April 6 — The head of the government's main internal watchdog agency said the Pentagon's inability to clean up its books and account for its property remains a major reason the federal government cannot pass an audit.
Gene Dodaro, comptroller general of the United States and head of the Government Accountability Office, made the comments at an April 6 hearing by the Senate Budget Committee that focused on the recently released government financial report. The report, unveiled Feb. 25, looks at government finances from an accrual-accounting basis, similar to accounting used by Wall Street companies, rather than the cash-in, cash-out basis used in the monthly U.S. budget statements .
The financial report found the government ran an accrual-basis deficit—or “net operating cost,” in its word—of $519.7 billion in fiscal 2015, higher than the $438.9 billion deficit reported in the budget statements. For the 19th straight year since the report was created, the GAO issued a “disclaimer,” saying it was unable to vouch for its accuracy.
Dodaro said the main reasons for the disclaimer were the Defense Department's serious financial management problems, the government's inability to reconcile major transfers of money between federal agencies and an ineffective process for compiling the annual financial statement.
Dodaro said Defense—by virtue of being responsible for 30 percent of all the government's assets and 15 percent of its net costs—was a major factor behind the inability of GAO to give the overall report a clean opinion. Of the 24 federal agencies required to pass an annual financial audit, all but one either had a clean audit in 2015 or had achieved one in earlier years. “DOD is the one,” Dodaro said.
“DOD really is the main obstacle, along with these other processes,” he said. “You have to help us hold DoD accountable for making progress. They're working on it, but they're not really fixing the underlying problems.”
Dodaro said some small portions of the Defense Department are capable of passing an audit, such as its pension programs or the Corps of Engineers. “Offhand, I'd say it's less than 10 percent,” he said. “It's not anywhere close to being solved.”
Sen. David Perdue (R-Ga.) also criticized the Pentagon for being unable to get its books in order. Citing the Defense Department's approximately $600 billion annual budget, Perdue said, “People say, ‘Well, that's too large to audit.' Well, Wal-Mart's not much smaller than that. As a matter of fact, it's pretty close to being the same size.”
“I'm over this too-large-to-be-audited thing,” Perdue said. “It's time we get a real accounting of that.”
Even though the GAO could not express an opinion about the accuracy of the financial report, Dodaro said it showed the government's budget path was still unsustainable in the long run. To keep the debt in proportion to the U.S. economy stable over 75 years, he said, revenue would have to be increased by 35 percent annually or spending cut by 26 percent on the same basis.
Budget Chairman Mike Enzi (R-Wyo.) said the hearing was one of four he plans to hold in coming weeks on overhauling the federal budget process. Enzi said he hopes the hearings will lead to a bipartisan bill.
“This is the time to do it, when nobody knows who the majority will be or who the president will be, so we can all be responsible,” Enzi said.
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Dodaro's prepared testimony to the Budget Committee is available here: http://src.bna.com/dVB.
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