DoD Faces Mounting Pressure To Pass A First Ever Clean Audit

 

"MILITARY TIMES" By Ellen Ioanes

"House lawmakers and government watchdogs express skepticism about the Defense Department’s ability to produce a clean financial audit by a Dec. 31, 2028, statutory deadline."

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"The House Committee on Oversight and Government Reform held a hearing on the DoD years-long struggle to produce a clean financial audit despite claiming around half of the government’s discretionary spending.

Congress passed a measure as part of the 2024 National Defense Authorization Act that requires the DoD to produce a clean audit by Dec. 31, 2028. “Clean” means a clear enough accounting of the military’s assets, what was budgeted and spent, along with evidence and documentation, so that the Government Accountability Office can make an accurate assessment of the entire federal government’s finances.

The Marine Corps has been the only service to pass an audit since 2018, when it was first mandated to conduct a full audit. To date, the DoD has never passed a full, clean audit, according to the GAO.

Over the course of Wednesday’s hearing, both the members of the subcommittee on government operations and some of the witnesses had some concern about the department’s ability to pull it off.

“That’s a standard that every other large [government] agency is able to meet, and meet regularly,” Rep. Kweisi Mfume, D-Md., said in his opening remarks.

Knowing that the Pentagon has failed to deliver on that, Mfume said he could not vote for the proposed massive increase to DoD’s budget — from around $901 billion for fiscal 2026 to $1.5 trillion for fiscal 2027.

In 2024, the committee instituted a new system for the DoD’s auditing process, which follows a rubric or scorecard. Since that strategy was implemented, committee chairman Pete Sessions, R-Texas, said, “Progress was made but not enough to ensure full financial transparency and accountability. Financial transparency and accountability are core principles of good government.”

The underlying problems, as both Sessions and Asif Khan, director of the GAO, pointed out, are the internal accounting, budget and expenditure mechanisms across the DoD.

This is not a new issue; in fact, it has been going on for 30 years, according to Khan’s pre-hearing witness testimony.

“In 1995, GAO designated DoD financial management as a high-risk area because of pervasive weaknesses in its financial management systems, business processes, internal controls, corrective action plans, acquisition management and financial monitoring and reporting,” the testimony reads. “In 2025, we expanded DoD’s financial management high-risk area to include fraud risk management.”

That potential for fraud rises with a budget increase like the one proposed, one witness said.

“Any time there is an influx of cash or funds into any organization, the likelihood of increased risk of fraud, waste, and abuse coincides with that,” Brett Mansfield, deputy inspector general for audit in DoD’s Office of the Inspector General.

“I’m not sure if it’s a one-for-one [but] there is definitely a positive relationship between an influx of funds and the increased risks,” he added."

DoD faces mounting pressure to pass clean audit for the first time

Pentagon Fails Sixth Straight Audit, With Number Of Passing Grades Stagnant

 

Glad I Did Not Take The Job - The Destroyer Without A Round For Its Gun

DEFENSE NEWS By Noah Robertson

The Pentagon resolved around 500 Notifications of Findings and Recommendations, [NFR's] or specific problems found in last year’s audit. 2,500 more NFRs were identified this year, a total that includes new and recurring issues.

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"For the sixth year in a row, the Pentagon failed its annual audit.

The result is not a surprise. The Department of Defense’s assets are vast and decentralized, amounting to $3.8 trillion alongside $4 trillion in liabilities. These are located in all 50 states and more than 4,500 sites around the world.

Since the Pentagon began auditing itself in 2018 — the last department to do so after Congress required the practice across the government in 1990 — it’s solved some of its easiest accounting problems. Now change each year is more incremental.

If there’s change at all, that is — last year, auditors only ratedseven of the nearly 30 sub-audits as clean. This year too there were seven.

One other was rated as “qualified,” the next step down in accounting jargon. Three more audits are still ongoing. The remaining 18 were given failing grades.

Pentagon officials have tried to reassure the public there is progress, despite the same topline rating. Speaking to reporters this week, ComptrollerMike McCord pointed to three areas.

The first is movement toward a resolved fund balance with the Treasury Department, meaning the two departments are getting closer to matching their ledgers. This consistency helps prevent fraud.

The second is the increasing use of automated programs, or bots, for rote tasks, freeing up accountants’ time for more important work. McCord said that in the Navy and Air Force alone, the use of bots saved around 600,000 hours.

The last is more relevant to the battlefield. Since Russia invaded Ukraine in early 2022, the U.S. Defense Department has put a magnifying glass to its stockpiles while offering support. That effort proved useful when war began between Israel and Hamas this October. When Israel asked the U.S. for aid, McCord said, the U.S. knew what it had, where the capabilities were and what condition they were in.

“The Ukraine experience informed the Israeli one because there was already a lot of good practice built up,” he said.

Smaller successes aside, audits are still pass-fail tests and the Pentagon continues to fail, McCord acknowledged.

“It’s not enough,” McCord said. “The secretary [of defense] feels that we need to be doing better at this and moving faster.”

There is just under $5 billion worth of U.S. stockpiles that can still be sent to assist Kyiv, McCord said. At a Pentagon briefing last week, spokeswoman Sabrina Singh said there was $1 billion remaining to replenish those stocks.

The drawdown money leftover is itself the product of an accounting error. Earlier this year, Pentagon officials realized they had often been valuing the aid sent to Ukraine at its sticker cost rather than factoring in age — the equivalent of an insurance company reimbursing a totaled car at its original purchase price rather than its value at the time of a crash.

The funding vehicles being used to aid Israel in its war against Hamas are far different, in part because Israel has a large defense-industrial base and decades-long relationships with American arms manufacturers. But the road to keep funding them without more money approved by Congress is narrow, McCord said

“The running room we have to actually help Israel is much more constrained [than it is for Ukraine] because we don’t have any action by Congress yet,” he said.

Meanwhile, on Capitol Hill, the Pentagon’s inability to get a passing grade continues to draw lawmakers’ ire. This summer, House Republicans held a hearing focused on the auditing failures.

This week, the House passed a continuing resolution to keep the government funded through early next year. The Pentagon has said such temporary spending bills make its accounting process more difficult."

https://www.defensenews.com/pentagon/2023/11/16/pentagon-fails-sixth-audit-with-number-of-passing-grades-stagnant/

About Noah Robertson

Noah Robertson is the Pentagon reporter at Defense News. He previously covered national security for the Christian Science Monitor. He holds a bachelor’s degree in English and government from the College of William & Mary in his hometown of Williamsburg, Virginia.