GAO: Ineffective risk management jeopardizes DoD audit readiness


Ineffective risk management is impairing progress towards audit-ready financial statements at the Defense Department, says the Government Accountability Office.

Specifically, auditors take (.pdf) the DoD to task for not having documented policies and procedures to effectively manage risks to the implementation of its Financial Improvement and Audit Readiness plan, which hasn't been "fully in accordance with widely recognized guiding principles for effective risk management."

"DOD's risk mitigation plans, published in its FIAR Plan Status Reports, consisted of brief, high-level summaries that did not include critical management information, such as specific and detailed plans for implementation, assignment of responsibility, milestones, or resource needs," states the GAO report.

"In addition, information about DoD's mitigation efforts was not sufficient for DoD to monitor the extent of progress in mitigating identified risks," the report adds.

Auditors say that the risks identified by the department were "not comprehensive" and "did not provide evidence of efforts to identify additional risks." 

To help address these shortfalls, the GAO report recommended that DOD design and implement policies and procedures for FIAR plan risk management that fully incorporate the five risk management guiding principles and also consider the Navy's and Defense Logistics Agency's risk management practices. According to auditors, the Navy and the DLA have established practices consistent with risk management guiding principles, such as preparing risk registers, employing analytical techniques to assess risk, and engaging internal and external stakeholders consistently to assess and identify new risks.  

"While DoD did not fully concur, it cited planned actions that are consistent with GAO's recommendations and findings," the report says.

For more:
-downnload the report, GAO-13-123

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