NEW CUMBERLAND, Pa. –
In a recent audit readiness after action review, the Defense Logistics Agency Distribution Commanding Officer, Navy Rear Adm. Kevin M. Jones, foot stomped the importance of audit readiness with his headquarters leadership and distribution center commanders. “We, DLA Distribution, must improve the quality of our work, increase our productivity and reduce our cost of doing business,” said Jones as he addressed his worldwide leadership team via video teleconference.
In 2010, Congress mandated that the Department of Defense have all of its financial statements validated and be audit ready by the end of fiscal year 2017. From 2017 through 2018, DLA received a disclaimer of opinion for its financial statements—meaning there were areas to review and improve.
DLA Distribution received an adverse opinion from the independent public accountants for fiscal year 2019. The majority of the 2019 challenges centered on the lack of accounting procedures, internal controls, oversight and proper documentation. The fiscal year 2020 goal is a modified opinion—formerly referred to as a qualified opinion—that indicates everything in the financial statement is good, with a few minor exceptions. Meeting this goal is critical because DLA Distribution holds $105 billion in inventory—the largest inventory for the nation’s services.
The audit process is meant to make the organization better and that was the focus of the after action review. “It’s important for us to continue to progress,” said Ms. Denise Kanelos, DLA Distribution audit readiness site lead. “Inventory accuracy is a priority. It comes down to our core work.”
Addressing his leadership, Jones said, “We need to highlight our successes so we can take best practices that we’ve discovered at our distribution centers and make them policy.”
Some of the highlighted best practices from the meeting include:
• Align contract language with audit readiness requirements, to allow distribution centers with a contracted workforce to align to the 98% inventory requirement;
• Establish quality performance expectations within the Defense Performance Management and Appraisal Program;
• Standardize audit checklists;
• Continue mock audits; and
• Understand unique challenges at distribution centers.
To assist distribution centers throughout the on-going audit journey, the Distribution audit team is developing an audit readiness SharePoint site, a help desk, audit readiness handbook and the new Patrick McCormick Quality Achievement Award to incentivize employees to follow standard operating procedures.
Employee training is another area of focus for the audit team. Jones expressed the importance of on-boarding new employees, and utilizing best practices for training new hires to know what right looks like. “We want our employees focused on quality when they come to work,” said Jones.
DLA Distribution Susquehanna, Pennsylvania, is currently establishing a virtual training warehouse for new employee, refresher, corrective and new mission simulation training. The focus of the new training area will be to validate performance proficiency before releasing an employee to their assigned duty station.
The lessons learned from the Fiscal Year 2019 Audit include:
• Perform large counts in smaller groups that are easier to count—stage materiel.
• Recounts should continue to match what is in the books;
• Distribution process workers should be trained properly and processes should follow the standard operating procedures and
• Focus on quality/honesty instead of metrics and metrics will follow.
Jones concluded his after action meeting with a challenge to his leadership team, stating, “Distribution’s inventory gets talked about at the Secretary of Defense level. This is important. We did well last year…we have to do better this year.”