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. GRI-
JALVA, Mr. CONYERS, Mr. LEWIS, Mr. HONDA, Ms. CLARKE, Mr. BUR-
GESS, 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 Serv-
ices, 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. 
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 2013’’. 
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 2012 Financial Report of the United 
States Government found that 21 of 24 major Fed-
eral agencies received clean audit opinions. Two 
more, the Department of Homeland Security and 
the Department of State, received ‘‘qualified’’ audit 
opinions but are making progress. Only the Depart-
ment of Defense had a ‘‘disclaimer’’ because it 
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lacked any auditable reporting or accounting avail-
able for independent review. In the Financial Re-
port, the Treasury Department summarized: ‘‘Over 
the past 20 years, an increasing number of Federal 
agencies have initiated and sustained disciplined and 
consistent financial reporting operations, imple-
mented effective internal controls around financial 
reporting, and have successfully integrated trans-
action processing and accounting records. These ef-
forts have resulted in improved results on financial 
statement audits. However, weaknesses in basic fi-
nancial management practices and other limitations 
continue to prevent one major agency, and the Gov-
ernment as a whole, from achieving an audit opin-
ion.’’. 
(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 
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past expenditures by the Department of Defense of 
$5,800,000,000 to improve financial information, 
and billions of dollars more of anticipated expendi-
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. At that hearing, the Government Account-
ability Office could not predict when the Department 
would achieve full audit readiness of such state-
ments. 
(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. 
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(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. 
(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) The National Defense Authorization Act for 
Fiscal Year 2002 (Public Law 107–107) requires 
the Secretary of Defense to report to Congress an-
nually on the reliability of the financial statements 
of the Department of Defense, to minimize resources 
spent on producing unreliable financial statements, 
and to use resources saved to improve financial man-
agement policies, procedures, and internal controls. 
(9) 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-
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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. 
(10) The National Defense Authorization Act 
for Fiscal Year 2010 (Public Law 111–84) requires 
regular status reports on the Financial Improvement 
and Audit Readiness Plan described in paragraph 
(9), and codified as a statutory requirement the goal 
of the Plan in ensuring that Department of Defense 
financial statements are validated as ready for audit 
not later than September 30, 2017. 
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. 
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