Pentagon Accounting Fraud
On november 15, ernst & young and the other private firms hired to audit the pentagon announced that they couldn’t complete the job. Congress had ordered an independent audit of the Department of Defense, the government’s largest discretionary-cost center—which receives 54 cents out of every dollar in federal appropriations—because the Pentagon had failed for decades to audit itself. The firms concluded, however, that the DOD’s financial records were so
riddled with bookkeeping deficiencies, irregularities, and errors that a reliable audit was simply impossible.
Deputy Secretary of Defense Patrick Shanahan tried to put the best face on things, telling reporters, “We
failed the audit, but we never expected to pass it.” Shanahan suggested that the department should get credit for
the effort, saying, “It was an audit on a $2.7 trillion organization, so the fact that we did the audit is substantial.”
The truth, however, is that the DOD was dragged kicking and screaming to this audit by bipartisan frustration in
Congress—and had this been a major corporation, the result likely would have been a crashed stock.
