DeFazio says the Pentagon can’t track its budget; we audit the claim

At $530 billion this fiscal year, the budget for the Department of Defense is the federal government’s largest agency and third biggest spending item, trailing only the amount spent on Social Security and the two big health programs Medicare and Medicaid.

Even so, the Pentagon and its friends in the White House and in Congress keep asking for more. (The fiscal 2013 budget released by the White House reduces defense spending to $525 billion in 2013 before boosting it to $534 billion in 2014 and $546 billion in 2015. The budget proposal written by House Republicans calls for $554 billion for defense next year.)

Having a budget for the Pentagon is a curious thing, according to Rep. Peter DeFazio, D-Ore. The reason? The Pentagon, he says, has no idea how much money it actually has or how much it actually spends or wastes.

The reason, DeFazio says, is both obvious and outrageous.

"Despite the fact that the Pentagon is the largest and most expensive department in the federal government, it has never passed a financial audit," he says on his House website. "In fact, under current law, the Pentagon is exempt from a federal law that requires all federal agencies to complete annual audits."

What? Really? At a time when politicians and voters alike are obsessed with deficits and government spending, the agency with the biggest annual budget - by far - has never been able to fully audit its spending and isn’t required to do so?

Let’s take a look.

The best place to start is 1990, when Congress passed legislation requiring all federal agencies to present "auditable financial statements." It was a reasonable standard for most agencies to satisfy and every federal department did, except one: the Pentagon.

The Pentagon has promised to create a system to make its books "auditable" by 2017. Congress accepted the pledge, which was an estimate rather than a hard "mandate."

It’s important to note that auditing your books is a two-step process. First, as any business person knows, you have to have a system in place to track income and expenses and other parts of your budget. Meeting that goal makes you "auditable."

Once there, you can have an audit that provides a detailed thumbnail of your financial well-being.

The Pentagon hasn’t accomplished either one.

DeFazio sponsored an amendment to the defense bill last year that requires the Pentagon to organize its books so they can be audited. That step has yet to be satisfied and DeFazio’s measure was stripped during negotiations  between the House and Senate.

Independent reports of the Pentagon’s problems monitoring its budgets continue to pile up.

As far back as 1995, the General Accountability Office, the independent investigative arm of Congress, deemed the Pentagon’s financial management to be "high risk."

In 2000, the GAO  found that nearly one third of the accounting entries in the Pentagon's budget were untraceable.

In 2009, the GAO said its auditors "have continued to report significant weaknesses in the department’s ability to provide timely, reliable, consistent, and accurate information for management analysis, decision-making, and reporting."

The next year, the GAO found that half of the Pentagon's $366 billion in contract awards were never even completed.

And in yet another 2010 report, the GAO found that the Pentagon’s effort to install a system to make itself "auditable" were taking on the personality of a new weapons system - over budget and behind schedule. In this case, the GAO said that two-thirds of the systems the Department of Defense is putting in place to make its budget auditable have slipped years in implementation and doubled in cost -- to more than $13 billion.

The GAO also showed why the ability of the Pentagon to audit itself is important. Among the problems:

• The Army can’t be sure that it doesn’t overdraw its personnel expenditures account, which funds soldier pay, enlistment bonuses and other benefits;
• The Defense Department still can’t "reliably identify, aggregate and report the full cost of its investment" in weapons systems — currently estimated at more than $1 trillion — and doesn’t have enough information to manage and reduce the billions it spends each year on weapons operations and support costs;
• Databases tracking hundreds of millions of dollars’ worth of Army property are improperly managed.

The Pentagon does not dispute DeFazio’s claim.

In an appearance before the Senate Budget Committee in March, Defense Secretary Leon Panetta declared that the department would be fully auditable by 2014 instead of waiting until 2017. He acknowledged it’s "crazy" that the department is still unable to audit its finances. "That's, frankly, something we owe the taxpayer," he said.

Therefore, with the audit of DeFazio’s statement complete, we rate his claim: True.

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Department of Government Efficiency

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