DOD Completes Fiscal Year 2020 Department-Wide Financial Statement Audit; Continued Value and Progress Despite COVID-19 Constraints

 Nov. 16, 2020

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Today, the Department of Defense (DOD) completed its fiscal year (FY) 2020 Department-wide financial statement audit. “For the third year in a row, the audit has proven its tremendous value,” Deputy Secretary of Defense David Norquist said. “As we continue reforming the Department for greater affordability, the audit delivers returns that significantly outweigh its cost by improving business operations and enhancing the lethality of our warfighters.”

Seven DOD organizations are expected to sustain unmodified or “clean” opinions. Four audits are still underway and are expected to be completed between December 15, 2020, and March 25, 2021.

• We are working towards, and optimistic that we will have, an additional (beyond the seven) clean opinion this year for the Defense Information Systems Agency (DISA) Working Capital Fund (WCF).
• Auditors thus far validated that DOD resolved over 530 findings from the FY 2019 audits.
• DOD continued to demonstrate progress despite the challenges presented by the COVID-19 pandemic. 

The COVID-19 pandemic struck during a typically critical time for audit testing. Nevertheless, our Military Service members, civilians, contractors, and auditors came together to develop and implement alternative and innovative solutions to complete this year’s audit. Our financial statement audits continue to be foundational to business reform and our 2018 National Defense Strategy. The most tangible benefits come from addressing audit findings, which help us enhance our information system controls, improve the reliability of our financial data, and improve operational efficiency. 

This year, we are optimistic that the DISA WCF can achieve an unmodified opinion, a notable improvement from a disclaimer of opinion last year, and the beginning of a future trend where smaller organizations begin to achieve positive opinions over the next several years.

The following entities sustained their unmodified opinions:  the U.S. Army Corps of Civil Engineers – Civil Works; the Military Retirement Fund (MRF), the Defense Health Agency – Contract Resource Management; the Defense Contract Audit Agency; the Defense Finance and Accounting Services (DFAS) WCF; and the Defense Commissary Agency.  These were the 26th and 21st consecutive unmodified opinions for the MRF and DFAS WCF, respectively. The DISA WCF; Department of the Navy General Fund and WCF; and DOD Office of Inspector General (DOD OIG) audits are still ongoing.  We expect the DOD OIG to sustain its clean opinion.

The DOD has made important progress since last year. For example, the Department anticipates the downgrade of two Agency-Wide material weaknesses; and is hopeful that Navy’s auditors can downgrade three Navy material weaknesses when the Navy’s audit is completed in December. Several material weaknesses for the Marine Corps and Defense Agencies have been downgraded. Auditors also confirmed during the FY 2020 audit that the Department successfully closed over 530 FY 2019 audit findings, and were able to expand their testing in several areas. Progress continued in an array of areas including information technology, inventory, Fund Balance with Treasury, and financial reporting. 

During the FY 2020 audit, auditors verified the Department sustained earlier progress reported in the

FY 2019 audit, including:

• No significant issues found with payment amounts made to civilian or military members,
• No evidence of fraud, and
• Existence and completeness of major military equipment.

The annual audit continues to play a pivotal role in improving financial management and supporting business reform throughout the Department. It reinforces our accountability to the American taxpayer and our stewardship over resources entrusted to us in support of our warfighters.

Defense Logistics Agency Helps DOD Prepare for Second COVID-19 Wave

 Nov. 16, 2020 | BY Beth Reece , Defense Logistics Agency

The Defense Department now has a four-month supply of personal protective equipment  including respirators, surgical masks and gloves to see troops and families through the second wave of COVID-19. 

The supplies, which aren't part of the department's pandemic reserves, were procured by the Defense Logistics Agency to help replenish on-hand stock for military services and geographic combatant commands. Much of it will be used for patient care at military treatment facilities and by service members training or deployed, said Army Col. Matthew Voyles, director of DLA Troop Support's medical supply chain.

"The new reality is that all of our service members have got to have personal protective equipment. This PPE will be used across the gamut, from individual units at tactical levels to treatment facilities here stateside and at our overseas locations where all service members and beneficiaries receive care," Voyles said. 

Quantities were based on demand prediction models and in coordination with the department's COVID-19 Joint Acquisition Task Force. Widespread material shortages early in the pandemic prompted DLA Troop Support to work with logistics planners at the Joint Chiefs of Staff and Defense Health Agency to create a priority and allocation board made up of members from the defense medical logistics enterprise who meet weekly to prioritize protective equipment orders based on customer missions and the virus's prevalence in local communities, Voyles said. Readiness and contingency contracts such as those managed through the agency's Warstopper program helped the agency meet initial military needs, as well.

Additional protective equipment is being stored at DLA distribution warehouses to fulfill emerging DOD requirements, added Beth McMaster, medical supply chain deputy director.

"None of us truly knows what's coming. We've prepared for the upcoming months and will remain aware of manufacturing disruptions, especially for those items that remain in a fragile support state," she said. 

DLA contracting officials continue searching for new vendors that can provide COVID-19 supplies. 

The agency has also provided protective equipment and other items to surge test sites and nationwide nursing homes in support of the Department of Health and Human Services. Although the agency already had contracts in place for personal protective items when the pandemic rolled across the United States in March and April, the demand was limited to mostly military medical customers, McMaster said.

"It was a very small part of the medical, surgical and pharmaceutical materials we supported, but we quickly became very hyper-focused as demand dramatically increased and the industrial base struggled to keep up," she continued. 

Orders for medical supplies are typically shipped directly to customers as part of the agency's prime vendor program rather than from agency distribution warehouses. However, increased worldwide demands for protective equipment supplied solely through prime vendors led the agency to store and distribute equipment at its locations.

"That was a new muscle movement that hadn't been exercised in a long time, so we had to go out and educate and train our customers to point their electrons to a different source when placing online orders, as well as make internal changes to our business processes," Voyles said. "The adaptability of the entire supply chain team was pretty incredible in making that happen."

DLA's strong partnership with industry and long-term contracts for medical supplies helped the agency transition from a peacetime pace to a global pandemic, McMaster added. But the expertise and personal commitment of acquisition and customer assistance employees made it possible, she said.

"While the scope of this event has been overwhelming, I'm impressed every day by the ability of our staff to come up with innovative solutions and do things differently," she said of her team's support of efforts such as the supply of the USS Mercy and Comfort. "It's been pure dedication from day one."

The agency is also preparing to support the DOD COVID-19 vaccination plan now in development.

Norquist Highlights DOD Efforts to Produce COVID Treatments

 Nov. 16, 2020 | BY Jim Garamone , DOD News

Deputy Defense Secretary David L. Norquist thanked blood plasma donors and the workers who collected it for their work in combating the COVID-19 pandemic.

Norquist spoke at the Defense Health Agency — the Department of Defense agency tasked with leading this effort. He also went to Walter Reed National Military Medical Center to personally thank the donors.

The coronavirus pandemic called for a departmentwide effort and involved even those who came down with the virus.

Early on, scientists identified COVID-19 convalescent plasma — or CCP — as a tool needed to develop potential treatments to decrease the severity of the illness and aid in recovery of patients who had become infected with COVID-19, according to Health Agency officials. 

CCP comes from the blood of individuals who had the virus and recovered.

In mid-April, the DOD began its effort to collect and manufacture the plasma. In late May, senior DOD officials announced a goal of collecting 8,000-10,000 units of CCP. 

The Defense Health Agency built on the foundation laid by the Armed Services Blood Program. Norquist celebrated the success of the campaign with the current amount at 10,745 units — and counting.

"I congratulate you for achieving thousands of units in such a short amount of time — that is no small feat. It is a testament to your hard work to conduct daily collections at blood donor centers and your willingness to venture into hot spots for mobile blood drives. It also would not be possible without the generosity of the approximately 3,000 donors who participated in the campaign," Norquist said.

Norquist praised those who participated acknowledging the "selfless act of volunteering to collect or donate convalescent plasma."

Scientists are still examining the plasma and its use in treating the disease. But current findings are that CCP is "both safe and promising," he said. The plasma is the first widely available antibody-based treatment for coronavirus.

"I am truly grateful to the donor center staff and headquarters personnel who made this drive a success, as well as our DOD men and women who stepped up to help their fellow Americans during this pivotal moment in time," he said. "DOD has supported our national coronavirus response in many ways, and yours is worthy of applause."

Norquist — who serves on the coronavirus task force — highlighted the department's efforts to produce protective gear and other equipment and that they are where they need to be. He noted that the DOD has helped more than 130 different nations fighting the same scourge.

He also spoke about the efforts military medical first responders have made in hard-hit U.S. cities and towns. He praised National Guard personnel for their efforts to test and support their fellow citizens in every state and territory.

Finally, he touted the DOD's vaccine efforts — from groundbreaking work by the Defense Advanced Research Projects Agency aimed at speeding development and manufacture of vaccines, to the logistical support from the military in Operation Warp Speed. 

Spotlight: Operation Warp Speed

More must be done, he said, but it is a good start and there is the possibility of 300 million initial doses of the vaccine being delivered by the end of the year.

Sharing the View

 

A soldier supporting Operation Inherent Resolve in Syria lets a child look through his binoculars, Nov. 2, 2020.

Command Call

 

Marine Corps Ashlee Ford repeats a command during a range training event at Fort Drum, N.Y., Nov. 6, 2020.

Drone Dog

 

Airmen watch a test of an unmanned ground vehicle at Tyndall Air Force Base, Fla., Nov. 10, 2020. Tyndall plans to use the “computerized canines” to aid in reconnaissance and enhanced security patrolling operations across the base.

Small Businesses Key to Nation's Defense

 Nov. 16, 2020 | BY C. Todd Lopez , DOD News

Small businesses are the backbone of the American economy and a large part of the defense of the nation, the Defense Department's director for the Office of Small Business said today.

Small businesses make up 99.7% of U.S. firms and create 64% of net new private sector jobs, said Amy Murray, who spoke during a keynote address before members of the National Defense Industrial Association. Murray also serves as the department's deputy director for industrial policy.

In fiscal year 2019, Murray said, DOD awarded over $75 billion in prime contracts to small businesses, providing an opportunity for those business owners to contribute to national security by providing both combat power to U.S. troops and economic power to the nation.

"Small businesses are the backbone of the American economy," Murray said. "[They] represent 67% of businesses that are awarded contracts in the DOD — creating hundreds of thousands of jobs."

By their very size, Murray said, small businesses also benefit the department's need to more adequately adapt to the new security environment.

"Small businesses are key to DOD's mission and innovation initiatives," she said. "Their agility delivers the speed and performance to transform the defense industrial base and provide competitive advantage. And this agility drives ... value faster by increasing innovation, responsiveness, customer satisfaction, productivity and quality."

The mission of the Office of Small Business Programs, or OSBP, Murray said, is to maximize opportunities for small businesses. She said the department has achieved it's small business prime contracting goal every year since fiscal year 2014 and received a procurement scorecard grade of 'A' for six consecutive years.

Why do we have these goals, and why do we need small business participation?. Murray said 99.7% of all employer firms are small businesses, and 97.5% of all identified exporters are small businesses. "Small businesses produce 16.5 times more patents than large patenting firms and create more than half of non-farm private gross domestic product — which is significant to our economy," she said.

Protecting the Industrial Base for U.S. Security

The industrial policy team's efforts also protect American businesses from being influenced by investment by foreign adversaries. That's part of the industrial policy team's "protect" line of effort, Murray said.

"These are the hard tools that we use to deter those who would seek to use America's traditional strengths — openness and fair competition — against us," she said. "This is the team that identifies those transactions, or economic activities, which undermine our economic and national security."

Much work done in this area is in partnership with the Committee on Foreign Investment in the United States, or CFIUS. As part of the mission to protect American companies from adversarial investment, she said, it is important to recognize that during a crisis such as that posed by COVID-19, the defense industrial base becomes vulnerable to adversarial capital.

Coronavirus: DOD Response

"We need to ensure companies can stay in business without losing their precious intellectual property, the foundation of so many critical technologies," Murray said. "CFIUS now has jurisdiction over non-controlling investments for innovative technology, critical infrastructure, and personal data, and certain real estate transactions, in addition to the long-standing jurisdiction over transactions that could result in foreign control of a U.S. business."

During the COVID-19 crisis, Murray said, the department became more acutely aware of the fragility of the U.S. industrial supply chain. In response, more investments through the Defense Production Act have been made to further strengthen the U.S. defense industrial base.

Horse Course

 

Marines participate in a horsemanship course at Marine Corps Mountain Warfare Training Center in Bridgeport, Calif., Oct. 20, 2020. The course teaches students how to ride horses, load pack animals and maintain animals for military applications in remote and dangerous environments.

Helicopter Ops

 

Coast Guardsmen conduct helicopter operations aboard the Coast Guard Cutter Diligence in the Caribbean Sea, Oct. 28, 2020.

Shooting Soldier

 

A member of the Georgia Army National Guard conducts his individual weapons qualification at Fort Stewart, Ga., Nov. 13, 2020.