Why The Pentagon Can’t Count: It’s Time to Reinvent the Audit
The Pentagon has repeatedly failed its financial audit due to its complex and massive financial management systems.
Auditing the Department of Defense (DoD) is a massive task as it involves counting the location...
...and condition of every piece of military equipment, property, inventory, and supplies.
The DoD is the largest employer in the country with 2.9 million people and has 643,900 assets...
...ranging from buildings, pipelines, roads, and fences to aircraft and battle force ships.
Despite spending close to a billion dollars annually on auditing, the Pentagon has consistently failed to meet audit standards comparable to private companies.
The DoD could innovate in auditing by leveraging new technology and approaches, including predictive analytics, fraud detection, and machine learning.
The DoD has a history of leading business innovation, such as creating the COBOL programming...
...language in 1959, demonstrating its potential to innovate in the auditing sector.
By allocating 10% of the auditing budget to Small Business Innovation Research programs, the DoD could...
...stimulate the creation of new startups in the auditing/data management/finance space each year.
The DoD could also work with existing government audit standards bodies to create new machine-driven and semi-automated audit standards.
Such investment could lead to the establishment of a defense audit center of excellence, fostering academic research and public-private partnerships.
These actions could drastically reduce audit costs, standardize the DoD's financial management environment, and improve budget transparency.
Despite these potential benefits, the DoD has not pursued this innovative approach, missing...
...an opportunity to lead in the development of next-generation auditing tools and services.
Transformational, contrarian, and disruptive advice is needed to drive change within large organizations like the DoD.
The DoD should consider if the high cost of auditing is leading to greater efficiency and better management, or if there might be more effective approaches.
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