The Department of Defense’s most recent financial audit was a failure. Last year, the organization’s budget was more than $700 billion, so keeping track of where that money goes is clearly a difficult task.
It may seem strange that one of the federal government’s largest organizations would fail an audit. The fact that the Department of Defense has never passed a single audit is even more surprising. Not a single one of them.
In 2017, the first independent financial audit was launched in an attempt to hold the military and related organizations accountable. The Department of Defense failed the 2017 audit, as well as the audits in 2018 and 2019. No one has been able to keep track of the Pentagon’s trillions of dollars in assets and an unknown amount of liabilities.
A bipartisan group of lawmakers proposed a bill earlier this year (the Audit the Pentagon Act of 2021) that would impose penalties on any division of the Pentagon that failed to pass the annual audit. So, what are the problems with these audits? An excerpt from an NPR article exemplifies the complications:
The Pentagon attributes some of the delay to its enormous size: its auditing process necessitates 24 separate audits covering all DoD reporting entities, as well as a consolidated audit.
Independent public accounting firms and the Department of Defense Inspector General conducted the audits.
However, critics point out that since the early 1990s, all federal agencies, including the Pentagon, have been required to undergo an independent financial audit. Since the Department of Homeland Security’s first clean audit in fiscal 2013, every other federal department has met audit requirements. “
The more I learn about the problem, the more startling it becomes. According to reports, the Department of Defense has no idea which buildings it owns or where they are in the United States.
During audits, hundreds of millions of dollars in airplane parts were discovered, according to reports.
And even multi-trillion-dollar defense programs can’t account for what they spent, who they gave the money to, or what their spending accomplished.
So why am I writing about the Pentagon’s financial audit?
This, in my opinion, will not always be the case. The transition to digital currencies will take some time, but the eventual adoption of these new technologies will resolve many of these issues. Some believe that hyper-bitcoinization will be the final state.
Others envision a world in which US dollar stablecoins are the norm. In either case, both systems will allow for more precise tracking of on-chain transactions, which could make auditing organizations like the Pentagon much easier, more efficient, and less expensive.
This isn’t going to happen overnight.
There will be a substantial amount of infrastructure and training to develop and implement. A soldier in the field, for example, will require a digital device to scan each piece of equipment as it is moved. If a piece of equipment is destroyed, they’ll need a quick and accurate way to document it. Payroll and contract payouts, for example, will need to transition from legacy banking rails to these new stablecoin or bitcoin rails.
I wish I could see a way for this to happen in the next 5–10 years.
Regrettably, that appears to be overly optimistic. It’s the federal government we’re talking about. If we’re lucky, we’ll be talking about a 25-year journey to update and operationalize the various systems. That isn’t to say we shouldn’t try, or that we shouldn’t understand what this could look like.
Today, technology is being developed. It is, in the long run, laying the groundwork for these types of use cases. There isn’t a single technologist in the near future who sits down to write code and thinks, “I’m so excited to create new tech to help the Department of Defense audit!” Rather, the technology that is currently being developed will eventually infiltrate every organization. Small businesses, public companies, and federal departments will all begin to adopt the technology because it is superior to anything else currently available.
We’ve come a long way in terms of technological advancement. The zero to one transition has already happened, but now we must scale the infrastructure to support as many use cases as possible.
My mind immediately jumps to the solution whenever I see data points like the Pentagon never passing a financial audit, but I have to remind myself that we are still a long way from that implementation.
In the world of technology investing, being an optimist pays off. You should avoid betting against innovation.
However, you must be realistic in the short term.
Reasonable optimism In my opinion, this is the path to take.
Credit : GlobalCrypto.Exchange