It’s been 23 years and all US
federal agencies have annual audited financial statements except one…..the US
Dept of Defense.
Yeah, that’s right, even though they have been required to
have annual audited financial statements for over 20 years, the US Dept of Defense
has failed to do so.
And the US Dept of Defense has accounted for more than 50% of the discretionary
annual spending of the entire US Government. In fiscal year ended 2011, the US Dept of Defense Budgeted Spending Authority was a massive $687 bil, or 56% of the total for all US Government Discretionary Budgeted Spending Authority of $1,221 bil. And
the US Dept of Defense still doesn’t issue annual audited financial statements.
The Republicans in the US Congress claim that all they care
about is reducing the over $16 trillion of US Debt by massive reductions in US
Government spending. But yet, they have permitted
by far the largest US Government Agency, the US Dept of Defense, to avoid
issuing audited financial statements for over 20 years.
How can you possibly know if all of the spending was proper
if you don’t even have audited financial statements?
More
to the point, below here is the Inspector General’s statement regarding
Improper Payments included as an Appendix to the US Dept of Defense most recent
financial statements for the fiscal year 2012:
“Improper
Payments IG Summary of Challenge
Improper
payments have been a longstanding problem within the Department, often the result
of unreliable data and/or lack of adequate internal controls which create an environment
where fraud is more likely. As a result, the Department lacks assurance that
the billions of dollars in payments it disburses annually are made correctly.
Simply
stated, the Department does not always know that it is paying the right person,
the correct amount, at the right point in time.”
And below here is the Inspector General’s statement regarding major problems in Contract Management also included in this same Appendix A to the US Dept of Defense most recent financial statements for the fiscal year 2012:
Below here is a link to Appendix A: Other Accompanying Information of the US Dept of Defense Financial Report for the fiscal year 2012, which goes into incredibly expansive detail on many of the huge accounting, finance, IT, contract management, acquisition and other problems existing at the US Dept of Defense.....yeah, it's a major embarrassment to the country, and has been so for over 20 years:
And below here is the Inspector General’s statement regarding major problems in Contract Management also included in this same Appendix A to the US Dept of Defense most recent financial statements for the fiscal year 2012:
"The
Department continues to experience inefficiencies and wasteful use of funds in
its contracting efforts. The Department’s continuing contracting challenges
include obtaining
adequate competition in contracts, defining contract requirements, overseeing contract
performance, obtaining fair and reasonable prices, and maintaining contract documentation
for contract payments."
Below here is a link to Appendix A: Other Accompanying Information of the US Dept of Defense Financial Report for the fiscal year 2012, which goes into incredibly expansive detail on many of the huge accounting, finance, IT, contract management, acquisition and other problems existing at the US Dept of Defense.....yeah, it's a major embarrassment to the country, and has been so for over 20 years:
Addendum A- Other Accompanying Information
So how in the world can the US Congress require middle income and lower income retired and near-retired US citizens to have their Social Security, Medicare, and Medicaid Benefits all substantially reduced, when the Inspector General states that the US Dept of Defense lacks assurance that the hundreds of billions of dollars in payments it disburses annually are made correctly?
If
this were to happen, you would have an incensed retired and near-retired community
of US citizens.
The US
Congress now requires the US Dept of Defense to ensure that its financial
statements are validated as audit ready by September 30, 2017…..yeah, that’s 2017, almost five years away. What an incredibly low bar being set here.
And
do you really think they will be audit ready then? They
haven’t been for over 20 years.
And
the US Congress, mainly the Republicans in both the US House and US Senate, have
consistently let the US Dept of Defense off the hook in meeting this critically
important financial requirement, and yeah, for over 20 years.
And
the Republicans in the US Congress are the ones who put themselves out as the
financial watchdogs of US Government spending and fiscal responsibility. Give me a break!
Every
gigantic publicly-held company issues its audited financial statements each
year. Can you imagine what would happen if companies like ExxonMobil and IBM told their stockholders and the SEC that their financial statements and the supporting documentation backing them were of such unreliable quality that they couldn't be audited for one year, let alone for over 20 years? The market price of their common stock would just plummet.
And both Revenues and Expenses of public companies are audited, whereas the US Dept of Defense has very little in the way of Revenues.....it just gets money from the US Treasury to spend.
And both Revenues and Expenses of public companies are audited, whereas the US Dept of Defense has very little in the way of Revenues.....it just gets money from the US Treasury to spend.
The
US Dept of Defense is huge, but they have 58,000 Financial Managers, both military and civilians. I have to wonder just how many military and civilian workers are in the US Dept of Defense finance function below the financial manager level. From my experience in the private sector working for a major corporation many years ago, the ratio was then about 8 or 10 to 1. Using an 8 to 1 ratio, that would be another 464,000 US Dept of Defense accounting and finance workers.
How
many financial and accounting personnel do the largest US corporations
have? It’s not even close to just the 58,000 Financial Managers of the US Dept of Defense. For instance, at Dec 31, 2012, Google had only 53,861
total full-time employees, with 19,746 in R&D, 15,306 in Sales and Marketing, 12,595 in Operations and only 6,214 in General and Administrative. Google's total number of accounting and finance employees would be just a portion, and certainly not a large portion, of those 6,214 General and Administrative total employees.
To
consistently assert that you are too big to be audited is absurd. Get the right people, and it can be done, and
in very short order. It’s not the number
of people as much as it’s the quality of the people.
Thus
my recommendation is that a key part of the Sequester Solution should be that
the US Dept of Defense now start taking the legal requirement of annual audits
seriously, and do whatever it takes to meet the audit requirements not by
September 2017, but by September 2014.
And if they meet the September 2014 deadline, they should be given very
lucrative incentive bonuses.
It is
only right that the US Dept of Defense Finance Function be world class, just
like the US Military is in all other respects.
And this is especially so when the US Debt level is north of $16
trillion and the US Congress is trying to decide how best to reduce the US
Debt, which is clearly weighing heavily on the country's national security.
I’d
even consider bringing on board temporarily for the next 18 to 20 months, to help bring the US Dept of Defense financial
statements and their supporting documentation up to the high quality level necessary
to being audit ready as quickly as possible, something similar to the “Financial
Consumer Protection Bureau”, which has worked out so well.
It’s a very daunting task, but I think that a not too large number of patriotic, driven, exceptionally strong accountants and IT systems professionals could help to get this done in a reasonable amount of time.
Just ask all of the country's largest corporations if they would want to volunteer one or several of their best and brightest financial and IT systems people to accomplish this critically needed task and see how quickly many of them would patriotically do it. I am certain of it. And then ask CPA and consulting firms and other relevant organizations if they would want to add to this exceptionally talented group. And also ask some very talented retired financial people if they want to volunteer. And ask the best and brightest recent college graduates, and college students at both the undergraduate and the graduate level, in the accounting and IT systems areas to volunteer.
It’s a very daunting task, but I think that a not too large number of patriotic, driven, exceptionally strong accountants and IT systems professionals could help to get this done in a reasonable amount of time.
Just ask all of the country's largest corporations if they would want to volunteer one or several of their best and brightest financial and IT systems people to accomplish this critically needed task and see how quickly many of them would patriotically do it. I am certain of it. And then ask CPA and consulting firms and other relevant organizations if they would want to add to this exceptionally talented group. And also ask some very talented retired financial people if they want to volunteer. And ask the best and brightest recent college graduates, and college students at both the undergraduate and the graduate level, in the accounting and IT systems areas to volunteer.
And
when it’s all said and done and the US Dept of Defense starts issuing audited financial
statements starting for the fiscal year 2014, I am pretty sure that there will be substantial US Dept of Defense spending savings which
will subsequently flow from this for many years on end. And with the clean audited opinions of the US Dept of Defense financial statements, US citizens would then be assured that all of the spending by the US Dept of Defense is proper.
