Publicly Released: May 17, 2023
During FY 2022, the DoD underwent its fifth financial statement audit. As in prior years, the DoD Office of Inspector General (OIG) issued a disclaimer of opinion on the DoD Agency-Wide Basic Financial Statements, meaning the DoD could not provide sufficient evidence for the auditors to conclude whether the DoD presented the financial statements fairly and in accordance with accounting guidance.
During the course of this year’s audit, auditors closed 633 prior-year notices of findings and recommendations (NFRs) for a variety of reasons. For example, auditors closed NFRs because the DoD took action and the condition no longer existed, the auditors combined NFRs, or the process or system used was eliminated. Auditors also reissued 2,505 NFRs related to ongoing concerns and issued 479 new NFRs regarding issues identified during the current audit. In addition, the DoD OIG identified 28 Agency-Wide material weaknesses, which are weaknesses in internal controls that are so significant that they could prevent management from detecting and correcting a material misstatement in the financial statement in a timely manner. While the number of material weaknesses did not change between FYs 2021 and 2022, the DoD OIG combined three prior-year material weaknesses into repeat material weaknesses and identified three new material weaknesses in FY 2022.
Transparency is a core principle for OIGs, as we work to the greatest extent possible to highlight the issues that we identify regarding the operations of the departments and agencies we oversee. The DoD budget is large and of substantial public importance, comprising nearly half the non-discretionary spending of our Nation and almost three-fourths of its assets. In light of those considerations, this report is intended to summarize, in terms understandable to non-auditors, the findings of our audits of the DoD’s financial statements, the progress made by the DoD, and the additional actions the DoD should take to address the overall audit findings. This report focuses on material weaknesses that are scope-limiting, meaning they prevent auditors from performing the necessary procedures to draw a conclusion on the financial statements. In addition, this report discusses how the DoD tracks progress toward its auditability goals and the DoD’s decision to produce stand-alone financial statements for relatively small components whose finances are immaterial to the Department’s overall financial picture.
We believe that obtaining an unmodified (clean) audit opinion is critically important for the DoD and that it is necessary for the government-wide financial statements to receive a clean opinion. However, the financial statement audit has value far beyond the audit opinion. The audit—and accurate financial statements—enable Congress and the public to assess how the DoD spends its money, identify vulnerabilities in information technology systems, help prevent wasteful practices, and help the DoD improve its operations.
The DoD OIG has initiated a number of performance audits, and it will continue to explore the potential for additional impactful oversight regarding issues identified through the financial statement audit. For example, during FY 2023, the DoD OIG will conduct performance audits related to the Joint Strike Fighter, the DoD’s use of attestation engagements to review shared systems and processes, and the DoD’s plans to address longstanding issues with outdated financial management systems. We will continue to fully and fairly audit the financial statements, identify deficiencies, and provide clear information to the DoD on what is necessary to fix these deficiencies. We remain fully committed to this important, long-term effort to improve the financial health of this critically important Department.