According to a bombshell report first published in Politico, the Defense Logistics Agency is unable to account for more than $600 in construction projects.
An internal audit performed by the accounting firm Ernst & Young shows that no documentary trail can be found for millions of dollars worth of property and equipment that the DLA is responsible for.
What the audit showed
The audit, which was completed in mid-December, stated that mistakes in the DLA’s financial records amounted to approximately $465 billion for building projects being paid for by the U.S. Army Corps of Engineers and other federal agencies.
The trouble doesn’t end there. There was not enough documentation or no documentation at all to support $384 billion that had been spent on incomplete construction projects.
The DLA also could not provide documentary evidence in support of $100 million in assets that can be found on computer systems that handle the daily tasks of the agency, according to the report.
The audit covers the fiscal year that concluded on Sept. 30. 2016. It also found that the DLA wrongly recorded computerized assets of $46 million. The Agency could also not balance its books with those of the Treasury Department.
The audit has led many lawmakers to question whether the Defense Department can manage its annual budget of $700 billion, which could grow if President Donald Trump’s proposal for a funding increase is green-lighted by Congress.
The DLA serves as the military’s purchasing agency. It has a staff of 25,000 who process around 100,000 orders each day for the Army, Navy, Air Force, Marine Corps as well as other federal agencies.
Some lawmakers, like Republican Iowa Sen. Chuck Grassley have expressed skepticism that a clean audit of the Defense Department’s finances is even possible.
The head of the DLA, Army Lt. Gen. Darrell Williams, responded to the audit’s findings in writing. He said that the Agency is committed to fixing the weaknesses uncovered by the report and to strengthening its internal controls.
The DLA was the first agency of its size and scope to be audited in the Defense Department. Under the Trump administration, all federal agencies will begin being audited annually this year with reports released on Nov. 15.
Those audits are expected to cost around $367 million plus another $551 million to repair or replace antiquated accounting systems.
The audit by Ernst & Young was ordered by the Defense Department’s inspector general.
YORKVILLE ADVISORS – global alternative investment manager providing