The DOD's Failed Audit Shows It Shouldn't Get a Bigger Budget
On November 15, a senior Pentagon official publicly admitted that the U.S. Department of Defense (DOD) failed its first-ever comprehensive audit. More than 1000 auditors took nearly a year to review the $2.7 trillion organization’s finances. The result: DOD officials say it may take years for the Pentagon to properly account for all its assets and bring recordkeeping practices into line. Until it does, lawmakers should not blindly expand the military’s budget.
This report has been a long time coming. The Pentagon avoided review for 27 years until new legislation started the auditing process last December. Now, the DOD will undergo an audit annually. The Pentagon estimates it must spend over half a billion dollars fixing problems found in the first comprehensive inspection.
The alarming audit results emerged as the DOD was preparing modified budget proposals to comply with President Trump’s request for a slimmer, $700 billion defense spending package. In October, Trump asked cabinet agencies to trim their budgets by five percent or more in light of a soaring budget deficit. On December 3, Trump called the current $716 billion defense budget “crazy.”
But after the President met with Defense Secretary James Mattis and the Republican chairs of the House and Senate Armed Services committees, Trump changed his mind. On December 9 he approved $750 billion for the next DOD budget, just six days after calling rising defense spending “crazy.”
A cursory look at the Pentagon audit showcases an organization not fiscally responsible enough to receive more money. The report listed numerous accounting and management errors across the department. Among the problems auditors found, DOD transaction records are inconsistent with the U.S. Treasury’s—a tragedy for public accountability, considering the Treasury issues the public financial reports for federal agencies.
The Pentagon frequently deviated from proper accounting practices, and the department carried out subpar oversight of its equipment. When internal records are inaccurate, it is difficult for the department to really know what resources or expenses it has. And an organization that can’t track its finances properly does not deserve unquestioned budget increases.
Furthermore, the DOD has not fully recorded its existing land and property assets, and it insufficiently monitors its inventory. $1.2 billion in expenses was mismanaged, leading to $665 million in waste — losses absorbed by taxpayers.
The audit’s criticisms did not surprise Deputy Secretary Shanahan, who acknowledged that the DOD expected to fail the audit. Yet in the same statement to reporters, Shanahan expressed frustration that President Trump ordered a $700 billion budget instead of the $733 billion the Pentagon initially requested. Considering the serious waste revealed in the audit, Shanahan’s complaints appear tone deaf to taxpayers.
Notably, the DOD has not published any estimates of how much money might be saved through improved accounting practices and internal oversight. While this may be incidental, the Pentagon has intentionally shut down opportunities for austerity in the past.
According to the Washington Post, a 2015 internal study revealed a “clear path” for the Pentagon to save $125 billion over five years without reducing personnel. At the time, about a quarter of the DOD budget paid for basic operations like accounting, human resources, and logistics. Cutting waste in these areas offered significant savings.
Officials were afraid to publicize these shortcomings, however, because they worried Congress would see this waste as a chance to cut their budget rather than expand it. So instead of reducing waste, or at least reallocating funds to the front lines, the Pentagon imposed secrecy restrictions on the study revealing their excesses, and a public summary of the report was removed from a government website.
Other financial failings have also crept up in recent years. Earlier this year, an audit of the DOD’s Task Force for Business and Stability Operations found waste exceeding $675 million. In one revealing example, they allegedly spent $43 million to build a gas station that should have cost less than $500,000.
So if the Trump administration is serious about slashing federal spending broadly, the DOD should not receive an exception. Right now, the Pentagon has failed to show it knows what resources it has or where its money is going — usually not signs that a budget hike is needed. Until the military fixes the holes found in the audit, it cannot actually know whether it needs more taxpayer money to meet its goals.
It is politically difficult to say no to more defense spending, and DOD bureaucrats have found it easier to ask for more money than to handle its finances better. But lawmakers should flip that script, and demand solid financial management from the country’s largest government agency before another dollar is doled out.
John Kristof is a research fellow at the Sagamore Institute and a contributor for Young Voices, frequently writing on fiscal policy and other economic issues. You can follow him on Twitter.