Government Audit

A Government Audit Puts Pentagon in Hot Water Over Serious Non-Compliance Issues

A full financial audit of the Pentagon was conducted and the results showed a failing grade. Auditors requested that various financial irregularities be addressed.

Since the release of the audit results in November 2018, the press has been buzzing about the U.S. military’s assets, which are valued at $2.7 trillion. Over 600 locations were visited to conduct this audit, which involved the work of 1,200 accountants.

Auditors discovered that many back-office functions are not tracked sufficiently, making it very difficult to monitor the flow of cash in and out of the organization. The effort cost more than $400 million, and the Pentagon is being criticized for conducting such a costly audit that would undoubtedly be flawed.

In spite of the results, the amount of financial irregularities and compliance issues discovered during the audit were mostly viewed as unsurprising, and a few agencies did pass the audit: the U.S. Army Corps of Engineers, Civil Works; the Military Retirement Fund; the Defense Health Agency — contract resources management; the Defense Contract Audit Agency; and the Defense Finance and Accounting Service.

Specific instances of fraud were not called out in the report, but the report did specify “significant information technology systems security issues.” The audit also identified 20 “material weaknesses” in the department’s internal controls. The audit further specified that not all transactions are being properly recorded, which makes it very difficult to detect errors in financial statements. Historical cost data is also not being tracked sufficiently.

Rep Adam Smith (D-Wash.) said in a statement that “it is essential that we get the Defense Department to a position where Congress, taxpayers, and DOD itself can track and account for the money that is being used.”

Compliance is important and Flexi knows that

The recent Pentagon audit is a cautionary tale. Don’t let your business receive a failing grade on your next audit. Work with Flexi to ensure your accounting is always in line for your next audit by utilizing accounting compliance software.

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