S. 5185: Audit the Pentagon Act

This bill would tie part of the Pentagon’s budget to whether it can pass a clean financial audit.

What it does

Starting after fiscal year 2024, if the Secretary of Defense finds that any department, agency, or other part of the Department of Defense did not receive an unqualified opinion on its full financial statements for the calendar year ending in that fiscal year, then that part of the Defense Department would face a 2% funding reduction for the fiscal year in which that determination is made.

How the cut would work

• The affected department, agency, or other DoD element would receive 98% of the amount otherwise authorized for that year.
• The 2% reduction would be spread across all of its programs, projects, and activities on a pro rata basis.
• Money withheld under this rule would be deposited into the Treasury’s general fund and used for deficit reduction.

What “unqualified opinion” means

An unqualified opinion is the standard term for a clean audit result, meaning auditors found the financial statements to be fairly presented in accordance with accounting rules.

Practical effect

The bill is intended to create a financial penalty for parts of the Pentagon that do not pass a clean audit, with the goal of encouraging improved financial reporting and accountability.

Relevant Companies

• RTX — A major defense contractor that could be affected indirectly if Pentagon funding reductions lead to lower spending or delayed contracts in affected programs.
• LMT — Could be indirectly affected through reduced or reallocated Department of Defense spending if the bill leads to budget cuts for certain DoD elements.
• NOC — May see indirect effects if Pentagon funding reductions change contract timing, scope, or program funding.
• BA — Its defense and aerospace operations could be indirectly affected if DoD budget reductions influence procurement or program awards.
• GD — Could be indirectly impacted by changes in Pentagon spending on defense programs and services.
• HII — May be indirectly affected if Navy or other DoD-related funding is reduced under the bill’s audit-linked penalty.