DOD's audit plan defers internal-control fixes for at least two years
Summary
The Department of Defense spends more than $1 trillion a year and holds about 82% of the federal government's physical assets, yet remains the only one of 24 major federal agencies that has never earned a clean opinion on its financial statements. Two GAO reports, about 8 months apart, show why: DOD's fiscal year 2024 audit left 28 agencywide material weaknesses essentially unchanged, and its fiscal year 2025 audit trimmed that to 26 -- a 7% reduction -- while 11 of its 28 reporting entities, holding at least 43% of DOD's assets and 64% of its budgetary resources, still couldn't produce auditable statements. DOD's answer, announced in early 2026, is a revised strategy that explicitly won't prioritize fixing key internal-control deficiencies for at least the next two years.
FY2024: a persistent set of weaknesses, one narrow exception
Auditors reported 28 material weaknesses for at the agencywide level in both fiscal year 2023 and fiscal year 2024 -- one weakness was downgraded, but a new one (over 's reporting of leases) was identified, for no net change. and its component reporting entities started the FY2024 audit cycle with 3,277 open notices of findings and recommendations (NFRs); auditors closed 952 of them and issued or reissued 2,912 more over the course of the year. The one service to break through was the Marine Corps, which became the first military service ever to earn a clean opinion, for fiscal year 2023, and repeated it for fiscal year 2024 -- by migrating to a new financial system, accepting a labor-intensive substantive-testing approach, and stretching its audit into a 2-year cycle. noted that approach may not scale: as of fiscal year 2024, the Marine Corps held just 2% of 's total assets, versus 49% for the Navy, 23% for the Air Force, and 15% for the Army.
View data as table
| FY 2023 | 28 |
|---|---|
| FY 2024 | 28 |
| FY 2025 | 26 |
FY2025: a little more progress, still short of a fix
The next audit cycle brought 's material weaknesses down to 26, by resolving one weakness and consolidating another -- a reduction of about 7%. The Marine Corps extended its streak to three straight clean opinions -- one of 11 reporting entities that sustained a clean opinion in both FY2024 and FY2025. But of 's 28 total reporting entities, 11 others -- including the Army's and Air Force's general and working capital funds, and the Navy's general fund -- received disclaimers of opinion for FY2025. Those 11 entities alone account for at least 43% of 's total assets and at least 64% of its total budgetary resources.
View data as table
| Share of DOD's 28 reporting entities | 39.3% |
|---|---|
| Share of DOD's total assets | 43% |
| Share of DOD's total budgetary resources | 64% |
The pace of paperwork remediation barely moved either. closed about 29% of its open NFRs during the FY2024 audit and about 34% during FY2025 -- an improvement of less than 5 percentage points, and still under the 50% threshold that led the House Oversight Subcommittee on Government Operations' Financial Management Scorecard to grade the Army, Navy, Air Force, and Marine Corps each an 'F' in the NFR category, and each an 'F' in the Material Weakness category too.
View data as table
| FY 2024 (952 of 3,277 closed) | 29.1% |
|---|---|
| FY 2025 (1,004 of 2,972 closed) | 33.8% |
The new plan changes what gets fixed first
In early 2026, after the FY2025 disclaimer, announced a revised strategy for hitting its legally mandated 2028 deadline. It replaces a decentralized, bottom-up approach focused on correcting control deficiencies with centralized, top-down coordination focused on validating material line items -- using manual testing of large samples and artificial intelligence tools rather than relying on internal controls. In March 2026, the Secretary of Defense created a Joint Task Force Audit to run it, targeting a clean opinion on 's Working Capital Fund in fiscal year 2027 and on the department's consolidated statements in fiscal year 2028.
's own testimony flags the tradeoff built into that plan: under the revised approach, would not prioritize remediating key internal-control deficiencies for at least the next two years, even though calls addressing those deficiencies critical to producing reliable financial information for decision-making. The strategy could still deliver a clean opinion on the calendar wants. Whether it delivers a financial-management system anyone can actually rely on in the meantime is the question says remains open.
The takeaway
- The needle barely moved between FY2024 and FY2025. Material weaknesses fell from 28 to 26 -- about 7% -- and 's NFR closure rate improved less than 5 percentage points, still low enough that the House Oversight Scorecard failed all four military services on both measures.
- The entities that can't pass an audit aren't the small ones. The 11 of 28 reporting entities that received a disclaimer of opinion for FY2025 hold at least 43% of 's assets and 64% of its budgetary resources -- including the Army's and Air Force's general and working capital funds and the Navy's general fund.
- 's plan to hit its 2028 deadline explicitly defers fixing internal controls for at least two years. The revised strategy trades reliance on internal controls for centralized, line-item-focused manual testing -- a path says may reach a clean opinion on schedule without resolving the underlying control weaknesses calls critical to reliable financial information.
Findings on the fiscal year 2024 audit cycle -- the persistent 28 material weaknesses, the NFR backlog, and the Marine Corps' narrow path to a clean opinion -- are from -25-107427, ' Financial Management: Status of Remediation Efforts to Meet Audit Mandate' (September 16, 2025), read directly in full via an archived copy after the current gao.gov asset URL blocked direct access. Findings on the fiscal year 2025 audit cycle and 's revised audit strategy are from -26-109115, ' Financial Management: Questions Associated with New Financial Audit Approach' (May 13, 2026), read directly in full. Both are part of the same recurring oversight series on financial management, which has been on 's High-Risk List since 1995 and was expanded in 2025 to include fraud risk management.
Sources(2) ▾
- U.S. Government Accountability Office, DOD Financial Management: Status of Remediation Efforts to Meet Audit Mandate (2025-09-16) — -25-107427, a Q&A report to congressional committees on 's fiscal year 2024 financial statement audit results and remediation progress -- part of 's recurring financial-management audit series. Distinct from doc-gao26-109115 (the same series, about 8 months later, covering fiscal year 2025 results and 's revised audit strategy). Direct gao.gov/files.gao.gov fetch returns HTTP 403; fetched via an existing Wayback capture of the PDF asset. gao.gov · original document
- U.S. Government Accountability Office, DOD Financial Management: Questions Associated with New Financial Audit Approach (2026-05-13) — -26-109115, testimony of Asif A. Khan before the House Oversight Subcommittee on Government Operations, about 8 months after doc-gao25-107427, covering 's fiscal year 2025 audit results and raising questions about 's newly announced revised approach to achieving a clean audit opinion by the end of 2028. Fetched directly from files.gao.gov (HTTP 200); direct gao.gov PDF asset returns HTTP 403. No existing Wayback capture was found at read time, so a fresh snapshot was requested and captured. gao.gov · original document
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spends more than $1 trillion a year, accounts for almost half of federal discretionary spending, and holds about 82% of the federal government's total physical assets. It is also the only one of the 24 agencies covered by the Chief Financial Officers Act that has never earned an unmodified, or 'clean,' opinion on its financial statements. In September 2025⧉, reported on 's fiscal year 2024 audit results and remediation progress. In May 2026⧉ -- about 8 months later -- testified on 's fiscal year 2025 results and a newly announced strategy shift that raises its own questions about whether can hit its legally mandated deadline of a clean opinion by the end of 2028.