affect the reliability of DOD’s financial data; the economy, efficiency, and effectiveness of its operations; and its ability to produce auditable financial statements. Several DOD business practices, including financial management, continue to be included on GAO’s list of high-risk programs designated as vulnerable to waste, fraud, abuse, and mismanagement10 or in need of transformation.
To transform its business operations, DOD management must have reliable financial information. Without it, DOD is severely hampered in its ability to make sound budgetary and programmatic decisions, monitor trends, make adjustments to improve performance, reduce operating costs, or maximize the use of resources.
DOD continues to take steps toward resolving the department’s long- standing financial management weaknesses. The department’s Financial Improvement and Audit Readiness (FIAR) Plan, which defines DOD’s strategy and methodology for improving financial management operations and controls, has continued to evolve and mature. DOD’s Comptroller has established two priority focus areas—first, strengthening processes, controls, and systems that produce budgetary information and support the department’s Statements of Budgetary Resources; and second, improving the accuracy and reliability of management information pertaining to mission-critical assets, including military equipment and real property, and validating improvement through existence and completeness testing. In 2010, DOD revised its FIAR strategy, governance framework, and methodology to support the DOD Comptroller’s direction and priorities.
We are supportive of this initiative and believe that a focused and consistent approach may increase DOD’s ability to demonstrate incremental progress toward auditability in the short term. Budgetary and asset-accountability information is widely used by DOD managers at all levels. As such, its reliability is vital to daily operations and management. In this regard, the U.S. Marine Corps (USMC) recently underwent an audit of its fiscal year 2010 Statement of Budgetary Resources (SBR). Although the auditors were unable to express an opinion on the USMC SBR, DOD indicated that the lessons learned from the audit will be applied to the fiscal year 2011 USMC SBR audit currently underway and shared with the other DOD components to assist them in their audit readiness efforts.
10GAO, High-Risk Series: An Update, GAO-11-278 (Washington, D.C.: February 2011).