The Pentagon’s various auditors seem to disagree about the size of improper payments at the Department of Defense (DOD). 

The Defense Health Agency (DHA) spends approximately $23 billion annually on the Military Health Benefits program, supporting more than nine million active-duty service members, veterans, and their families.  A November 2021 Agency Financial Report for fiscal year (FY) 2021 noted that improper payments for the Military Health Benefits program in FY 2021 amounted to $168 million, a 50.4 percent reduction from the $338.9 million in FY 2020.  It expressed a 95 percent level of confidence in the accuracy of its method for identifying improper payments within the program.

However, these results have been called into question by a January 11, 2022, DOD Office of Inspector General (IG) report, which found that the DHA “did not have adequate processes to identify improper payments and produce a reliable improper payment estimate.”  Because the DHA used inappropriate sampling methodology and did not undertake proper reviews, the agency is “unable to produce a reliable improper payment estimate.”

The DOD is not known for outstanding fiscal stewardship, and the IG report casts doubt on the veracity of agency-wide improper payment estimates.  The Pentagon’s FY 2020 Agency Financial Report identified $11.4 billion in improper payments across all expenditures, a rate of 1.7 percent.  The FY 2021 version claimed an improved improper payment rate of 0.38 percent, costing $2.5 billion.  If auditing standards in these analyses were similarly insufficient, then the true amount of improper payments at the DOD would be far higher than reported.

Past DOD IG reports have identified eye-watering amounts of potentially wasted money.  A July 26, 2016, report noted that the Defense Financing and Accounting Service could not adequately document $6.5 trillion worth of year-end adjustments to general fund transactions and data. 

The IG report further underscores the necessity for the Pentagon to right its fiscal ship.  The DOD remains the sole federal agency that has not undergone a clean audit under the Chief Financial Officers Act of 1990.  The Pentagon now estimates that it will not fully pass a clean audit before 2027, or 37 years after it was required to do so by law.  Remarkably, areas within the DOD have been on the Government Accountability Office’s list of programs at high risk for waste, fraud, abuse, and mismanagement since 1995.

All claims of improvements in improper payments and accounting standards at the Pentagon should be taken with a mountain of salt until it corrects longstanding and egregious financial deficiencies.