Will there be another clean audit coming out of the Defense Department following the Marine Corps for fiscal 2023? The former top financial leader in the Air Force suggests that it could come from the department’s newest service, the Space Force.
Kristyn Jones, former assistant secretary of the Air Force for financial management and comptroller, said the vast size of many Defense operations and the diversity of their missions makes achieving a clean audit opinion challenging — but not impossible.
“We’re so big that we need to have those controls in place to be able to get through an audit. But the smaller services like the Marine Corps and the Space Force can go about it in a different way,” Jones said during an interview for the Society of Defense Financial Management’s The Business of Defense podcast on Federal News Network.
After also serving in the dual role of undersecretary of the Air Force for 15 months, Jones — who left the service in July of this year — expressed confidence that DoD efforts at modernizing its business operations will help more Defense organizations deliver audits free of material misstatements.
Specifically, Jones said she has hope “that the Space Force will be the next service that’s auditable, maybe as soon as next year.”
She also shared three things than can help DoD organizations continue to modernize business processes, better manage their financial operations, and successfully track and report their spending.
Tip #1 for getting to a clean audit: Collaborate across the enterprise
Achieving better financial management requires removing silos and working collectively to improve business operations across an organization, Jones said. That continues to be tough, often just given the sheer size of the organizations involved.
“It’s challenging when you’re trying to improve the data, improve the business systems — all of the underlying processes — and that requires coordination across the entire enterprise,” not just across the financial management operation itself, she said.
“I want to give kudos to the Marine Corps for the level of leadership engagement that I saw — that I think sets the standard for everybody else,” Jones said.
She noted that it takes coordinated effort to tackle each material weakness. During her tenure as undersecretary, the Air Force was able to address some key material weaknesses, including its funds balance with the Treasury Department. “And I’m hoping that when I see the financial statements for the end of [fiscal 2024] that the military equipment material weakness was also addressed,” Jones said.
Tip #2 for getting to a clean audit: Get beyond financial controls
Financial controls are the policies and procedures that make resource management and operational efficiency possible. While acknowledging their critical importance, Jones said that the focus on controls has meant DoD organizations sometimes fail to uncover and address the underlying issues that lead to financial errors and unqualified audits.
“Another key lesson learned from the Marine Corps was how you can get after an audit that is more substantive,” Jones said.
This advice aligns with continued recommendations that have come out of the Government Accountability Office. DoD has been on the GAO High-Risk List since 1995, and GAO noted in a 2023 report that “DoD remains the only major federal agency that has never been able to receive a clean audit opinion on its financial statements.”
Tip #3 for getting to a clean audit: Make digital transformation a priority
Although Jones has spent the bulk of her career in DoD roles and began career life as a military intelligence officer for the Army after graduating from West Point, she spent nearly eight years at KPMG before her most recent stint at the Air Force.
She said that commercial work informed her perspective on how to think about modernization programs for the Air Force and Space Force and how to consider risk in large programs generally.
Systems transformation and tapping into data analytics are essential to getting to substantive issues within DoD operations and ultimately improving financial management, Jones said.
“Business systems has been a passion of mine for a couple decades, since I worked earlier at the DoD Business Transformation Agency,” she said, adding, “There’s no way that the larger services will get to auditability without improving our business systems. The end-to-end processes, the data, the controls are so reliant on having those business systems modernized and in the state that they should be.”
To listen to the full discussion between Kristyn Jones and Rich Brady, CEO of SDFM, click the podcast play button below:
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Discover more stories about how to thrive as a federal contractor. Find all episodes of The Business of Defense podcast.
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