Audit reveals Army's trillion-dollar accounting gaffes

Story highlights

  • The financial errors last year hit nearly $7 billion
  • The Army disputed some of the report's findings

(CNN)The US Army made trillions of dollars of accounting mistakes and often did not have the receipts or invoices needed to support figures in its budget, according to a scathing Pentagon report.

The audit, conducted by the Defense Department's Office of Inspector General, found that the Army erroneously made $2.8 trillion in adjustments in the third quarter of 2015 to its Army general fund - one of the main accounts used to fund the service. The error amount skyrocketed to $6.5 trillion for all of last year, the report said.
    The June report, first disclosed by Reuters on Friday, found "unreliable" data was used to prepare the financial statements, leading to the possibility that the Army's finances were "materially misstated."
    Financial managers from the Pentagon and the Army "could not rely on the data in their accounting systems when making management and resource decisions," the audit said.
    An Army spokesman disputed some of the findings.
    "Though there is a high number of adjustments, we believe the financial statement information is more accurate than implied in this report," Dov Schwartz, an Army spokesman, said in a written statement while adding that the Army was still reviewing the report.
    The Defense Department's budget for the year is nearly $600 billion, but the accounting errors have run into the trillions of dollars because making changes to one account requires changes to various other accounts. In that way, the amount of one mistake can mushroom to many times the amount of the original error.
    The Inspector General largely attributed the errors to Defense Department accounting employees failing to prioritize fixing the glitches in the systems that partly caused the mistakes. In addition, more than 16,000 files vanished from the computer system of the Defense Finance and Accounting Service (DFAS) because of a flaw in the computing software, the audit said.
    The Army is in the process of identifying and correcting the root causes of the errors and has put in place a stronger review process for supporting documentation of budget entries, Schwartz said.
    It comes at a time when the Pentagon has faced mounting criticism from both sides of the political aisle for not being prepared to undergo a complete audit by the Government Accountability Office. Lawmakers on Capitol Hill have introduced legislation to impose penalties on the Pentagon if it fails to meet the legally mandated goal of being ready for a full audit by September 30, 2017.