The Department of Defense completed its first-ever audit. It failed, but officials don’t seem terribly bothered by that. Because, you know, they figured they would; and the real success here is that it was done at all.
“We never thought we were going to pass an audit, right? Everyone was betting against us, that we wouldn’t even do the audit.” That’s what Deputy Secretary of Defense Patrick Shanahan told reporters.
I suppose the fact that an audit was completed at all is worthy of celebration — or perhaps a subdued “nice job” — when you consider it was nearly two decades in the making. Remember that the Pentagon remained the sole holdout to complying with a 1990 law passed by Congress requiring audits for all government agencies.
But arguments from several administrations as to why it could not be done were difficult to swallow: The building is too large and has too many systems that don’t link up to give any kind of helpful result that would be worth the cost.
Isn’t it precisely those kind of circumstances that make an audit necessary? And if a department or entity of any sort is just too large to be appropriately monitored — to be scrutinized in such a way to ensure that funds are properly spent and systems appropriately managed — then might that entity by definition be, in fact, too large?
No, I’m not arguing for a breakup of the Pentagon. But I am questioning a rationale that ultimately involves throwing one’s hands up and saying: “Not possible.”
Consider that federal securities laws require publicly held companies file financial reports with the Securities and Exchange Commission that are “accurate, truthful, and complete and prepared according to a set of accounting standards,” according to the SEC. Many of these financial statements, including those in the company’s annual report and those provided to shareholders, must be examined by an independent auditor.
I know it’s not apples to apples. Companies are in the business of selling, while the Pentagon is in the business of buying. And even when you look at a company like Apple, which reported revenue of $265.6 billion in 2018, its highest ever, the dollars entering pale in comparison to the dollars going out from the military — which touts a top-line budget of roughly $700 billion, with calls for more.
But the Pentagon answers to taxpayers and Congress as much as companies answer to shareholders. The Pentagon is expected to keep data and systems secure, same as companies. The Pentagon is expected to track assets, same as companies. Furthermore, while a company that fails in any one of these areas could at best see its stock price plummet or at worst go out of business, the Pentagon will (must) continue spending taxpayer dollars and functioning much as it always has.
In fact, the cynic in me thinks the delay was less about the challenge of the undertaking and more about the potential fallout — cuts to budgets or increased oversight.
And now, here we are. The Pentagon completed an audit, which is good, but it failed. Which, one would think, is not.
As tweeted by Cisco’s Alan Balutis, who served as the Commerce Department’s head of management and budget and its first chief information officer: “No surprise. But it also taints all of government. How could one give a clean opinion to the Federal government overall when 50+ percent of its spend can’t be properly accounted for?”
Indeed, inventory management challenges persisted, in that systems in one place would say an item is usable or missing when the truth on the ground is different. And arguably the most significant issue was that IT security measures were not being taken.
As the acting inspector general pointed out, the value of the audit is that it provides the department with a to-do list, so to speak, in terms of identified deficiencies that need to be fixed.
Fair. And perhaps one more reason why it’s ridiculous it took so long.
The good news: With plans for next year’s audit underway, we’ll get to see if any of this changes. I, for one, will be watching closely.