Key Issues > DOD Financial Management - High Risk Issue
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DOD Financial Management - High Risk Issue

Long-standing deficiencies in the Department of Defense’s financial management, related systems, and reporting practices hinder mission and operation decision-making and affect the auditability of DOD financial statements. Sound financial management practices and reliable, useful, and timely financial information could help DOD ensure accountability and efficient and effective management of the department’s extensive resources.

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The Department of Defense’s (DOD) financial management has been on GAO's High Risk List since 1995 due to long-standing problems that continue to negatively affect the efficiency and effectiveness of its operations.

DOD expenditures make up about half of the federal government's discretionary spending, and its physical assets represent more than 70 percent of the federal government's property. However, DOD remains one of the few federal entities that cannot accurately account for (or reliably report on) its spending or assets.

In 2018, DOD underwent its first agency-wide financial statement audit. However, the audit resulted in a disclaimer of opinion—meaning that the auditors were unable to express an opinion on DOD’s fiscal year 2018 financial statements due to insufficient evidence.

The auditors found a number of issues with DOD’s financial management, and provided over 2,400 findings and recommendations. These issues pose a significant risk to DOD operations and could result in payments and collections being lost, stolen, or duplicated. In response, DOD developed a centralized database to summarize these audit findings and recommendations, as well as the plans to address them.
DOD has reported benefits from the actions it has taken to address findings from previous audits. For instance:

  • The Army found 39 Blackhawk helicopters that had not been recorded in its property system.
  • The Air Force identified 478 buildings and structures at 12 installations that were not in its property systems.
  • The Army improved its process for counting assets at its depots, ensuring a more accurate inventory count and avoiding annual future costs of about $10 million.
  • The Navy expanded its use of automatic data feeds to prepare for financial audits and improve its efficiency and operations, thereby avoiding $65 million of charges for service provider support that manual entry would have required.

However, as the 2018 audit results show, DOD still needs to address a large number of complex financial management issues to routinely generate reliable, timely, and useful financial management information.

For example, DOD needs to:

  • Develop and deploy IT systems to perform a variety of business-related tasks, such as general ledger accounting, payroll, and supply chain management
  • Make changes to its remaining legacy IT systems to satisfy audit requirements and improve the data it uses for day-to-day decision making
  • Ensure that it develops, prioritizes, and tracks corrective action plans to address all of the issues that the audit raised

Looking for our recommendations? Click on any report to find each associated recommendation and its current implementation status.

More Reports

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Podcasts

DOD Financial ManagementMonday, September 28, 2015
DOD Improper PaymentsThursday, June 6, 2013
  • portrait of Asif Khan
    • Asif Khan
    • Director, Financial Management and Assurance
    • khana@gao.gov
    • 202-512-9869