First-Ever DoD Audit Reveals Compliance and Cyber Issues, But No Major Fraud

The results of the Pentagon’s first audit reveal flaws in its information technology processes and internal tracking database issues, but no evidence of major abuse or fraud.

The audit, which was conducted by the DoD’s Offices of the Inspector General and Comptroller, was revealed last Thursday evening and covered over $2.7 trillion in department assets. The Department of Defense technically failed the audit, as a mere five out of 21 individual targeted areas received a full passing grade. DF-ST-87-06962

But Deputy Defense Secretary Patrick Shanahan told reporters Nov. 15 that “we never thought we were going to pass an audit” considering it’s the first time the department has performed one.

The report itself acknowledged that the FY '18 DoD consolidated audit “is arguably one of the largest and most complex financial statement audit[s] ever undertaken.”

“As the Department’s audit posture matures, it will continue to improve its controls to support reliable financial reporting, effective and efficient programmatic operations, and compliance with applicable laws and regulations as well as increase the compliance of financial management systems with Federal financial management systems requirements,” the report said.

The department spent about $406 million on audit remediation and $153 million on financial system fixes based on the report's findings, according to a Pentagon statement issued Friday.

Instead of just adding up the findings of the report, the department is working on developing corrective actions, Shanahan said at the Pentagon. “We need to develop the plans to address the findings, and actually put corrective actions in place.”

Shanahan acknowledged that issues that emerged related to compliance were “irritating” to him.

“The point of the audit is to drive better discipline in our compliance with our management system and our procedures. So, some of those things frustrated me because they have a job to do and we just need to follow our procedures,” he said.

Inventory accuracy is an example of that issue, he noted, specifically pointing out that the Navy audit revealed some buildings were not being recorded properly.

“Does that impact cost? No, it doesn't. But it's like we should have … that higher level of discipline,” Shanahan added.

Cyber compliance is another issue the audit revealed, and the Pentagon is working to establish a higher degree of standardization to address those concerns, Shanahan said.

Lawmakers have long been pushing for the department to conduct its first-ever audit, which began last December. House Armed Services Committee Chairman Rep. Mac Thornberry (R-Texas) said in a statement Nov. 15, “As expected, this audit has uncovered a number of matters that Congress and the Pentagon must work together to address. We must take advantage of this opportunity to continue our reform efforts and make the Pentagon more efficient and agile.”

However, this audit “should not be used as an excuse for arbitrary cuts that reverse the progress we have begun on rebuilding our strength and readiness,” Thornberry added.





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