Defense Department likely to miss audit deadline | AMI Newswire

Norman Leahy
The Department of Defense is unlikely to meet a September 2017 deadline to present audited financial statements because of its inability to account for how much land, equipment, and office space it owns, a government report says.

According to the report issued Friday, the Defense Department is responsible for nearly 70 percent of the federal government’s property, buildings, and equipment, worth an estimated $630 billion.

But “poorly designed internal controls, processes, and systems” have plagued the DOD’s efforts to put its financial house in order, even in areas where the Defense Department says it has accounted for “some individually large-value and high-visibility equipment, such as ships and aircraft.”

But the Government Accountability Office says the numbers may be unreliable because the DOD has not fixed previously identified “internal control deficiencies” in its accounting process.

The report further identifies what it calls a series of “dealbreakers” the department admits could be “so severe that they could prevent the services from demonstrating audit readiness or succeeding in audits — such as the inability to produce a complete list of items the services own.”

The GAO states the DOD has yet to show it has made any progress toward correcting these “dealbreakers.”

Accounting for just how much property and equipment the department owns is an enormous undertaking.

The DOD says “it needs to value over 440,000 real property assets and several hundred thousand individual pieces of equipment” scattered at thousands of military bases across the globe.

The department’s financial accounting practices have been on the GAO’s “list of federal programs and operations at high risk of being vulnerable to fraud, waste, and abuse” since 1995.

Because of its longstanding “financial management deficiencies” and “control weaknesses,” the GAO says the Defense Department is unable to effectively control costs, anticipate future budget needs, and cannot adequately “prevent and detect fraud, waste, and abuse.”

According to Mandy Smithberger, director of the Center for Defense Information’s Straus Military Reform Project, the GAO report represents more of the same behavior from the DOD.

Smithberger told AMI Newswire that while the DOD will “probably get their books in order eventually, it continues to look unlikely that they’ll be able to keep to promised schedules” for a full financial audit.

“The inability to straighten the accounts is due to a number of factors,” Smithberger said, adding that putting the DOD’s books in order “hasn’t been a priority for the Department, and Congress hasn’t meaningfully held them accountable for failing to do it.”

Pressure on the DOD to show progress toward its readiness for an audit has lead to some high profile embarrassments.

Smithberger pointed to a piece she wrote for the Military Reform Project website in March of this year, in which she noted that, in 2014, the Defense Department trumpeted an inspector general’s report crediting the Marine Corps for producing the first “clean audit” of its finances.

The Defense Department inspector general withdrew its report last year. A subsequent GAO investigation criticized the inspector general for not obtaining “sufficient, appropriate evidence” for its conclusions.

Senator Charles Grassley (R-Iowa), went further, saying the inspector general’s report “wasn’t worth the paper it was written on.”

The Air Force, too, has had setbacks in trying to clean up its books.

An eight-year, $1 billion effort to bring hundreds of aging logistical software systems together into one program to be called the Expeditionary Combat Support System (ECCS) was cancelled in 2012 because it failed to produce what the Air Force called “any significant military capability.”

The program was intended to help the Air Force pass an audit. Instead, it resulted in what a 2014 Senate Homeland Security and Governmental Affairs committee report called “a waste of $1.1 billion in taxpayer money, a loss of eight years of effort, the same old inadequate logistics system far inferior to the promise of ECSS, and a major setback to the Air Force’s attempt to transform how it does business.”

In response to last week’s GAO report on its financial management, the Department of Defense said it would work with the military services to “ensure their audit readiness plans include specific milestones for addressing internal control deficiencies.”


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