I 

113TH CONGRESS 

1ST SESSION H. R. 559 

To reduce by 5 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 

FEBRUARY 6, 2013 

Ms. LEE of California (for herself, Ms. SCHAKOWSKY, Mr. ELLISON, Mr. GRIJALVA, Mr. CONYERS, Mr. LEWIS, Mr. HONDA, Ms. CLARKE, Mr. BURGESS, Mr. RUSH, Mr. SCHRADER, and Mr. BLUMENAUER) 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 5 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 2013’’. 

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 2012 Financial Report of the United 

21 States Government found that 21 of 24 major Fed22 eral agencies received clean audit opinions. Two 

23 more, the Department of Homeland Security and 

24 the Department of State, received ‘‘qualified’’ audit 

25 opinions but are making progress. Only the Depart26 ment of Defense had a ‘‘disclaimer’’ because it 


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1 lacked any auditable reporting or accounting avail2 able for independent review. In the Financial Re3 port, the Treasury Department summarized: ‘‘Over 

4 the past 20 years, an increasing number of Federal 

5 agencies have initiated and sustained disciplined and 

6 consistent financial reporting operations, imple7 mented effective internal controls around financial 

8 reporting, and have successfully integrated trans9 action processing and accounting records. These ef10 forts have resulted in improved results on financial 

11 statement audits. However, weaknesses in basic fi12 nancial management practices and other limitations 

13 continue to prevent one major agency, and the Gov14 ernment as a whole, from achieving an audit opin15 ion.’’. 

16 (2) The financial management of the Depart17 ment of Defense has been on the ‘‘High-Risk’’ list 

18 of the Government Accountability Office (GAO). The 

19 GAO found that the Department is not consistently 

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

21 anticipate future costs and claims on the budget; 

22 measure performance; maintain funds control; and 

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

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

25 the Government Accountability Office stated that 


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1 past expenditures by the Department of Defense of 

2 $5,800,000,000 to improve financial information, 

3 and billions of dollars more of anticipated expendi4 tures on new information technology systems for 

5 that purpose, may not suffice to achieve full audit 

6 readiness of the financial statement of the Depart7 ment. At that hearing, the Government Account8 ability Office could not predict when the Department 

9 would achieve full audit readiness of such state10 ments. 

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

12 the United States requires all agencies of the Fed13 eral Government, including the Department of De14 fense, to publish ‘‘a regular statement and account 

15 of the receipts and expenditures of all public 

16 money’’. 

17 (5) Section 303(d) of the Chief Financial Offi18 cers Act of 1990 (Public Law 101–576) required 

19 that financial statements be prepared and independ20 ently audited for the Department of the Army by 

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

22 Force by March 31, 1993. Neither the Department 

23 of the Army nor the Department of the Air Force 

24 has complied. 


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

2 Code, requires the agencies of the Federal Govern3 ment, including the Department of Defense, to 

4 present auditable financial statements beginning not 

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

6 complied with this law. 

7 (7) The Federal Financial Management Im8 provement Act of 1996 (31 U.S.C. 3512 note) re9 quires financial systems acquired by the Federal 

10 Government, including the Department of Defense, 

11 to be able to provide information to leaders to man12 age and control the cost of government. The Depart13 ment has not complied with this law. 

14 (8) The National Defense Authorization Act for 

15 Fiscal Year 2002 (Public Law 107–107) requires 

16 the Secretary of Defense to report to Congress an17 nually on the reliability of the financial statements 

18 of the Department of Defense, to minimize resources 

19 spent on producing unreliable financial statements, 

20 and to use resources saved to improve financial man21 agement policies, procedures, and internal controls. 

22 (9) In 2005, the Department of Defense cre23 ated a Financial Improvement and Audit Readiness 

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

25 office of the Under Secretary of Defense (CompVerDate Mar 15 2010 16:51 Feb 15, 2013 Jkt 029200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H559.IH H559

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1 troller), to improve Department business processes 

2 with the goal of producing timely, reliable, and accu3 rate financial information that could generate an 

4 audit-ready annual financial statement. In December 

5 2005, that directorate, known as the FIAR Direc6 torate, issued the first of a series of semiannual re7 ports on the status of the Financial Improvement 

8 and Audit Readiness Plan. 

9 (10) The National Defense Authorization Act 

10 for Fiscal Year 2010 (Public Law 111–84) requires 

11 regular status reports on the Financial Improvement 

12 and Audit Readiness Plan described in paragraph 

13 (9), and codified as a statutory requirement the goal 

14 of the Plan in ensuring that Department of Defense 

15 financial statements are validated as ready for audit 

16 not later than September 30, 2017. 

17 SEC. 4. SPENDING REDUCTIONS FOR AGENCIES WITHOUT 

18 CLEAN AUDITS. 

19 (a) APPLICABILITY.— 

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

21 this section applies to each Federal agency identified 

22 by the Director of the Office of Management and 

23 Budget as required to have an audited financial 

24 statement under section 3515 of title 31, United 

25 States Code. 


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1 (2) APPLICABILITY TO MILITARY DEPARTMENTS

2 AND DEFENSE AGENCIES.—For purposes of para3 graph (1), in the case of the Department of Defense, 

4 each military department and each Defense Agency 

5 shall be treated as a separate Federal agency. 

6 (b) DEFINITIONS.—In this section, the terms ‘‘finan7 cial statement’’ and ‘‘external independent auditor’’ have 

8 the same meanings as those terms have under section 

9 3521(e) of title 31, United States Code. 

10 (c) ADJUSTMENTS FOR FINANCIAL ACCOUNT11 ABILITY.— 

12 (1) On March 2 of fiscal year 2014 and each 

13 subsequent fiscal year, the discretionary budget au14 thority available for each Federal agency for such 

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

16 (2) If a Federal agency has not submitted a fi17 nancial statement for the previous fiscal year, or if 

18 such financial statement has not received either an 

19 unqualified or a qualified audit opinion by an inde20 pendent external auditor, the discretionary budget 

21 authority available for the Federal agency is reduced 

22 by 5 percent, with the reduction applied proportion23 ately to each account (other than an account listed 

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

25 is made under subsection (e)). 


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1 (3) An amount equal to the total amount of any 

2 reduction under paragraph (2) shall be retained in 

3 the general fund of the Treasury for the purposes of 

4 deficit reduction. 

5 (d) ACCOUNTS EXCLUDED.—The following accounts 

6 are excluded from any reductions referred to in subsection 

7 (c)(2): 

8 (1) Military personnel, reserve personnel, and 

9 National Guard personnel accounts of the Depart10 ment of Defense. 

11 (2) The Defense Health Program account of 

12 the Department of Defense. 

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

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

15 that applying the subsection to that account would harm 

16 national security or members of the Armed Forces who 

17 are in combat. 

18 (f) REPORT.—Not later than 60 days after an adjust19 ment under subsection (c), the Director of the Office of 

20 Management and Budget shall submit to Congress a re21 port describing the amount and account of each adjust22 ment. 


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1 SEC. 5. REPORT ON DEPARTMENT OF DEFENSE REPORT2 ING REQUIREMENTS. 

3 Not later than 180 days after the date of the enact4 ment of this Act, the Under Secretary of Defense (Comp5 troller) shall submit to Congress a report setting forth a 

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

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

8 Under Secretary, interferes with the capacity of the De9 partment to achieve an audit of the financial statements 

10 of the Department with an unqualified opinion. 

11 SEC. 6. SENSE OF CONGRESS. 

12 It is the sense of Congress that— 

13 (1) as the overall defense budget is cut, con14 gressional defense committees and the Department 

15 of Defense should not endanger the Nation’s troops 

16 by reducing wounded warrior accounts or vital pro17 tection (such as body armor) for members of the 

18 Armed Forces in harm’s way; 

19 (2) the valuation of legacy assets by the De20 partment of Defense should be simplified without 

21 compromising essential controls or generally accept22 ed government auditing standards; and 

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

24 require or permit the declassification of accounting 

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1 sure financial accountability in such programs using 

2 proven practices, including using auditors with secu3 rity clearances. 

Æ 


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