Pentagon fails seventh consecutive audit

WASHINGTON (TNND) — The Department of Defense has failed its seventh consecutive audit, highlighting ongoing challenges in financial management for the nation’s largest government agency. The Pentagon’s budget is over $800 billion and they began conducting audits in 2018, making the process relatively new.

Pentagon officials have expressed satisfaction with the progress made so far. Of the 28 military agencies, DoD leaders think 11 are expected to receive clean audit opinions, one more than the previous fiscal year.

“I believe the department has turned a corner in its understanding of its challenges, and more importantly in addressing them,” said Mike McCord, the department’s chief financial officer. “Momentum is on our side, and throughout the department, there is strong commitment — and belief in our ability — to achieve an unmodified audit opinion.”

However, the department’s Chief Financial Officer acknowledged that significant work remains to meet the congressional mandate for a clean audit by 2028, as outlined in the National Defense Authorization Act.

The Department of Defense continues to face substantial issues in tracking its finances, with 28 material weaknesses identified in its audit. According to Investopedia, Material weakness is when one or more of a company’s internal controls—activities, rules, and processes designed to prevent significant financial statement irregularities and improve operation efficiency—are ineffective.

“Although the DoD made some progress in improving financial management during the FY 2024 financial statement audits, many of its identified weaknesses have not improved since 2005,” said the DoD’s Inspector General Robert P. Storch. “A continued commitment to addressing root causes and implementing corrective actions is necessary to move toward achieving an unmodified opinion. The DoD must continue to address the Secretary of Defense Audit Priorities. Aggressively retiring noncompliant systems and modernizing the DoD’s financial management systems would materially support those efforts. However, achieving a clean audit opinion does not rest solely in the hands of financial management professionals, but encompasses the entirety of processes and systems that track the accountability and use of DoD assets.”

The Pentagon’s financial management issues are among the most severe. While 19 of the 24 Chief Financial Officers Act agencies received unmodified opinions on their financial statements, the Department of Defense remains one of the five agencies that did not achieve a clean audit last year. The other agencies include the Department of Agriculture, the Department of Education, the Department of Labor, and the Small Business Administration.

The Department of Education, in particular, has failed its third consecutive audit, with its 2024 audit revealing one material weakness and issues related to its direct loan and loan guaranty programs.