The Department of Defense (DoD) has completed its fourth consecutive Department-wide financial statement audit. “These audits are a driving force for reaching the Department’s transformation goals,” says Under Secretary of Defense (Comptroller) and Chief Financial Officer Michael McCord. “Findings from the audits catalyze change by spotlighting areas that need improvement and giving Department leaders the information they need to prioritize modernization efforts and effect meaningful, long-term change.”

Eight DoD reporting entities are expected to sustain their unmodified opinions. This was the 27th consecutive unmodified opinion for the Military Retirement Fund, which represents more than 30 percent of the Department’s total assets; the 22nd for the Defense Finance and Accounting Service Working Capital Fund; the 14th for the U.S. Army Corps of Engineers – Civil Works; and the 12th for Defense Health Agency – Contract Resource Management. The Medicare-Eligible Retiree Health Care Fund again received a qualified opinion.  Nearly 47 percent of the Department’s assets are expected to be under a favorable opinion. 

The audits continued to mature and were extensive in fiscal year (FY) 2021. They required more than 1,200 auditors, 278 in-person site visits, and 1,069 virtual site visits to review DoD business processes and activities. Auditors requested approximately 34,000 documents and tested approximately 55,000 samples. While virtual site visits provided some efficiencies, a full year of COVID-19 protocols exacerbated challenges by limiting auditor access to some sites and data, especially in areas that required in-person access.

The Department successfully downgraded the Military Housing Privatization Initiative DoD-wide material weakness. However, the Department received one new material weakness (Financial Statement Compilation), and saw the return of two material weaknesses (Contingent Legal Liabilities and Reconciliation of Net Cost of Operations to Outlays, both of which had been downgraded last year) for a total of 28 material weaknesses. The Services downgraded four material weaknesses. The Air Force General Fund downgraded Contingent Legal Liabilities and Oversight and Monitoring of Internal Control. The Air Force Working Capital Fund and Navy General Fund each downgraded one material weakness (General Property, Plant, and Equipment; and Utilities, respectively).

Auditors also completed 27 Statement on Standards of Attestation Engagement No. 18 examinations covering 44 systems owned by eight service providers. The number of unmodified opinions increased by three in FY 2021 to 15 unmodified opinions. There were seven qualified and five adverse opinions. The Department exceeded its 75 percent Annual Performance Plan goal with 81 percent favorable opinions (22 of 27 opinions). 

The Defense Commissary Agency and the Defense Contract Audit Agency also sustained unmodified audit opinions in FY 2021.  Audits of the DoD Office of Inspector and the Defense Information Systems Agency – Working Capital Fund are still ongoing, but these reporting entities are expected to sustain their unmodified audit opinions.

“I am proud of all that the Comptroller organization continues to accomplish,” continued Mr. McCord. “While we stayed true to our audit priorities, the Comptroller organization also played a major role in supporting other Department-wide high-visibility FY 2021 objectives including, transitioning administrations, supporting our Troops and the Nation in response to the COVID-19 pandemic, and withdrawing our troops and Afghan allies from Afghanistan. I have no doubt that with the continued dedication of the women and men throughout the Department of Defense, and the support of our other stakeholders—Congress, the federal community, and the American people—we will reach our goal of achieving an unmodified audit opinion.”

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