Significant Progress in FY 21

• Downgraded Real Property Utilities material weakness and sustained remediation of previously closed or downgraded material weakness issues in General Fund Real Property; Working Capital Fund Real Property; Contract Authority; Ability to Provide Complete, Timely, and Sufficient Evidence; and Contingent Legal Liabilities.
• Consolidated and/or decommissioned seven financially-relevant systems to shed legacy systems; automate, clean, and standardize data; and shift efforts from a transactional-orientation to high-value analytics.
• Transitioned the Marine Corps to a modern, enterprise resource-planning accounting system; the Marine Corps has also attained full accountability of its real property and military equipment assets.
• Realized and maintained DoD’s lowest improper payment rate (less than 1 percent), covering both military and civilian pay.
• Validated 100 percent accountability of all afloat Trident missiles.
• Implemented controls to sustain Uninstalled Aircraft Engines (UAE) accountability, which positions the Navy to assert to the valuation of UAE as early as the next fiscal year.
• Expanded the use of streamlined disbursing to vendors, which removes cumbersome reporting requirements.
• Implemented key reconciliations and controls in our Advana data-analytics platform, which significantly improves the timeliness and accuracy of our “checkbook” reconciliations with Treasury.

The DON’s audit maturity is progressing, covering more areas with greater depth. This is enabling the DON to prepare, present, and provide greater access to auditors than ever before.  As auditors gain greater insight into DON internal controls, processes, data, and interdependencies, their recommendations will be more granular and extensive. The DON welcomes the feedback and is collaborating with auditors to use it as a more direct tool for improving business operations.   

Audit Milestones

With each audit, the DON has improved business processes and better data for decision-making. The Navy and Marine Corps are realizing greater visibility of assets, improved buying power, and cost savings. Examples include:

• The Navy Material Accountability Campaign – a wall-to-wall, inventory-clean-up effort – led Navy commands in FY 2021 to identify more than $959 million in material not previously visible in DON enterprise property systems. More than $629 million of identified material was retained by the Navy through additions to accountable property systems of record and reutilized, or recapitalized to the Navy Working Capital Fund. 
• The DON continues to accelerate, modernize, and transform its information technology capabilities by reviewing and decommissioning obsolete, non-secure, and unauditable financial management systems. The decommissioning of general ledger systems is estimated to save the DON $70 million from FY 2020-26. The consolidations also reduced the complexity of various operational and financial processes, forced data cleansing and standardization, and improved overall data flow and communication.
• The Process to Improve Expenditure Efficiency budgetary-reform initiative will preserve more than $3.4 billion in buying power during FY 2019-2023. Buying power was optimized by identifying funds at risk of expiring or canceling and de-obligating dollars in time to spend them on other critical requirements.
• The DON is leveraging its Jupiter data analytics platform to provide leaders with scalable, data-driven analytics to meet pressing business and audit needs. The DON is also using robotic process automation or “bots” to improve data timeliness and accuracy and allow personnel to focus on more high-value analytical tasks. For example, the DON established an enterprise-wide automation center of excellence and community of practice with more than 200 members across the enterprise. To date, 74 bots are deployed; 83,000 labor hours were redirected to value-added analytics; more than 79 bots are in development.

DON FY 2022 Audit Priorities

Despite progress, there is more work to achieve an audit opinion. One of the DON’s biggest priorities for the next two years is assisting the Marine Corps in achieving a positive audit opinion by FY 2023. Leaders in every functional unit and discipline across the DON are poised and ready to support the Marine Corps’ goal of achieving the first audit opinion.  The Navy is also focused on financially reporting its environmental liabilities accurately, reconciling balances with its “checkbook” (fund balance) with the Treasury, and valuing its property. The DON will also work with DoD service providers and commercial partners to maintain accountability for government property and resolve its audit findings.

The DON will build on the findings of the annual audit process and other assessments to foster a culture that encourages innovation, solves problems, and achieves positive results to increase our lethality, improve readiness, and get the most out of every dollar entrusted to us.

The audit plays a pivotal role in Navy and Marine Corps efforts to modernize their business systems and processes, to enhance auditability, performance, and affordability.