House members today grilled officials from the Department of Defense (DoD) on a long-standing and vexing issue for Congress – the Pentagon’s inability to produce a clean audit opinion on its financial statements since that requirement went into effect for Federal agencies in 1990.
In a May 2023 report, the Government Accountability Office (GAO) explained that although DoD is responsible for about half of the Federal government’s discretionary spending, “DOD remains the only major federal agency that has never been able to receive a clean audit opinion on its financial statements.”
Since 1995, GAO has designated DOD financial management as high risk “because of pervasive deficiencies in its financial management systems, business processes, internal controls, and financial reporting,” the watchdog agency said.
“DOD should not get a free pass from the law, especially when other agencies that invest in priorities like health care, education, climate change, or economic growth are under high scrutiny and take important and difficult steps to comply with statutory auditing requirements,” stated Rep. Robert Garcia, D-Calif., today during a joint subcommittee hearing of the House Oversight and Accountability Committee.
John Tenaglia, principal director of Defense Pricing and Contracting at the DoD, blamed the current procurement system as one factor that’s stopping DoD from keeping better tabs on its finances.
“The standard procurement system needs to be retired. It’s a legacy system. It works, but we’re working with the comptroller on the standards to make sure that it communicates with the financial system, so it’s really all about the data standards behind that,” stated Tenaglia.
Asif Khan, director of Financial Management and Assurance at the GAO, discussed some of the reasons that DoD has not been able to produce a clean audit, including its use of older financial systems.
“It is helping that DoD is embracing technology” including robotic process automation in its financial work, Khan said. “It is freeing up the resources to be able to do more analytical work, but the problems are very pervasive across DoD and that’s why it’s taking them time,” to generate the ability to produce a clean audit, he said.
The issue of antiquated systems at DoD to manage the department’s finances was something that Rep. Gerry Connolly, D-Va., said can also be a hallmark of introducing cybersecurity risks.
“This directly affects the security of our missions, of our intelligence, of our defense planning on our new weapons systems development,” said Rep. Connelly.
Earlier this year, GAO released a new set of recommendations for the DoD on steps that the department needs to take to produce a clean audit.