The DOD OIG also reported that the  Marine Corps had identified remediation activities that needed to be  accomplished before an audit of its SBR was undertaken. Subsequent fiscal year Schedules of Budgetary  Activity would include activity in subsequent years’ appropriations,  building toward an SBR. Budgetary Resources. The Audit of the Marine Corps’ Fiscal Year 2012 Schedule of Budgetary Activity Did Not Obtain Sufficient, Appropriate Evidence to Support the Audit Opinion

Our review of the audit documentation supporting the audit of the Marine  Corps’ Fiscal Year 2012 General Fund Schedule identified key areas  where sufficient audit procedures were not performed, under professional  auditing standards, and consequently sufficient, appropriate evidence  was not obtained to support the reported audit opinion. Specifically, the  audit documentation does not provide evidence that the auditors had   (1) performed sufficient procedures to determine the completeness of  budgetary transactions reported on the Marine Corps’ Fiscal Year 2012  General Fund Schedule, (2) performed sufficient procedures to determine  the reliability of certain evidence used to support transactions included on  the Marine Corps’ Schedule, (3) performed sufficient procedures to  determine whether budget activity was recorded in the proper period and  shipment obligations were properly recorded, and (4) properly considered  and evaluated the audit evidence in concluding and reporting on the audit  results. As discussed later in this report, the Marine Corps had not yet addressed  all information technology system recommendations from its fiscal years  2010 and 2011 SBR audits related to control weaknesses over data  transfers between feeder systems and SABRS. DOD’s reported target date for completing corrective actions  was 2014. The Marine Corps Has Made Limited Progress in Addressing Internal Control Weaknesses Identified by the OIG

Our review of the OIG’s documentation on the status of actions to  address its recommendations to Marine Corps management resulting  from its fiscal years 2010 through 2012 audits of the Marine Corps  budgetary activity showed that as of the end of its audit of the Marine  Corps’ Fiscal Year 2012 General Fund Schedule, 130 of the 177  recommendations issued had not been fully addressed. Because other DOD  components also rely on many of those same DOD agencies’ business  processes and feeder systems, these issues will likely present DOD-wide  challenges related to (1) ensuring the completeness of populations used  for transaction testing and the proper cutoff of transactions for the  accounting period, (2) determining the reliability of feeder system data  transferred to the general ledger system, and (3) determining the  reliability of reported obligations and outlays. The OIG withdrew its opinion on the Marine Corps’ Fiscal Year 2012  General Fund Schedule because of issues identified in the audit of the  Marine Corps’ Fiscal Year 2014 General Fund Schedule that raised  questions concerning the completeness of transactions in the Fiscal Year  2012 Schedule on which its opinion was based. At that time, the OIG  indicated that once additional information has been gathered and  analyzed, the fiscal year 2012 audit opinion will be revisited in light of its  analysis and reissued. Recommendations for Executive Action

To improve the quality of DOD’s financial statement audits and ensure  that corrective actions to address audit recommendations are fully and  effectively implemented prior to their closure, we are making the following  three recommendations to the Department of Defense Inspector General:  In addition to analyzing additional information related to the  withdrawal of the auditor’s opinion on the Marine Corps’ Fiscal Year  2012 General Fund Schedule, reconsider the conclusions made in the  OIG’s initial audit report based on the findings in our report before  determining whether the auditor’s opinion should be reissued or  revised, or whether additional work should be performed. DOD OIG Comments and Our Evaluation

In commenting on our report, the DOD OIG agreed with our three  recommendations directed to it but generally disagreed with our findings  that the OIG did not perform sufficient procedures, under professional  standards, and consequently did not obtain sufficient, appropriate audit  evidence to support its audit opinion on the Marine Corps’ Fiscal Year  2012 General Fund Schedule. The OIG stated that certain audit testing in  subsequent audits was expanded to address GAO concerns. However, the OIG did not do so. However, the Marine Corps did not agree with certain findings  with respect to (1) support for certain audit sample items, and   (2) progress in addressing audit recommendations. We acknowledge DOD’s  continuing efforts to become audit ready. To the extent that the other DOD  military services and DOD agencies rely on these support agencies, they  are likely to experience similar challenges as the Marine Corps with  regard to having reliable information for decision making on their missions  and operations and achieving auditability of their budgetary information. To identify any DOD-wide implications of the Marine Corps’ Fiscal Year  2012 General Fund Schedule audit results, we considered our findings  with regard to the conduct of the Marine Corps audit and the status of  Marine Corps actions to address auditor recommendations as well as  November 2014 Financial Improvement and Audit Readiness (FIAR) Plan  Status Report information on the status of DOD military service and DOD  mission support agency audit readiness efforts. 2. The  OIG stated that it considered such occurrences as a compliance  issue.
Why GAO Did This Study

After being identified in August 2009 as the pilot military service for an audit of its SBR, the Marine Corps received disclaimers of opinion on its fiscal year 2010 and 2011 SBRs. Because of difficulties in locating supporting documents for prior fiscal years, in June 2012, DOD leadership decided that the Marine Corps would prepare and subject to audit a Schedule of Budgetary Activity that would include only current year activity on fiscal year 2012 appropriations. In December 2013, the DOD OIG issued an unqualified opinion on the Schedule.
GAO was asked to assess the 2012 audit results. GAO (1) determined the extent to which the OIG's audit met professional standards, (2) analyzed the status of Marine Corps actions on recommendations, and (3) identified any DOD-wide implications from the audit. GAO reviewed auditor documentation, re-performed certain tests, evaluated Marine Corps corrective action plans and statuses, and determined whether other military services and DOD would likely encounter similar issues. GAO met with DOD OIG auditors and Marine Corps and DOD Comptroller officials.

What GAO Found

GAO found that in certain key audit areas, the Department of Defense (DOD) Office of Inspector General (OIG) did not perform sufficient procedures, under professional standards, and consequently did not obtain sufficient, appropriate audit evidence to support the audit opinion on the Marine Corps' Fiscal Year 2012 Schedule of Budgetary Activity (Schedule). GAO found that the OIG did not perform sufficient procedures to determine (1) the completeness of transactions reported on the Schedule, (2) the reliability of certain evidence used to support transactions included on the Schedule, (3) whether budgetary activity was recorded in the proper period and shipment obligations were properly recorded. In addition, the OIG did not properly consider and evaluate the audit evidence in concluding and reporting on the results of the audit.
For example, about half of the Marine Corps' reported fiscal year 2012 budgetary activity originated in non-payroll feeder systems. However, the OIG did not perform sufficient procedures to determine the completeness of the data transferred to the general ledger from the non-payroll feeder systems, although the OIG had reported control weaknesses over feeder system transfers in the 2 prior year audits that the Marine Corps had not yet fully addressed. Also, the OIG did not perform sufficient procedures to determine the reliability of data in certain feeder systems that were used as support when the Marine Corps could not locate or provide original support for some of the OIG's sampled transactions. The OIG stated that certain audit testing in subsequent audits was expanded to address GAO's concerns.
On March 23, 2015, the OIG withdrew its fiscal year 2012 audit report, stating that facts identified in the audit of the Marine Corps' fiscal year 2014 Schedule raised questions about the completeness of information on which the 2012 opinion was based. The OIG has indicated that once additional information has been gathered and analyzed, it will revisit its fiscal year 2012 audit opinion in light of its analysis and determine whether the report should be reissued.
GAO also found that the Marine Corps had made limited progress in addressing auditor recommendations since the audit of its fiscal year 2010 Statement of Budgetary Resources (SBR). For example, as of December 2013, the Marine Corps had not completed action on 130 of the 177 OIG recommendations. In commenting on GAO's report, the Marine Corps noted that it has subsequently remediated numerous recommendations. GAO has not assessed these subsequent corrective actions.
GAO identified DOD-wide implications from the Marine Corps audit related to challenges in assuring the (1) completeness of budgetary transactions, (2) reliability of data generated by DOD agencies' business processes and systems, and (3) proper fiscal year recording of obligations and outlays. Actions to address these challenges will help ensure the reliability of DOD component agencies' financial information; however, until such actions are complete, DOD and its component agencies likely will continue to face significant challenges in having reliable budgetary information for decision making on DOD missions and operations and achieving auditability of their budgetary information.

What GAO Recommends

GAO makes three recommendations related to the quality of DOD OIG audits. The OIG agreed with GAO's recommendations, but disagreed with many of its findings; the Marine Corps disagreed with certain findings; and the Office of the DOD Comptroller generally agreed with GAO's findings on the DOD-wide audit readiness implications from GAO's work. GAO acknowledges DOD's continuing efforts to become audit ready. GAO maintains that its findings are accurate.