The US Department of Defense has flunked its sixth annual independent audit due to failing to provide auditors with sufficient financial data to complete the evaluation, as per a report released by the Pentagon on Wednesday. This marks the sixth consecutive year of failure since the department was mandated to commence auditing itself in 2018. The outcome of the audit was deemed a “disclaimer of opinion,” the most unfavorable grade possible, which is consistent with the rating received by the department in the previous year. The assessment considered 29 component audits, of which 18 received disclaimers of opinion. Only seven components attained “unqualified opinions,” the most desirable rating, while one received a “qualified opinion.”
Pentagon Chief Financial Officer Michael McCord attempted to put a positive spin on the audit results, noting in a press release that the department is “making progress toward the goal of a clean audit.” However, this claim seems dubious considering the longstanding pattern of unfavorable audit results.
In a phone call with reporters on Wednesday, McCord conceded that the Pentagon had not anticipated passing the audit but optimistically stated that steps are being taken to settle the department’s balance of funds with the Treasury Department. He also lauded the use of automated programs for routine tasks, stating that “bots” had saved 600,000 hours of work between the Navy and Air Force alone and that a detailed inventory of stockpiles had been conducted while providing billions of dollars in military aid to Ukraine.
Despite McCord’s assertions, the Pentagon is still the only cabinet-level department to have never received a clean financial bill of health. With $3.8 trillion in assets, $4 trillion in liabilities, and insufficient meaningful oversight, the risk of waste and fraud is substantial. The Government Accountability Office has included the department’s business systems modernization and financial management initiatives on its “High-Risk List” – a catalog of federal programs at high risk of fraud, abuse, mismanagement, and waste – for almost 30 years.
The Pentagon consumes more than half of the US discretionary budget, and policymakers in Washington are hesitant to reduce military spending, fearing backlash from the defense industry, which is a significant source of donations for both sides of the political aisle. Defense Department staff have even acknowledged “misplacing” trillions of dollars in transactions, accounting discrepancies that have not been resolved.
Efforts in Congress to rein in excessive defense spending have repeatedly come up short. The Audit the Pentagon Act, introduced in the Senate last year, would punish any military department that fails its annual audit by forcing it to relinquish 1% of its budget but never made it for a vote.
There is clear evidence of a systemic issue in the Defense Department, and failure to address these concerns could have dire consequences. It’s crucial for lawmakers to put aside political differences and work toward rectifying the financial and managerial deficiencies plaguing the Pentagon. Otherwise, the risk of fraud, abuse, and waste will only continue to grow.
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