For years, Pentagon financial staff and outside critics have kept 2017 on the radar as the target year for achieving clean internal books to help get the Defense Department’s auditability issues off the Government Accountability Office’s high-risk list.
It appears the department has a lot of work left to achieve that goal. Last Thursday, GAO released a 70-page review of recent offerings by all the military services, concluding that “significant efforts are still needed for remediating audit readiness deficiencies.”
Hindering progress toward a departmentwide Statement of Budgetary Resources that will reflect multiyear budget activity is the fact that all three of the independent public accountants contracted to audit the services’ fiscal 2015 budgetary schedules “were unable to express an opinion because of a lack of sufficient evidence to support the amounts presented,” GAO wrote.
Directives from the Office of Management and Budget and Defense’s own Financial Improvement and Audit Readiness Guidance require the services’ financial managers to identify and track transitions, prioritize them, develop corrective actions to remediate deficiencies and monitor implementation of the corrective steps.
The outside teams identified material weaknesses in internal control and collectively issued a total of more than 700 findings and recommendations “for the services to assure that all of the relevant financial transactions that occurred and that documentation was available to support such transactions.”
For example, they found, “the Army did not consistently perform effective daily operating system backup procedures or maintain evidence of operating system and database backups when performed for certain financial systems.” Similarly, the “Air Force did not have a comprehensive process in place to identify and track all financial management-related findings and recommendations. The Air Force had written policies and procedures providing limited information for selected recommendations, such as those from the Air Force Audit Agency, but the policies did not discuss the development” of corrective actions.
The Navy, outside auditors found, “had no assurance that transactions were completely and accurately recorded in its four general ledger systems because it has not designed and implemented sustainable and recurring manual and automated reconciliations with its more than 100 feeder systems.”
As a result, the Defense comptroller “has established several elements of a departmentwide audit readiness remediation process,” GAO wrote, “but it does not have comprehensive information on the status of [corrective action plans] throughout the department needed to fully monitor and report on the progress being made to resolve financial management-related deficiencies.”
GAO made eight recommendations for the Defense secretary, the secretaries of the three major services and the comptroller to update written guidance and regular reports to improve documentation of financial transactions. The services and the department agreed with most, stating that updates to the guidance are under way.