Why Has the United States Department of Defense Not Been Audited in Over 15 Years?
The U.S. Department of Defense (DoD) has been the subject of numerous audits within the military system. Yet, the entire department has not been subjected to a comprehensive audit as a whole, despite ongoing efforts to achieve this. The lack of a full audit of the DoD raises questions about its financial transparency and accountability.
The Extensive Nature of the DoD
The Department of Defense is the world's largest organization, with trillions of dollars in assets and millions of employees. It comprises a wide range of entities, including the military departments, DoD agencies, Joint Chiefs, and their supporting organizations. Despite this vast scale, the DoD has never been audited in its entirety. This article explores the reasons behind the lack of a complete audit and the ongoing efforts to change this status quo.
Why the DoD Has Not Been Audited Previously
The primary reason for the absence of a full audit can be attributed to three main factors:
Congressional Control and Taxation
One of the main reasons the DoD has not been audited as a whole is the control exercised by Congress over the budget. Congress controls the funding provided to the Department and the spending of that funding is tightly regulated. The absence of a taxing authority further complicates matters since the government is not a traditional business entity.
Financial accountability is enforced through laws with both criminal and civil penalties for violations. In the past, this level of scrutiny was deemed sufficient to manage the DoD's expenditures. However, public demand for greater accountability has grown, particularly following incidents like the '550 hammer' and the '2000 toilet seat' controversies around 20 years ago. Even without a full audit, the DoD is accountable to Congress for its money.
Taxation and Asset Depreciation
The DoD does not pay taxes, which means there is no need to account for the value and depreciation of assets such as real property, land, buildings, and major equipment like airplanes and aircraft carriers. While the Department did account for these objects effectively, their 'book' value was considered zero, making a traditional commercial audit impractical.
Organizational Structure
The Department of Defense operates differently from a for-profit business, non-profit organization, or a corporation (LLC or partnership). It does not have shareholders, nor does it require bonds or other financing methods used by local governments. This unique structure means that the DoD serves a different purpose and operates under different accounting principles.
Ongoing Efforts to Implement Audits
Despite the challenges, efforts are underway to introduce auditing into the DoD. These changes are transforming the way the Department operates, leading to more efficient processes and better accountability. The rules for these audits are being modified, particularly for the Defense Department, while other areas adhere to standard audit practices.
The implementation of audits is significant in terms of cost, but it is also driving the Department to become more lean and efficient. As time goes on, the benefits of these audits will become increasingly apparent, improving the overall performance and financial management of the DoD.
It is important to note that while the audit process may disrupt certain operations, the long-term benefits of improved accountability and financial management are substantial. The DoD is on the path towards greater transparency and efficiency, aligning itself with the expectations of taxpayers and the public.
As the DoD continues to adapt to these changes, it will play a crucial role in maintaining national security and ensuring that taxpayer dollars are used effectively. The journey towards comprehensive auditing is a step in the right direction, fostering trust and confidence in one of the world's largest and most complex organizations.