Got Your Six: The Anatomy of Pentagon’s 6th Consecutive Audit Fail
What is a Pentagon audit?
Pentagon financial audits are a relatively new concept, beginning in 2017. Here’s the kicker: The fiduciary arm of the Department of Defense (DoD), headquartered at the Pentagon (a federal agency and the largest recipient of federal discretionary spending) is tasked with crucial financial duties, from budget formulation for the military-industrial complex and national defense to oversight of contracts and grants.
And has yet to pass a single audit.
It’s like the annual fiscal checkup your accountant advises. But on a massive, national scale.
So, what’s happening behind the scenes, and why has the DoD struggled to achieve a clean bill of financial health?
Let’s peel back the layers.
Why the lack of clean audits?
To start, the process of conducting audits for a colossal entity, with $3.8 trillion in assets and $4.0 trillion in liabilities as of 2023, such as the DoD is a multi-step process. According to Pentagon officials, 29 standalone sub-audits are carried out to cover all reporting entities of the DoD by independent accounting firms and the DoD Inspector General.
Still, members of the Senate who oppose the DoD’s perceived lack of accountability for its budget allocations strive to condemn the superfluous nature of the expenditure. They are endeavoring to pass bipartisan legislation that would penalize each failed audit by the federal agency, starting with the “Audit the Pentagon Act of 2021.” Reintroduced as the “Audit the Pentagon Act of 2023” this June, the DoD faces repeat scrutiny for fraud, abuse, and waste from Congress.
The bill was introduced by Democratic Representative Barbara Lee and sponsored by Senators Bernie Sanders (I-VT), Chuck Grassley (R-IA), and Edward J. Markey (D-Mass). If enacted, the penalty under the bill would entail that the DoD must return 1% of its budget to the Treasury upon each annual audit failure.
In 2020, then-Acting Comptroller Thomas Harker suggested that the Pentagon could potentially pass its annual audit by 2027. However, doubts about this milestone’s viability have arisen from Michael J. McCord, the current Under Secretary of Defense (Comptroller) and Chief Financial Officer for the U.S. Defense Department since June 3, 2021.
“Things are showing progress,” remarked Mr. McCord to reporters on Nov. 15. “But it’s not enough.”
Simultaneously, the Biden Administration faces criticism for requesting $114 million for “Diversity, Equity, and Inclusion (DEI)” in the FY 2024 DoD budget. This request comes amid ongoing audit discrepancies where trillions of U.S. dollars remain unaccounted for.
“The Biden Admin[istration]’s focus on progressivism over warfighting continues to exacerbate the military recruiting crisis,” wrote the Republican-led House Oversight Committee on X (formerly Twitter). “And calls into action our level of military preparedness.”
Rep. Blaine Luetkemeyer (R-MO), another Republican leader, commented, “Americans are currently being held hostage, and global conflict surrounds us,” referencing ongoing conflicts like the Israel-Gaza and Russia-Ukraine wars.
“Yet the Pentagon has the gall to ask for $114 million for DEI.”
The future trajectory remains uncertain. While some are optimistic about potential progress in audit outcomes, cautionary voices, including figures like McCord, highlight the significant challenges embedded in the DoD’s financial landscape.
As the nation advances, the Department’s management of federal discretionary spending remains a hot topic of debate and a subject of rigorous scrutiny. What lies ahead for the DoD’s financial accountability is a question echoing within Capitol Hill and beyond.
AI as a Solution: Revolutionizing the DoD’s Financial Behavior
Make no mistake — the future of the DoD’s financial actions hangs in the balance, with uncertainty casting a shadow. Amidst this, AI emerges as a potential game-changer. Integrating AI into auditing practices could empower the Pentagon to streamline complex procedures, enhance transparency, and provide real-time, error-free assessments. Notable AI accounting tools like ClickUp, Vic.ai, Bill, Indy, Zeni, Docyt, Gridlex, and Booke, along with major firms like Deloitte, PwC, Ernst & Young (EY), and KPMG, showcase the accuracy of AI in handling vast datasets, detecting fraud, and assessing risks swiftly.
While ethical concerns persist, AI is positioned to revolutionize the DoD’s financial landscape, addressing its longstanding shortcomings. The nation keenly observes as the DoD navigates audits, technology, and a future shaped by newfound accountability.
Citations
Roque, A. (2023, November 16). With trillions at play, Pentagon Fails Audit for sixth year in a row. Breaking Defense. https://breakingdefense.com/2023/11/with-trillions-at-play-pentagon-fails-audit-for-sixth-year-in-a-row/#:~:text=The%20department%20has%20now%20failed,an%20independent%20public%20accounting%20firm.
Bipartisan Senate group introduces bill to force clean audit of … (n.d.). https://thehill.com/homenews/4061378-bipartisan-senate-group-introduces-bill-to-force-clean-audit-of-pentagon-funding-amid-price-gouging-concerns/
Carbonaro, G. (2023, November 22). Pentagon’s plan to spend over $100m on Diversity Training Sparks Fury. Newsweek. https://www.newsweek.com/pentagon-plan-spend-hundred-million-diversity-training-sparks-fury-1845887
