Audits Reveal Complete Lack of Accountability in the Defense-Industrial Complex

A review of the audit reports of the Office of the Inspector General for the Defense Department reveals Defense Secretary Pete Hegseth has a monstrous task ahead to rectify outdated systems and a lack of accountability departmentwide. Over half of the Defense Department failed 2024 financial audits and many divisions have never received a passing grade since audits began in 1991.

Yet no one seems to be held accountable.

Since being confirmed on January 24th, Defense Sec. Pete Hegseth has put a focus on rectifying accountability issues in his department. Upon taking office, Hegseth promised that within four years the Pentagon would pass a clean audit to be accountable to the American taxpayer. There is still much work to be done.

In 2024, the Defense Department employed approximately 2.1 million service members and 811,000 civilian employees. Assets include more than 712,000 facilities across the world and total spending is $909.7 billion—half the discretionary spending of the U.S.

Reports indicate even when leadership adopts the right tone for accountability, it isn't trickling down to those responsible for daily tasks such as inventory. For example, a sergeant in charge of inventory may understand the need for the assets but not the importance of accurate accounting. A culture change on the importance of financial management and accountability must be instilled.

A Summary of Recent Audits

Restoration News analyzed some of the Office of the Inspector General's complex audit reports to provide a summary of important items.

Fiscal Year 2024 Financial Statement Audit—More than half of the Defense Department failed the financial audit. The Marine Corps was the only branch with a clean audit of its general fund.

The report revealed that systems are outdated and cumbersome. The Defense Department has 4,700 management systems, of which 400 of those are relevant to financial management which have at least 2,000 interfaces between them. Some of these systems have been in use since the 1950s. According to the report, "They are not always interoperable, meaning they cannot talk to each other. Many of them also require manual processes and do not have effective controls."

The financial audit revealed 11 unmodified "Clean" opinions, 1 qualified opinion, and 12 disclaimers of opinion as defined below.

It should be required by the leadership of each service that if they cannot pass an audit of their general funds within 2 years, they should no longer be in charge. If the Marine Corps can do it, why can't the other branches?

Report on Outside Auditors—In January, the Defense Department's Inspector General revealed that outside auditors contracted with the government to perform oversight did not comply with required auditing standards for 69 percent of its audits. New audits are being performed to identify problems.

Operation Atlantic Resolve —Under this operation, the U.S. "provides security assistance to Ukraine and conducts other military activities to strengthen the collective security of European partners." This audit evaluated the operation's spending.

• America is paying for Ukraine social programs:
  1. $159,079,200 guaranteed minimum income for low-income families
  2. $76,420,400 for housing and utility subsidies
  3. $290,475,500 civil servant salaries
  4. $1,483,959,400 for internally displaced persons
• These are all in addition to $1.1 billion in humanitarian assistance for shelter, water, sanitation, logistics, health, and economic recovery.

Defense Department Inspector General Audit Findings—This was an audit of the Army's Management of Undefinitized Contract Actions (UCA) for Ukraine assistance. A UCA is "any contract action for which the contract terms, specifications, or price are not agreed upon before the contractor begins performance." It is a "cost-reimbursable" contract in which the government accepts risk until the contract is finalized. Since these are high risk to taxpayers, there are specific requirements on how these should be processed and the audit found many were not followed. Army contracting personnel did not properly manage 75 percent of the contracts audited in accordance with Federal policies.

Audit of the Defense Department's 2022 compliance with Payment Integrity Information Act (PIIA) requirements—The PIIA was enacted to reduce improper payments. In FY 2022, the Defense Department reported improper and unknown payment estimates of $2 billion for 9 programs. The PIIA audit found that the department did not properly publish this information as required under the law.

Operation Enduring Sentinel—The purpose of this operation is to "contain terrorist threats emanating from Afghanistan and to protect the homeland by maintaining pressure on those threats." Some important revelations from the report:

• The Taliban is prohibiting female aid workers and placed a ban on women studying in health fields.
• Opium production increased by 30% in 2024.
• USAID staff was unable to conduct oversight of grant awards of over $500 million.
• Between September 2021 and December 2024, $1.8 million was paid to the Taliban by the Treasury Department for so-called fees for Afghan's employed by the United States. These are prohibited payments since the Taliban is a Foreign Terrorist Organization.
• Sensitive security assets at the U.S. Embassy in Kabul were abandoned including 26 percent of Kabul's embassy firearms. Also, 64 percent of its armored vehicles were left in Afghanistan, most were intact.
• The report revealed years of poor training and staffing to rebuild Afghanistan by all agencies (DoD, State, USAID).
• USAID failed to provide required oversight of water management systems after the Taliban dismantled the community councils put in place to manage them.

National Defense Stockpile Transaction Fund—This audit revealed a lack of adequate policies, procedures, and internal controls to validate inventory and accounts payable systems. There were material weaknesses in internal controls of financial reporting which lacked controls to identify inaccurate balances. There were also no controls to review and approve transactions with elevated access privileges.

Material weaknesses were also found in design and operation of information systems controls over financial data. Revenues of goods sold to the public were not properly recorded.

Operation Inherent Resolve—The purpose of this operation is "to advise, assist, and enable partner forces until they can independently maintain the enduring defeat of ISIS in Iraq and designated areas of Syria and to set conditions for long-term security cooperation frameworks."

In fiscal year 2024, Congress appropriated $175 million to Foreign Military Financing for Iraq even though the State Department only requested $75 million, because previously appropriated funds were not spent. Fortunately, the 2024 funds are under review and not yet obligated.

The audit also confirmed the Texas murderer who drove his truck into a crowd on New Year's Even in New Orleans was ISIS-inspired.

Evaluation of the DoD’s Validation of Repair Parts Requested by the Ukrainian Armed Forces (UAF)—Processes were not in place to appropriately determine the need for repair parts for the UAF which unnecessarily burdened American taxpayer. Parts were being replaced rather than being sent for repair, which came at a much higher cost. The UAF returned only a small portion of recoverable parts that were repairable because there was no agreement in place requiring them to do so.

TRICARE Audit—This audit reviewed payments of the TRICARE military health system and revealed wide variations in payments across regions. One big problem is that TRICARE policy did not require officials to ensure state prevailing rates are reasonable and consistent with other states.

• TRICARE East Region paid a rate of $11,500 for custom sleep apnea mouthguards in Illinois but it only cost $3,000 in Iowa.
• TRICARE East paid $5,000 per month to rent a medical device which was advertised for $675 per month by other suppliers.
• Reimbursement rates increased 39 percent from 2021-2023 and varied greatly among states for the same procedures.
• Undefined miscellaneous codes were used causing an increase of over 52 percent, costing taxpayers an additional $26 million.

The Office of the Inspector General is doing a respectable job shining light on problems in the Defense Department. Not only do they identify weaknesses in their reports, but they also offer solutions that must be acted upon by officials in charge. Sec. Hegseth must hold those officials responsible for acting upon the inspector's recommendations.

(READ MORE: Biden Put Recruits at Risk to Increase Military Enlistment)