Pentagon fails first-ever audit, but touts progress

(Editor's note: This story has been updated to include additional information on the nature of the audit.)

The Pentagon, as long expected, has failed its first-ever audit, according to Deputy Defense Secretary Pat Shanahan, who said the department is still making steady progress in business reforms.

“We failed the audit,” he told reporters at the Pentagon today. “We never thought we were going to pass an audit. Everyone was betting against us that we would even do the audit. . . . It was an audit on a $2.7 trillion organization. The fact we did the audit is substantial.”

Though Shanahan put it in stark terms, the audit process is more nuanced than simply “pass/fail.”

“We did not receive an 'adverse' finding -- the lowest possible category -- in any area,” DOD spokesman Lt. Col. Joe Buccino said. “We did receive findings of ‘disclaimer’ in multiple areas. Clearly more work lies ahead of us.”

Full results of the audit are expected to be released later today by the Defense Department's inspector general, but Shanahan previewed several details.

“We count ships right,” he said.

But “some of the compliance issues are irritating to me,” he continued. “The point of the audit is to drive better discipline. Some of those things frustrated me because we have a job to do. It's like inventory accuracy. When they did the Navy audit, they found that some of the buildings they said were on the books weren't on the books. Does that impact cost or anything? No, it doesn't, but we should have that higher level of discipline. We need to develop the plans to address the findings and actually put corrective action in place.”

Shanahan also said he is concerned about gaps in cybersecurity discovered by auditors. He said the audit is a valuable signal to American taxpayers the Defense Department is working

“Audits should be fundamental to any effective organization,” he said. “If I'm a taxpayer, what I want to see is . . . you did the audit. You have all these findings. How long is it going to take to fix those. Then show me next year it takes less to audit and you have fewer findings.”