After decades of ducking the legal requirement that it undergo a thorough financial audit, the Pentagon finally opened up its books to 1,200 outside accountants and analysts. The report was recently completed, and here’s the good news: The Army Corps of Engineers (most of it, anyway) and the Military Retirement Fund passed the audit.
The bad news: The Army, Navy, Air Force and Marines and most other divisions failed, which means they were unable to show that they were properly keeping track of their finances and assets.
The Pentagon has long prided itself on being a “can do” organization, firmly committed to protecting the nation. But when it comes tohusbanding the billions of taxpayer dollars that pay for the vast military establishment, defense leaders have had less exacting standards.
“We failed the audit,” Deputy Defense Secretary Patrick Shanahan told reporters with a curiously nonchalant air. “We never expected to pass it.”
The Pentagon failed the audit largely because there are serious gaps in the financial controls that guide it, the world’s largest military organization. It has $2.7 trillion in assets (weapons, bases and such) and $2.6 trillion in liabilities (mostly the costs of military personnel and retirees). Basically, the auditors couldn’t account for where all the money went because of flaws in information technology systems.
That laxity — and the prospect of tax dollars flowing to boondoggles — would be concerning at any time. But it is especially worrisome when the federal budget deficit has skyrocketed to $779 billion — and the military is insisting it needs more money.
In a way, Mr. Shanahan’s attitude is understandable. The Pentagon is an enormous bureaucracy — three million people, 15,700 aircraft, 280 ships, 585,000 facilities at 4,700 sites worldwide, an annual budget of $700 plus billion — and some experts say that expecting a clean bill of health on the first audit was never realistic.
Yet the Pentagon had nearly three decades to prepare for this accounting Judgment Day. While federal agencies were mandated by Congress in 1990 to begin performing annual financial audits, the Pentagon resisted for so long that it became the last one to comply with the law. Private companies, accountable to shareholders, couldn’t get away with that.
But audits are hard work; most defense officials aren’t business experts; and to some, bookkeeping and other management operations just aren’t a priority in wartime which has been a permanent state.