After 3 Failures, Pentagon Now Says It Won't Be Able to Produce a 'Clean' Audit Until 2027

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The Pentagon
This March 27, 2008, file photo shows the Pentagon in Washington. (AP Photo/Charles Dharapak)

For the third year in a row, the Defense Department failed to come up with a "clean" audit of its agencies and $2.9 trillion in assets. And it probably won't be able to produce one until 2027, Pentagon officials said Monday.

A clean report is issued when an auditor finds no misrepresentation in financial records and that those records have been maintained according to established standards.

The COVID-19 pandemic limited auditors' ability to check the fiscal 2020 books, but the effort still managed to identify about $700 million in savings, the officials added.

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This year's effort by outside public accounting firms hired to audit the DoD cost $203 million, said Thomas Harker, who is performing the duties of under secretary of defense (comptroller).

He called for patience, saying the task is just too difficult in size and scope to expect success before 2027. In addition, the auditors could visit only 100 locations to do their work because of the pandemic, compared to 600 last year.

"This is something that's never been done for an entity of the size and complexity of the Department of Defense," Harker said at a Pentagon briefing Monday. "We've been clear that this is a journey that will require a sustained effort over several years.

"When we look at the return on investment for the process improvements that we're making, around accountability for property accountability, for inventory, that type of thing, we've identified more than $700 million in savings based on these process improvements," he added, pointing to progress in matching what's on the books with what's actually in the inventory.

All of the service branches again fell short of conducting a clean audit, but the Marine Corps "made a ton of progress" while also dealing with the restrictions imposed by COVID-19, Harker said.

One bright spot in the audit of 24 DoD agencies is the clean audit that is expected to be completed in December for the Defense Information Systems Agency's working capital fund, he said. DISA failed to do a clean audit last year.

"I think anytime you have a new agency get a clean opinion, that's a huge accomplishment. Last year, we did not have any agencies get new clean opinions. This year, we did," Harker said.

Separately, the DoD office of Inspector General, which plans to issue its overall assessment of the DoD audit in January, said, "While progress has been made, the road to an unmodified [clean] DoD financial statement opinion is a long-term effort."

In a statement, Sean O'Donnell, the Acting DoD Inspector General, said, "Despite challenges presented by the COVID-19 pandemic, the Department of Defense demonstrated improvement in its financial management processes in fiscal 2020. However, the Department still has significant challenges to overcome before achieving a clean opinion."

-- Richard Sisk can be reached at Richard.Sisk@Military.com.

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