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The Defense Department’s Audit Disappearing Act

Sunday November 24th, 2013   •   Posted by Craig Eyermann at 10:35am PST   •  

12942515_SIn Washington, D.C., an investigation by James Rosen and Marisa Taylor of the McClatchy news service has found that the Defense Finance and Accounting Service (DFAS), which the Pentagon set up over twenty years ago to strengthen the accountability of its spending, has broken down. Worse, it appears that Defense Department officials are currently working to prevent an accurate account of the Pentagon’s spending from being made:

Among the signs of dysfunction, according to interviews with key players, internal emails, memos and other documents obtained by McClatchy, are:

– Outside audits by a certified public accounting firm of the Defense Finance and Accounting Service’s books turned out to be shoddy, according to the Pentagon’s own accountants, although that same CPA firm had endorsed the agency’s previous fiscal records for years.

– In reaction to the skeptical evaluations, Pentagon officials pressured their accountants to suppress their findings, then backdated documents in what appears to have been an effort to conceal the critiques.

– The Defense Department’s Office of the Inspector General, which was brought in to watchdog the audit, not only helped squelch the critical work but also allowed the outside firm to be paid despite the serious questions about the quality of its work.

The inability to conduct accurate audits of defense spending matters because of its sheer amount, which represents nearly one-fifth of the federal government total spending of $3.5 trillion in 2013, and coincidentally, an amount in the same ballpark as the government’s annual budget deficit of $680 billion for 2013. With numbers like that, being off by even a small percentage in the accounting can cost taxpayers tens of millions of dollars.

And like any good investigative story coming out of Washington, D.C., there would appear to be a cover up underway:

In April 2010, three months after being backed by their bosses, the inspector general’s two lead accountants of the audits received letters informing them that their assignments had been “terminated,” according to documents reviewed by McClatchy.

Even more unusual, the terminations were retroactive to Jan. 27, 2010 – the precise point when the inspector general’s office had informed the Defense Finance and Accounting Service that it would not endorse the 2009 audit.

“They wanted to get rid of us because we were seeing the naughty-naughty,” said a member of the inspector general’s audit team, who spoke on condition of anonymity for fear of retaliation.

The retroactive terminations effectively wiped the slate clean, turned back the clock and removed from the official record the inspector general accountants’ critical findings that the audit did not meet professional standards.

The termination letters were signed by Normand Gomolak Jr., the principal contracting officer with the Defense Finance and Accounting Service.

And so, the audit’s findings miraculously disappeared. Funny how the federal government’s bureaucrats can make that kind of magic happen.

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November 2013