After the close of business Friday night, the Pentagon released the findings of its fiscal 2024 annual audit. For the seventh consecutive year, it failed, though it claims to have made incremental improvements.
“This result was not a surprise, and I know that on the surface it doesn’t sound like we’re making progress. However, that is not the case,” said Michael McCord, the Under Secretary of Defense and Chief Financial Officer, during a press briefing. “I believe the department has turned a corner in its understanding of the challenges and, more importantly, in addressing those challenges; momentum is on our side.”
The annual audit is conducted by the Department of Defense’s Office of Inspector General, alongside an independent public accounting firm that examined $4.1 trillion in assets and $4.3 trillion in liabilities.
This year’s report provides assessments on 28 entities, ranging from various military services to the Military Retirement Fund—one fewer than last year since Special Operations Command was consolidated under the audit.
In total, nine entities received an “unmodified audit opinion,” indicating a clean audit, which is one more than last year. This means auditors found that those offices’ financial statements were fairly presented and adhered to accounting principles.
One entity received a “qualified opinion,” meaning there were misstatements or potential undetected misstatements that did not adversely influence the financial statements. Three entities—Marine Corps, Defense Logistics Agency’s National Defense Stockpile Transaction Fund, and the DoD Office of Inspector General—still have outstanding audits, leaving their final evaluations pending.
The remaining 15 entities were given failing grades, known as “disclaimers,” as auditors could not determine the accuracy of their financial statements. As a result of these findings, the department received a “disclaimer” opinion, essentially a failing grade.
“Momentum is on our side, and throughout the Department, there is strong commitment—and belief in our ability—to achieve an unmodified audit opinion,” McCord stated in a press release.
Highlighting some incremental improvements, McCord pointed out that eight DoD entities successfully closed or downgraded their fund balance with treasury material weakness. This means they succeeded in balancing their accounts and accounting for their funds, although accounting for actual material items remains a challenge.
“We made more progress on the funding than we have on the property,” McCord informed reporters.
It remains unclear whether the DoD will achieve a clean audit across all financial statements by the end of 2028—a requirement included in the FY28 National Defense Authorization Act. At the current pace, McCord indicated that this timeline appears unachievable. However, if the incoming Trump administration can provide continuity in the audit process and continue improving efficiency, it might be attainable.
“I would not fundamentally change strategy,” he told reporters. “I would lean towards allowing the team to continue their existing work and making minor adjustments rather than initiating a widespread review that halts progress while we reassess our approach.”
Earlier in the day, the DoD Inspector General released its FY25 Oversight Plan focusing on six challenges: increasing military readiness, strengthening allies’ capabilities, protecting critical defense infrastructure, building future forces, improving military family quality of life, and enhancing financial management.
On the financial front, the oversight office specifically pointed out concerns regarding “inadequate controls over financial data and accounting records,” outdated financial data management systems, and a shortage of skilled workers.
“These challenges require collaboration between the DoD’s financial management and operational leaders to implement the necessary policies, processes, procedures, and systems to strengthen the DoD’s control environment and address budget and personnel needs,” the DoD IG noted.
