In this episode of the "All Things Financial Management" podcast, presented by the American Society of Military Comptrollers (ASMC) and Guidehouse, Mr. Aaron Harding, Chief Financial Officer, and Chief Operating Officer at Defense Security Cooperation Agency (DSCA), sat down with host Tom Rhoads to discuss security cooperation, its significance, and challenges.
Tom Rhoads: Would you mind taking a moment and tell us about your background and what brought you to your current position as the Chief Financial Officer for the Defense Security Cooperation Agency? Or maybe in other words, can you just share with us your story?
Aaron Harding: I'd be happy to share that with you. My career in the field of security cooperation as well as financial management has been quite a dynamic and rewarding process. However, before I get into the financial and security cooperation aspects, I do want to share that I started my career in the private sector, working information technology primarily for DOD, but also for a number of other federal agencies as well. I did this for a little over a decade, and then transition to the public sector with DOD, performing IT in support of financial management systems. And as any good IT professional will tell you, it's important to understand the business for which your IT solutions are meant to enable and support, which I did. And in doing so, I gained a pretty good understanding of financial management and actually made the transition from IT to FM, for which I've been performing for over the past 15 years. And I haven't looked back.
I'm currently, as you said, holding the role of the Chief Financial Officer at DSCA, but I also have another role as the Chief Operating Officer. It's in these capacities that I oversee a wide range of critical functions including financial operations, IT, physical security, and facility policy and operations. But one of the most significant aspects of my role involves managing the financial aspects of the Foreign Military Sales program and the Foreign Military Sales Trust Fund, which collectively hold a program value exceeding a half a trillion dollars. Pretty large account. This encompasses management of the four military financing program as well, which some may have heard of in the news lately. I've also had the privilege of serving as the Acting Deputy Director of the agency on two separate occasions for approximately one year in total, which afforded me the opportunity to oversee the agency's diverse portfolio of security cooperation programs. This has involved close collaboration with external stakeholders to ensure that DSCA's activities were closely synchronized with our nation's foreign policy and national security goals.
In addition to this, I played a key role in a pretty recent transformation of the organization, which aimed to improve operational effectiveness and better align our efforts with the national defense strategy. And ultimately, my journey has been shaped by deep commitment to contributing to global security and forging strong relationships with other nations. The field of security cooperation offers incredible opportunities to make a lasting impact on international stability and cooperation, and I'm honored to be a part of it.
Tom Rhoads: Mr. Harding, a Chief Operating Officer, and a Chief Financial Officer as standalone positions is a lot of work for one person for each role, and you're wearing both those hats. I suspect that keeps you very busy.
Aaron Harding: Yes. It's very hard to understand where the priorities are when you have so many different business lanes for which you're responsible. so, it just takes close synchronization with my leadership to ensure that we're focused on the things that matter most.
Tom Rhoads: Speaking of business lanes or business operations, for our listeners who may not know about what security cooperation is, would you mind taking a moment and share with us what it is why it's so important?
Aaron Harding: Absolutely. The US security cooperation comprises all activities undertaken by DOD to encourage and enable US allies and partner nations to work with United States to achieve strategic objectives. Security cooperation activities in some represent a key tool of US national security and foreign policy, which is why they are subject to continuous supervision in the general direction of this Secretary of State as well as the Secretary of Defense. As an excellent example of how security cooperation helps US allies and partners is our ongoing support of Ukraine. Since Russia launched its premeditated and unprovoked and brutal war against Ukraine on February 24, 2022, the United States has invested more than $43 billion for training and equipment to help Ukraine preserve its territorial integrity, secure its borders, and improve interoperability with NATO.
While security cooperation obviously benefits our allies and partners, it also provides the US with benefits as well. First, training and equipping our allies and partners to independently protect their sovereignty and the safety of their people reduces the possibility of direct US involvement. Second, economies of scale and increased buying power. The majority of what the US defense exports to our partners are purchased. We also are buying for ourselves as well for the US military, thereby lowering unit costs for the US and the partner. Third, interoperability. I think we all can understand it's unlikely that future conflicts will not include coalition forces, meaning we will go to war or have a conflict side by side with our partners. Not likely that we'll do that independent of that. So having interoperability amongst the coalition partners improves the effectiveness of the coalition. And then lastly, support to the US economy. The defense industrial base, as we know, is over a $600 billion industry annually and is a key contributor to the US economy in terms of GDP and jobs.
Tom Rhoads: Mr. Harding, with respect to financial management and security cooperation, what are some of the biggest challenges that you see and what are you doing about them?
Aaron Harding: I think there's three total challenges that I see across the community. And they're not just specific to security cooperation and financial management. The first one really applies to a number of other business lanes, which is that senior leaders are performing the work of their subordinates. Not entirely sure why this seems to be so prominent in both the public and private sector, frankly. However, I suspect it's due to several reasons. One, we often promote strong action officers in a leadership or management positions based on past performance as an action officer without ensuring that they have the requisite leadership skills. And then two, a lack of trust may contribute to this challenge, not trusting the subordinate is capable or can be relied upon to perform the work. Whatever the reasons, the consequences are real and have a cascading negative effect across the organizations, that it also diminishes and erodes leadership at both the strategic and tactical levels and hinders professional development of the workforce.
So in my estimation, I think leaders should understand, embrace, and perform their respective role, which is to set strategic goals and objectives, establish clear expectations with their subordinates, and set the conditions for their teams to be successful. Delegation with oversight is critical not only to the success of an organization, but critical to the development of each employee as well. At DSCA, I'm very proud to say that we fully embrace the concept of an empowered workforce. Empowerment is actually one of our agency's core values established by our director, Jim Hirsch, and we strive to align responsibilities with the required authority as much as we possibly can.
Secondly, and I think this is also pretty pervasive across both private and public sector, is the pandemic's impact on the workforce. Many individuals have reset what "work" means to them. And consequently, their career goals have evolved, and we are seeing a greater emphasis on life in the work-life balance equation. In my estimation, work is what you do. It's not where you do it. So, I think of it as a verb, not a noun. And at DSCA, we understand the new priorities of current and future employees and employed OPM's telework policy to provide maximum flexibility to the workforce. Currently, that is that we have individuals who are required to come into the office at least two days per pay period. Other than that, they can enjoy telework. Further, our talent management division has partnered with other organizations within DOD to participate in virtual job fairs, which has provided our leadership the opportunity to broadcast career opportunities at DSCA to those applicants searching for more flexibility. And then consequently, we have onboarded many talented individuals who are providing great value towards the agency's mission while also achieving their own work-life balance goals.
And then lastly, the large item or issue across at least our financial management security cooperation area is audit. And we're not unique in this. However, we are somewhat unique in that we are responsible, DSCA, for reporting two separate sets of financial statements. The first is on the Title 10 side for DOD-appropriated funds. That rolls up into the defense-wide financial statements. We're currently a tier three entity. And that's overseen by OSD Comptroller. It's part of the big DOD audit that you hear a lot about in the news and also in your ongoing work in support of the department. The other financial statements that we're responsible for is that of the security assistance accounts, which are currently consolidated into the US government's financial statements. And we provide the oversight associated with those in partnership with OSD Comptroller and other partners at DFAS.
It was only in 2017 that the Treasury identified that these security assistance accounts are material to the financial statements of the US government, and required that these statements be audited, with the first audit started in an FY '22. As you can imagine, with the department already working to achieve audit readiness for almost a decade, they had some significant head start on us. We were largely excluded from those activities as they began to work on them. And so we've been working hard to catch up and try to lash ourselves up to all of the great work that our Title 10 partners have performed over the last decade to try to maximize the value of those efforts to support our ongoing issues.
To achieve this objective, however, DSCA is working through system modernizations of our own to retire legacy systems that have had minimal infrastructure changes over the past, believe it or not, 30 or 40 years, and antiquated data architecture with limited interoperability. The modernized systems will comply with the department's required financial structure and will help remediate audit findings. The good news here is the DSCA financial statement audit has not to date produced any unique findings as compared to the DOD side of the house. And we are making demonstrated progress in achieving our audit goals.
Tom Rhoads: So, Mr. Harding, amidst the current geopolitical tensions, could you elaborate on the significance of security cooperation between the United States and its allies, particularly ensuring Ukraine's stability and resilience?
Aaron Harding: We've provided unprecedented security assistance at an incredible speed to Ukraine. The security assistance we are providing to Ukraine is enabling critical success on the battlefield against the Russia invading force. The effort is global. The United States is leading the coalition of more than 50 countries from North America to Europe to Indo-Pacific that is providing security assistance to Ukraine. The latest presidential drawdown announced August 14 is the 43rd drawdown of the equipment for Ukraine since August of 2021. The latest security assistance package announced August 14 is also valued at $200 million. The United States has committed more than $41.3 billion in security assistance to Ukraine since February of 2022, underscoring our unwavering support for Ukraine's sovereignty.
And I would be remiss if I didn't mention just the unbelievable effort across DOD, specifically the services, Army carrying a big burden, but also the Navy and the Air Force, and the work that they've done to be able to provide these critical assets to our Ukrainian partners. It's really unbelievable the amount of work that the department has been able to accomplish in such a short period of time.
Tom Rhoads: With that level of complexity and the support from all the services, could you elaborate on one measure that the United States employs to enhance the ease of conducting business and fostering cooperation with our mission partners or partner nations?
Aaron Harding: I think it's important to recognize that while the US remains the global security cooperation partner of choice, the quality of US defense products can often be associated with high cost for our US allies and partner nations. Access to US defense exports enabled through what we call competitive financing is essential to security cooperation and development of US ally and partner defense capabilities.
So, over the years, we've enacted several reforms to lower the cost of doing business with the United States. Just earlier this year, we created what we call the Credit Assured Payment Schedules or CAPS policy, which provides an alternative to the standard cash upon acceptance term of sale, which requires full payment upfront. So earlier this summer, we announced also the new Bank Letter of Credit or BLOC policy. This program allows partners to keep a minimal amount of cash on deposit with the United States government, freeing up cash for other procurement priorities. It also provides the partner with the ability to make FMS payments in an extended timeline by the normal billing process. Using BLOC, DSCA provides three ways a letter of credit may be used: first, to replace national funds held in the FMS trust fund to make routine payments; second, to supplement national funds on one or more letters of offer and acceptance; and three, and finally, to secure payment schedules under the Credit Assured Payment Schedule term of sale.
Tom Rhoads: That's great. Thanks, Mr. Harding. And we'd like to wrap up each episode with some advice for early careers that are listening. So, knowing what you know now, what advice would you share to those who are just starting out their careers?
Aaron Harding: I'm thrilled to have an opportunity to share some advice and insights about pursuing a career in a security cooperation arena within the US government, specifically in the financial management area, so that I have an opportunity to work with you directly. As someone who has been in the position of CFO at DSCA, I've had a chance to witness firsthand the impact and importance of this security cooperation. Here are some key pieces of advice to consider as you explore and drive interest in this rewarding career path. I have quite the list, but I'm going to start with understanding the big picture. Security cooperation involves diplomatic, military, and economic efforts to strengthen relationships with partners and promote global security. It's crucial to have a broad understanding of international relations, geopolitics, and defense strategies in order to excel in this field.
Education and Skill Development — I encourage everyone to continue to pursue educational opportunities that align with international relations, security studies, economics, finance, or any other related field. Developing strong analytical and communication, negotiation, and problem-solving skills will serve you well in the complex world of security cooperation.
Networking — I encourage everyone to connect with professionals routinely. Make it part of your actual everyday effort agenda, who are already established in the security cooperation field. So connect with those folks. Attend conferences, workshops, seminars related to international security and defense to broaden your network and gain insights into industry trends.
Government & Military Familiarity — Given the nature of the field, having a solid understanding of the workings of the US government and military can be highly advantageous. Familiarize yourself with relevant policies, procedures, and agencies involved in security cooperation efforts.
Cultural Sensitivity — Effective security cooperation requires working closely with diverse cultures and nations. Developing cultural sensitivity and cross-cultural communication skills is essential for building trust and collaboration.
Languages — If you're able, consider learning a second language, especially one spoken in regions of strategic importance. This can greatly enhance your ability to communicate and negotiate effectively with partners from different backgrounds.
Flexibility & Adaptability — The security landscape is ever-evolving, and being able to adapt to new challenges and changing priorities is a valuable trait. Embrace a mindset of continuous learning and improvement.
Interdisciplinary Approach — Security cooperation involves various disciplines from policy, diplomacy, finance, logistics, etc. Being able to bridge these disciplines and understand their interplay is key to success.
Attention to Detail — In the financial aspect of security cooperation, meticulous attention to detail is vital. Small errors can have significant consequences, so being thorough is essential.
Passion for Global Security — To excel in this field, you need to have a genuine passion for contributing to global security and stability. Your dedication will drive your commitment to overcoming challenges and making a positive impact.
Seek Mentorship — Don't hesitate to seek out mentors who can guide you on your journey. Their insights and experiences can be invaluable as you navigate your early career.
Stay Up to Date with Current Events, International Developments, Defense News — Being well-informed will help you understand the context in which security cooperation efforts take place. Remember that a career in security cooperation offers the chance to contribute to a safer world for its meaningful partnerships with other nations. By combining your passion, skills, and determination, you can make a lasting impact on global security.
I wish the best to everyone listening as you explore this exciting and impactful career path. If you're interested, DSCA has a number of job opportunities that are currently on the street. I encourage everyone to go to USA jobs, type in DSCA, and see what exciting opportunities exist here. Thanks.
About ASMC: The American Society of Military Comptrollers is the nonprofit educational and professional organization for individuals, military, civilian, corporate, or retired involved or interested in the field of defense financial management. ASMC promotes the education and training of its members and supports the development and advancement of the profession of defense financial management. The society provides membership, education and professional development and certification programs to keep members in the overall financial management community abreast of current issues and encourages the exchange of information, techniques, and approaches.
Disclaimer: This podcast and related materials do not constitute an endorsement of Guidehouse Inc. or any other non-federal entity. The opinions, anecdotes, and any other comments made by the presenter or interviewee do not represent any position of the United States Government, the Department of Defense, or other components of the United States Government whether official or unofficial. Any opinions, anecdotes, and any other comments made by the presenter or interviewee are their own and are made in their personal capacity alone.
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