The Pentagon failed its seventh consecutive audit Friday, with the nation's largest government agency still unable to fully account for its more than $824 billion budget, but officials remain on track for a clean audit in 2028. He emphasizes that progress is being made.
The Pentagon technically obtained opinion immunity, meaning it failed to provide auditors with enough information to form an accurate opinion.
The goal is to obtain an unmodified audit opinion, or a clean audit that the financial statements are accurate. The qualified opinion states that although there are some omissions and concerns, the company's financials are generally reliable.
Michael McCord, the Under Secretary of Defense for Comptroller and Chief Financial Officer, said that despite the expected abandonment of the opinion, the Pentagon “has pivoted in its understanding of the depth and breadth of the challenge.”
“Momentum is on our side, and there is strong commitment and belief in our ability to achieve unmodified audit opinions across the department,” he said in a statement.
The entire Department of Defense report card is comprised of 28 organizations under the Department of Defense that have conducted independent audits.
Nine received unmodified audit opinions, one received qualified opinions, 15 received disclaimers, and three opinions are pending. The Department of Defense expects the final number of clean or qualified audits to be about the same as last year.
The Pentagon has never passed an audit since it was legally required to do so in 2018. A major challenge in auditing remains gaining a complete understanding of the vast number of systems employed by the Department of Defense.
The Department of Defense said it is steadfastly committed to achieving a clean audit by 2028, as required by the 2024 National Defense Authorization Act.
At a press conference Friday, McCord explained that the number of clean audits shows progress and disputed the characterization that the Pentagon had failed another audit.
“I'm not saying we've failed. Like I said, we have about half a clean opinion. Half of us don't have a clean opinion,” he added. “So if someone's report card is half good and half bad, I don't understand calling that student or their report card a failure. We have a lot of work to do, but I think we are making progress. “
He added that a clean audit in 2028 is possible, but the Pentagon will need to make “significant progress” to get all government agencies over the line.
“Is 2028 achievable? I believe so,” he said. “But we need to keep getting faster and keep getting better.”
The audit was conducted by independent auditors in conjunction with the Department of Defense Inspector General.
Agencies that have earned clean audits include the Department of Defense, Defense Contract Audit Agency, Defense Financial Accounting Agency, and Defense Health Agency.
The Defense Information Systems Agency, Military Retirement Fund, National Reconnaissance Office, U.S. Army Corps of Engineers Civil Works Directorate and Defense Threat Reduction Agency also achieved clean audits.
Eight government agencies also had material weaknesses related to their balances with the Treasury Department resolved or downgraded. This means that funds held in government accounts and expenditures are accurately balanced or achieve positive reporting on their tracking.
These agencies were the Army, Navy, and Air Force Financial Management Systems, as well as the Defense Information Systems Agency, the Defense Threat Reduction Agency, the Defense Advanced Research Projects Agency, and the National Geospatial-Intelligence Agency.
McCord likened fixing critical weaknesses to balancing a checkbook and said it was the “biggest sign of progress” toward a clean audit across the Department of Defense.
He added that since 2021, the Department of Defense has gone from less than 7% of its funding to more than 82% without significant weaknesses.
“This means that the Army, Navy, Marines and Air Force are all set up with all their money – cash,” he said.
The Department of Defense continues to work towards a clean audit by modernizing the workforce, improving financial data systems, and increasing interoperability between systems.
Although the goal of a clean audit in 2028 means the Pentagon will have to hand over its strategy to the incoming Trump administration, McCord said it is possible to maintain much of the continuity of strategy that he has seen so far. “He said he was looking forward to it.
“The strongest path forward for us is to have a lot of continuity in what we're doing,” he said, noting that this is not a “typical political” issue between administrations. Ta. “There are different ways to solve that problem, but there are not different ways to define the problem.”
This year's audit cost the Department of Defense $178 million and involved about 1,700 auditors.
