The Defense Department (DoD) has flunked its seventh consecutive departmentwide financial audit, according to a Nov. 15 press release.
DoD Chief Financial Officer (CFO) Michael McCord said the results were expected, but that the fiscal year (FY) 2024 audit shows the Pentagon has “turned a corner” and is charting progress in its financial management practices and transparency.
The audit for FY24 came back once again with a “disclaimer of opinion” which in finance-speak means that the audit is not “clean.” Auditors typically issue disclaimers of opinion due to the absence of financial information, or management cooperation, that would allow them to complete their review and issue an unqualified opinion on the results.
“Despite the disclaimer of opinion, which was expected, the Department has turned a corner in its understanding of the depth and breadth of its challenges,” said McCord.
“The path forward is clear,” he said. “Significant work remains and challenges lie ahead, but our annual audit continues to be a catalyst for Department-wide financial management reform, resulting in greater financial integrity, transparency, and better-supported warfighters.”
According to the release, nine of the DoD’s 28 reporting entities received unmodified audit opinions. The Defense Threat Reduction Agency (DTRA) was a new addition to this clean audit category this year.
The DoD said it is “firmly committed and is taking actions” to achieve an unmodified audit opinion on its financial statements by Dec. 31, 2028, as mandated by the National Defense Authorization Act for FY24.
The department said it saw a return on investment across areas essential for achieving and sustaining an unmodified opinion: workforce modernization, business operations, quality decision making, reliable networks, and enhanced public confidence.
For example, in FY24, the Air Force delivered 76 bots saving 577,000 labor hours and improving the efficiency of 76 business processes; the Army’s new Integrated Personnel and Pay System consolidates information from over 50 legacy systems and promotes secure and consistent processes and data; and the Navy further consolidated its systems by migrating nine major commands, decommissioning 11 systems, and transitioning three Budget Submitting Offices to Navy ERP, its enterprise resource planning system.
“Momentum is on our side, and throughout the Department there is strong commitment – and belief in our ability – to achieve an unmodified audit opinion,” McCord said.
The CFO attributed DoD’s audit momentum to the “tone-at-the-top.”
“The Department continues to need the sustained investment, senior leadership commitment, and the support of our partners in Congress, federal regulators, the audit community, and our military and civilian personnel to accomplish its audit goals,” added McCord. “An unmodified audit opinion has always been the Department’s primary financial management goal, and with their help, I know it is achievable.”
