Major Pentagon agency can’t account for $800 million — but still may get a budget increase

Major Pentagon agency can’t account for $800 million — but still may get a budget increase
An audit of the Pentagon's Defense Logistics Agency reportedly revealed that it spent more than $800 million on projects, but it has no idea what that money actually paid for. (Bill Clark/CQ Roll Call)

An audit of the Pentagon’s Defense Logistics Agency revealed that it spent more than $800 million on projects, but it has no idea what that money actually paid for, according to Politico.

An audit conducted by Ernst & Young found that the agency’s accounting procedures are so flawed that there is no reliable way to track how it uses its $40 billion annual budget.

In fact, Ernst & Young implied that the lack of documentation means there could be even more funds the DLA lost track of.

“We cannot determine the effect of the lack of sufficient appropriate audit evidence on DLA’s financial statements as a whole,” the audit report read.

What is the Defense Logistics Agency?

According to the DLA website, the agency “is the Department of Defense’s logistics combat support agency, providing worldwide logistics support in both peacetime and wartime to the military services as well as several civilian agencies and foreign countries.”

The DLA employs about 25,000 people and processes around 100,000 orders each day for the military and other federal agencies for items ranging from poultry to aircraft parts, Politico reported.

What problems did the audit reveal?

Here are the main problems turned up by the audit, which covered the 2016 fiscal year:

  • $465 million in misstatements in DLA books for construction projects
  • $384 million in spending that had little documentation, or none at all, for “in progress” projects
  • Records for $100 million in computer systems that have no supporting evidence of ever being tested or accepted
  • $46 million in computer assets that were wrongly recorded as belonging to the DLA

How did the DLA respond?

Army Lt. Gen. Darrell Williams, the agency’s director: “The initial audit has provided us with a valuable independent view of our current financial operations. We are committed to resolving the material weaknesses and strengthening internal controls around DLA’s operations.”

A DLA statement to Politico: “DLA is the first of its size and complexity in the Department of Defense to undergo an audit so we did not anticipate achieving a ‘clean’ audit opinion in the initial cycles. The key is to use auditor feedback to focus our remediation efforts and corrective action plans, and maximize the value from the audits. That’s what we’re doing now.”

More money, more problems?

The audit raises concerns about the Defense Department’s ability to manage its budget, which could be growing in fiscal year 2019.

President Donald Trump plans to propose a $716 billion defense budget, which is a 7.2 percent increase from 2018.

Defense Secretary Jim Mattis has pushed for defense funding increases because he believes the U.S.’s “competitive edge has eroded in every domain of warfare — air, and, sea, space and cyberspace — and is continuing to erode.”

In June, Mattis criticized Congress for “wasting copious amounts of precious taxpayer dollars” due to “budgetary confusion” and spending cuts.

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