Audit finds Pentagon failed to properly keep track of $800 million in projects, says report

Key Points
  • A Pentagon agency failed to properly keep track of more than $800 million in construction projects, according to Politico.
  • It said an internal audit by Ernst & Young that it obtained found financial management was "weak" within the Defense Logistics Agency.
  • The findings follow the Pentagon announcing last year it planned to start the first agency-wide audit in the Pentagon's history.
The Pentagon building in Washington, DC.
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An internal audit found a large Pentagon agency failed to properly keep track of more than $800 million in construction projects, Politico reported on Monday.

The audit, issued by Ernst & Young and obtained by Politico, identified cases where the Defense Logistics Agency had deficiencies in the documentation for millions of dollars in property and equipment.

"Across the board, its financial management is so weak that its leaders and oversight bodies have no reliable way to track the huge sums it's responsible for, the firm warned in its initial audit of the massive Pentagon purchasing agent," Politico said.

It follows the Department of Defense announcing in December it planned to start the first agency-wide financial audit in the Pentagon's history.

Politico reported that the audit of DLA showed at least $465 million in misstatements for construction projects, including projects it financed for the Army Corps of Engineers or other defense-related agencies. It also found insufficient documentation for around $384 million in spending for "in progress" projects.

"DLA concurs with Ernst and Young's assessment of our failure to properly account for and track funding to specific construction projects," Patrick Mackin, a spokesman for the DLA, told CNBC in a statement. "While there were shortcomings in documentation, there was no loss of accountability of real property or associated funding."

DLA, which employs about 25,000 personnel, handles procurement of supplies, materials and other purchasing needs of the U.S. military from prime vendors. DLA purchases for the military range from fuel, water, food and pharmaceuticals to construction materials and spare parts.

According to Mackin, the agency began its first full financial audit in 2017 and found there was a "lack of complete documentation for military construction and real property."

"I expect we'll see much more of these things as the audit process goes on," said Dan Grazier, a former Marine captain and defense industry expert at the Project On Government Oversight, a Washington watchdog group. "There are a couple of auditing firms that are being hired to ... check all the books and property records and those kind of things."

The Pentagon estimates its department-wide audit would cost about $367 million in 2018 and another $551 million to fix problems. About 1,200 auditors are participating in the process of assessing books and records, according to the DoD.

The Pentagon's initial audit already has disclosed that the Army had 39 Black Hawk helicopters in its fleet that were not properly recorded in its system, David Norquist, the Pentagon's comptroller testified last month to the House Armed Services Committee. He also disclosed at the time the Air Force identified hundreds of structures and buildings "not in its real property system."

As for the Politico report, it said about $46 million in computer assets had been "inappropriately recorded" by DLA. The audit of the DLA covered the fiscal year ending Sept. 30, 2016.

"As part of DLA's responsibility to achieve audit compliance, DLA has already taken steps to correct this shortcoming," said Mackin, the agency spokesman. "As stewards of the American taxpayer's dollars, our goal is to make significant progress towards compliance during the FY 2018 audit cycle."

Read the full story from Politico here.