The U.S. Department of Defense’s annual audit once again resulted in a disclaimer.
That means the federal government’s largest agency – with a budget of more than $840 billion – can’t fully explain its spending. The disclaimer this year was expected. And it’s expected again next year. The Pentagon previously said it will be able to accurately account for its spending by 2027.
“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 Michael McCord, undersecretary of defense and chief financial officer. “Momentum is on our side, and throughout the Department there is strong commitment – and belief in our ability – to achieve an unmodified audit opinion.”
Of the 28 reporting entities undergoing standalone financial statement audits, nine got an unmodified audit opinion, one got a qualified opinion, 15 got disclaimers and three opinions remain pending.
“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,” McCord said. “An unmodified audit opinion has always been the Department’s primary financial management goal, and with their help, I know it is achievable.”
In February, a Congressional watchdog said it was again unable to determine if the federal government’s consolidated financial statements were reliable, largely due to problems at the Pentagon. The U.S. Government Accountability Office, which is Congress’ research arm, said it was hampered by “serious financial management problems at the Department of Defense,” among other issues.
Each year, teams of independent public accountants audit the department’s $4.1 trillion in assets and $4.3 trillion in liabilities.
The DOD Office of Inspector General audits the department’s overall or consolidated financial statements in support of that independent public accounting firms audit the individual military services and other DOD reporting entities, including the defense agencies that are all pieces of that overall audit that IG looks at. The overall DOD audit is comprised of or supported by 28 separate audits of these different components, McCord said.
“This result was not a surprise and I know that on the surface it doesn’t sound like we’re making progress,” he said. “However, that is not the case … The department has improved from less than 7% to over 82% of its funding being free of material weaknesses.”
