Pentagon ‘Disappointed’ It Failed Audit Again Despite Inching Closer to Success

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Pentagon is seen from Air Force One as it flies over Washington
The Pentagon is seen from Air Force One as it flies over Washington, March 2, 2022. (AP Photo/Patrick Semansky, File)

Five years after the Defense Department first accomplished the Herculean task of performing an audit of its books, it still has not adequately accounted for about 61% of its assets, according to the latest results released Tuesday.

The department, the largest federal agency, has made slight progress since 2021 toward a "clean" audit -- connecting all the dots of its $3.5 trillion in assets and $3.7 trillion in liabilities, Pentagon comptroller Mike McCord said in a briefing to reporters on the latest annual audit results.

"The results of the 5th annual DoD-wide financial audit will be a disclaimer of opinion for DoD as a whole. This is the same as last year and not unexpected," McCord said. "We did expect that disclaimer, but we will also sustain all of our prior-year positive opinions, which cover approximately 39% of our assets."

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Overall, the audit found several new weaknesses in the department's accounting and consolidated others, meaning no net change.

"I am disappointed that we didn't show more progress this year," said McCord, who was sworn in as comptroller for the second time in June 2021. He previously served in the position from 2009 to 2017.

The department has faced a federal law requiring mandatory audits since 1994, but its size and vastness led to the law being largely ignored for more than two decades. Many doubted that it could be done. Then, in 2018, former comptroller David Norquist announced it had accomplished the feat.

Norquist called it the largest known audit in human history, but the first attempt came with the caveat that the department had failed the audit, which Norquist said at the time was expected. Each year since, the department has faced the same outcome, despite improvements along the way.

The result has been that the Pentagon may know how it and the military service branches spend money, but it hasn't been able to prove it.

Its massive $7.2 trillion in assets and liabilities is just the top line. Per the department, it employs 2.9 million troops and civilians; manages 643,900 physical assets such as buildings, roads and fences on 4,860 sites around the world; and has one of the largest health care systems in the U.S. with 9.6 million beneficiaries.

The audit also looks at equipment such as ships and tanks, and other high-dollar weapons systems such as the military's flagship fifth-generation fighter, the F-35 Lightning II.

Trying to account for all of that -- especially spread over multiple services -- requires a major deployment of financial experts. The overall DoD audit is actually an aggregate of 27 separate audits conducted by about 1,600 auditors from private firms such as Ernst & Young, KPMG and others contracted by the department.

The auditors did 220 in-person site visits and 750 virtual site visits as part of the review.

"As we get sort of to the harder things, the progress is getting a little harder as well," McCord said. Each year, he said, the auditor recommendations show increasing complexity and difficulty "with much of the lower hanging fruit having been picked."

For McCord, the quest for a clean audit comes down to increasing confidence in the Pentagon and military. Being able to prove on paper how the U.S. resources poured into defense are actually being used would be a badge of responsibility for the department -- a result that is, at least for this year, out of reach.

"I think many people feel that it does improve taxpayers' or veterans' or service members' confidence if they would see that or if they see more clean opinions than we have now," McCord said.

-- Travis Tritten can be reached at travis.tritten@military.com. Follow him on Twitter @Travis_Tritten.

Related: After 3 Failures, Pentagon Now Says It Won't Be Able to Produce a 'Clean' Audit Until 2027

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