News - Bill's Blog

How seriously is DoD taking its accounting and auditing challenges?

February 5, 2018

Politico is reporting today, in a report headlined “Exclusive: Massive Pentagon agency lost track of hundreds of millions of dollars,” that a “damning outside review” indicates that “one of the Pentagon’s largest agencies can’t account for hundreds of millions of dollars’ worth of spending.”

Politico then reports on what it calls an “internal audit” of the Defense Logistics Agency by Ernst & Young, which is a private sector accounting firm. That audit included damning conclusions about the ability of this agency to keep track of hundreds of millions of dollars of construction contract spending. In turn, the article included valuable warnings about what these findings suggest for the massive “first-ever” DoD-wide audit now underway – an effort reportedly slated to cost nearly a billion dollars this year.

Politico’s author Bryan Bender quoted U.S. Senator Charles Grassley, R-IA, “If you can’t follow the money, you aren’t going to be able to do an audit.”

We will have more to say about DoD finances and the cost-effectiveness of that new audit effort soon.  Truth in Accounting has developed a new “Defense Department Accounting Advisory Council.”  This council includes some very experienced and thoughtful individuals, and we will be delivering policy statements and related research going forward.

But for now, let’s take a peek at the webpage for West Point for some perspective on how seriously the U.S. Army and DoD more generally are prioritizing their accounting, auditing and financial challenges.

West Point’s “Academics” webpage section lists 13 Departments. “Accounting” and “Finance” are not among them.

In turn, the Academics section has an underlying “Curriculum” section listing 36 academic majors.

“Accounting” and “Finance” are not listed as academic majors.

The Curriculum page stresses that at the top of those 36 majors that “The curriculum at West Point is carefully designed to meet the needs of the Army for "officer-leaders of character to serve the Army and the Nation." …”

Accounting and Finance are not entirely missing at West Point.  Within the Behavioral Sciences and Leadership department, “Managerial Finance” and “Fundamentals of Accounting” are listed as required courses.

But perhaps the time has come for a more formal concentration on Accounting and Finance at the Academy, either as a department, or as an academic major.  An honors program for cadets concentrating in Accounting and Finance could be a way to identify future leaders for the current and future challenges facing the Army in managing our money.

Can our new President help provide leadership necessary in this area?  Maybe not, if the new, recently-released National Security Strategy update is an indication.  The words “accounting” and “audit” do not appear in this document, which supposedly delivers a high-level statement of principles and fundamental objectives.


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