Improving Financial Stewardship to the American People
The Department recognizes its responsibility to the American people to manage resources carefully as it executes its mission to support the joint warfighter. DoD's financial statements are tools to help manage operational performance and demonstrate accountability to the American people and compliance with federal accountability laws and regulations.
Effective financial management depends on information that is accurate, reliable, and timely. The Department has developed a comprehensive Financial Improvement and Audit Readiness (FIAR) Plan that provides a DoD-wide strategy and systematic approach for making improvements to financial and business operations within the Components while prioritizing and synchronizing efforts to achieve an unqualified, or clean, audit opinion. The FIAR Plan charts a course to sound financial management by improving internal controls, resolving material weaknesses, and advancing the Department's fiscal stewardship. Deployment of the business systems detailed in the ETP will drive the Department's ability to achieve a clean audit. For example, the deployment of the Capital Asset Management System-Military Equipment (CAMS-ME) will impact the Department's ability to achieve favorable audit results for military equipment. By improving DoD's audit readiness, the Department is helping to satisfy its responsibility for stewardship of the resources provided by the American taxpayer.
The Defense Financial Improvement and Audit Readiness (FIAR) Plan is the Department's roadmap for improving the overall financial management health of the Department of Defense. Submitted to Congress and the Office of Management and Budget twice yearly, the FIAR Plan details the progress achieved to date in several important areas.
Improvement efforts proceed along two tracks: 1) those that improve accuracy, timeliness, and availability of financial information; and 2) those that help the Department achieve audit readiness.
Since the plan was initiated in December 2005, clear progress has been made toward the goal of achieving audit readiness. Today, seven Defense reporting entities have received an unqualified audit opinion. They are the:
- Defense Commissary Agency
- Defense Contract Audit Agency
- Defense Finance and Accounting Service
- Defense Threat Reduction Agency
- Military Retirement Fund
- Office of the Inspector General
- Chemical Biological Defense Program
In addition, the Medicare-Eligible Retiree Health Care Fund has received a qualified opinion; three DoD-wide financial statement line items have received favorable audit reviews; and the Department of the Navy is ready to validate the audit readiness of its $12.7B Environmental Liability, for nuclear and conventional ships, which represents 18% of the Department's total Environmental Liabilities.
Based on discussions with the internal and external audit communities, the Department's original audit strategy has been refined from one that conducts full scope audits of line items to one that ensures that a line item is audit ready as confirmed by an independent validation. Readiness will be sustained through a process of annual assessments and internal controls.
The FIAR Plan complements the ETP by providing details that support the ETP Financial Visibility priority. Conversely, the ETP provides system implementation details that support the FIAR Plan and are essential to achieving DoD-wide audit readiness. The FIAR team uses the ETP Key Milestone Plan to identify system dependencies for audit readiness. The FIAR Plan and ETP share a tool that hosts the FIAR's Component Financial Improvement Plans (FIPs) and the ETP's Key Milestone Plans (KMPs). This tool allows easier alignment of shared critical key milestones.
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