Story highlights

The Pentagon has never before had to produce a "clean audit"

Panetta warns that deep spending cuts would harm military

The Defense Department should be able to conduct an audit in 2014

Washington CNN —  

The Defense Department, considered by some a black hole of federal spending, is promising lawmakers it will open its books and show in detail how the billions are spent.

Defense Secretary Leon Panetta, who’s been making almost daily public appearances to warn of the dire consequences of deep budget cuts, admitted Thursday that the Pentagon must improve its accountability.

“While the department’s systems do tell us where we are spending taxpayer funds, we do not yet have the details and controls necessary to pass an audit,” Panetta said in remarks prepared for his appearance before the House Armed Services Committee. “This is inexcusable and must change.”

Until now, the Pentagon has never been subjected to a so-called “clean audit,” a full examination of its spending. And in the past, the Defense Department had pledged to provide Congress with auditable financial statements by 2017. Panetta shaved several years off that deadline to deliver that key part of how the Pentagon monitors its spending.

“I have directed the department to cut in half the time it will take to achieve audit readiness for the Statement of Budgetary Resources, so that in 2014 we will have the ability to conduct a full budget audit,” Panetta said. “We owe it to the taxpayers to be transparent and accountable for how we spend their dollars, and under this plan we will move closer to fulfilling that responsibility.”

The Statement of Budgetary Resources, according to the Pentagon, shows what funds the Defense Department received, what was obligated and what checks were written. It is just one of four parts of the internal accounting. The other three, including a consolidated balance sheet and a net cost for the entire department, will remain on the 2017 timetable.

Panetta continued his warnings of the consequences if lawmakers fail to reach a compromise on other provisions of the debt ceiling deal reached in August. Such a failure would trigger deep, mandated, across-the-board spending reductions, “cuts that in my view would do catastrophic damage to our military, hollowing out the force and degrading its ability to protect the country,” he said.

The secretary said that President Barack Obama agrees that the Pentagon should be off-limits for additional budget cuts beyond the estimated $450 billion already established.

“You’ve seemed quite clear that you believe that we should make no further cuts in the defense budget beyond those which have already been enacted. Is that true?” asked Rep. Mac Thornberry, R-Texas.

“Correct,” Panetta answered.

“Does the President share your view on that?” Thornberry asked.

“He does,” Panetta said.

Thornberry said he hopes Obama would speak out on defense cuts “and say we have gone as far as we can go.”

This was Panetta’s first appearance before the House Armed Services Committee as defense secretary. He was joined by the new Joint Chiefs of Staff chairman, Gen. Martin Dempsey.

Dempsey said he, too, is committed to making spending cuts, but there is a limit.

“We must make hard choices that balance risk and avoid hollowing the force,” Dempsey said. “These choices should be deliberate and precise. Indiscriminate cuts would cause self-inflicted, and potentially irrevocable wounds to our national security.”

Protesters interrupted the hearing several times. Some carried signs and yelled slogans – “How many more lives are going to be sacrificed” – before being led out by Capitol Police. Eight demonstrators were arrested and charged with disruption of Congress; one also was charged with simple assault.

Panetta told members of the House Armed Services Committee that he knows firsthand the difficulty of making budget cuts that hurt politician’s constituents. Panetta, when he was in Congress, participated in cuts of military bases, including Fort Ord, which was in his own district. He said that cost his district 25 percent of its local economy.

“I know what it means to go through this process,” Panetta said.

And he displayed the blunt talk that has been his trademark. He promised that he will oversee a military that will remain ready to confront existing as well as still-unknown threats. “You’ve got to be damn flexible,” he said.