Audit the Pentagon Act of 2017

To strengthen American national security by ensuring that—

To instill a culture of accountability at the Department of Defense that supports the vast majority of dedicated members of the Armed Forces and civilian employees of the Department who want to ensure proper accounting and prevent waste, fraud, and abuse.

The 2016 Financial Report of the United States Government found that, the Department of Defense again had a disclaimer because it lacked any auditable reporting or accounting available for independent review. The Department of Defense is the only covered major agency that has always had such disclaimers and has never had a clean audit.

The financial management of the Department of Defense has been on the “High-Risk” list of the Government Accountability Office (GAO) since 1995 because it has never achieved an unqualified audit opinion. The GAO's 2015 High-Risk Report found that “The Department of Defense (DOD) is responsible for more than half of the Federal Government’s discretionary spending. Significant financial and related business management systems and control weaknesses have adversely affected DOD’s ability to control costs; ensure basic accountability; anticipate future costs and claims on the budget; measure performance; maintain funds control; prevent and detect fraud, waste, and abuse; address pressing management issues; and prepare auditable financial statements. Without accurate, timely, and useful financial information, DOD is severely hampered in making sound decisions affecting the department’s operations.”.

At a September 2010 hearing of the Senate, the Government Accountability Office stated that past expenditures by the Department of Defense of $5,800,000,000 to improve financial information, and billions of dollars more of anticipated expenditures on new information technology systems for that purpose, may not suffice to achieve full audit readiness of the financial statement of the Department.

Section 9 of article I of the Constitution of the United States requires all agencies of the Federal Government, including the Department of Defense, to publish “a regular statement and account of the receipts and expenditures of all public money”.

Section 303(d) of the Chief Financial Officers Act of 1990 (Public Law 101–576) required that financial statements be prepared and independently audited for the Department of the Army by March 31, 1992, and for the Department of the Air Force by March 31, 1993. Neither the Department of the Army nor the Department of the Air Force has complied.

Section 3515 of title 31, United States Code, originally required the agencies of the Federal Government, including the Department of Defense, to present auditable financial statements beginning not later than March 1, 1997. The Department of Defense has not complied with this law.

The Federal Financial Management Improvement Act of 1996 (31 U.S.C. 3512 note) requires financial systems acquired by the Federal Government, including the Department of Defense, to be able to provide information to leaders to manage and control the cost of Government. The Department has not complied with this law.

In 2005, the Department of Defense created a Financial Improvement and Audit Readiness (FIAR) Plan, overseen by a directorate within the office of the Under Secretary of Defense (Comptroller), to improve Department business processes with the goal of producing timely, reliable, and accurate financial information that could generate an audit-ready annual financial statement.

Then Secretary of Defense Ashton Carter said in a statement to the Defense Subcommittee of the Committee on Appropriations of the House of Representatives on February 25, 2016, “I cannot ask for more taxpayer dollars for defense without being candid about the fact that not every defense dollar is spent as wisely or responsibly as it could be, and also being determined to change that and make our department more accountable.”.

Then Secretary of Defense Robert M. Gates said in a speech on May 24, 2011: “The current apparatus for managing people and money across the DoD enterprise is woefully inadequate. The agencies, field activities, joint headquarters, and support staff functions of the department operate as a semi-feudal system—an amalgam of fiefdoms without centralized mechanisms to allocate resources, track expenditures, and measure results relative to the department's overall priorities.”.

The accounting problems of the Department of Defense result in widespread errors in pay that can be difficult to correct. Such payroll errors can impose hardship on members of the Armed Forces and their families.

Definitions— In this section:

Reduction To Encourage Financial Accountability— If, by March 2 of a fiscal year, the Department of Defense has not submitted a financial statement for the previous fiscal year, or if, by such date, such financial statement has been submitted but has not received either an unqualified or a qualified audit opinion by an independent external auditor, the discretionary budget authority available for the Department of Defense shall be reduced by .5 percent.

Application of reduction— Consistent with applicable laws, the Secretary of Defense shall apply any reduction under subsection (b)—

Deficit reduction— An amount equal to the total amount of any reduction under subsection (b) shall be retained in the general fund of the Treasury for the purposes of deficit reduction.

Accounts excluded— The following accounts are excluded from any reductions under subsection (b):

Waiver— The President may waive subsection (b) with respect to an account if the President certifies that applying the subsection to that account would harm national security or members of the Armed Forces who are deployed in combat zones.

Report— Not later than 60 days after a reduction takes effect under subsection (c), the Director of the Office of Management and Budget shall submit to Congress a report specifying each Department of Defense subject to reduction and the amount of the reduction.

as the overall defense budget is cut, congressional defense committees and the Department of Defense should not endanger the Armed Forces by reducing wounded warrior accounts or vital protection (such as body armor) for members of the Armed Forces serving in harm’s way;

the valuation of legacy assets by the Department of Defense should be simplified without compromising essential controls or generally accepted government auditing standards; and

nothing in this Act should be construed to require or permit the declassification of accounting details about classified defense programs, and, as required by law, the Department of Defense should ensure financial accountability in such programs using proven practices, including using auditors with security clearances.