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The Defense Department lost out on $28 billion at the end of fiscal 2018 because it let authority to spend the funds expire, according to a report by its inspector general on results of the Pentagon’s first-ever audit.

Money appropriated by Congress expires if it isn’t spent within certain time frames and typically can no longer be used for new spending, according to the IG report.

The Defense Department said that the $28 billion spans five years, starting in fiscal 2013.

“Lost in the wording of the IG report is the fact that the $28 billion actually began expiring in fiscal year 2013,” Pentagon spokesman Lieutenant Col. Joe Buccino said in an e-mailed statement. “The total amount expired is over a five-year period. This is less than one percent of the department’s budget over that time period.”

For example, money in procurement accounts is available for three years, research accounts for two years while money in personnel and operations and maintenance accounts expires after one year.

The Pentagon also faced a unique quandary in fiscal 2018: too much money and too little time to spend it. The Pentagon was funded through stopgap measures for a good chunk of fiscal 2018 before Congress and the White House struck a deal to provide $700 billion for national security, most of which goes to the Pentagon.

The Pentagon’s failure to spend almost $28 billion as revealed by the audit report could hamper its case for more money in fiscal 2020 as a divided Congress will consider the budget request scheduled for Feb. 4. Lawmakers and President Donald Trump also will need to come to an agreement to lift spending caps set to trigger in fiscal years 2020 and 2021. Additionally, Trump is at loggerheads with congressional Democrats over using Pentagon money to build a wall at the southern border.

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The Pentagon fails its first-ever financial audit.

Failed Audit

The Defense Department announced in November that it had failed its first-ever audit as investigators found weak information technology security that could endanger weapon inventories and equipment mislabeled in far-flung warehouses. Auditors found no evidence of fraud in the review of finances that Congress required, even as they flagged a laundry list of problems, including uncontrolled access to computer systems and listing functioning rocket motors as out-of-order, according to Pentagon Comptroller David Norquist, who is now acting deputy defense secretary.

“The road to a clean opinion is not short; it will not happen immediately,” said Glenn Fine, the acting Pentagon inspector general. “Continued progress requires sustained effort and attention throughout the Department.”

In its audit report, the IG said that financial management of inventory and military readiness could be improved if the deficiencies identified are corrected. For example, 107 rotor blades used for Blackhawk helicopters made by Lockheed Martin Corp.‘s Sikorsky unit couldn’t be used but remained on inventory records, one aircraft door wasn’t included in inventory records, 24 gyro electronics for military aircraft included in the inventory records were in a disposal status, and 20 fuel-injector assemblies for Blackhawk helicopters didn’t have supporting documentation to demonstrate which military service owned the assets.

Costly Investigation

Pentagon and congressional leaders expected the Defense Department to fail its first-ever audit, covering $2.7 trillion in assets and $2.6 trillion in liabilities. The Defense Department spent almost $1 billion on the audit, including $413 million on executing the audit in fiscal year 2018, about $406 million on audit remediation, and $153 million on financial system fixes, according to a fact sheet provided by the Pentagon.

(Updates first and third paragraph to reflect Defense Department statement)

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