"... All Four Feet and their Snout in the Trough..."

The Senate Budget Committee held a hearing Wednesday on the DoD-wide financial audit that is now just getting underway. You can view that hearing here as well as download prepared testimony by the two DoD witnesses.

One of the notable quotes from the hearing came from Sen Kennedy, Louisiana. After the DoD representatives admitted that they didn't have an accurate tally of the number of Government contractors or the value of contracts, Sen Kennedy stated "We've got some hogs who have all four feet and their snout in the trough and we got to find out who they are, gentlemen". That was really besides the point of the hearing but entertaining nevertheless.

The DoD audit is a massive undertaking involving 1,200 auditors, 24 stand-alone audits and one over-arching audit. It is costing $367 million and the services have set aside $550 million to "fix" any problems that might arise. Of course, DoD anticipates that many issues will arise and does not expect to get a "clean" audit report this year. It might take 10 years to get a clean audit.

The DoD witnesses promised transparency throughout the process, not only to Congressional members but to the public as well. Any findings or issues raised during the audit process will be publicly available on a website dedicated to that purpose. Its not set up yet so we cannot link to it but we will when it goes live. We will also monitor the interim findings and report on matters that might be of interest to Government contractors.

1,200 Auditors and $847 Million

If you think that you have it bad when undergoing an audit, consider what the Defense Department is facing this year.

The Department of Defense, Office of Inspector General (IG) is about to embark on department-wide audit of the Defense Department. It is expected to employ up to 1,200 Government and outside auditors at a projected cost of $847 million. Some people think that is too expensive.

The financial statement audit coordinated by the IG's office will involve 24 stand-alone audits of every defense component including the Army, Navy, Air Force, Marine Corps, DCAA (Defense Contract Audit Agency), and many more.

The IG plans to make its findings public (transparency, you know) so that leadership will be accountable for correcting deficiencies and making improvements. By this means, taxpayers will be assured that money is being spent wisely and the Department is doing its best to to prevent fraud, waste, and abuse within the organization.

The stated objective of the audit is as follows:

Our objective is to determine whether the DoD Agency-Wide Basic Financial Statements as of September 30, 2018, and September 30, 2017, taken as a whole, were presented fairly, in all material respects, and in conformity with accounting principles generally accepted in the United States of America. In addition, we will determine whether these principles were consistently applied. We will review the DoD Agency-Wide Consolidated Balance Sheet as of September 30, 2018, and September 30, 2017, and the related Consolidated Statement of Net Cost, Consolidated Statement of Changes in Net Position, Combined Statement of Budgetary Resources, and related notes. We will also review the Required Supplementary Stewardship Information, Required Supplementary Information, and Other Accompanying Information. In addition, we will review internal controls related to the reliability of financial reporting and compliance with laws and regulations that apply to these financial statements. We will fully consider suggestions from management on additional or revised objectives.

The review of internal controls is probably where most of the findings will occur. We know from prior IG and GAO audits that there are significant problems in the accounting for Government property. Chances are good that the auditors will have to disclaim an opinion on the Balance Sheets.