Assistant Secretary of the Navy (Financial Management and Audit) Russell Rumbaugh delivers remarks at the U.S. Marine Corps Audit Awards ceremony at the Marine Barracks in Washington, DC, April 19, 2024. (DoD photo by U.S. Navy Petty Officer 1st Class Alexander Kubitza)
WASHINGTON — For 25 years, the Navy has been painstakingly migrating all of its myriad commands to a single 21st-century accounting system known as ERP (enterprise resource planning). This summer, the last major commands began converting to ERP, the Navy’s comptroller announced at a recent conference. When they’re finished sometime in 2026, it will enable not only the Navy’s first clean audit in history, Russell Rumbaugh said, but also an explosion of cutting-edge applications of big data analytics.
“Using these modern financial systems makes us auditable and unleashes the power of data,” Rumbaugh told Breaking Defense. Instead of data being scattered across multiple incompatible systems, ERP will handle “every single transaction,” he explained, and “the better your input is, the better the output will be. … Clean data makes every single data analysis you do better.”
It’s been a long and arduous journey to get to this starting point. “We implemented ERP, the Navy’s major financial management system, 25 years ago,” Rumbaugh said last week at the Potomac Officers Club Navy Summit. “We are just beginning the migration of our last major commands (Pacific Fleet, Fleet Forces Command and Reserve Forces Command). They will be fully integrated into our modern system by 2026.”
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“Everyone is excited about the potential of data analytics,” Rumbaugh said in a follow-up interview with Breaking Defense after his conference speeches. While his team is already using analytics with great success within the confines of the Navy’s existing systems, he said, “Ultimately, we need to get clean data in modern systems” — and that means ERP.
ERP is understandably exciting for experienced budget planners like Rumbaugh, who has spent his career dealing with defense spending in Congress, the Pentagon and academia and who calls auditing one of his “true passions.” But it should also open doors for data scientists, software vendors and anyone interested in more efficient management, he said, because ERP will provide a single, consistent and up-to-date record of everything the Navy pays for.
Currently, Rumbaugh said at the conference, all sorts of vendors are coming to him and offering him elaborate data visualization dashboards and other cutting-edge management tools, but “all the time I’m sitting there thinking that our data is in no way suited to represent that.”
Accountable, not verifiable
There is a crucial caveat to any discussion of the Department of Defense audits. It is not that the Navy or other defense organizations are missing a lot of important data—much less that they have somehow lost track of entire warehouses full of billions of dollars’ worth of weapons and spare parts, as reports on the audit problem often suggest.
The data is all there, somewhere. It’s just buried in different systems run by different organizations for different purposes. So getting an answer to a specific question requires time-consuming sifting through different documents. Essentially, the Defense Department is what accountants call a “shoebox customer”: someone who never throws away their receipts but never organizes them properly either, so they show up for their tax return with a shoebox full of crumpled pieces of paper.
“The Ministry of Defence is very responsibleit is simply not verifiable” Rumbaugh said at the conference. “We know where the things are that go ‘boom,’ we know where the money is being spent, (but) to answer those questions we have to interrogate a number of isolated systems.”
Unlike commercial accounting, the Defense Department’s data systems are designed to answer questions from Congress, not investors or auditors. Rumbaugh’s audit teams have extensive access to data on how much Congress has appropriated for various Navy functions and how much of that money the Navy has actually contracted (“obligated”), but they must ask separate offices to query separate systems to determine whether those obligated funds were actually disbursed, when, and how. What actually happened to the goods or services purchased with those funds — who used them, where they are stored, what was spent, and what is left over — is often tracked in other systems run by other organizations.
Skilled data scientists and experienced bureaucrats can cobble together these systems and get great results on a case-by-case basis, Rumbaugh said. “I love my data analytics teams. I think they’re doing a great job,” he told Breaking Defense. Using the Navy’s Jupiter system, part of the defense-wide Advana system, they’ve even “recovered about half a billion dollars in unspent funds” that could be used for more pressing purposes, he said at the conference.
But these current data efforts are “ad hoc,” he continued. That means each one requires “a huge amount of manual work,” he said, rather than being able to automate common tasks so users can get the updated answer at the click of a button. That lack of repeatability also causes third-party auditors to “freak out,” he said, who expect every single transaction to be done the same way and to strict and rigorous standards.
By moving all Navy commands to ERP, the repeatability problem will finally be solved by having all financial data in one system and one format that tracks funds throughout their lifecycle, from congressional authorization to contractual obligation to payment to the contractor.
In effect, ERP will “straitjacket” the data, Rumbaugh told Breaking Defense, by forcing the kind of machine-like repeatability and accuracy needed for both auditing and analytical algorithms. “It puts us in a modern financial system where you just can’t fake it anymore,” he said.
The transition will not be easy, he admitted at the conference and asked the representatives of the contracting parties in the audience for help.
Audits are a “mandatory function,” Rumbaugh said at the Potomac Officers Club event. “It’s going to be a little difficult as we try to link these systems together. We’re going to need help with the software. We’re going to need help with the hardware. We’re going to need consulting.”
“I want you to be excited about this,” he said.
