Why Can’t the Pentagon Pass An Audit?

Budget & Tax, National Security, | Weekly Wastebasket

May 18, 2000 | 3 min read | Print Article

The Pentagon’s accounting records are so convoluted that billions of dollars cannot be accounted for, charges a new government report.

In fact, no major part of the Department of Defense (DOD) has ever passed an audit, according to recent congressional testimony by the non-partisan U.S. General Accounting Office (GAO), the investigative arm of Congress. The Pentagon admitted that flawed business systems and practices are common within the agency and said it would take decades to get all of the agency books in order. Accounting problems led the GAO in 1995 to put DOD financial management on GAO’s list of agencies that are at high-risk of waste, fraud, abuse, and mismanagement.

Some of the GAO’s findings are astonishing:

About 58 percent of the material the Pentagon possesses ($36.9 billion worth) are items it does not need.
Over the past three years, the Navy lost track of $3 billion in equipment and other items.
At one distribution center for the Navy, there was a backlog of over 122,000 items that had not been properly processed, leading the Navy to purchase items it didn’t need.
The $600 billion Pentagon inventory of weapons systems and other items failed to include nearly $6 billion in Army communications defense equipment, $7.6 billion in Navy aircraft engines and about $7 billion in Air Force electronic pods that attach to warplanes.

The GAO testimony follows a March report by the office of the Defense Department’s Inspector General that concluded that the Pentagon’s books were in such disarray that they couldn’t be audited. In fact, the Pentagon’s books are in such poor shape that the military’s money managers last year made almost $7 trillion in adjustments to their financial ledgers in an attempt in make them add up. The Inspector General also concluded the Pentagon could not show receipts for $2.3 trillion of those changes and half a trillion dollars of the adjustments were corrections of earlier mistakes.

The Pentagon is not alone: Only 11 of 24 big federal agencies could produce reliable financial statements for last fiscal year. Taxpayers must be prepared to pass an audit. It is high time Congress demanded the same level of accountability from the Pentagon and other high-risk agencies.