DHS and DoD Failing Federal Accounting Audits

Departments not meeting standard accounting procedures; DHS failed audits since 2004


Jonas noted that there also have been what she called "significant successes." In 2001, the Pentagon had hundreds of inoperable accounting systems and no data standards. This year, she said, it received a clean audit opinion on $215 billion, or 15 percent, of its assets and $967 billion, or 49 percent, of its liabilities.

Established in 2002, the Department of Homeland Security faces slightly different challenges. Norquist, the agency's third chief financial officer, said that despite recent problems, officials have "a number of checks on our numbers and our budgets."

What there isn't, however, is a central financial management manual - something all other federal agencies have - that would enable auditors to check if Homeland Security is even meeting its own policies.

Nor is there a central accounting system: In 2005, after spending $52 million, DHS dropped a $229 million contract with BearingPoint to develop a single software accounting system after it became obvious it wasn't going to work. The department now plans to base its systems on those already in place at the Transportation Security Administration or Customs and Border Protection.

Norquist also likened his agency's situation to a house.

"If you left your front door unlocked, it doesn't mean your house got robbed. But you should be concerned if your front door is routinely left unsecured," he said.

Some experts say the accounting standards for federal agencies themselves don't make much sense because they treat the government like a company, which buys and sells things, rather than a public entity, which collects taxes and spends whatever is needed. The federal government also doesn't have to account for required future payments, such as Social Security and Medicare.

"Even if they were getting clean bills of health on these audits, they only measure what's going on this year and don't talk about promises being made down the road," said Kent Smetters, former deputy assistant secretary for economic policy at the Treasury Department.

If those funds committed into the future are taken into account, the federal deficit this year would be about $2 trillion, not $158 billion, said Smetters, who teaches at the University of Pennsylvania's Wharton School.

"The bottom line is that you have the president's budget passed by Congress, and these agencies have a line in there of how much money they're going to get. And what these audits say is that they can't trace how that money actually gets spent," he said. "That's a problem."


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