Air Force Fails Audit Again, Says It’s Made Progress

The Department of the Air Force once again failed its audit for fiscal 2021, but leaders say they’re making progress in cleaning up the department’s books, with hopes of a clean audit later this decade.

The independent public accounting firm Ernst & Young identified 19 major issues, classified as “material weaknesses,” that are preventing the Air Force from passing the audit. That’s down from 22 a year ago and 23 two years before that. The Air Force has been undergoing full financial audits for four consecutive years and has never passed.

“Now entering our fifth year under audit, DAF leadership is growing more eager to demonstrate to both Congress and the American taxpayer the full impact having a clean set of books can have on our mission,” Stephen R. Herrera, acting assistant secretary for financial management and comptroller, said in a statement. “So much so that, in FY21, we refined our approach that not only paved the way for a highly successful year, but set us up to sustain this momentum moving forward.”

Of the three major issues that came off the list this past year, two were downgraded, and one was resolved. In a letter written to accompany the financial report, Air Force Secretary Frank Kendall credited those improvements to the Air Force’s development of real-time tracking capabilities and master schedules.

“FY 2021 marked an important maturation point for the DAF’s audit efforts. The rollout of an Integrated Master Schedule is operationalizing our audit strategy and driving a methodical, disciplined approach to track progress and produce on-demand metrics that demonstrate risks, issues, and remediation requirements,” Kendall wrote.

The Air Force’s stated goal is to get a clean audit opinion on its General Fund by fiscal 2026 and for its Working Capital Fund by fiscal 2028. 

While full financial audits only began four years ago, the Air Force’s annual financial statements indicate that the department’s General Fund, which supports its core missions and overall operations, and Working Capital Fund, have not passed an audit for at least a decade now. Prior to fiscal 2017, these disclaimers were all based on the department’s financial records not conforming to standard accounting practices.  

The entire Pentagon failed its 2021 audit for the fourth consecutive year, the Defense Department announced Nov. 15, with eight out of 26 reporting entities obtaining unmodified audit opinions, the same number as last year. 

In 2020, department officials estimated that they would produce a clean audit by 2027. But this year, Michael J. McCord, undersecretary of defense (comptroller), sounded less certain about that timeline in a briefing with reporters.

“When we’re at this stage, where none of the three military departments have a clean opinion, for example, we’re not just close enough in my opinion to say that I know, for sure, it’s going to be 2027 or it’s not,” McCord said.