Management Accounting

Pentagon Watchdog Approved Flawed Audit

The DoD's office of the inspector general found documentation gaps and inaccuracies in an external audit of the Marine Corps but approved it anyway.
Matthew HellerMay 22, 2015
Pentagon Watchdog Approved Flawed Audit

Pentagon officials knew there were problems with the work of the outside accounting firm hired to do an audit of the U.S. Marine Corps but still issued a clean audit opinion, according to Reuters.

The Marine Corps provided Grant Thornton LLP with its financial statement for the year ended Sept. 30, 2012, as part of the Pentagon’s efforts to produce clean ledgers by a 2017 deadline mandated by Congress. The Department of Defense’s watchdog, the Office of the Inspector General, issued the “unqualified” opinion in December 2013.

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Little more than a year later, on March 23, 2015, the IG withdrew that opinion, saying new information had cast doubt on the reliability of the audit.

marineIn fact, Reuters reports, the IG team overseeing Grant Thornton found gaps in documentation and inaccuracies in the firm’s work. They recommended that the inspector general flunk the Marine Corps but, according to Reuters, they were overruled by Daniel Blair, deputy inspector general for auditing.

“The inside story of the Marine Corps audit process and its aftermath raises new questions about the independence of the inspector general’s office, an agency required by law to serve as an impartial watchdog,” Reuters said. “That independence will be crucial if the Pentagon is ever audited.”

The Pentagon is the only federal agency that has not complied with a 1992 law that requires annual audits of all government departments. In 2009, Congress gave the department until 2017 to be audit-ready.

As a step toward meeting that deadline, then-Secretary of Defense Leon Panetta in October 2011 ordered the department to prepare an auditable financial statement.

According to DefenseNews, the inspector general’s decision to withdraw its approval of the Marine Corps’ statement is “an embarrassing snag for the Defense Department’s endeavor to become auditable” and has drawn head-shaking in Congress.

“By law and by common sense, the Pentagon needs to break the habit of relying on bad accounting,” Republican Senator Chuck Grassley of Iowa said in a statement. “Clean, accurate audits are necessary to hold the Pentagon bureaucracy accountable to the taxpayer.”

The Pentagon receives in excess of $500 billion a year, by far the largest appropriation of any government agency.

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