DOD Financial Management
- The nation's economic and fiscal difficulties have added urgency to the need to improve DOD's financial management.
DOD's financial management has been on GAO's High Risk List since 1995 because of pervasive deficiencies in its financial and related business management systems, processes, and controls. DOD's deficiencies have impaired its ability to
establish effective financial management that can
- provide managers with timely, accurate, reliable, and useful information and
- prevent or timely detect fraud, abuse, and waste.
- sustain a full audit of its financial statements to ensure basic accountability
DOD’s progress in improving its financial management processes and operations has been mixed. DOD has made partial progress toward demonstrating leadership commitment and developing capacity and action plans.DOD continues to address its financial management challenges by (1) implementing the Financial Improvement and Audit Readiness (FIAR) Plan and the accompanying FIAR Guidance, (2) working to establish modern business information systems, and (3) developing training programs to build a skilled workforce. However, DOD continues to face challenges in monitoring corrective actions and demonstrating progress. For example, DOD’s risk management policies associated with preparing auditable financial statements are not in accordance with widely recognized guiding principles for effective risk management. And, DOD continues to experience impediments to deploying its planned modern business systems on schedule and with the intended capabilities.
The National Defense Authorization Act for Fiscal Year 2013 established certain requirements for the FIAR Plan, including actions taken to ensure audit readiness of DOD’s Statement of Budgetary Resources (SBR) no later than September 30, 2014, and an assessment of readiness.However, DOD did not meet its target date for audit readiness of the SBR, which reflects multiple-year budget activity. In response to difficulties in preparing for a full SBR audit, DOD reduced its scope; initial SBR audits, beginning in fiscal year 2015, will focus only on current-year budget activity, to be reported on a Schedule of Budgetary Activity. This would be an interim step toward achieving an audit of multiple-year budget activity required for an SBR. Army, Navy, Air Force, and other defense organizations started first-year Schedule of Budgetary Activity audits in fiscal year 2015.
Congress has mandated a full audit of DOD’s fiscal year 2018 financial statements, and that those results be submitted to Congress by March 31, 2019. To prepare for a full financial audit by 2018, it will be critical that all DOD component agencies continue to implement the FIAR Plan and FIAR Guidance to focus on strengthening processes, controls, and systems, as well as fully defining the actions to be taken to resolve long-standing financial management weaknesses and address full financial statement auditability. To help DOD address impediments to progress, GAO is monitoring DOD’s progress on its initial Schedule of Budgetary Activity audits as well as assessing the existence and completeness of its mission critical assets. In two recent reports, GAO noted that DOD had focused on meeting deadlines for asserting audit readiness rather than first assuring that processes, systems, and controls are effective, reliable, and sustainable. While timeframes are important for measuring progress, DOD should not lose sight of the ultimate goal of implementing lasting financial management reform to ensure it can routinely generate reliable financial management information critical to decision making and effective operations.
GAO-14-470: Published: Sep 30, 2014. Publicly Released: Oct 30, 2014.
GAO-14-10: Published: Jun 23, 2014. Publicly Released: Jun 23, 2014.
GAO-14-60: Published: May 30, 2014. Publicly Released: May 30, 2014.
GAO-14-576T: Published: May 13, 2014. Publicly Released: May 13, 2014.
GAO-14-94: Published: Apr 29, 2014. Publicly Released: May 13, 2014.
GAO-15-463: Published: Sep 28, 2015. Publicly Released: Sep 28, 2015.
GAO-15-658: Published: Sep 15, 2015. Publicly Released: Oct 15, 2015.
GAO-15-198: Published: Jul 30, 2015. Publicly Released: Aug 3, 2015.
GAO-15-462: Published: Jun 30, 2015. Publicly Released: Jun 30, 2015.
GAO-15-371T: Published: Feb 11, 2015. Publicly Released: Feb 11, 2015.
GAO-15-373T: Published: Feb 11, 2015. Publicly Released: Feb 11, 2015.
GAO-15-290: Published: Feb 11, 2015. Publicly Released: Feb 11, 2015.
GAO-13-123: Published: Aug 2, 2013. Publicly Released: Sep 3, 2013.
GAO-13-227: Published: May 13, 2013. Publicly Released: Jun 6, 2013.
GAO-13-28: Published: Dec 12, 2012. Publicly Released: Dec 12, 2012.