Inspector General Robert P. Storch announced today that the Department of Defense Office of Inspector General (DoD OIG) released its “Audit of Financial Improvement and Audit Remediation Contracts for DoD Components.”
From FY 2018 to FY 2022, the DoD reported spending approximately $4.11 billion on audit remediation and support with the goal of obtaining an unmodified (clean) audit opinion on its financial statements. However, after spending more than $4 billion over 5 years, the DoD made minimal progress to correct its financial management deficiencies.
The audit identified that DoD Components did not effectively manage Financial Improvement and Audit Remediation (FIAR) contracts, resulting in the DoD not efficiently using the contracts to meet FIAR goals and, in FY 2022, spending more than $75 million of FIAR contract funds on non-remediation efforts. This occurred because the Office of the USD(C)/CFO did not define the specific tasks and types of contracts that DoD Components should use for supporting FIAR efforts.
“The DoD aims to achieve an unmodified audit opinion by December 31, 2028,” said IG Storch. “Correctly identifying and using their contracted audit remediation efforts will aid in achieving this goal.”
The DoD OIG made six recommendations to the USD(C)/CFO to clarify and define FIAR tasks for the DoD Components and oversee the DoD’s reporting and usage of FIAR contracts. The DoD OIG also made eight total recommendations to the Assistant Secretaries of the Army, Navy, and Air Force (Financial Management and Comptroller) and the Chief Financial Officer of the Defense Logistics Agency to better align their FIAR contracts to FIAR goals and develop a plan to reduce their use of contractors for FIAR efforts by transitioning to DoD personnel. Additionally, the DoD OIG made two recommendations to the Assistant Secretaries of the Army and Navy (Financial Management and Comptroller) to develop a centralized process to monitor their FIAR efforts as they achieve unmodified opinions.
The DoD OIG will continue to monitor the DoD’s progress toward full implementation of these recommendations.