Audit the Department of Defense

By Senator David Perdue (R-GA)

Today, our country faces a global security crisis. The world is more dangerous than any time in my lifetime. At the same time, our military has been disinvested for the third time in the last forty years and finds itself at a point where we have the smallest army since World War II, the smallest Navy since World War I, and the oldest and smallest Air Force in our history.

It’s going to take capital to rebuild our military, but before we can even begin thinking about a long-term investment to do so, we have to get a better understanding of how its current $600 billion budget is being spent.

The Department of Defense – the largest single discretionary line item in the federal government’s budget and the very agency charged with providing for our national defense – has never been audited.

The Department of Defense is comparable in size to Walmart. Can you imagine what would happen if the top brass at Walmart refused to comply with SEC and IRS laws by not providing audited financial results? That’s what the Department of Defense has done for the past twenty-seven years.

By not providing an audited financial statement, the Department of Defense is violating federal law. The Chief Financial Officer’s Act of 1990 mandates an annual audited financial statement for certain funds and accounts from executive agencies, and the Department of Defense is not exempt.

Since coming to the United States Senate, I have heard many excuses for this failure to comply, the most common being the Department of Defense is too large and complex to complete an audit. While there are systems compatibility issues, the truth is that bureaucrats have dragged their feet for almost thirty years.

As a public company CEO, if I had refused to provide audited financial results and cited systems complexity as an issue, I would’ve been laughed out of the boardroom. Every single publicly traded company provides quarterly audited results.
For example, when a company buys another company, their systems may not be compatible, but they still have to file audit reports with the SEC and the IRS. They do not get twenty-seven years as the Department of Defense has had, to become compatible. They are required to comply immediately.

Because the Department of Defense has never completed an audit, it is vulnerable to waste and inefficiency. A 2016 report by the DoD Inspector General found improper oversight of DoD travel cards, which led to misuse, improper payments, and potential security vulnerabilities. Millions more were wasted on defective spare parts ($12 million), ships with no proven combat ability ($12 billion), unused or unworkable Missile Defense Agency targets ($375 million), and unauthorized expense reimbursements ($1 million).

An audit would likely identify even more misdirected funds that could better serve those in uniform elsewhere.
I have questioned eight witnesses—from outside experts to Chairman of the Joint Chiefs, General Dunford to Under Secretary David Norquist and Defense Secretary Mattis himself – testifying before the Senate Armed Services Committee about this exact issue. They all agreed that a full audit should be completed.

Past administration officials – including former Secretary Ash Carter – also said they support completing an audit. However, the kind of changes at DoD it will take to expedite this process have not been made. The provisions I secured in this year’s National Defense Authorization Act are the biggest step Congress has ever taken to move forward and hold DoD accountable.
The Department of Defense’s systems, processes, and controls were not developed with audit readiness in mind. My amendment requires them to be updated to match audit-readiness terminology used in the private sector and every other federal agency that completed a full audit.

To be audit ready, your financial statements must be reliable. The Department of Defense has never reached that point. My amendment forces the Secretary of Defense to annually certify that DoD’s financial statements as being reliable.

Furthermore, my amendment gives the process more visibility and improves oversight by requiring a ranking of all DoD agencies and activities in order of audit progress. It would direct the Defense Business Board to review current audit progress and recommend actions to improve the agency’s standing moving forward.

With real action finally coming from Congress and new leadership in place at the Pentagon, there is more pressure on DoD to complete this audit than ever before. The first responsibility the federal government has, according to the United States Constitution, is to provide for the national defense. Because of Washington’s fiscal intransigence – primarily over the last sixteen years – we find ourselves with a $20 trillion national debt that underpins our ability to fulfill this Constitutional duty and rebuild our military. In this crisis, it is imperative that we know where every single dollar is being spent. It is time we complete a Department of Defense audit, and use it to start rebuilding our military.
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Senator David Perdue (R-GA) is the only Fortune 500 CEO in Congress and sits on the Senate Armed Services Committee.