Senate endorses provision pressuring Pentagon to clean up its books

Inside the Defense authorization bill now headed for House-Senate conference negotiations is an amendment to pressure the Pentagon to step up its ongoing effort to produce its first auditable financial statements or to face the consequences.

The Senate last Thursday approved provisions of the Audit the Pentagon Act (S. 3487) as an amendment to the Defense authorization bill. The language would intensify an existing congressional mandate that the Defense Department obtain its first clean audit by 2017. (Defense Secretary Leon Panetta has accelerated the Pentagon’s internal goal of achieving some clean audits by 2014.)

The Government Accountability Office has long criticized Defense for failing to produce auditable statements, placing it on its list of high-risk programs.

Under the amendment -- introduced by Sens. Tom Coburn, R-Okla., and Joe Manchin, D-W.Va. -- if no clean audit is produced by 2017, then the Pentagon will be required to appoint a separate chief management officer to repair the department’s financial management, business transformation and information technology problems. In addition, its check-writing entity -- the Defense Finance and Accounting Service -- would be moved to the Treasury Department.

At a September hearing on progress toward auditability, Pentagon Comptroller Robert Hale said moving check-writing to Treasury would have the “opposite effect than intended,” saying Defense employees need such day-to-day operations in-house.

“Forcing the Pentagon to pass an audit is the law and will both strengthen our national defense and our economy,” Coburn said in a statement. The Marine Corps recently reported that “for each $1 spent on financial improvement, an estimated $2.77 in value was created for the warfighter,” he said.

“An audit is a critical step in making sure that decision-makers have accurate information about our spending and our priorities,” Manchin said. “One of my top priorities is to make sure we remain the most powerful and efficient military force in the world -- and we must do that by cutting fat, not muscle, from the Pentagon.”

Codification of the Pentagon’s mandate for auditable books has been applauded by outside groups across the political spectrum. “The Pentagon is the largest and most expensive federal government department but its spending has been isolated from any serious scrutiny,” Julie Borowski, a policy analyst for the conservative advocacy group Freedom Works, wrote in a blog.

The nonprofit Project on Government Oversight praised Coburn’s amendment as a tool to increase accountability. “It is an outrage that the Pentagon budget continues to grow unchecked,” wrote public policy fellow Suzanne Dershowitz, “and that it is still in violation of the law that requires it to be auditable and to produce a basic financial statement.