As it races an internal September deadline for achieving a clean budget statement, the Defense Department’s Finance and Accounting Service is being criticized by congressional auditors for failing to implement formal guidance designed to help the entire department achieve audit readiness.
In disbursing $200 billion in annual contract payments, the Pentagon’s accounting service has recognized the importance of a Financial Improvement Plan required under Financial Improvement and Audit Readiness Guidance, the Government Accountability Office said in a report released Monday. But it “did not fully implement the steps” needed to improve internal controls and contract pay processes.
GAO identified “deficiencies” such as failing to adequately perform planning activities to assess dollar activity and risk factors in processes, systems and controls. As a result, “DFAS did not obtain sufficient assurance that the contract disbursements are accurately recorded and maintained in the components' general ledgers, and that the status of DoD's contract obligations is accurate and up-to-date,” the report said.
The service also did not adequately “validate the populations used to perform substantive and internal control testing as required by the [audit readiness guidance],” GAO said, and provided insufficient documentation that it had remediated previously identified control deficiencies.
The outside auditors made nine recommendations for the undersecretary of Defense (the comptroller) on improving controls, planning and documentation, to which the department agreed. Robert Hale is soon to leave the comptroller’s job, the Senate having confirmed his successor, Michael McCord, on June 12.
Congress has required the Defense Department to achieve auditability for all its financial statements by 2017.