Senator Trained as Accountant Presses Pentagon on Pricey Audit

Anticipating “many more painful findings,” the chairman of the Senate Budget Committee has asked the Pentagon chief for a detailed plan and timeline for incorporating results of the Defense Department’s new and unprecedented across-the-board audit into specific defense budgeting decisions.

Sen. Mike Enzi, R-Wyo., a professional accountant, this week released a Feb. 8 letter to Defense Secretary James Mattis seeking concrete commitments for using the new audit in light of an embarrassing report this month on poor tracking of millions of dollars by the Defense Logistics Agency.

As reported this month by Politico, DLA was given a “disclaimer of opinion” in a December audit by Ernst and Young released by the Defense Department Office of Inspector General. The shoddily tracked funds spent on military construction and property were estimated at nearly $1 billion, and the report cited numerous “deficiencies” in accounts payable and financial reporting, software and operations such as reconciling accounts with the Treasury Department.

“DLA does not have policies and procedures in place to manage stale payables/obligations,” it read on pages 58-59. “DLA does not comply with the Federal Financial Management Improvement Act,” and “transactions are not recorded at the detailed transaction level.” 

Because the departmentwide audit itself (due in November) is slated to cost up to $900 million this year, Enzi expressed concern about the fact that 60 percent of that, or $551 million, will be used to rectify problems identified by the original auditor. “It is important for Congress to better understand how DoD is translating audit findings into changes in its business practices,” Enzi wrote Mattis. “The success of that audit over time will depend upon continued oversight and improvement by Congress.”

Congress’s continued support for the audit, he added, depends on it helping lawmakers “understand the cost inefficiencies created by the broken budget process, such as disruptions from continuing resolutions.”

Enzi asked that Mattis supply by March 15, as part of the fiscal 2019 budget justification, a multi-year plan for spending related to the consolidated audit.

Though DLA’s problems with tracking and documenting funds made headlines, the agency had actually anticipated the bad news from Ernst and Young back in late October. The disclaimer “isn’t good but was not unexpected,” DLA Vice Director Ted Case told members of the agency’s audit advancement team on Oct. 31. 

“It simply means that Ernst & Young was unable to completely perform its work and the agency has difficulty providing certain information in a timely manner. Disclaimers of opinion are common for agencies undergoing a first-year audit,” he said, adding that it took the Homeland Security Department more than 10 years to receive a clean audit opinion. 

Case said the findings “shouldn’t overshadow achievements already made, such as the creation of a central repository for key evidential matter and audit-readiness training provided to all DLA employees.”

A spokeswoman for House Budget Committee Chairman Rep. Steve Womack, R-Ark., said: “Mr. Womack is supportive of the Department of Defense conducting this review to identify overdue accountability requirements. His firsthand experience in defense budgeting leaves him optimistic that this audit can lead to better stewardship of taxpayer dollars, ultimately ensuring our men and women in uniform have the best resources available.”

Another senator concerned by the implications of the DLA situation is Sen. Chuck Grassley, R-Iowa, who in 2010 championed the legislation requiring the Pentagon to pursue auditability. (The Obama administration’s goal of auditable statements by 2017 was missed). Grassley told Politico the recent expose reduces the odds of a successful larger Defense Department audit to zero.

“The financial operations at the Department of Defense are mired in ‘serious financial management problems’ as reported again last year by the Government Accountability Office,” Grassley said in a Q&A posted Feb. 9 on his website. “However, that challenge won’t stop me from poking the hornet’s nest for as long it takes. Exposing how mismanaged funds sting the taxpayer and undermine the Armed Forces is a powerful weapon to identify and implement more effective and efficient use of defense dollars.”