Defense was unable to complete its first audit until 2018.

Defense was unable to complete its first audit until 2018. Jeremy Christensen / EyeEm

Republicans Want a Briefing on the Defense Department’s ‘Lax’ Financial Management

The Pentagon failed its fifth-ever audit in 2022, but department officials say they are making some progress. 

Two top Republican lawmakers are asking the Defense Department for a briefing on its “lax” financial management. 

The Defense Department failed its fifth-ever department-wide audit, which was released in November. In January, the Government Accountability Office reported that “serious control issues” are preventing Defense from having complete and accurate records on government-furnished property in the hands of contractors and, thus, “reliable and auditable” financial information on that property. The department’s financial management has been on GAO’s high-risk list since 1995, while its contract management has been on the list since 1992. 

“DoD’s lax financial management and inability to adequately track weapons, equipment and other defense articles have raised serious concerns about DoD’s stewardship of taxpayer dollars, especially as DoD’s budget approaches 13 figures,” wrote Reps. James Comer, R-Ky., chairman of the House Oversight and Accountability Committee, and Pete Sessions, R-Texas, chairman of the committee’s government operations and federal workforce panel, to Defense Secretary Lloyd Austin on Monday. “The committee requests a staff-level briefing on DoD’s failed audit, financial management practices generally, and what it is doing to implement outstanding recommendations for improvement.” The lawmakers asked to schedule this briefing by March 13. 

In 1990, Congress required financial audits for agencies, but DoD was not able to complete its first until fiscal 2018. “I would not say that we've flunked. The process is important for us to do, and it is making us get better,” said Michael McCord, the undersecretary of defense (comptroller)/chief financial officer, in November, upon the release of the fifth audit. “It is not making us get better as fast as we want.” Of the department’s 27 entities, only seven received a clean audit, which represented 39% of its total assets. 

GAO made three recommendations in its January report: to shore up Defense-wide guidance on government furnished property in the hands of contractors; ensure there are written procedures for how the Property Functional Council (which Defense established in 2018) and other oversight groups work; and develop a strategy, separate from the financial management one, to specifically outline Defense-wide actions to tackle the government property issues. Department officials agreed with one recommendation and partially agreed with two. 

Comer and Sessions also wrote in their letter that the Defense Department's adherence to GAO’s recommendations on “weapons systems acquisition, business systems modernization, and overall financial tracking,” as outlined in its May 2021 high-risk list, “will improve tracking of weapons and funds, including those sent to Ukraine.” The high-risk list comes out after two years and shows the progress and challenges agencies are having with the high-risk areas. 

A Pentagon spokesperson declined to comment on correspondence with members of Congress. 

The Pentagon achieving a clean financial audit has been an issue that’s garnered bipartisan attention over the years. 

For instance, in May 2021, Sens. Bernie Sanders, I-Vt., Chuck Grassley, R-Iowa, Ron Wyden, D-Ore., and Mike Lee, R-Utah, introduced a bill that would have required the Pentagon to pass a full, independent audit by fiscal 2022 and any department component that failed to do so would have to return 1% of its budget to the Treasury Department to help with deficit reduction. A bipartisan group in the House introduced a similar bill in June 2021. Neither bill received a vote. 

In March 2022, Grassley and Sanders wrote to the Commission on Planning, Programming, Budgeting and Execution Reform, part of the legislative branch that was established by the fiscal 2022 National Defense Authorization Act to examine the Defense Department, about the issue. 

On Tuesday, Grassley, Wyden and Sanders reiterated their call for their legislation following the release of a new GAO report, which they commissioned, finding that challenges with Defense’s financial management and business systems modernization “remain a key impediment to the department’s efforts to achieve a clean audit opinion.” GAO made nine recommendations; Defense officials agreed with seven and partially agreed with two. 

A press release from Grassley’s office said, “the senators will continue to actively examine legislative solutions to these ongoing problems.”