DoD Falls Short in Passing Its 2018 Premier Financial Audit

Posted Nov 28, 2018 by
Tim S.

After decades of planning and preparation with help from a team of over 1,000 Defense Department (DoD) and Inspector General (IG) auditors, DoD fell short obtaining a clean opinion for its fiscal year 2018 financial statements on its first-ever audit. Instead, DoD received a general disclaimer of opinion based on the findings conducted by DoD Office of Inspector General and supporting audit teams. The DoD Agency Financial Report Fiscal 2018 including IG’s disclaimer of opinion is available here.

DoD was the last remaining major government agency to complete its first financial audit as mandated by the Chief Financial Officers Act of 1990 (the Act). This federal law was intended (among other things) to improve the government’s financial management by outlining standards of financial performance and disclosures for 23 federal agencies. The Government Accountability Office (formerly known as the US General Accounting Office) followed up on the Act by publishing “The Chief Financial Officers Act – A Mandate for Federal Financial Management Reform” which provided further guidance on the Act’s principle features, actions needed to successfully implement the act and sources of information to assist in carrying out the Act’s provisions. A copy of the Act and GAO’s guidance may be found here and here, respectively.

IG’s disclaimer of opinion was widely anticipated by DoD and relevant Congressional committees given the gargantuan scope and scale of this audit effort which included site visits to over 600 locations, over 40,000 requests for documentation, and testing more than 90,000 audit samples according to Federal News Network. Congress was aware of these challenges and enacted special legislation in 2010 and 2014 requiring DoD to sufficiently improve the condition of their financial reporting systems and internal controls so that it could at least complete its first audit (pass or fail) by fiscal yearend 2018. While DoD succeeded in achieving the goal of system readiness by 2018, it faces daunting challenges in addressing and resolving over 2,000 findings related to financial audit and internal control deficiencies.

St. Michael’s is an integral player in supporting the DoD audit efforts and provides proven experience and expertise to overcome audit challenges, implement compliant and sustainable business practices and prepare organizations to achieve an unmodified audit opinion. Find out more about our audit readiness services here.

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