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 Com-
mittee on Oversight and Government Reform, and in addition to the 
Committee on Armed Services, for a period to be subsequently deter-
mined 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. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
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SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Audit the Pentagon 
Act of 2014’’. 
SEC. 2. PURPOSES. 
The purposes of this Act are as follows: 
(1) To strengthen American national security 
by ensuring that— 
(A) military planning, operations, weapons 
development, and a long-term national security 
strategy are connected to sound financial con-
trols; and 
(B) defense dollars are spent efficiently. 
(2) To instill a culture of accountability at the 
Department of Defense that supports the vast ma-
jority of dedicated members of the Armed Forces 
and civilians who want to ensure proper accounting 
and prevent waste, fraud, and abuse. 
SEC. 3. FINDINGS. 
Congress finds the following: 
(1) The 2013 Financial Report of the United 
States Government found that, of major agencies, 
only the Department of Defense had a ‘‘disclaimer’’ 
because it lacked any auditable reporting or account-
ing available for independent review. In the Finan-
cial Report, the Treasury Department summarized: 
‘‘Since the passage of the CFO Act of 1990, the fed-
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eral financial community has made important strides 
in instilling strong accounting and financial report-
ing practices. This year, 23 of the 24 CFO Act 
agencies obtained an opinion from the independent 
auditors on their financial statements. Out of the 24 
major ‘CFO Act’ agencies, there were 22 clean opin-
ions, 1 qualified opinion, and only one remaining 
disclaimer in FY 2013. . . . However, weaknesses 
in basic financial management practices and other 
limitations continue to prevent one major agency, 
and the Government as a whole, from achieving an 
audit opinion.’’. 
(2) The financial management of the Depart-
ment of Defense has been on the ‘‘High-Risk’’ list 
of the Government Accountability Office (GAO). The 
GAO found that the Department is not consistently 
able to ‘‘control costs; ensure basic accountability; 
anticipate future costs and claims on the budget; 
measure performance; maintain funds control; and 
prevent and detect fraud, waste, and abuse’’. 
(3) At a September 2010 hearing of the Senate, 
the Government Accountability Office stated that 
past expenditures by the Department of Defense of 
$5,800,000,000 to improve financial information, 
and billions of dollars more of anticipated expendi-
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tures on new information technology systems for 
that purpose, may not suffice to achieve full audit 
readiness of the financial statement of the Depart-
ment. 
(4) Section 9 of article 1 of the Constitution of 
the United States requires all agencies of the Fed-
eral Government, including the Department of De-
fense, to publish ‘‘a regular statement and account 
of the receipts and expenditures of all public 
money’’. 
(5) Section 303(d) of the Chief Financial Offi-
cers Act of 1990 (Public Law 101–576) required 
that financial statements be prepared and independ-
ently audited for the Department of the Army by 
March 31, 1992, and for the Department of the Air 
Force by March 31, 1993. Neither the Department 
of the Army nor the Department of the Air Force 
has complied. 
(6) Section 3515 of title 31, United States 
Code, requires the agencies of the Federal Govern-
ment, including the Department of Defense, to 
present auditable financial statements beginning not 
later than March 1, 1997. The Department has not 
complied with this law. 
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(7) The Federal Financial Management Im-
provement Act of 1996 (31 U.S.C. 3512 note) re-
quires financial systems acquired by the Federal 
Government, including the Department of Defense, 
to be able to provide information to leaders to man-
age and control the cost of government. The Depart-
ment has not complied with this law. 
(8) In 2005, the Department of Defense cre-
ated a Financial Improvement and Audit Readiness 
(FIAR) Plan, overseen by a directorate within the 
office of the Under Secretary of Defense (Comp-
troller), to improve Department business processes 
with the goal of producing timely, reliable, and accu-
rate financial information that could generate an 
audit-ready annual financial statement. In December 
2005, that directorate, known as the FIAR Direc-
torate, issued the first of a series of semiannual re-
ports on the status of the Financial Improvement 
and Audit Readiness Plan. 
(9) Secretary of Defense Robert M. Gates said 
in a speech on May 24, 2011: ‘‘The current appa-
ratus for managing people and money across the 
DoD enterprise is woefully inadequate. The agencies, 
field activities, joint headquarters, and support staff 
functions of the department operate as a semi-feudal 
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system—an amalgam of fiefdoms without centralized 
mechanisms to allocate resources, track expendi-
tures, and measure results relative to the depart-
ment’s overall priorities.’’. 
(10) The accounting problems of the Depart-
ment of Defense result in widespread errors in pay 
that can be difficult to correct. Such payroll errors 
can impose hardship on members of the Armed 
Forces and their families. 
SEC. 4. SPENDING REDUCTIONS FOR AGENCIES WITHOUT 
CLEAN AUDITS. 
(a) APPLICABILITY.— 
(1) IN GENERAL.—Subject to paragraph (2), 
this section applies to each Federal agency identified 
by the Director of the Office of Management and 
Budget as required to have an audited financial 
statement under section 3515 of title 31, United 
States Code. 
(2) APPLICABILITY TO MILITARY DEPARTMENTS 
AND DEFENSE AGENCIES.—For purposes of para-
graph (1), in the case of the Department of Defense, 
each military department and each Defense Agency 
shall be treated as a separate Federal agency. 
(b) DEFINITIONS.—In this section, the terms ‘‘finan-
cial statement’’ and ‘‘external independent auditor’’ have 
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the same meanings as those terms have under section 
3521(e) of title 31, United States Code. 
(c) 
ADJUSTMENTS
FOR
FINANCIAL
ACCOUNT-
ABILITY.— 
(1) On March 2 of fiscal year 2015 and each 
subsequent fiscal year, the discretionary budget au-
thority available for each Federal agency for such 
fiscal year is adjusted as provided in paragraph (2). 
(2) If a Federal agency has not submitted a fi-
nancial statement for the previous fiscal year, or if 
such financial statement has not received either an 
unqualified or a qualified audit opinion by an inde-
pendent external auditor, the discretionary budget 
authority available for the Federal agency is reduced 
by .5 percent, with the reduction applied proportion-
ately to each account (other than an account listed 
in subsection (d) or an account for which a waiver 
is made under subsection (e)). 
(3) Consistent with applicable laws, the Sec-
retary of Defense may make any reduction under 
paragraph (2) in a manner that minimizes any effect 
on national security. 
(4) An amount equal to the total amount of any 
reduction under paragraph (2) shall be retained in 
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the general fund of the Treasury for the purposes of 
deficit reduction. 
(d) ACCOUNTS EXCLUDED.—The following accounts 
are excluded from any reductions referred to in subsection 
(c)(2): 
(1) Military personnel, reserve personnel, and 
National Guard personnel accounts of the Depart-
ment of Defense. 
(2) The Defense Health Program account of 
the Department of Defense. 
(e) WAIVER.—The President may waive subsection 
(c)(2) with respect to an account if the President certifies 
that applying the subsection to that account would harm 
national security or members of the Armed Forces who 
are in combat. 
(f) REPORT.—Not later than 60 days after an adjust-
ment under subsection (c), the Director of the Office of 
Management and Budget shall submit to Congress a re-
port describing the amount and account of each adjust-
ment. 
SEC. 5. REPORT ON DEPARTMENT OF DEFENSE REPORT-
ING REQUIREMENTS. 
Not later than 180 days after the date of the enact-
ment of this Act, the Under Secretary of Defense (Comp-
troller) shall submit to Congress a report setting forth a 
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list of each report of the Department required by law to 
be submitted to Congress which, in the opinion of the 
Under Secretary, interferes with the capacity of the De-
partment to achieve an audit of the financial statements 
of the Department with an unqualified opinion. 
SEC. 6. SENSE OF CONGRESS. 
It is the sense of Congress that— 
(1) as the overall defense budget is cut, con-
gressional defense committees and the Department 
of Defense should not endanger the Nation’s troops 
by reducing wounded warrior accounts or vital pro-
tection (such as body armor) for members of the 
Armed Forces in harm’s way; 
(2) the valuation of legacy assets by the De-
partment of Defense should be simplified without 
compromising essential controls or generally accept-
ed government auditing standards; and 
(3) nothing in this Act should be construed to 
require or permit the declassification of accounting 
details about classified defense programs, and, as re-
quired by law, the Department of Defense should en-
sure financial accountability in such programs using 
proven practices, including using auditors with secu-
rity clearances. 
Æ 
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