Auditable Financial Statements for DOD: Are We There Yet?

Achieving auditable financial statements continues to elude the Department of Defense (DOD). Arguably DOD has had accountability problems since inception. In the last two decades legislative reform attention by senior leadership and actions by responsible organizations have been aimed towards enhancing financial management within the Government. However over the last 12 years DOD's financial management reform efforts have failed. Although DOD has made progress much more work is required to reach a dean audit opinion. Examples of DOD's accounting problems include $1.1 trillion worth of unsupported entries that made their way into DOD's financial statements according to DOD lG's audit report for fiscal year 2000 because of poor systems and unreliable documentation of transactions and assets. In another instance relating to "balancing the checkbook," DOD lG's audit report for fiscal year 2003 revealed an approximate $20 billion error in balancing DOD's checkbook with Treasury. In addition, to "dollar impact," DOD's poor accountability has also impacted mission accomplishment. Inventory accountability problems resulted in defective chemical garment suits being shipped to U.S. military forces in high-threat areas. DOD has ramped up its efforts and is now striving to fully develop and implement an enterprise architecture by 2007. Committed support by the President and the Secretary of Defense has provided impetus for financial management reform. This paper will recognize selected reform efforts toward resolving DOD's problematic financial management history; provide examples of and explore reasons for DOD's accounting problems and analyze what DOD has accomplished to improve accountability of DOD's financial management.