The fifth annual Department-wide financial statement audit resulted in a disclaimer of opinion, however significant progress was achieved. Seven Components have received unmodified opinions and one received a qualified opinion. Opinions for the Office of Inspector General and the Defense Information Systems Agency Working Capital Fund are pending. The U.S. Marine Corps (USMC) two-year audit cycle will be completed in November 2023 and will not be reporting this year. The remaining Components received disclaimers of opinion.
The FY 2022 audit resulted in three new DoD-wide material weaknesses and the consolidation of six material weaknesses into three for no net change in the number of material weaknesses. The DoD Components closed three material weaknesses and downgraded one.
The Department also made important progress on the Secretary of Defense audit priority areas—Fund Balance with Treasury (FBWT), Access Controls, and Universe of Transactions. The Department maintained an overall Statement of Differences balance of $1.41 billion in June 2022 (0.2 percent of DoD FBWT), down from $6.7 billion in December 2018. Additionally, the Department expects auditors to close a prior year finding regarding controls for the Treasury Index-97 Cash Management Report.
The Army remediated 64 percent of its high-priority corrective actions related to access controls. The Navy deployed an Identity, Credential, and Access Management (ICAM) solution to automate account-provisioning, removal, and access reviews for over 83,000 users (11 percent of its unique user identities). Additionally, Navy remediated 27 percent of its access control and segregation of duties findings.
In this year, the USMC decommissioned three legacy systems and put in place a new general ledger system, Defense Agencies Initiative (DAI)—a significant accomplishment for any IT system migration. DAI greatly simplifies and modernizes the USMC’s already lean system environment. USMC transferred its universe of transactions to Advana to support DAI balances and reconciliations, a big step toward achieving an opinion.
The trustworthiness and transparency the audit delivers will promote a lasting, leaner, more accountable DoD resulting in:
A Modernized Workforce. Robotic process automation (RPA) efforts are reducing manual tasks, allowing financial managers to focus on more complex issues. As of October 2022, DoD has deployed 607 “bots,” with 54 percent aligning to financial management processes and 20 percent directly supporting compliance or audit response. DFAS deployed 52 “bots” for 48 new use cases and projects saving approximately 128,045 hours or an estimated $4.2 million in cost savings.
Improved Business Operations. The Air Force corrected approximately $5.2 billion in historical variances on its equipment and accumulated depreciation general ledger accounts. This increased level of visibility allows for greater control and oversight of military equipment financial transactions. The Air Force also automated its trial balance reconciliations, redirecting those hours to more value-added tasks.
Quality Decision Making. DLA completed a 100 percent physical inventory, establishing beginning balances and item counts for stockpile inventory. That, plus other corrective actions, has allowed DLA to sustain an inventory accuracy at 98 percent or greater, which supports decision-making at all Military Services.
Reliable Networks. In FY 2022 the Navy decommissioned three audit relevant legacy systems, migrating data and users across three Commands to modern systems. To date, Navy has decommissioned 11 audit relevant legacy systems.
Enhanced Public Confidence. Our audits demonstrated the Department takes care of its people. The Military Pay and Civilian Pay systems received unmodified Statement on Standards for Attestation Engagements No. 18 opinions for the sixth and tenth consecutive years, respectively.
Achieving our audit goals will require the continued investment of resources and focus of senior Comptroller leadership in partnership with Acquisition and Sustainment and the Chief Information Officer. While there is much work remaining, and some of our most complex problems still lay before us, the audit has been a catalyst for business reform across the Department, resulting in greater financial integrity, increased transparency, and ultimately, a better-supported warfighter.
For more information, please see the Department’s Agency Financial Report at https://comptroller.defense.gov/odcfo/afr/.
