Secrecy News

Pentagon Audit: “There Will Be Unpleasant Surprises”

For the first time in its history, the Department of Defense is now undergoing a financial audit.

The audit, announced last December, is itself a major undertaking that is expected to cost $367 million and to involve some 1200 auditors. The results are to be reported in November 2018.

“Until this year, DoD was the only large federal agency not under full financial statement audit,” Pentagon chief financial officer David L. Norquist told the Senate Budget Committee in March. Considering the size of the Pentagon, the project is “likely to be the largest audit ever undertaken,” he said.

The purpose of such an audit is to validate the agency’s financial statements, to detect error or fraud, to facilitate oversight, and to identify problem areas. Expectations regarding the outcome are moderate.

“DOD is not generally expected to receive an unqualified opinion [i.e. an opinion that affirms the accuracy of DoD financial statements] on its first-ever, agency-wide audit in FY2018,” the Congressional Research Service said in a new report last week. See Defense Primer: Understanding the Process for Auditing the Department of Defense, CRS In Focus, June 26, 2018.

In fact, “It took the Department of Homeland Security, a relatively new and much smaller enterprise, about ten years to get to its first clean opinion,” Mr. Norquist noted at the March Senate hearing.

In the case of the DoD audit, “I anticipate the audit process will uncover many places where our controls or processes are broken. There will be unpleasant surprises. Some of these problems may also prove frustratingly difficult to fix.”

“But the alternative is to operate in ignorance of the challenge and miss the opportunity to reform.¬† Fixing these vulnerabilities is essential to avoid costly or destructive problems in the future,” Mr. Norquist said.

3 thoughts on “Pentagon Audit: “There Will Be Unpleasant Surprises”

  1. Whenever secrecy is permitted, and that secrecy means Congress is in the blind, it creates the perfect situation for misappropriation of funds, aka theft. Contractors can pad their bills and contracting officers cannot elevate due to secrecy – if DOD sues, then our enemies will know what we are trying to do.

    The quest is noble and worth the cost even if all it accomplishes is to figure out better accounting measures to rein in waste, fraud, and abuse.

  2. Well this story began just before 9/11 when Rumsfeld announced the Pentagram couldn’t account for $2.3 Trillion. Since that’s orders of magnitude greater than the annual budget, it alerted others to the problem, and now the figure is up to $21 Trillion the Fedgov can’t account for.
    So this is well beyond just finding “better accounting measures”, it’s about how this was allowed to occur, by whom, and for how long can we lock them up.

  3. The $21 Trillion the Pentagon “can’t account for” are actually the sum of many years’ requests for supplemental money that could not be satisfactorily explained. However the actual Pentagon budget runs well over $1 Trillion a year, and if the report of the Special Inspector General for Afghanistan Reconstruction is anything to go by I’ll bet a third of it could be saved. Tens of millions of dollars were spent to build a LNG gas station in a location that had no roads and whose inhabitants could not afford to buy LNG powered cars and trucks anyway. And after five years the station was abandoned because there was no way the contractor could get the building materials to the site. He got paid in full, though. There’s so much like that. The F-35 and the aircraft carrier Gerald Ford were contracted for before the design was complete. Both are hugely over budget and years late being delivered. It may well turn out that neither one will ever be able to be used.

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