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

Page 328 TITLE 10—ARMED FORCES § 240a (1) The term ‘‘budget’’, with respect to a fis- cal year, means the budget for that fiscal year that is submitted to Congress by the President under section 1105(a) of title 31. (2) The term ‘‘defense budget materials’’, with respect to a fiscal year, means the mate- rials submitted to Congress by the Secretary of Defense in support of the budget for that fiscal year. (3) The term ‘‘nuclear command, control, and communications programs’’ means pro- grams through which presidential authority and operational command and control of nu- clear weapons is conducted, including pro- grams that facilitate senior-level decisions on nuclear weapons employment. (Added Pub. L. 118–31, div. A, title XVI, § 1631, Dec. 22, 2023, 137 Stat. 591.) CHAPTER 9A—AUDIT Sec. 240a. Audit of Department of Defense financial statements. 240b. Financial Improvement and Audit Remedi- ation Plan. 240c. Audit: consolidated corrective action plan; centralized reporting system. 240d. Audits: audit of financial statements of De- partment of Defense components by inde- pendent external auditors. 240e. Audits: use of commercial data integration and analysis products in preparing audits. 240f. Audits: selection of service providers for audit services. 240g. Defense Business Audit Remediation Plan. 240h. Annual report on auditable financial state- ments. 240i. Annual report on unfunded priorities. [251 to 254b. Renumbered.] Editorial Notes AMENDMENTS 2021—Pub. L. 116–283, div. A, title X, § 1005(b)(2), Jan. 1, 2021, 134 Stat. 3838, added item 240i. 2019—Pub. L. 116–92, div. A, title X, §§ 1002(b), 1004(a)(2), Dec. 20, 2019, 133 Stat. 1571, 1573, added items 240g and 240h. 2018—Pub. L. 115–232, div. A, title X, § 1002(a)(1)(B), Aug. 13, 2018, 132 Stat. 1945, renumbered items 251 to 254b as 240a to 240f, respectively. § 240a. Audit of Department of Defense financial statements The Secretary of Defense shall ensure that a full audit is performed on the financial state- ments of the Department of Defense for each fis- cal year as required by section 3521(e) of title 31. (Added Pub. L. 115–91, div. A, title X, § 1002(b)(1), Dec. 12, 2017, 131 Stat. 1538, § 251; renumbered § 240a, Pub. L. 115–232, div. A, title X, § 1002(a)(1)(A), Aug. 13, 2018, 132 Stat. 1945; amended Pub. L. 118–31, div. A, title X, § 1061(g), Dec. 22, 2023, 137 Stat. 400.) Editorial Notes AMENDMENTS 2023—Pub. L. 118–31 struck out subsec. (a) designation and heading before ‘‘The Secretary’’ and struck out subsec. (b). Text of subsec. (b) read as follows: ‘‘The Secretary shall submit to Congress the results of the audit performed in accordance with subsection (a) for a fiscal year by not later than March 31 of the following fiscal year.’’ 2018—Pub. L. 115–232 renumbered section 251 of this title as this section. Statutory Notes and Related Subsidiaries USE OF TECHNOLOGY USING ARTIFICIAL INTELLIGENCE TO FACILITATE AUDIT OF THE FINANCIAL STATEMENTS OF THE DEPARTMENT OF DEFENSE FOR FISCAL YEAR 2025 Pub. L. 118–159, div. A, title X, § 1007, Dec. 23, 2024, 138 Stat. 2049, provided that: ‘‘(a) USE OF AI TECHNOLOGY FOR AUDITS.—The Sec- retary of Defense, the Secretary of the Army, the Sec- retary of the Navy, and the Secretary of the Air Force shall encourage, to the greatest extent practicable, the use of technology that uses artificial intelligence or machine learning for the purpose of facilitating audits of the financial statements of the Department of De- fense. ‘‘(b) IMPLEMENTATION OF AI TECHNOLOGY FOR AU- DITS.—The Director of the Chief Digital and Artificial Intelligence Office of the Department, in coordination with the Under Secretary of Defense for Research and Engineering and the Inspector General of the Depart- ment, shall oversee the adoption of artificial intel- ligence and machine learning technologies in support of financial management and enterprise business oper- ations.’’ REQUIREMENT FOR UNQUALIFIED OPINION ON DEPARTMENT OF DEFENSE FINANCIAL STATEMENTS Pub. L. 118–31, div. A, title X, § 1005, Dec. 22, 2023, 137 Stat. 379, provided that: ‘‘The Secretary of Defense shall ensure that the Department of Defense has re- ceived an unqualified opinion on the financial state- ments of the Department by not later than December 31, 2028.’’ REVIEW AND RECOMMENDATIONS ON EFFORTS TO OB- TAIN AUDIT OPINION ON FULL FINANCIAL STATEMENTS Pub. L. 115–91, div. A, title X, § 1006, Dec. 12, 2017, 131 Stat. 1544, provided that: ‘‘(a) IN GENERAL.—The Secretary of Defense may es- tablish within the Department of Defense a team of dis- tinguished, private sector experts with experience con- ducting financial audits of large public or private sec- tor organizations to review and make recommenda- tions to improve the efforts of the Department to ob- tain an audit opinion on its full financial statements. ‘‘(b) SCOPE OF ACTIVITIES.—A team established pursu- ant to subsection (a) shall— ‘‘(1) identify impediments to the progress of the De- partment in obtaining an audit opinion on its full fi- nancial statements, including an identification of the organizations or elements that are lagging in their efforts toward obtaining such audit opinion; ‘‘(2) estimate when an audit opinion on the full fi- nancial statements of the Department will be ob- tained; and ‘‘(3) consider mechanisms and incentives to support efficient achievement by the Department of its audit goals, including organizational mechanisms to trans- fer direction and management control of audit activi- ties from subordinate organizations to the Office of the Secretary of Defense, individual personnel incen- tives, workforce improvements (including in senior leadership positions), business process, technology, and systems improvements (including the use of data analytics), and metrics by which the Secretary and Congress may measure and assess progress toward achievement of the audit goals of the Department. ‘‘(c) REPORTS.— ‘‘(1) REPORT ON ESTABLISHMENT OF TEAM.—If the Secretary takes action pursuant to subsection (a), the Secretary shall, not later than September 30, 2019, submit to the congressional defense committees [Committees on Armed Services and Appropriations Page 329 TITLE 10—ARMED FORCES § 240b of the Senate and the House of Representatives] a re- port on the team established pursuant to that sub- section, including a description of the actions taken and to be taken by the team pursuant to subsection (b). ‘‘(2) REPORT ON DETERMINATION NOT TO ESTABLISH TEAM.—If as of June 1, 2019, the Secretary has deter- mined not to establish a team authorized by sub- section (a), the Secretary shall submit to the Com- mittees on Armed Services of the Senate and the House of Representatives on that date a report on the determination, including an explanation and jus- tification for the determination.’’ § 240b. Financial Improvement and Audit Reme- diation Plan (a) FINANCIAL IMPROVEMENT AND AUDIT REME- DIATION PLAN.— (1) IN GENERAL.—The Under Secretary of De- fense (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 para- graph (1) shall— (A) describe specific actions to be taken, including interim milestones with a detailed description of the subordinate activities re- quired, 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 manage- ment information; (ii) ensuring the financial statements of the Department of Defense go under full fi- nancial statement audit, and that the De- partment 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 fol- lowing such fiscal year; (iv) achieving an unqualified audit opin- ion for each major element of the state- ment of budgetary resources of the Depart- ment of Defense; and (v) addressing the existence and com- pleteness of each major category of De- partment of Defense assets; and (B) systematically tie the actions de- scribed under subparagraph (A) to business process and control improvements and busi- ness 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 congres- sional defense committees a report on the status of the implementation by the Depart- ment of Defense of the Financial Improve- ment and Audit Remediation Plan under subsection (a). (B) ELEMENTS.—Each report under sub- paragraph (A) shall include the following: (i) An analysis of the consolidated cor- rective action plan management summary prepared pursuant to section 240c of this title. (ii) Current Department of Defense-wide information on the status of corrective ac- tions 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 depart- ments, 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 trans- action data pertinent to obtaining an un- qualified audit of their financial state- ments, including from feeder systems. (iv) A current projected timeline of the Department in connection with the audit of the full financial statements of the De- partment, to be submitted to Congress an- nually 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 Depart- ment, and the military departments, De- fense 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 Depart- ment, and the military departments, De- fense Agencies, and other organizations and elements of the Department, for a fiscal year. (III) The dates on which the Depart- ment estimates it will obtain an un- qualified audit opinion on the full finan- cial statements of the Department, the military departments, the Defense Agen- cies, and other organizations and ele- ments 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 state- ments of the Department, the military de- partments, the Defense Agencies, and other organizations and elements of the Department for a fiscal year after an un- qualified audit opinion on such full finan- cial statements for a fiscal year is first ob- tained. (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 condi- tion of the financial statements of the De- partment. (vii) A description of audit activities and results for classified programs, including a