It was the largest financial review in history. Reports from the U.S. Department of Defense announced that the Pentagon has recently completed its organization-wide audit. The project was a colossal effort. Since December of 2017, more than 1,200 auditors conducted over 900 site visits at over 600 locations across the DoD, and examined hundreds of thousands of items. Simply put, the year-long DoD audit was the largest audit ever, covering $2.7 trillion in assets and $2.6 trillion in liabilities.
There were several important reasons for investing in the massive oversight project. The first was simply transparency.
With yearly defense budgets in the hundreds of billions of dollars—and only increasing annually—there has been a growing sense both among the public and in Washington, that clarity needed to be brought to the Pentagon’s books. As Deputy Secretary of Defense Patrick M. Shanahan put it: “We conducted the audit to facilitate transparency with Congress and the American taxpayer.” In addition to clarifying fund allocations, the DoD audit was also meant to be a precursor to reform. As Shanahan added in the same statement, the audit will “determine corrective actions to instill long-term discipline” within DoD and demonstrates the Department’s “commitment to accountability and reform.”
But beyond clearing up the Pentagon’s spending habits, the administration had a very practical goal in mind with the recently completed audit.
One of President Trump’s more emphasized campaign promises was the “rebuilding” of the American military. Caped by the rules of the 2011 Budget Control Act, while at the same time fighting several wars abroad, DoD has felt a squeeze in funding over the past several years. Earlier on in his administration, Trump had taken flack for not getting the ball rolling on his defense plan. But over the past year, the president began to make good on his word. The National Defense Authorization Act, for instance, which authorized a $717 billion defense budget back in August, secured the funds for Trump’s defense spending. Plans to expand the Navy and the now famous Space Force initiative were also major milestones in fleshing out his vision for military build-up. But while plans for development are important, any hopes for their long-term success are dependent on a well-functioning financial department. The final element on the agenda was to put the DoD’s house in order. The Pentagon has committed to taking on some form of financial overview every year.
So what exactly were the findings of the DoD audit? Well, it’s all a matter of perspective.
Strictly speaking, the effort overall is considered a fail as only five of the twenty one individual DoD organizations checked by the third-party auditors received a fully passing grade. Only two received an “ok” grade.
But department officials were quick to note that there was never any expectation that the audit would be perfectly clean. In a memo reportedly delivered by Defense Secretary James Mattis to Pentagon personnel, the former general gave a balanced view of the audit’s results. “To those agencies receiving a clean opinion, well done. To those who have more work to do—know that I intended the audit to detect problems. Identifying areas for improvement is the only way to ensure we craft effective solutions.”
While the recent findings may be hard to swallow—especially for those in DoD who now have to implement major reforms—this is indeed the only realistic way to maintain sustainable efficiency and growth for America’s defense. If audits indeed become a regular practice, the internal audits of the Pentagon may be one of the more important, lasting contributions of this administration.