the auditors got in there and made a lot of recommendations. hundreds of recommendations. what have you learned from the service audits, air force, army,
whatever in the sense -- navy. was there anything to be gleaned there? secretary norquist: yes. there's a couple things. one of the overarching findings was that there is often a gap between what management believes is being done based on the policies issued. expecting those policies will be followed. then you go into the field and discover either the field is not or cannot operate according to those. that information gap, the audit closes and allowings you to recognize we either have to change the policy or the way we operate. that's a valuable tool that lets you bring better controls in. there are someplaces we have seen -- senator boozman: are we able to follow up on that right now? are we starting already? or do we have to wait for a time line? secretary norquist: this is the point i wanted to follow up with the senator. which is we will get those findings each year. we'll start the corrective action plans right away.
what we need to do is prioritize those. there will be some things where the benefit to the taxpayer and american people is quite high. you want to get to those sooner. the other ones where it's an accounting entry. i know it's important from an accounting point of view, but it won't save money and you want to be cautious about how much effort and money you spend trying-to-achieve that goal. we want to strike that balance. senator boozman: i interrupted you. are there other things you learned? secretary norquist: inventory records and making sure the acuracy of those. i think the -- -- accuracy of those. i think the army found the blackhawk helicopters. the person there may have done known it but if the army did a search, it wouldn't have shown up. air force looked at 12 facilities and found approximately 400 buildings and structures. the people in the bimmeding knew they were there. but if you look how much do i need to do to do maintenance, you wouldn't have had that in the datea. those types of issues.
the acuracy of that affects a better operation and enables reform. thetor boozman: mr. gibson, fiscal year 2019 defense budget submission indicates an exspictation of $2.9 billion from ongoing reforms, including reforms in health care management. can you give us some examples, can you talk a little bit about health care management and some of the -- that's such a huge issue for not only the department of defense but the country in general. do you have any ideas about efficiencies or savings in that regard? mr. gibson: we're looking at this in two ways. there's the larger -- >> you can watch this hearing later online at c-span.org. we're leaving here as the u.s. house is gaveling in for legislative work. this afternoon a bill suspending certain e.p.a. emissions standards for brick and clay kilns. votes later this afternoon.