House Oversight Committee Opens Investigation Into DOD 5th Consecutive Failed Audit

After the Department of Defense (DOD) failed its fifth consecutive audit in November, House Committee on Oversight and Accountability Chairman James Comer (R-Ky.) and Subcommittee on Government Operations and the Federal Workforce Chairman Pete Sessions (R-Texas) are looking into the DOD’s failure to prevent waste, fraud, and abuse.

The Republican congressmen write to Defense Secretary Lloyd Austin asking for a staff-level briefing to learn more about the DOD’s failed audit, general financial management processes, and what the department is doing to carry out outstanding suggestions for reform.

“The Department of Defense (DOD(DOD) )’s failure to prevent waste, fraud, and abuse is under investigation by the Committee on Oversight and Accountability. In November 2022, DOD failed its fifth straight audit because it was unable to account for 61% of its $3.5 trillion worth of assets. The two Republican legislators wrote in response to a recent report by the U.S. Government Accountability Office (GAO) that the Defense Department (DOD) “continues to fail to appropriately account for hundreds of billions of dollars in government-provided property in the hands of contractors. Even though it receives almost a trillion dollars a year, the DOD’s inability to appropriately track assets puts our military readiness at risk and shows a flagrant disdain for taxpayer money.

The Pentagon’s comptroller and top financial officer, Mike McCord, announced the findings of the department’s fifth annual audit to reporters back in November 2022. “We failed to get a ‘A,'” he said. “The process is crucial for us to complete, and it is helping us to improve. We are not healing as quickly as we would want thanks to it.

The Financial Audit of the Defense Department covers more than $7 trillion in assets, such as real estate and military equipment, and liabilities, such as legal claims and base realignment or closure costs. It is a compilation of 27 investigations across the enterprise, including individual agencies and military departments.

For defense leaders and taxpayers, the audit’s purpose is to shed light on how the department spends its funds and to keep track of its assets, which spread over all 50 states, Washington, D.C., seven territories, and 40 nations. Although it is not the only option for DOD to monitor expenditure and uncover waste, fraud, and abuse, obtaining a clear financial audit opinion for each component could increase taxpayer and service member confidence.

According to the report, 16 of the 27 standalone audits determined to have multiple areas for improvement, while seven of the 27 had unmodified views, meaning auditors found their financial statements to meet with generally accepted accounting standards.

GAO’s High-Risk List has routinely featured DOD’s contractor management and financial management. According to a GAO report from January 2023, DOD failed to adequately account for a significant amount of government-owned property given to contractors, including weapons, tools, and other defense-related items. In 2014, the DOD estimated that contractors had $220 billion worth of government-provided property in their custody, but the GAO thinks the number is “seriously overstated.” The acquisition of DOD weapon systems, the modernisation of business systems, and overall financial tracking have all received many recommendations from GAO.

“Serious questions about the Department of Defense’s management of taxpayer funds have been raised, particularly as the Department of Defense’s budget approaches the thirteen-figure mark due to the DOD’s poor financial management and inability to adequately track weapons, equipment, and other defense articles. The inability of DOD to create auditable financial statements that would allow for proper monitoring of DOD’s financial management processes has been hampered by failure to resolve these concerns, according to both Republican congressmen.

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