Another Year, Another Failed Pentagon Audit

Another Year, Another Failed Pentagon Audit

REUTERS/Jason Reed

The Department of Defense underwent its fifth annual financial audit this year, and for the fifth time in a row, it failed.

This year’s audit involved a team of 1,600 analysts who visited 220 sites in person and 750 sites virtually as they reviewed the Pentagon’s $3.5 trillion in assets and $3.7 trillion in liabilities. The overall audit was broken down into 27 units, of which nine received “clean” or passing grades, one received a modified grade, which can pass once an identified issue is resolved, and the rest received disclaimers due to a lack of complete data.

The cost of the audit was estimated to be $218 million.

Defense Department Comptroller Mike McCord said the results were similar to last year’s. “We failed to get an ‘A’,” he told reporters earlier this week. “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.”

McCord said he expects to see steady improvement in the use of financial controls at the Pentagon, but there are still challenges ahead. “Valuing properties is probably the hardest thing for us to do,” he said. “I would say systems are probably the most important thing for us to do—reducing the number of systems, getting the right controls on systems. There are areas where I think that real progress is going to come in the next two years. But having it be across the board — it has to be across the board for these opinions to flip over — and that, I think, is going to be hard.”

McCord added that the war in Ukraine has served as an important reminder of the need to maintain accurate records. “We've not been in a conflict with a peer competitor, a kinetic conflict as the Ukrainians are with the Russians,” he said. “And, so we've not been in a position where we've got only a few days of some critical munition left. Right? But we are now supporting a partner who is and so when they appeal to us for help and say, I've got a week's worth left of something … when can you get me more? I mean that's, to me, a really great example of why it matters to get this sort of thing right, of counting inventory, knowing where it is and knowing when it is.”

Dive into the fiscal year 2022 Defense Department audit here.