Senators introducing bill to penalize Pentagon for failed audits

A bipartisan group of Senators have introduced a bill that would penalize the Pentagon for failing to pass an audit.

The Audit the Pentagon Act of 2021, led by Senate Budget Committee Chairman Bernie Sanders (I-Vt.), centers around the Pentagon’s failure to pass an independent financial audit for the past several decades.

The bill would require military agencies to pass a full independent look at their finances every year beginning in fiscal 2022. Each year that any of the agencies fails to obtain a clean audit, one percent of their budget would be returned to the Treasury Department.

“The Pentagon and the military industrial complex have been plagued by a massive amount of waste, fraud and financial mismanagement for decades. That is absolutely unacceptable,” Sanders, who co-sponsored the bill with Sens. Chuck Grassley (R-Iowa), Ron Wyden (D-Ore.) and Mike Lee (R-Utah), said in a statement. “If we are serious about spending taxpayer dollars wisely and effectively, we have got to end the absurdity of the Pentagon being the only agency in the federal government that has not passed an independent audit.”

The Defense Department in December 2017 launched a major effort to meticulously comb its books — the first comprehensive audit of the agency in its history — but failed that audit, as well as the next two that were held. All three efforts received a “disclaimer of opinion,” as the accounting records needed to complete the assessment were not available. 

Congress since 1990 has mandated federal agencies to comply with annual audits by the Government Accountability Office. All have been able to satisfy such requirements since fiscal 2013. 

But the Pentagon, which makes up for more than half of the U.S. discretionary budget, remains the only federal agency unable to pass such scrutiny, as it has never detailed its assets and liabilities in a given year. 

The lawmakers who cosponsored the bill reason that the Pentagon has been unable to have a successful independent audit due to years of financial mismanagement stemming from program cost overruns, redundant efforts and misplaced funds.

“We’ve seen example after example of excessive and inefficient spending by the Pentagon, and every dollar squandered is a dollar not being used to support our men and women in uniform,” Grassley said in the statement. “After 30 years to get ready, this bill pushes the Defense Department to finally achieve a clean annual audit– a requirement that every other federal agency is held to.”

Pentagon officials, meanwhile, say the department is difficult to audit due to its massive size and numerous assets that range from personnel and supplies to bases and weapons. 

In the 2017 audit, for example, at least 2,400 Pentagon auditors surveyed the department’s estimated $2.4 trillion in resources across more than 24 stand-alone audits and an overarching consolidated audit. The effort took nearly a year to complete and cost $367 million.

“We failed the audit, but we never expected to pass it,” then-Deputy Secretary of Defense Patrick Shanahan told reporters at the time. He added that with each audit, the department would gain more clarity on its finances. 

Only a handful of Defense Department agencies have since met auditing requirements as of 2021.