I 

113TH CONGRESS 

2D SESSION H. R. 5126 

To reduce by one-half of one percent the discretionary budget authority 

of any Federal agency for a fiscal year if the financial statement of 

the agency for the previous fiscal year does not receive a qualified 

or unqualified audit opinion by an external independent auditor, and 

for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

JULY 16, 2014 

Ms. LEE of California (for herself, Mr. BURGESS, Ms. SCHAKOWSKY, and Mr. 

BENISHEK) introduced the following bill; which was referred to the Committee on Oversight and Government Reform, and in addition to the 

Committee on Armed Services, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions 

as fall within the jurisdiction of the committee concerned 

A BILL 

To reduce by one-half of one percent the discretionary budget 

authority of any Federal agency for a fiscal year if 

the financial statement of the agency for the previous 

fiscal year does not receive a qualified or unqualified 

audit opinion by an external independent auditor, and 

for other purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 


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1 SECTION 1. SHORT TITLE. 

2 This Act may be cited as the ‘‘Audit the Pentagon 

3 Act of 2014’’. 

4 SEC. 2. PURPOSES. 

5 The purposes of this Act are as follows: 

6 (1) To strengthen American national security 

7 by ensuring that— 

8 (A) military planning, operations, weapons 

9 development, and a long-term national security 

10 strategy are connected to sound financial con11 trols; and 

12 (B) defense dollars are spent efficiently. 

13 (2) To instill a culture of accountability at the 

14 Department of Defense that supports the vast ma15 jority of dedicated members of the Armed Forces 

16 and civilians who want to ensure proper accounting 

17 and prevent waste, fraud, and abuse. 

18 SEC. 3. FINDINGS. 

19 Congress finds the following: 

20 (1) The 2013 Financial Report of the United 

21 States Government found that, of major agencies, 

22 only the Department of Defense had a ‘‘disclaimer’’ 

23 because it lacked any auditable reporting or account24 ing available for independent review. In the Finan25 cial Report, the Treasury Department summarized: 

26 ‘‘Since the passage of the CFO Act of 1990, the fedVerDate Mar 15 2010 02:17 Jul 22, 2014 Jkt 039200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H5126.IH H5126

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1 eral financial community has made important strides 

2 in instilling strong accounting and financial report3 ing practices. This year, 23 of the 24 CFO Act 

4 agencies obtained an opinion from the independent 

5 auditors on their financial statements. Out of the 24 

6 major ‘CFO Act’ agencies, there were 22 clean opin7 ions, 1 qualified opinion, and only one remaining 

8 disclaimer in FY 2013. . . . However, weaknesses 

9 in basic financial management practices and other 

10 limitations continue to prevent one major agency, 

11 and the Government as a whole, from achieving an 

12 audit opinion.’’. 

13 (2) The financial management of the Depart14 ment of Defense has been on the ‘‘High-Risk’’ list 

15 of the Government Accountability Office (GAO). The 

16 GAO found that the Department is not consistently 

17 able to ‘‘control costs; ensure basic accountability; 

18 anticipate future costs and claims on the budget; 

19 measure performance; maintain funds control; and 

20 prevent and detect fraud, waste, and abuse’’. 

21 (3) At a September 2010 hearing of the Senate, 

22 the Government Accountability Office stated that 

23 past expenditures by the Department of Defense of 

24 $5,800,000,000 to improve financial information, 

25 and billions of dollars more of anticipated expendiVerDate Mar 15 2010 02:17 Jul 22, 2014 Jkt 039200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H5126.IH H5126

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1 tures on new information technology systems for 

2 that purpose, may not suffice to achieve full audit 

3 readiness of the financial statement of the Depart4 ment. 

5 (4) Section 9 of article 1 of the Constitution of 

6 the United States requires all agencies of the Fed7 eral Government, including the Department of De8 fense, to publish ‘‘a regular statement and account 

9 of the receipts and expenditures of all public 

10 money’’. 

11 (5) Section 303(d) of the Chief Financial Offi12 cers Act of 1990 (Public Law 101–576) required 

13 that financial statements be prepared and independ14 ently audited for the Department of the Army by 

15 March 31, 1992, and for the Department of the Air 

16 Force by March 31, 1993. Neither the Department 

17 of the Army nor the Department of the Air Force 

18 has complied. 

19 (6) Section 3515 of title 31, United States 

20 Code, requires the agencies of the Federal Govern21 ment, including the Department of Defense, to 

22 present auditable financial statements beginning not 

23 later than March 1, 1997. The Department has not 

24 complied with this law. 


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1 (7) The Federal Financial Management Im2 provement Act of 1996 (31 U.S.C. 3512 note) re3 quires financial systems acquired by the Federal 

4 Government, including the Department of Defense, 

5 to be able to provide information to leaders to man6 age and control the cost of government. The Depart7 ment has not complied with this law. 

8 (8) In 2005, the Department of Defense cre9 ated a Financial Improvement and Audit Readiness 

10 (FIAR) Plan, overseen by a directorate within the 

11 office of the Under Secretary of Defense (Comp12 troller), to improve Department business processes 

13 with the goal of producing timely, reliable, and accu14 rate financial information that could generate an 

15 audit-ready annual financial statement. In December 

16 2005, that directorate, known as the FIAR Direc17 torate, issued the first of a series of semiannual re18 ports on the status of the Financial Improvement 

19 and Audit Readiness Plan. 

20 (9) Secretary of Defense Robert M. Gates said 

21 in a speech on May 24, 2011: ‘‘The current appa22 ratus for managing people and money across the 

23 DoD enterprise is woefully inadequate. The agencies, 

24 field activities, joint headquarters, and support staff 

25 functions of the department operate as a semi-feudal 


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1 system—an amalgam of fiefdoms without centralized 

2 mechanisms to allocate resources, track expendi3 tures, and measure results relative to the depart4 ment’s overall priorities.’’. 

5 (10) The accounting problems of the Depart6 ment of Defense result in widespread errors in pay 

7 that can be difficult to correct. Such payroll errors 

8 can impose hardship on members of the Armed 

9 Forces and their families. 

10 SEC. 4. SPENDING REDUCTIONS FOR AGENCIES WITHOUT 

11 CLEAN AUDITS. 

12 (a) APPLICABILITY.— 

13 (1) IN GENERAL.—Subject to paragraph (2), 

14 this section applies to each Federal agency identified 

15 by the Director of the Office of Management and 

16 Budget as required to have an audited financial 

17 statement under section 3515 of title 31, United 

18 States Code. 

19 (2) APPLICABILITY TO MILITARY DEPARTMENTS

20 AND DEFENSE AGENCIES.—For purposes of para21 graph (1), in the case of the Department of Defense, 

22 each military department and each Defense Agency 

23 shall be treated as a separate Federal agency. 

24 (b) DEFINITIONS.—In this section, the terms ‘‘finan25 cial statement’’ and ‘‘external independent auditor’’ have 


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1 the same meanings as those terms have under section 

2 3521(e) of title 31, United States Code. 

3 (c) ADJUSTMENTS FOR FINANCIAL ACCOUNT4 ABILITY.— 

5 (1) On March 2 of fiscal year 2015 and each 

6 subsequent fiscal year, the discretionary budget au7 thority available for each Federal agency for such 

8 fiscal year is adjusted as provided in paragraph (2). 

9 (2) If a Federal agency has not submitted a fi10 nancial statement for the previous fiscal year, or if 

11 such financial statement has not received either an 

12 unqualified or a qualified audit opinion by an inde13 pendent external auditor, the discretionary budget 

14 authority available for the Federal agency is reduced 

15 by .5 percent, with the reduction applied proportion16 ately to each account (other than an account listed 

17 in subsection (d) or an account for which a waiver 

18 is made under subsection (e)). 

19 (3) Consistent with applicable laws, the Sec20 retary of Defense may make any reduction under 

21 paragraph (2) in a manner that minimizes any effect 

22 on national security. 

23 (4) An amount equal to the total amount of any 

24 reduction under paragraph (2) shall be retained in 


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1 the general fund of the Treasury for the purposes of 

2 deficit reduction. 

3 (d) ACCOUNTS EXCLUDED.—The following accounts 

4 are excluded from any reductions referred to in subsection 

5 (c)(2): 

6 (1) Military personnel, reserve personnel, and 

7 National Guard personnel accounts of the Depart8 ment of Defense. 

9 (2) The Defense Health Program account of 

10 the Department of Defense. 

11 (e) WAIVER.—The President may waive subsection 

12 (c)(2) with respect to an account if the President certifies 

13 that applying the subsection to that account would harm 

14 national security or members of the Armed Forces who 

15 are in combat. 

16 (f) REPORT.—Not later than 60 days after an adjust17 ment under subsection (c), the Director of the Office of 

18 Management and Budget shall submit to Congress a re19 port describing the amount and account of each adjust20 ment. 

21 SEC. 5. REPORT ON DEPARTMENT OF DEFENSE REPORT22 ING REQUIREMENTS. 

23 Not later than 180 days after the date of the enact24 ment of this Act, the Under Secretary of Defense (Comp25 troller) shall submit to Congress a report setting forth a 


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1 list of each report of the Department required by law to 

2 be submitted to Congress which, in the opinion of the 

3 Under Secretary, interferes with the capacity of the De4 partment to achieve an audit of the financial statements 

5 of the Department with an unqualified opinion. 

6 SEC. 6. SENSE OF CONGRESS. 

7 It is the sense of Congress that— 

8 (1) as the overall defense budget is cut, con9 gressional defense committees and the Department 

10 of Defense should not endanger the Nation’s troops 

11 by reducing wounded warrior accounts or vital pro12 tection (such as body armor) for members of the 

13 Armed Forces in harm’s way; 

14 (2) the valuation of legacy assets by the De15 partment of Defense should be simplified without 

16 compromising essential controls or generally accept17 ed government auditing standards; and 

18 (3) nothing in this Act should be construed to 

19 require or permit the declassification of accounting 

20 details about classified defense programs, and, as re21 quired by law, the Department of Defense should en22 sure financial accountability in such programs using 

23 proven practices, including using auditors with secu24 rity clearances. 

Æ 


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