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Department Of Defense Plans To Launch First Ever Major External Audit

The Department of Defense is set to launch its first ever major external financial audit in the agency’s history, awarding contracts for the job to three firms, Federal News Radio reports.

While the DOD knows that it won’t receive a clean bill of financial health, the three auditors who won the contract think they can at least pass muster on the schedule of budgetary activity (SBA) requirement for all military services, come November of 2015. An SBA is not a complete audit of finances, but rather examines whether documentation is possible for funds received and funds spent during a budget year. The move represents a downgrade from DOD expectations to perform a more expansive audit by the end of 2014.

A downgrade was necessary since a full audit would require evidence dating years back when DOD financial systems were in absolute disarray, making the original goal set by former Secretary of Defense Leon Panetta of a full audit by 2017 impossible. Documentary evidence simply does not exist or is inaccessible.  However, according to a statement from the Pentagon, the audit, in combination with other efforts, will bring around 90 percent of the 2015 budget under scrutiny.

“I think there are significant challenges in meeting the 2017 date,” said Asif Khan, the director of financial management and assurance at the Government Accountability Office (GAO).

“To be able to do a financial statement audit by that date, it’s going to be very difficult because of the sheer scale and resources required.”

This time around, the DOD hopes to follow in the footsteps of the Marine Corps, a service which passed a 2012 SBA audit, but only after years of trying.

Auditors will start immediately at the beginning of January 2015. Ernst & Young won the contract for examining the Air Force’s books. The contract will cost the Pentagon $14,402,567 million dollars, the most expensive contract out of the three services. The second most expensive contract was awarded to KPMG, which will conduct an audit of the Army for $13 million dollars.

The Pentagon has predicted that additional contracts will likely be necessary to complete the work.

“There is much left to be done, but this level of rigor will help the department focus on those areas that require the most attention,” the Pentagon said in a statement. “The awarding of these contracts is another milestone towards the department’s ultimate goal.”

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