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Marine Corps’ Accounting Flawed, But DOD Auditor Approved It Anyway

Not a single branch of the military has successfully passed a financial audit, that is, until the Pentagon triumphantly proclaimed in early 2014 that the Marine Corps counted as the first, a high honor.

The only problem is that the books were cooked the entire time.

On February 6, 2014, then-Secretary of Defense Chuck Hagel applauded the Marine Corps for its achievement, saying that “it might seem a bit unusual to be in the Hall of Heroes to honor a bookkeeping accomplishment, but, damn, this is an accomplishment.” The audit, officially completed on December 20, 2013, gave an “unqualified favorable” report.

However, on March 23, the inspector general at the Department of Defense suddenly revoked approval of the accounts, saying that the discovery of new information made it clear that the financial audits conducted were suspect. The report was pulled, but the IG declined to point the finger at any party.

In reality, an investigation from Reuters indicates that the inspector general’s office knew about the flawed audit conducted by Grant Thornton LLP as early as December 20, 2013.

Team members of the IG staff told Reuters that Daniel Blair, deputy inspector general for auditing, interfered with the process and ignored concerns raised by staff that the audit was flawed. The team recommended for the audit to be labeled as “qualified,” meaning that the Marine Corps would fail the assessment.

First, retired auditor Jack Armstrong pointed out that the choice of Grant Thornton for the job was strange, as previous reports from the company for the IG were riddled with errors.

Second, emails sent to Reuters show that Grant Thornton simply accepted raw figures from the Marine Corps without verifying the data with any sort of supporting documentation.

Third, management at the IG sent confidential documents regarding the audit to Grant Thornton for review.

“I hope you can understand that the firm will consider the situation as a risk to our reputation,” Tracy Greene, a partner at Grant Thornton, said in an email to deputy inspector general Blair. An email that explicit makes sense in light of past history between the two. Greene and Blaire had long worked together at the Government Accountability Office (GAO) in the 1990s.

Outside observers are now starting to question the independence of the inspector general’s office.

The rot is deep, as the Department of Defense remains the only agency left that has refused to comply with the auditing law established by Congress two decades ago, despite it receiving the largest budget out of any other agency. According to the Pentagon, an audit is impossible because the internal accounting system is so convoluted. It is unclear whether a follow-up command from Congress in 2009 for the Pentagon to be audit-prepared in 2017 will make any difference.

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