US Department of Defense (DoD) chief financial officer Mike McCord has emphasised that the department is on the right path to achieving the mandated clean audit, although substantial work remains.
The comment follows as the DoD completes its department-wide financial statement audit
involving 28 reporting entities, each undergoing their own stand-alone financial statement audits, for fiscal year (FY) 2024.
Congress has set a goal for the DoD to achieve an unmodified audit by fiscal year 2028. McCord expressed confidence in the department’s progress but acknowledged that the pace of improvement must accelerate in order to meet this target.
Mike McCord added: “[The] next couple of years will be critical time as the department works toward this 2028 mandate, which will require us to keep getting better and faster.”
Of the 28 reporting entities, nine entities achieved ‘unmodified audit opinions,’ with results from three additional entities still pending.
The Defense Threat Reduction Agency (DTRA) achieved an unmodified audit opinion for the first time.
This marks only the second year DTRA has undergone a stand-alone audit.
In the FY 2024 department-wide audit, eight DoD reporting entities addressed their fund balance with Treasury material weaknesses.
Entities such as the Department of the Navy Working Capital Fund and the Department of the Air Force Working Capital Fund successfully closed this material weakness.
The Department of the Army General Fund, Defense Advanced Research Projects Agency, and other entities downgraded their fund balance with Treasury material weaknesses.
McCord said: “Fund balance with [the] Treasury is, in layperson terms, like balancing your chequebook. Except I said we have 1,500 chequebook with $850bn in them.
“So, it’s a little more complicated than it might sound, but that’s basically what it is. It’s reconciling your version of all the money you have with [the Treasury Department’s] version of all the money you have in these 1,500 pots.”
As of the third quarter of FY 2024, the DoD has deployed more than 800 automations, with approximately 50% supporting financial management business functions.
Around 21% of these automations assist with compliance or audit activities, enhancing efficiency in audit processes.
The Army operates 68 automations, saving an estimated 115,000 hours of manual processes annually.
The cost of the FY 2024 audits is expected to remain stable, with audit remediation and support costs just over $1bn.
Early estimates show that the Department incurred $178m in FY 2024 audit costs, including around $166m in financial statement audit contracts and $12m for SSAE No. 18 examination contracts.
With total DoD FY 2024 net annual outlays of more than $903bn, the estimated cost of the audit represents a positive investment in transparency and accountability.
The latest audit marks the seventh such audit since 2018, where the audit covered $2.7trn in assets and $2.6trn in liabilities.
