Pentagon audit, take 5: ‘Curses, failed again!’
Special to Stars and Stripes December 27, 2022
The latest iteration of the annual audit of the Pentagon is now available to the public within the larger, annual, “Agency Financial Report.” And, as has been the case every year since 2018, most elements of the Department of Defense failed to achieve what is called a “clean opinion.” For all those Fractured Fairytale fans out there, it’s like that old Snidely Whiplash quote, “Curses, foiled again!” But make that “failed.”
The Pentagon’s comptroller, Mike McCord, said, “I would not say that we that we flunked. The process is important for us to do, and it is making us get better. It is not making us get better as fast as we want.” OK, you say “po-tah-to” and we’ll say “po-tay-to.” But let’s not call the whole thing off. It is important to show Congress and American taxpayers that proper procedures are in place to account for Pentagon inventories and processes.
Of the 27 military agencies audited, seven received a clean opinion — passing this audit. These included the Army Corps of Engineers and the Defense Finance Accounting Service. The Medicare Eligible Retiree Healthcare Fund received a qualified opinion, meaning it must first resolve some key issues to receive a clean opinion.
However, none of the military services received a clean opinion. The Marine Corps, much smaller than the other services except the brand-new Space Force, is likely to be the first military service to pass. But the Marines just moved to a two-year audit cycle, and this is the first year of that cycle. Perhaps next year we will see a military service pass for the first time.
Taxpayers for Common Sense has said for years that “passing” an audit shouldn’t be considered the be-all/end-all of oversight of the massive Pentagon budget, which accounts for half of all federal discretionary spending. The question should be, is the money being spent appropriately?
We’re glad to hear that the comptroller agrees with us: “Not to undervalue the audit, but in fairness, passing an audit doesn’t tell you that you spent the money wisely, it shows that you can match the records of the obligations in the financial system to the contracts.”
These annual audits are conducted by a number of outside, independent auditing firms and consolidated by the Department of Defense Inspector General. The resulting report appears starting at page 67 of the Agency Financial Report linked above. The report shows 28 “Identified Material Weaknesses [that result in] a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented or detected and corrected, in a timely manner.” All but one of those “Identified Material Weaknesses” is an overarching, systemic issue for the department. These include “Financial Management Systems Modernization, Access Controls, Segregation of Duties, Universe of Transactions, Fund Balance with Treasury” and “Accounts Payable.”
See what we mean? Snoozeville, right?
But … wait for it … one “Identified Material Weakness” really leaps out at you:
· Joint Strike Fighter Program
Hmmm. Of all the gin joints in all the world … or, in this case, all the ginormous procurement programs in all the Pentagon … why are we not surprised the F-35 makes this list of material weaknesses? Remember, it’s the most expensive weapon system ever produced by the U.S. Department of Defense (and that’s saying something!).
Of all the procurement programs, only the F-35 is singled out in this report.
“[T]he DoD did not account for or manage Joint Strike Fighter Program Government property, which is composed of Global Pooled Inventory and Support Equipment, or accurately record this property in an accountable property system of record. Despite ongoing remediation efforts, the DoD was unable to provide or obtain accurate and reliable data to verify the existence, completeness, or value of its Joint Strike Fighter Program Government property, and did not report Joint Strike Fighter Program assets on its financial statements as of September 30, 2022. The omission of the Joint Strike Fighter program resulted in a material misstatement on the financial statements.”
No accurate or reliable data regarding the U.S. government property in the F-35 program? And, it seems, this was the only individual procurement program that was found to have this deficiency?
Congress needs to stop throwing money at this program until its numerous oversight and transparency deficiencies are addressed.
Given the importance of the Inspector General to the carrying out of this audit, it’s ironic in the extreme that there is no Senate-confirmed IG at the Pentagon, and there hasn’t been since January 2016. Instead, an acting Inspector General is in place until the Biden administration nominee is confirmed.
What’s the holdup? Roughly a dozen nominees for senior Pentagon positions are idling in the Senate. Sen. Josh Hawley, R-Mo., has placed a hold on some of the nominees until he receives a briefing on the American withdrawal from Afghanistan. As he said in a statement on the Senate Floor “I want accountability for what happened in Afghanistan … and specifically, I want a public hearing on this [U.S. Central Command] report.”
We agree: oversight of military missions is important. But it seems absurd that “oversight” and “transparency” are the cited reasons for Hawley’s objection, while the nomination for Pentagon Inspector General sits idle in the Senate at his own behest.
The IG is instrumental in the audit. And other nominations being held up, like the assistant secretary of the Navy for financial management and comptroller, are for positions that provide the critical leadership and oversight of financial matters key to a successful audit.
Irony? Hypocrisy? However you define it, Congress can’t statutorily require a Pentagon audit on the one hand and refuse to confirm people into the senior positions that oversee that audit on the other. It’s long past time to provide the Pentagon the necessary capabilities and resources to drive toward a clean audit opinion. Such a clean audit of the Department of Defense is something Congress should demand on behalf of all American taxpayers — and for our national security.
Steve Ellis is president of Taxpayers for Common Sense, a nonpartisan budget watchdog that has served as an independent voice for the American taxpayer since 1995. It works to ensure that taxpayer dollars are spent responsibly and that government operates within its means.