USC Chapter 9a

in effect

10 U.S.C. § 240a Audit of Department of Defense financial statements

The Secretary of Defense shall ensure that a full audit is performed on the financial statements of the Department of Defense for each fiscal year as required by section 3521(e) of title 31.

10 U.S.C. § 240b Financial Improvement and Audit Remediation Plan

(a) Financial Improvement and Audit Remediation Plan.—(1) In general.—The Under Secretary of Defense (Comptroller) shall, in consultation with the Performance Improvement Officer of the Department of Defense, maintain a plan to be known as the “Financial Improvement and Audit Remediation Plan”. (2) Elements.—The plan required by paragraph (1) shall—(A) describe specific actions to be taken, including interim milestones with a detailed description of the subordinate activities required, and estimate the costs associated with—(i) correcting the financial management deficiencies that impair the ability of the Department of Defense to prepare timely, reliable, and complete financial management information; (ii) ensuring the financial statements of the Department of Defense go under full financial statement audit, and that the Department leadership makes every effort to reach an unmodified opinion as soon as possible; (iii) ensuring the audit of the financial statements of the Department of Defense for each fiscal year after fiscal year 2020 occurs by not later than March 31 following such fiscal year; (iv) achieving an unqualified audit opinion for each major element of the statement of budgetary resources of the Department of Defense; (v) addressing the existence and completeness of each major category of Department of Defense assets; (vi) meeting resource requirements, including personnel and information technology infrastructure; and (vii) identifying long-range goals and measurable objectives, including audit cycle timelines, control testing frequency, and auditor-validated corrective action plans; and (B) systematically tie the actions described under subparagraph (A) to business process and control improvements and business systems modernization efforts described in section 2222 of this title. (b) Report and Briefing Requirements.—(1) Annual report.—(A) In general.—Not later than July 31 each year, the Under Secretary of Defense (Comptroller) shall submit to the congressional defense committees a report on the status of the implementation by the Department of Defense of the Financial Improvement and Audit Remediation Plan under subsection (a). (B) Elements.—Each report under subparagraph (A) shall include the following:(i) An analysis of the consolidated corrective action plan management summary prepared pursuant to section 240c of this title. (ii) Current Department of Defense-wide information on the status of corrective actions plans related to critical capabilities and material weaknesses, including the standard data elements recommended in the implementation guide for Office of Management and Budget Circular A–123, for the armed forces, military departments, and Defense Agencies. (iii) A current description of the work undertaken and planned to be undertaken by the Department of Defense, and the military departments, Defense Agencies, and other organizations and elements of the Department, to test and verify transaction data pertinent to obtaining an unqualified audit of their financial statements, including from feeder systems. (iv) A current projected timeline of the Department in connection with the audit of the full financial statements of the Department, to be submitted to Congress annually not later than six months after the submittal to Congress of the budget of the President for a fiscal year under section 1105 of title 31, including the following:(I) The date on which the Department projects the beginning of an audit of the full financial statements of the Department, and the military departments, Defense Agencies, and other organizations and elements of the Department, for a fiscal year. (II) The date on which the Department projects the completions of audits of the full financial statements of the Department, and the military departments, Defense Agencies, and other organizations and elements of the Department, for a fiscal year. (III) The dates on which the Department estimates it will obtain an unqualified audit opinion on the full financial statements of the Department, the military departments, the Defense Agencies, and other organizations and elements of the Department for a fiscal year. (v) A current estimate of the anticipated annual costs of maintaining an unqualified audit opinion on the full financial statements of the Department, the military departments, the Defense Agencies, and other organizations and elements of the Department for a fiscal year after an unqualified audit opinion on such full financial statements for a fiscal year is first obtained. (vi) A certification of the results of the audit of the financial statements of the Department performed for the preceding fiscal year, and a statement summarizing, based on such results, the current condition of the financial statements of the Department. (vii) A description of audit activities and results for classified programs, including a description of the use of procedures and requirements to prevent unauthorized exposure of classified information in such activities. (viii) An identification of the manner in which the corrective action plan or plans of each department, agency, component, or element of the Department of Defense, and the corrective action plan of the Department as a whole, support the National Defense Strategy (NDS) of the United States. (ix) A detailed estimate of the funding required for the next fiscal year to procure, obtain, or otherwise implement each process, system, and technology identified to address the corrective action plan or plans of each department, agency, component, or element of the Department of Defense, and the corrective action plan of the Department as a whole, for purposes of this chapter during such fiscal year. (x) The number and scope of automated processes implemented, including reconciliation, inventory validation, and internal controls. (2) Semiannual briefings.—(A) Not later than January 31 and July 31 each year, the Under Secretary of Defense (Comptroller) and the comptrollers of the military departments shall provide a briefing to the congressional defense committees on the status of the corrective action plan. (B) The January 31 briefing under subparagraph (A) shall include a ranking of all of the military departments and Defense Agencies in order of how advanced each is in achieving auditable financial statements, as required by law. (3) Annual report by bottom quartile.—Not later than June 30 of each year, the head of each military department and Defense Agency that was ranked in the bottom quartile of the report submitted under paragraph (2)(B) for that year shall submit to the congressional defense committees a report that includes the following information for that military department or Defense Agency:(A) A description of the material weaknesses of the military department or Defense Agency. (B) The underlying causes of such weaknesses. (C) A plan for remediating such weaknesses. (D) The total number of open audit notices of findings and recommendations (in this paragraph referred to as “NFRs”) for the most recently concluded fiscal year and the preceding two fiscal years, where applicable. (E) The number of repeat or reissued NFRs from the most recently concluded fiscal year. (F) The number of NFRs that were previously forecasted to be closed during the most recently concluded fiscal year that remain open. (G) The number of closed NFRs during the current fiscal year and prior fiscal years. (H) The number of material weaknesses that were validated by external auditors as fully resolved or downgraded during the current fiscal year relative to prior fiscal years. (I) A breakdown, by fiscal year, of which open NFRs are forecasted to be closed. (J) Explanations for any unfavorable trends in the information included under paragraphs (1) through (9). (4) Critical capabilities defined.—In this subsection, the term “critical capabilities” means the financial statement audit priorities designated by the Secretary of Defense for the fiscal year in which the report is submitted. (c) Selection of Audit Remediation Services.—The selection of audit remediation service providers shall be based, among other appropriate criteria, on qualifications, relevant experience, and capacity to develop and implement corrective action plans to address internal control and compliance deficiencies identified during a financial statement or program audit.

10 U.S.C. § 240c Audit: consolidated corrective action plan; centralized reporting system

The Under Secretary of Defense (Comptroller) shall— (1) on a bimonthly basis, prepare a consolidated corrective action plan management summary on the status of key corrective actions plans related to critical capabilities for the armed forces and for the components of the Department of Defense that support the armed forces; and (2) develop and maintain a centralized monitoring and reporting process that captures and maintains up-to-date information, including the standard data elements recommended in the implementation guide for Office of Management and Budget Circular A–123, for key corrective action plans and findings and recommendations Department-wide that pertain to critical capabilities.

10 U.S.C. § 240d Audits: audit of financial statements of Department of Defense components by independent external auditors

(a) Audits Required.—For purposes of satisfying the requirement under section 3521(e) of title 31 for audits of financial statements of Department of Defense components identified by the Director of the Office of Management and Budget under section 3515(c) of such title, the Inspector General of the Department of Defense shall obtain each year audits of the financial statements of each such component by an independent external auditor. (b) Selection of Auditors.—The selection of independent external auditors for purposes of subsection (a) shall be based, among other appropriate criteria, on their qualifications, independence, and capacity to conduct audits described in subsection (a) in accordance with applicable generally accepted government auditing standards. The Inspector General shall participate in the selection of the independent external auditors. (c) Monitoring Audits.—The Inspector General shall monitor the conduct of all audits by independent external auditors under subsection (a). (d) Reports on Audits.—(1) In general.—The Inspector General shall require the independent external auditors conducting audits under subsection (a) to submit a report on their audits each year to—(A) the Under Secretary of Defense (Comptroller) as the Chief Financial Officer of the Department of Defense for the purposes of chapter 9 of title 31; (B) the Controller of the Office of Federal Financial Management in the Office of Management and Budget; (C) the head of each component audited; and (D) the appropriate committees of Congress. (2) Appropriate committees of congress defined.—In this subsection, the term “appropriate committees of Congress” means—(A) the Committee on Armed Services, the Committee on Homeland Security and Governmental Affairs, and the Committee on Appropriations of the Senate; and (B) the Committee on Armed Services, the Committee on Oversight and Government Reform, and the Committee on Appropriations of the House of Representatives. (e) Relationship to Existing Law.—The requirements of this section—(1) shall not be construed to alter the requirement under section 3521(e) of title 31 that the financial statements of the Department of Defense as a whole be audited by the Inspector General or by an independent external auditor, as determined by the Inspector General; and (2) shall not be construed to limit or alter the authorities of the Comptroller General of the United States under section 3521(g) of title 31.

10 U.S.C. § 240e Audits: use of commercial data integration and analysis products in preparing audits

(a) Deployment of Data Analytics Capabilities.—The Secretary of Defense shall use competitive procedures under chapter 137 11 See References in Text note below. of this title to procure or develop technologies or services, including those based on commercially available information technologies and services to improve data collection and analyses to support preparation of auditable financial statements for the Department of Defense. (b) Use of Funding and Resources.—The Secretary of Defense may use science and technology funding, prototypes, and test and evaluation resources as appropriate in support of deployment of technologies and services as described in subsection (a).

10 U.S.C. § 240f Audits: selection of service providers for audit services

The Department of Defense shall select service providers for auditing services based on the best value to the Department, as determined by the resource sponsor for an auditing contract, rather than based on the lowest price technically acceptable service provider.

10 U.S.C. § 240g Defense Business Audit Remediation Plan

(a) In General.—The Secretary of Defense shall maintain a plan, to be known as the “Defense Business Systems Audit Remediation Plan”. Such plan shall include a current accounting of the defense business systems of the Department of Defense that will be introduced, replaced, updated, modified, or retired in connection with the audit of the full financial statements of the Department, including a comprehensive roadmap that displays—(1) in-service, retirement, and other pertinent dates for affected defense business systems; (2) current cost-to-complete estimates for each affected defense business system; (3) dependencies both between the various defense business systems and between the introduction, replacement, update, modification, and retirement of such systems; (4) the amount spent by the Department on operating and maintaining financial management systems during the preceding five fiscal years; and (5) the amount spent by the Department on acquiring or developing new financial management systems during such five fiscal years. (b) Annual Report.—On the same date as the date of the submission of the audited financial statements of the Department of Defense required pursuant to section 240a of this title each year, the Secretary of Defense shall submit to the congressional defense committees an updated annual report on the Defense Business Systems Audit Remediation Plan under subsection (a). (c) Defense Business System.—In this section, the term “defense business system” has the meaning given such term in section 2222(i)(1)(A) of this title.

10 U.S.C. § 240i Annual report on unfunded priorities

(a) In General.—Not later than 10 days after the date on which the budget of the President for a fiscal year is submitted to Congress pursuant to section 1105 of title 31, the Under Secretary of Defense (Comptroller) shall submit to the Secretary of Defense, the Chairman of the Joint Chiefs of Staff, and the congressional defense committees a report on unfunded priorities of the Department of Defense related to audit readiness and remediation. (b) Elements.—(1) Each report under subsection (a) shall include, for each unfunded priority covered by such report, the following:(A) A summary description of such priority, including the objectives to be achieved if such priority were to be funded (whether in whole or in part). (B) The additional amount of funds recommended in connection with the objectives identified under subparagraph (A). (C) Account information with respect to such priority, including, as applicable, the following:(i) Line item number, in the case of applicable procurement accounts. (ii) Program element number, in the case of applicable research, development, test, and evaluation accounts. (iii) Sub-activity group, in the case of applicable operation and maintenance accounts. (2) The Under Secretary shall ensure that the unfunded priorities covered by a report under subsection (a) are listed in the order of urgency of priority, as determined by the Under Secretary. (c) Unfunded Priority Defined.—In this section, the term “unfunded priority”, with respect to a fiscal year, means an activity related to an audit readiness or remediation effort stemming from a relevant requirement under the Chief Financial Officer Act 11 See References in Text note below. (Public Law 101–576), chapter 9 of title 31, or this chapter that—(1) is not funded in the budget of the President for that fiscal year, as submitted to Congress pursuant to section 1105 of title 31; (2) is necessary to address a shortfall in an audit readiness or remediation activity; and (3) would have been recommended for funding through the budget referred to in paragraph (1) if—(A) additional resources had been available for the budget to fund the program, activity, or mission requirement; or (B) the program, activity, or mission requirement had emerged before the budget was formulated.