§ 240b. Financial Improvement and Audit Remediation Plan

§ 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.

(Added and amended Pub. L. 115–91, div. A, title X, § 1002(c)(1)–(3), Dec. 12, 2017, 131 Stat. 1538, § 252; renumbered § 240b and amended Pub. L. 115–232, div. A, title X, § 1002(a)(1)(A), (2)–(c), Aug. 13, 2018, 132 Stat. 1945, 1946; Pub. L. 116–92, div. A, title X, §§ 1003, 1008–1009(b), Dec. 20, 2019, 133 Stat. 1571, 1575, 1576; Pub. L. 116–283, div. A, title X, §§ 1003, 1004(b), 1081(a)(14), Jan. 1, 2021, 134 Stat. 3836, 3837, 3871; Pub. L. 117–81, div. A, title X, § 1081(a)(7), Dec. 27, 2021, 135 Stat. 1920; Pub. L. 118–31, div. A, title IX, § 901(c), title X, § 1061(h), Dec. 22, 2023, 137 Stat. 354, 400; Pub. L. 118–159, div. A, title X, § 1002, Dec. 23, 2024, 138 Stat. 2047; Pub. L. 119–60, div. A, title X, § 1002(a), Dec. 18, 2025, 139 Stat. 1026.)

Editorial Notes

Codification

Subsec. (a) of this section, as added by Pub. L. 115–91, is based on text of subsec. (a) of section 1003 of Pub. L. 111–84, div. A, title X, Oct. 28, 2009, 123 Stat. 2439, which was formerly set out as a note under section 2222 of this title, prior to repeal by Pub. L. 115–91, div. A, title X, § 1002(c)(4), Dec. 12, 2017, 131 Stat. 1540.

Amendments

2025—Subsec. (a)(2)(A)(vi), (vii). Pub. L. 119–60, § 1002(a)(1), added cls. (vi) and (vii).

Subsec. (b)(1)(B)(ix), (x). Pub. L. 119–60, § 1002(a)(2)(A), added cls. (ix) and (x).

Subsec. (b)(2)(B). Pub. L. 119–60, § 1002(a)(2)(B), added subpar. (B) and struck out former subpar. (B) which read as follows: “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.”

Subsec. (b)(3). Pub. L. 119–60, § 1002(a)(2)(D), added par. (3). Former par. (3) redesignated (4).

Subsec. (b)(4). Pub. L. 119–60, § 1002(a)(2)(C), (E), redesignated par. (3) as (4) and substituted “the financial statement audit priorities designated by the Secretary of Defense for the fiscal year in which the report is submitted” for “the critical capabilities described in the Department of Defense report titled ‘Financial Improvement and Audit Readiness (FIAR) Plan Status Report’ and dated May 2016”.

2024—Subsec. (b)(1)(B)(ix). Pub. L. 118–159 struck out cl. (ix) which read as follows: “A description of the incentives available pursuant to the guidance required by section 1004(a) of the William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021, including a detailed explanation of how such incentives were provided during the fiscal year covered by the report.”

2023—Subsec. (a)(1). Pub. L. 118–31, § 901(c)(1), substituted “The Under Secretary of Defense (Comptroller) shall, in consultation with the Performance Improvement Officer of the Department of Defense,” for “The Chief Management Officer of the Department of Defense shall, in consultation with the Under Secretary of Defense (Comptroller),”.

Subsec. (b)(1)(A). Pub. L. 118–31, § 1061(h)(1)(A), substituted “July 31 each year” for “June 30, 2019, and annually thereafter”.

Subsec. (b)(1)(B)(vii) to (xiii). Pub. L. 118–31, § 1061(h)(1)(B), redesignated cls. (xi) to (xiii) as (vii) to (ix), respectively, and struck out former cls. (vii) to (x) which related to elements to be included in annual reports by the Under Secretary of Defense (Comptroller) covering auditing and audit remediation services under contract where less than 50 percent, or less than 25 percent, of such services were being performed by professionals with certain qualifications.

Subsec. (b)(1)(C). Pub. L. 118–31, § 1061(h)(1)(C), struck out subpar. (C). Text read as follows:

“(i) Unclassified form.—A description submitted pursuant to clause (vii) or (ix) of subparagraph (B) or a certification submitted pursuant to clause (viii) of such subparagraph shall be submitted in unclassified form, but may contain a classified annex.

“(ii) Delegation.—The Secretary may not delegate the submission of a certification pursuant to clause (viii) of subparagraph (B) to any official other than the Deputy Secretary of Defense, the Performance Improvement Officer, or the Under Secretary of Defense (Comptroller).”

Subsec. (b)(1)(C)(ii). Pub. L. 118–31, § 901(c)(2), substituted “the Performance Improvement Officer” for “the Chief Management Officer”.

Subsec. (b)(2)(A). Pub. L. 118–31, § 1061(h)(2)(A), substituted “July 31” for “June 30” and struck out “Such briefing shall include both the absolute number and percentage of personnel performing the amount of auditing services being performed by professionals meeting the qualifications described in section 240d(b) of this title.” after “corrective action plan.”

Subsec. (b)(2)(B). Pub. L. 118–31, § 1061(h)(2)(B), substituted “July 31” for “June 30” and struck out “Such briefing shall include both the absolute number and percentage of personnel performing the amount of audit remediation services being performed by professionals meeting the qualifications described in subsection (c).” after “corrective action plan.”

2021—Subsec. (a)(2)(A)(iii). Pub. L. 116–283, § 1003, substituted “for each fiscal year after fiscal year 2020 occurs by not later than March 31 following such fiscal year;” for “for fiscal year 2018 occurs by not later than March 31, 2019.”

Subsec. (b)(1)(B)(ix). Pub. L. 116–283, § 1081(a)(14)(A), substituted “subsection” for “suhsection”.

Subsec. (b)(1)(B)(xii). Pub. L. 116–283, § 1081(a)(14)(B), inserted “of” after “identification”.

Subsec. (b)(1)(B)(xiii). Pub. L. 117–81 substituted “A description” for “An description”.

Pub. L. 116–283, § 1004(b), added cl. (xiii).

2019—Subsec. (b)(1)(B)(i). Pub. L. 116–92, § 1009(b), substituted “section 240c” for “section 253a”.

Subsec. (b)(1)(B)(vii). Pub. L. 116–92, § 1003(a)(1), struck out “or if less than 50 percent of the audit remediation services” after “auditing services” and “and audit remediation activities” after “conducting audits”.

Subsec. (b)(1)(B)(viii). Pub. L. 116–92, § 1003(a)(2), struck out “or if less than 25 percent of the audit remediation services” after “auditing services”.

Subsec. (b)(1)(B)(ix), (x). Pub. L. 116–92, § 1003(c)(1), added cls. (ix) and (x).

Subsec. (b)(1)(B)(xi). Pub. L. 116–92, § 1008(1), added cl. (xi).

Subsec. (b)(1)(B)(xii). Pub. L. 116–92, § 1009(a), added cl. (xii).

Subsec. (b)(1)(C)(i). Pub. L. 116–92, § 1008(2), inserted “or (ix)” after “clause (vii)”.

Subsec. (b)(2). Pub. L. 116–92, § 1003(b), (c)(2), designated existing provisions as subpar. (A), struck out “or audit remediation” before “services”, and added subpar. (B).

Subsec. (c). Pub. L. 116–92, § 1003(d), added subsec. (c).

2018—Pub. L. 115–232, § 1002(a)(1)(A), renumbered section 252 of this title as this section.

Subsec. (a)(2)(A)(iii) to (v). Pub. L. 115–232, § 1002(a)(2), which directed amendment of subsec. (a)(2) by redesignating cl. (iii), relating to unqualified audit opinion, as (iv) and cl. (iv) as (v), was executed by making the amendment in subpar. (A) of subsec. (a)(2), to reflect the probable intent of Congress.

Subsec. (b)(1)(B)(vii), (viii). Pub. L. 115–232, § 1002(c)(1), added cls. (vii) and (viii).

Subsec. (b)(1)(C). Pub. L. 115–232, § 1002(c)(2), added subpar. (C).