How is it possible that DoD’s financial data are going to be sufficiently available and reliable to support audit-readiness assertions for Statements of Budgetary Resources (SBRs) by FY 2014, but not sufficiently available and reliable by that time to support audit-readiness assertions for Balance Sheets and Income Statements?

The answer, of course, is that budgetary accounting (which is what you have to do to produce audit-ready SBRs) is different from financial accounting (which is what you have to do to produce audit-ready Balance Sheets and Income Statements). Federal agencies have always had to do budgetary accounting (budgets, after all, are what they run on), but with the passage of the CFO and GMRA laws in the early 1990s, all federal agencies had to start doing financial accounting as well, because the Congress decided federal agencies ought to report on their financial performance in the same way that private-sector businesses do (even though federal agencies are not trying to make money, which is what financial accounting is designed to measure).

Just over two years ago, at another hearing on DoD’s audit problems, Senator Tom Carper of Delaware did something interesting: He asked Mr. Hale to “please tell us if some of what the Congress is demanding in this area doesn’t make sense.”

Unfortunately, Mr. Hale didn’t take him up on his offer – and he still hasn’t.