In November 2024, the Defense Department released its annual audit, showing improvement over previous years but continued deficiencies. DOD leaders testified today on the department's financial situation during a House Committee on Oversight and Government Reform government operations subcommittee hearing in Washington.
During previous audits, the Office of the Inspector General determined that DOD needs financial management accountability at all levels, starting with senior leaders.
"At the individual level, personnel do not consistently understand how the work they do impacts financial statements," said Brett Mansfield, DOD's deputy inspector general for audit.
For example, he said, an individual in a warehouse may not grasp the financial impact of receiving and recording inventory, tracking customer orders, maintaining supporting documentation, and documenting the item's condition and how all that ultimately relates to operational readiness.
"The culture must continue to change so that all personnel realize that financial management has a direct impact on operational readiness and is everyone's business," he added.
Another difficulty is the number of systems. DOD has over 4,700 systems in use, some of which are extremely complex, and more than 400 have at least 2,000 interfaces relevant to financial management.
Mansfield said some of these systems have been in use since the 1950s.
"The systems are not always interoperable, meaning they cannot talk to each other, and many of the systems require manual processes and do not have effective controls," he added.
Another issue is that department policies and procedures for accounting do not consistently match the capabilities of the systems they use. When implementing new systems, DOD components do not change their policies or procedures to align with the system's capabilities.
"Rather, they make modifications to the system to match their current procedures, negating the value of the system investment," Mansfield said. Addressing these weaknesses requires continued effort and significant coordination within and between each DOD entity.
He said the DOD OIG will continue to ensure the department receives full and fair audits of its financial statements to identify deficiencies and areas for improvement and to provide actionable information and recommendations.
"Our commitment to enhancing the DOD's financial health through independent oversight remains steadfast," Mansfield said.
Marine Corps Lt. Gen. James H. Adams III, deputy commandant for Marine Corps programs and resources, also testified. He noted that his service is the only one to pass a clean audit — for the second year in a row.
The general provided some ideas for achieving a clean audit departmentwide by 2028.
The priority should be placed on "streamlining, standardizing and harnessing technology, to include emerging technologies like artificial intelligence, to free up valuable resources, simplify our business environment and, ultimately, strengthen our financial management posture," Adams said.
He noted that one of the most persistent challenges remains the modernization of DOD's business information technology infrastructure, adding that much of the financial data continues to originate in legacy feeder systems that were never designed to meet audit.
"Passing an audit makes us more ready to fight when our nation calls. Readiness for the warfighter means being accountable for our assets — knowing where they are and in what condition they are — at a moment's notice," Adams said. "It also means having accurate, timely and relevant information in the hands of decision-makers so that the widest determinations can be made to successfully carry out every mission."