Key Issues > DOD Financial Management

DOD Financial Management

The nation’s economic and fiscal difficulties have added urgency to the need to improve DOD’s financial management.

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DOD’s financial management is 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 DOD’s ability to

sustain a full audit of its financial statements to ensure basic accountability and
establish effective financial management that can
- provide managers with timely, accurate, reliable, and useful information and
- prevent or timely detect fraud, abuse, and waste.

DOD has taken important steps in establishing sustained top-level support and in improving its strategic planning in this area. Importantly, it refined its strategic plan to focus on two important departmental priority areas: (1) budgetary information and (2) accountability for its mission-critical assets.

The Secretary of Defense issued a directive in October 2011 that sets a compressed timeline for achieving audit readiness for the department’s Statement of Budgetary Resources by 2014. Congress has mandated full DOD auditability for all DOD’s financial statements by 2017. To prepare for a full financial audit by 2017, it will be critical that all DOD component agencies develop complete and detailed supporting implementation plans. To help DOD address impediments to progress, GAO is assessing DOD’s process for identifying, assessing, and mitigating risks associated with its ability to develop audit-ready financial statements by 2017 and achieve interim milestones, including audit readiness of the Statement of Budgetary Resources.

While achieving financial statement auditability is important, it is also important that DOD not lose focus on the long-term objective of establishing effective financial management. The compressed timeline to 2014 could increase pressure for quick fixes that could delay progress toward sustainable, long-term financial management reform across DOD. Further, automated business systems are essential for effective financial management and reporting department-wide. However, DOD’s major systems acquisition and development efforts continue to experience impediments to deploying such systems on schedule and with the intended capabilities.

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