GAO Report Raises Concerns Regarding Marine Corp Financial Audit

New report calls into question DOD audit standards

WASHINGTON – Today, a bipartisan group of senators reacted to a report from the Government Accountability Office (GAO) that describes that a previously declared clean audit opinion for the Marine Corps was not valid. Sens. Tom Carper (D-Del.), John McCain (R-Ariz.), Ron Johnson (R-Wis.), Claire McCaskill (D-Mo.), and Chuck Grassley (R-Iowa) requested the GAO assessment, which examined the Department of Defense (DOD) Office of Inspector General’s assessment of the 2012 Marine Corps audit.

The DOD Inspector General had previously determined that the Marine Corps had obtained a clean audit opinion of its 2012 “schedule of budgetary activity,” a partial financial audit. However, GAO detailed in the report that the Marine Corps audit had inadequate internal controls, measurements and documentation – including incomplete budgetary transactions, unreliable data through DOD business process and systems, and improper fiscal year recording of obligations and outlays.

The senators released the following statements in reaction to the report:

Sen. Carper: “I often like to say that you can’t manage what you can’t measure; nowhere is that statement more true than at the Department of Defense, the largest federal agency. After all, we can’t effectively identify areas to reduce spending if we don’t know how much, and where, we’re spending that money in the first place. Unfortunately, the largest agency, the Department of Defense – which spends more than $2 billion every day – is the only federal agency that has not yet conducted an audit. While the Marine Corps has made more progress than the other services in conducting a financial audit, the Government Accountability Office raises serious concerns about the standards of financial reporting and audits the Marine Corps – and the entire Department — has been following. This is more than just a disagreement among accountants; it raises questions about the Department’s basic financial practices and whether the Department is being held to the high standards that taxpayers deserve. I am going to work with my congressional colleagues to review some critical questions with the Department of Defense and the Inspector General raised by this report, and to push the Department of Defense to do a better job for American taxpayers.”

Sen. Johnson: “As a businessman and an accountant, I know the importance of balancing your books. I am troubled by GAO’s findings and will continue to push for a clean audit to ensure the federal government is spending taxpayer dollars wisely.”

Sen. McCaskill: “We rely on inspectors general to be independent watchdogs, and this report raises serious concerns about the audit issued by the Department of Defense Inspector General. As the former auditor for the State of Missouri, I know how important independent audits are in accounting for and overseeing the use of tax dollars. This goes beyond a simple disagreement over auditing standards between the Inspector General and Government Accountability Office—it raises questions about the decision of Inspector General managers to override the concerns of their own audit team.”

Sen. McCain: “GAO’s report on the Marine Corps audit is troubling. The Defense Department’s response to its findings shows that the Pentagon is not making the progress achieving auditable financial statements it claims, let alone the progress it said it would have accomplished by now. We’ve spent billions of taxpayer dollars and decades implementing financial management improvement efforts across the Pentagon. Yet many of the Defense Department’s well-known and longstanding problems stretching back 25 years still remain. We need results from the Pentagon, not more ‘lessons learned.’ The rest of the government can pass an audit. It’s long past time for the Defense Department to demonstrate it can do the same and restore taxpayers’ confidence in its stewardship of precious defense dollars.”

Sen. Grassley: “Broken bookkeeping has plagued the Pentagon for years. Under deadline pressure, the Marine Corps claimed to be ready for a clean audit. The Defense Department Office of Inspector General rushed to help and issued an opinion supporting a clean audit. Then work papers began to creep out, showing the clean opinion wasn’t worth the paper it was written on. The inspector general was forced to withdraw the opinion. Now, the Government Accountability Office report exposes the flimsy basis for the clean bill of health. The report is an instruction manual for how not to jump to bogus conclusions. As hard as the inspector general’s office tried, it couldn’t produce any paper to support its conclusions. The Defense Department needs to follow every GAO recommendation to the letter. We need to get things back on track and prevent an embarrassing setback like this from ever happening again. The taxpayers deserve to know where their money goes, for defense and for everything else out of the federal government.”