Lynn will now take over the day-to-day management of the largest department in the federal government -- and the only one that has never been successfully audited.
In his last stint at Defense under President Clinton, Lynn was comptroller, the Pentagon's chief financial officer, from 1997 to 2000. While his supporters said he had done much in that job to address the department's notoriously chaotic finances, his critics charged that he bears much responsibility for the state they are still in today.
"As CFO," Sen. Charles Grassley, R-Iowa, said during the debate, "he advocated very questionable accounting practices that were not in the public interest."
Grassley said he had sent staff out to "where the Senate buries old skeletons," an archive center 20 miles from the Capitol in Maryland. "There they dug up the remains of what I came to know about Mr. Lynn some 10 years ago," he said, advising his colleagues to keep good records. "I have found that political nominees, good and bad, come back like Australian boomerangs," he said.
Chief among those questionable practices, according to Grassley, was a Pentagon policy called "straight pay," which governed the way the Defense Department paid contractors' bills.
Grassley charged that this policy, which he said Lynn had approved in December 1998, allowed Pentagon officials to pay bills for up to a half-million dollars, even if supporting documentation could not be found.
"This policy," said Grassley, "developed under Mr. Lynn's leadership, was dangerous, misguided and irresponsible. It demonstrated a lack of sound business judgment. And it may have been inconsistent with various provisions of law.
"'Straight pay' left the taxpayers' hard-earned money vulnerable to fraud and theft," he said, adding that it "created a superfund site for toxic (Department of Defense) payments."
Responding to Grassley's charges was Sen. Carl Levin, D-Mich., the chairman of the Senate Armed Services Committee and the man who has shepherded Lynn's controversial nomination through the Senate, negotiating not just worries about his record as CFO but also ethics concerns about his work since then as a lobbyist for Raytheon, one of the nation's top five defense contractors.
Lynn's nomination required the White House to waive part of a tough new ethics rule banning lobbyists from serving in the administration, and in addition, Lynn voluntarily recused himself from making decisions about six major programs that he had personally lobbied for while at Raytheon.
For other decisions that might impact his former employer, Lynn said in a letter to lawmakers, he would need special permission from the Pentagon's general counsel.
Sen. Tom Coburn, R-Okla., charged that these procedures were "going to handicap him," adding that although Lynn was "a man of character and a man of integrity -- we have set him up to fail."
"We have guaranteed that contracting will not go smoothly at the Pentagon," he said, adding that Raytheon would be able to appeal any contract decisions it lost from which Lynn was barred. "We have created a basis for a new protest on everything Raytheon will not win in the future. And if Raytheon does win a contract, we've created a protest for everyone who wasn't Raytheon, because there is a conflict of interest."
But Levin said Lynn's situation was "not at all unique," noting similar procedures had been invoked "in previous cases because senior officers," including Defense Secretary Robert Gates and his current deputy Gordon England -- whom Lynn will replace -- "have had experience in the private sector."
Levin called the vendor payments issue "incredibly complicated and difficult."
"These (Pentagon financial management) systems have been deficient, continue to be deficient and with the help of this body and hopefully some real energy in the Department of Defense, that can be corrected," he said. "We all need that."
In essence, he said, there was a miscommunication about the "straight pay" policy, which replaced an earlier policy known as "pay and chase," under which bills were paid even if relevant documentation could not be found.
"That system ended. It had to end. It was illegal," he said.
By contrast, he said, the "'straight pay' system was legal. The problem is that it was a confusing name, because it implied that the previous system of non-checking an invoice against the receipt of the goods or the contract continued when it did not continue."