DOD Financial Management: Status of Remediation Efforts to Meet Audit Mandate

What GAO Found

The Department of Defense (DOD) has realized many benefits from its financial statement audits. For example, the DOD Office of Inspector General (OIG) reported that DOD's fiscal year 2024 remediation plans included the retirement of 89 outdated information systems and will result in savings of at least $760 million annually through fiscal year 2029. However, DOD still needs to make substantial progress in remediating its pervasive deficiencies, which auditors call material weaknesses. Although DOD's auditors downgraded one material weakness related to contingent legal liabilities, they identified a new one related to DOD's reporting of leases, resulting in no net change.

Better financial management is critical to DOD's mission readiness, and it is important to demonstrating that DOD's financial statements and underlying financial information are reliable for decision-making. These audits help DOD to assess what is performing well and what areas still need improvement. For example, DOD OIG reported that DOD addressing its asset accountability challenges will provide leadership with more accurate information to assist in making operational decisions. The OIG noted that accurate asset data enable informed decisions about maintenance, replacement, and disposal, leading to better resource allocation and long-term planning. This in turn improves operations and helps better ensure optimum use of resources to support warfighter priorities.

The National Defense Authorization Act for Fiscal Year 2024 mandates that the Secretary of Defense ensure that DOD receives a clean audit opinion on its financial statements by no later than December 31, 2028. In response, DOD reported that it realigned each reporting entities' roadmap. These roadmaps guide the implementation of corrective measures and establish milestones against which entities can measure progress, to accelerate audit progress and achieve the December 2028 mandate.

Why GAO Did This Study

DOD is responsible for about half of the federal government's discretionary spending and about 82 percent of the federal government's reported total physical assets. As of fiscal year 2024, DOD remains the only major federal agency that has never been able to receive a clean audit opinion on its financial statements. The Marine Corps received a clean audit opinion on its fiscal year 2023 financial statements, becoming the first military service to ever do so, and again receiving a clean audit opinion for fiscal year 2024. However, DOD and many of its component reporting entities' fiscal years 2018 through 2024 financial statement audits resulted in disclaimers of opinion. It is important for DOD to obtain a clean audit opinion to demonstrate that its financial statements and underlying financial information are reliable for decision-making and efficient and effective operations.

In this Q&A report, GAO describes the audit approaches undertaken by the independent public accountants and results of DOD's and the military services' fiscal year 2024 financial statement audits, as well as DOD's planned timelines for addressing key audit findings.

GAO reviewed relevant DOD, DOD OIG, and military service independent public accounting documentation and reports, as well as memorandums and status reports, and interviewed officials. GAO also analyzed DOD's and the military services' fiscal years 2023 through 2025 audit roadmaps as well as certain detailed project plans, which included milestones for certain corrective actions.

For more information, contact Asif A. Khan at khana@gao.gov.