As the third largest department within the federal government in terms of annual cost, the Department of Defense constitutes 21 percent of the United States’ reported net cost for fiscal year 2012. The Government Accountability Office, a non-partisan investigative congressional agency, released findings Friday of massive un-auditable spending.
The office found a marked inability to appropriately appraise both DOD and other government agencies like the Department of Homeland Security:
“Material weaknesses resulted in ineffective internal control over financial reporting for fiscal year 2012.”
The ‘material weakness’ the GAO cites as a cause for its inability to function properly concerns a current lack of internal controls, whereby the misreporting or absence of financial statements is not effectively detected or corrected in a timely manner. The report contends:
“[T]hree major impediments continued to prevent us from rendering an opinion on the federal government’s accrual-based consolidated financial statements over this period: (1) serious financial management problems at DOD that have prevented its financial statements from being auditable, (2) the federal government’s inability to adequately account for and reconcile intragovernmental activity and balances between federal agencies, and (3) the federal government’s ineffective process for preparing the consolidated financial statements.”
The aforementioned ‘serious financial management problems’ are to be addressed through what is known as the Financial Improvement and Audit Readiness or FAIR plan. The plan requires that the DOD “prepare department-wide auditable statements by 2017.”
The Department of Homeland Security has avoided unqualified audit opinions from the Congressional Accountability Office as well; reportedly due to the DHS’s “inability to provide sufficient evidence to support certain components of property, plant, and equipment and heritage and stewardship assets presented in the financial statements.”
An unqualified audit opinion is also known as a complete audit, whereas a qualified audit is released when the agency disagrees with the information given to it as the audit may be inaccurate or incomplete. Unreliable data, as recognized by the GAO, has resulted in numerous detrimental oversight consequences.
Four of these consequences are outlined by the report:
- hamper[s] the federal government’s ability to reliably report a significant portion of its assets, liabilities, costs, and other related information
- affect[s] the federal government’s ability to reliably measure the full cost as well as the financial and nonfinancial performance of certain programs and activities
- impair[s] the federal government’s ability to adequately safeguard significant assets and properly record various transactions
- hinder[s] the federal government from having reliable financial information to operate in an efficient and effective manner
As DOD spending continues to increase, the Government Accountability Office seems to have little recourse to ensure that an accurate audit of the department’s financial statements be found before the next Olympic games.
The Department of Defense’s budget has increased by hundreds of billions of dollars over the past decade, with few transparency mechanisms in place. With little power to ensure that unqualified audit requirements are met, the GAO is forced to rely on whatever information it is given by the DOD. The question that remains is whether or not a substantive audit will materialize in this decade.