The Pentagon has failed its financial audit for the 6th year in a row, with officials saying it could take years before it gets a passing grade.
“Things are showing progress, but it’s not enough,” Mike McCord, the Defense Department’s (DOD’s) chief financial officer, told reporters at a Nov. 15 briefing.
Although the Pentagon is working to improve the health of its financial accounting systems, getting to the point at which it passes a department-wide audit could be years away, he said.
One other sub-agency received a “qualified” audit opinion in 2023, which is better than a fail but not good enough to pass.
The remaining 18 sub-agencies failed.
With this year’s failing grade, the DOD remains the only Cabinet-level department that has never managed to earn a clean financial report.
‘We Need to Do Better’
Despite failing the audit, the Pentagon said it managed to make some progress in some areas and that, at the very least, no new DOD-wide material weaknesses were found this year.
He said that getting to the point at which the Pentagon gets an overall passing grade on its accounting systems “will take time” and that “there are no easy solutions to audit success.”
All 29 of the Pentagon’s sub-agencies must pass for the overall audit to get approval.
Mr. Austin promised to “focus on resolving key issues” preventing a passing grade and pledged to “accelerate” the department’s “audit remediation” efforts.
Progress and Shortcomings
The Pentagon began auditing itself in 2018. It was the last department to do so after Congress mandated the practice across government agencies in 1990.
This year, in order to carry out the audit, 1,600 auditors conducted 700 site visits and assessed $3.8 trillion in assets and $4 trillion in liabilities, the Pentagon said.
He added that the various changes and improvements that are being made “every day as a result of these audits positively affect every soldier, sailor, airman, marine, guardian, and DOD civilian.”
The Pentagon said that it had made audit progress across five areas in 2023: workforce modernization, business operations, quality decision-making, reliable networks, and enhanced public confidence.
“For example, the Department of the Air Force has deployed a total of 65 [automated systems] saving approximately 429,000 labor hours and improving the auditability of business processes,” the Pentagon said.
“The Department of the Navy reviewed $17 billion of unliquidated obligations, validating that 97 percent of the balances met audit requirements and uncovering $330 million available for deobligation,” it added.
Further, the Pentagon said it received positive audit opinions on 27 of 30 of its financial system examinations, with two opinions still pending.
Also, the Pentagon said it retired several “audit-relevant legacy systems” and “resolved three high priority improper payment programs” to reduce tax dollar waste.
“We are working hard to address audit findings as well as recommendations from the Government Accountability Office,” Mr. McCord said.
GAO made nine recommendations, such as updating guidelines for DOD and military departments on business and financial systems. It also suggested ensuring data reliability, offering guidance for sustained systems, and implementing a strategic workforce plan to address capability gaps.
Mr. McCord said that the Pentagon was “making good progress” on the GAO recommendations, “resulting in meaningful benefits.”
“But we must do more, and we cannot do this alone,” he added. The Pentagon has asked for help from Congress to streamline budget processes and update outdated rules and policies.
“This will result in total funds visibility and ultimately help us all deliver defense mission capabilities faster and with more agility,” the Pentagon said in a statement.
Criticism From Congress
Congress has become increasingly critical in recent years of the Pentagon’s failure to pass its audit.
Sen. Rand Paul (R-Ky.) said in a statement that the latest failure shows the need for more accountability at the Pentagon.
Similar legislation has been introduced before but failed to pass.
“We need to ensure that our defense spending is accurate, accountable, and in the best interest of American Taxpayers,” Mr. Paul said at the time.
The GOP-led House Oversight Committee said the Pentagon’s inability to get a passing grade on its accounting systems undermines national security.
“DOD’s inability to adequately track assets risks our military readiness and represents a flagrant disregard for taxpayer funds, even as it receives nearly a trillion dollars annually,” the committee said in a statement.