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. 
(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 
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 2013 and each 
subsequent fiscal year, the discretionary budget au-
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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) An amount equal to the total amount of any 
reduction under paragraph (2) shall be retained in 
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. 
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(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 the 
following: 
(1) A list of each report of the Department of 
Defense required by law to be submitted to Congress 
which, in the opinion of the Under Secretary, would 
no longer be necessary if the financial statements of 
the Department of Defense were audited with an un-
qualified opinion. 
(2) A list of each report of the Department re-
quired by law to be submitted to Congress which, in 
the opinion of the Under Secretary, interferes with 
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the capacity of the Department 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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