WASHINGTON (Washington Insider Magazine) — For the sixth consecutive year, the Pentagon has failed its annual audit. The result is not surprising, given the massive and decentralized nature of the Department of Defense (DoD), which oversees $3.8 trillion in assets and $4 trillion in liabilities spread across over 4,500 sites worldwide.
Since 2018, the Pentagon has been attempting to audit itself, making incremental progress each year. However, the complexity of its financial operations continues to hamper its efforts. While the Pentagon has addressed some of its easier accounting issues, the audits remain mostly unchanged, with only seven of nearly 30 sub-audits receiving clean results.
In addition to the seven clean audits, one received a “qualified” rating, three remain in progress, and 18 failed outright. Despite these results, Pentagon officials, including Comptroller Mike McCord, insist that progress is being made.
McCord highlighted three key improvements:
- Fund Balance Resolution: The Pentagon is getting closer to matching its financial records with the Treasury Department, which is crucial for preventing fraud.
- Increased Automation: The use of automated programs has saved significant time. In the Navy and Air Force, bots have saved over 600,000 hours.
- Better Stockpile Management: The Pentagon’s experience with Ukraine’s war has improved its ability to manage and track its defense stockpiles, which proved useful when supporting Israel during its conflict with Hamas.
While these changes are important, the Pentagon still faces significant challenges. Half of its assets do not meet auditing standards, and the audit process continues to uncover thousands of new and recurring issues. McCord acknowledged that much more needs to be done.
One notable issue arose earlier this year when the Pentagon realized it had been overvaluing aid to Ukraine, leading to accounting discrepancies. This error was discovered while managing stockpiles for Israel’s ongoing conflict with Hamas.
The Pentagon is now facing a narrow path to continue aiding Israel, as Congress has yet to approve additional funding, unlike the more extensive support available for Ukraine.
On Capitol Hill, frustration is mounting. The Pentagon’s inability to pass its audits has drawn sharp criticism from lawmakers. This summer, House Republicans held a hearing on the issue, and recent legislation has made it harder for the Pentagon to resolve its financial challenges. The continuing resolution passed this week to fund the government may also complicate the Pentagon’s efforts to meet its auditing requirements.