DoD completes department-wide audit of financial statements; key catalyst for business transformation and modernization

The fifth annual audit of sector-wide financial statements resulted in a non-opinionary outcome, but significant progress was made. Seven components received unqualified comments and one component received qualified comments. Comments from the Office of the Inspector General and DISA Working Capital Fund are pending. The United States Marine Corps (USMC)’s two-year audit cycle will complete in November 2023 and will not report this year. The remaining components received a disclaimer.

The FY2022 audit resulted in three new DoD-wide material weaknesses and consolidated six material weaknesses into three, as there was no net change in the number of material weaknesses. DoD Components closed three material weaknesses and downgraded one.

The department also made significant progress in the Secretary of Defense audit priority areas – Treasury Balance of Funds (FBWT), access control and transaction coverage. The department’s overall variance statement balance for June 2022 is $1.41 billion (0.2% of DoD FBWT), down from $6.7 billion in December 2018. In addition, the department expects auditors to conclude the previous year’s findings on the Treasury’s index controls – the 97 Cash Management Report.

The Army remediated 64 percent of high-priority corrective actions related to access control. The Navy deployed an Identity, Credentials and Access Management (ICAM) solution to automate account provisioning, deletion and access review for more than 83,000 users (11 percent of its unique user identities). Additionally, the Navy fixed 27 percent of its access control and segregation of duties findings.

This year, the US Marine Corps decommissioned three legacy systems and established a new ledger system, the Defense Agency Initiative (DAI), a major achievement for any IT system migration. DAI greatly simplifies and modernizes USMC’s already streamlined system environment. USMC moving its transaction scope to Advana to support DAI balances and reconciliations is a big step towards consensus.

The credibility and transparency provided by the audit will promote a durable, leaner, more accountable DoD that:

modern workforce. Robotic process automation (RPA) efforts are reducing manual tasks, freeing financial managers to focus on more complex issues. As of October 2022, DoD has deployed 607 “bots,” 54 percent of which align with financial management processes and 20 percent directly support 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.

Improve business operations. The Air Force corrected approximately $5.2 billion in equipment historical variance and accumulated depreciation general ledger. This higher level of visibility allows for better control and oversight of military equipment financial transactions. The Air Force also automated trial balance reconciliations, reallocating that time to higher value-added tasks.

quality decisions. DLA completes 100% of the physical inventory, establishing opening balances and item counts for inventory. This, along with other corrective actions, enables DLA to maintain inventory accuracy rates of 98 percent or better, supporting decision making across all military branches.

reliable network. In FY22, the Navy decommissioned three audit-related legacy systems, migrating data and users across three commands to modern systems. To date, the Navy has decommissioned 11 audit-related legacy systems.

Enhance public confidence. Our audit shows that the department cares about its people. Military Pay and Civilian Payroll received the unmodified Statement of Assurance Engagement Standards No. 1. For the sixth and tenth year in a row, there were 18 comments each.

Achieving our audit objectives will require continued investment of resources and a focus led by the Senior Comptroller with Procurement and Sustainment and the collaboration of the Chief Information Officer. While much work remains to be done and some of the most complex issues still lie ahead, audit has been a catalyst for business reform across the department resulting in greater financial integrity, greater transparency and ultimately a better warfighter support.

For more information, see the Department of Defense’s Agency Financial Reports at https://comptroller.defense.gov/odcfo/afr/.

Source link