[USC02] 10 USC Ch. 9A: AUDIT
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TEXT OF PART V OF SUBTITLE A (3001 ET SEQ.), EFFECTIVE JANUARY 1, 2022, CURRENTLY SET OUT AS A PREVIEW

10 USC Ch. 9A: AUDIT
From Title 10—ARMED FORCESSubtitle A—General Military LawPART I—ORGANIZATION AND GENERAL MILITARY POWERS

CHAPTER 9A—AUDIT

Sec.
240a.
Audit of Department of Defense financial statements.
240b.
Financial Improvement and Audit Remediation Plan.
240c.
Audit: consolidated corrective action plan; centralized reporting system.
240d.
Audits: audit of financial statements of Department of Defense components by independent 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 statements.
240i.
Annual report on unfunded priorities.
[251 to 254b.
Renumbered.]

        

Amendments

2021Pub. L. 116–283, div. A, title X, §1005(b)(2), Jan. 1, 2021, 134 Stat. 3838, added item 240i.

2019Pub. L. 116–92, div. A, title X, §§1002(b), 1004(a)(2), Dec. 20, 2019, 133 Stat. 1571, 1573, added items 240g and 240h.

2018Pub. 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

(a) Annual Audit Required.—The Secretary of Defense shall ensure that a full audit is performed on the financial statements of the Department of Defense for each fiscal year as required by section 3521(e) of title 31.

(b) Annual Report on Audit.—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.

(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.)

Amendments

2018Pub. L. 115–232 renumbered section 251 of this title as this section.

Review and Recommendations on Efforts To Obtain 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 establish within the Department of Defense a team of distinguished, private sector experts with experience conducting financial audits of large public or private sector organizations to review and make recommendations to improve the efforts of the Department to obtain an audit opinion on its full financial statements.

"(b) Scope of Activities.—A team established pursuant to subsection (a) shall—

"(1) identify impediments to the progress of the Department in obtaining an audit opinion on its full financial 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 financial statements of the Department will be obtained; and

"(3) consider mechanisms and incentives to support efficient achievement by the Department of its audit goals, including organizational mechanisms to transfer direction and management control of audit activities from subordinate organizations to the Office of the Secretary of Defense, individual personnel incentives, 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 of the Senate and the House of Representatives] a report on the team established pursuant to that subsection, 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 determined not to establish a team authorized by subsection (a), the Secretary shall submit to the Committees on Armed Services of the Senate and the House of Representatives on that date a report on the determination, including an explanation and justification for the determination."

§240b. Financial Improvement and Audit Remediation Plan

(a) Financial Improvement and Audit Remediation Plan.—

(1) In general.—The Chief Management Officer of the Department of Defense shall, in consultation with the Under Secretary of Defense (Comptroller), 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; and

(v) addressing the existence and completeness of each major category of Department of Defense assets; 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 June 30, 2019, and annually thereafter, 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) If less than 50 percent of the auditing services under contract, as described in the briefing required under paragraph (2), are being performed by professionals meeting the qualifications described in section 240d(b) of this title, a detailed description of the risks associated with the risks of the acquisition strategy of the Department with respect to conducting audits and an explanation of how the strategy complies with the policies expressed by Congress.

(viii) If less than 25 percent of the auditing services under contract, as described in the briefing required under paragraph (2), are being performed by professionals meeting the qualifications described in section 240d(b) of this title, a written certification that the staffing ratio complies with commercial best practices and presents no increased risk of delay in the Department's ability to achieve a clean audit opinion.

(ix) If less than 50 percent of the audit remediation services under contract, as described in the briefing required under paragraph (2)(B), are being performed by individual professionals meeting the qualifications described in subsection (c), a detailed description of the risks associated with the risks of the acquisition strategy of the Department with respect to conducting audit remediation activities and an explanation of how the strategy complies with the policies expressed by Congress.

(x) If less than 25 percent of the audit remediation services under contract, as described in the briefing required under paragraph (2)(B), are being performed by individual professionals meeting the qualifications described in subsection (c), a written certification that the staffing ratio complies with commercial best practices and presents no increased risk of delay in the Department's ability to achieve a clean audit opinion.

(xi) 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.

(xii) 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.

(xiii) An 1 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.


(C) Additional requirements.—

(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 Chief Management Officer, or the Under Secretary of Defense (Comptroller).


(2) Semiannual briefings.—(A) Not later than January 31 and June 30 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. 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.

(B) Not later than January 31 and June 30 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. 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).

(3) Critical capabilities defined.—In this subsection, the term "critical capabilities" means the critical capabilities described in the Department of Defense report titled "Financial Improvement and Audit Readiness (FIAR) Plan Status Report" and dated May 2016.


(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.)

References in Text

Section 1004(a) of the William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021, referred to in subsec. (b)(1)(B)(xiii), is section 1004(a) of Pub. L. 116–283, which is set out as a note below.

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

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. 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).

2018Pub. 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).

Subsec. (b)(2). Pub. L. 115–232, §1002(b), inserted at end "Such briefing shall include both the absolute number and percentage of personnel performing the amount of auditing or audit remediation services being performed by professionals meeting the qualifications described in section 240d(b) of this title."

2017—Subsec. (a). Pub. L. 115–91, §1002(c)(3)(A), which directed substitution of "Financial Improvement and Audit Remediation Plan" for "Financial Improvement and Audit Readiness Plan" in heading, was executed by making the substitution for "Financial Improvement Audit Readiness Plan" to reflect the probable intent of Congress.

Subsec. (a)(1). Pub. L. 115–91, §1002(c)(3)(B)(i), substituted "Financial Improvement and Audit Remediation Plan" for "Financial Improvement and Audit Readiness Plan".

Pub. L. 115–91, §1002(c)(2)(A), struck out "develop and" before "maintain".

Subsec. (a)(2)(A). Pub. L. 115–91, §1002(c)(3)(B)(ii)(I)(aa), in introductory provisions, substituted "describe specific actions to be taken, including interim milestones with a detailed description of the subordinate activities required, and estimate the costs associated with" for "describe specific actions to be taken and the costs associated with".

Subsec. (a)(2)(A)(ii). Pub. L. 115–91, §1002(c)(3)(B)(ii)(I)(bb), substituted "go under full financial statement audit, and that the Department leadership makes every effort to reach an unmodified opinion as soon as possible;" for "are validated as ready for audit by not later than September 30, 2017, and the statement of budgetary resources of the Department of Defense is validated as ready for audit by not later than September 30, 2014; and".

Subsec. (a)(2)(A)(iii), (iv). Pub. L. 115–91, §1002(c)(3)(B)(ii)(I)(cc), added cl. (iii), relating to unqualified audit opinion, and cl. (iv).

Subsec. (a)(2)(B). Pub. L. 115–91, §1002(c)(3)(B)(ii)(II), inserted "business" before "process and control", struck out "the business enterprise architecture and transition plan required by" before "section 2222" and substituted period for semicolon at end.

Pub. L. 115–91, §1002(c)(2)(B), substituted "of this title" for "of title 10, United States Code".

Subsec. (a)(2)(C), (D). Pub. L. 115–91, §1002(c)(3)(B)(ii)(III), struck out subpars. (C) and (D) which read as follows:

"(C) prioritize—

"(i) improving the budgetary information of the Department of Defense, in order to achieve an unqualified audit opinion on the Department's statements of budgetary resources; and

"(ii) as a secondary goal, improving the accuracy and reliability of management information on the Department's mission-critical assets (military and general equipment, real property, inventory, and operating materials and supplies) and validating its accuracy through existence and completeness audits; and

"(D) include interim goals, including—

"(i) the objective of ensuring that the financial statement of each of the Department of the Army, the Department of the Navy, the Department of the Air Force, and the Defense Logistics Agency is validated as ready for audit: and

"(ii) a schedule setting forth milestones for elements of the military departments and financial statements of the military departments to be made ready for audit as part of the progress required to meet the objectives established pursuant to clause (i) of this subparagraph and clause (ii) of subparagraph (A) of this paragraph."

Subsec. (b). Pub. L. 115–91, §1002(c)(3)(C), added subsec. (b).

Incentives for the Achievement by the Components of the Department of Defense of Unqualified Audit Opinions on the Financial Statements

Pub. L. 116–283, div. A, title X, §1004(a), Jan. 1, 2021, 134 Stat. 3837, provided that:

"(a) Incentives Required.—

"(1) In general.—Not later than 180 days after the date of the enactment of this Act [Jan. 1, 2021], the Under Secretary of Defense (Comptroller), acting through the Deputy Chief Financial Officer of the Department of Defense, shall develop and issue guidance to provide incentives for the achievement by each department, agency, and other component of the Department of Defense of unqualified audit opinions on their financial statements.

"(2) Applicability.—The guidance required under paragraph (1) shall provide incentives for individual employees in addition to departments, agencies, and components."

Annual Reports on Funding for Corrective Action Plans

Pub. L. 116–92, div. A, title X, §1009(c), Dec. 20, 2019, 133 Stat. 1576, as amended by Pub. L. 116–283, div. A, title X, §1081(c)(5), Jan. 1, 2021, 134 Stat. 3873, provided that: "Not later than five days after the submittal to Congress under section 1105(a) of title 31, United States Code, of the budget of the President for any fiscal year after fiscal year 2020, the Secretary of Defense shall submit to the congressional defense committees [Committees on Armed Services and Appropriations of the Senate and the House of Representatives] a report setting forth a detailed estimate of the funding required for such fiscal year to procure, obtain, or otherwise implement each process, system, and technology identified to address the current corrective action plans of the departments, agencies, components, and elements of the Department of Defense, and the corrective action plan of the Department as a whole, for purposes of chapter 9A of title 10, United States Code, during such fiscal year."

[Pub. L. 116–283, div. A, title X, §1081(c), Jan. 1, 2021, 134 Stat. 3873, provided that the amendment made by section 1081(c)(5) of Pub. L. 116–283 to section 1009(c) of Pub. L. 116–92, set out above, is effective as of Dec. 20, 2020 (probably should be Dec. 20, 2019) and as if included in Pub. L. 116–92.]

1 So in original. Probably should be "A".

§240c. Audit: consolidated corrective action plan; centralized reporting system

The Under Secretary of Defense (Comptroller) shall—

(1) on a bimonthly basis, prepare a consolidated corrective action plan management summary on the status of key corrective actions plans related to critical capabilities for the armed forces and for the components of the Department of Defense that support the armed forces; and

(2) develop and maintain a centralized monitoring and reporting process that captures and maintains up-to-date information, including the standard data elements recommended in the implementation guide for Office of Management and Budget Circular A–123, for key corrective action plans and findings and recommendations Department-wide that pertain to critical capabilities.

(Added Pub. L. 115–91, div. A, title X, §1002(d), Dec. 12, 2017, 131 Stat. 1540, §253; renumbered §240c, Pub. L. 115–232, div. A, title X, §1002(a)(1)(A), Aug. 13, 2018, 132 Stat. 1945.)

Amendments

2018Pub. L. 115–232 renumbered section 253 of this title as this section.

§240d. Audits: audit of financial statements of Department of Defense components by independent external auditors

(a) Audits Required.—For purposes of satisfying the requirement under section 3521(e) of title 31 for audits of financial statements of Department of Defense components identified by the Director of the Office of Management and Budget under section 3515(c) of such title, the Inspector General of the Department of Defense shall obtain each year audits of the financial statements of each such component by an independent external auditor.

(b) Selection of Auditors.—The selection of independent external auditors for purposes of subsection (a) shall be based, among other appropriate criteria, on their qualifications, independence, and capacity to conduct audits described in subsection (a) in accordance with applicable generally accepted government auditing standards. The Inspector General shall participate in the selection of the independent external auditors.

(c) Monitoring Audits.—The Inspector General shall monitor the conduct of all audits by independent external auditors under subsection (a).

(d) Reports on Audits.—

(1) In general.—The Inspector General shall require the independent external auditors conducting audits under subsection (a) to submit a report on their audits each year to—

(A) the Under Secretary of Defense (Comptroller) as the Chief Financial Officer of the Department of Defense for the purposes of chapter 9 of title 31 and the Chief Management Officer of the Department of Defense;

(B) the Controller of the Office of Federal Financial Management in the Office of Management and Budget;

(C) the head of each component audited; and

(D) the appropriate committees of Congress.


(2) Appropriate committees of congress defined.—In this subsection, the term "appropriate committees of Congress" means—

(A) the Committee on Armed Services, the Committee on Homeland Security and Governmental Affairs, and the Committee on Appropriations of the Senate; and

(B) the Committee on Armed Services, the Committee on Oversight and Government Reform, and the Committee on Appropriations of the House of Representatives.


(e) Relationship to Existing Law.—The requirements of this section—

(1) shall not be construed to alter the requirement under section 3521(e) of title 31 that the financial statements of the Department of Defense as a whole be audited by the Inspector General or by an independent external auditor, as determined by the Inspector General; and

(2) shall not be construed to limit or alter the authorities of the Comptroller General of the United States under section 3521(g) of title 31.

(Added and amended Pub. L. 115–91, div. A, title X, §1002(e)(1)–(3), Dec. 12, 2017, 131 Stat. 1541, §254; renumbered §240d, Pub. L. 115–232, div. A, title X, §1002(a)(1)(A), Aug. 13, 2018, 132 Stat. 1945.)

Codification

Text of section, as added by Pub. L. 115–91, is based on text of section 1005 of Pub. L. 114–92, div. A, title X, Nov. 25, 2015, 129 Stat. 961, 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(e)(4), Dec. 12, 2017, 131 Stat. 1541.

Amendments

2018Pub. L. 115–232 renumbered section 254 of this title as this section.

2017—Subsec. (a). Pub. L. 115–91, §1002(e)(2)(B), struck out ", United States Code," after "title 31".

Subsec. (d)(1)(A). Pub. L. 115–91, §1002(e)(3)(A)(i), inserted "and the Chief Management Officer of the Department of Defense" before semicolon.

Pub. L. 115–91, §1002(e)(2)(A), struck out ", United States Code" after "title 31".

Subsec. (d)(1)(C), (D). Pub. L. 115–91, §1002(e)(3)(A)(ii)–(iv), added subpar. (C) and redesignated former subpar. (C) as (D).

Subsec. (e)(1). Pub. L. 115–91, §1002(e)(3)(B), redesignated par. (2) as (1) and struck out former par. (1) which read as follows: "shall be implemented in a manner that is consistent with the requirements of section 1008 of the National Defense Authorization Act for Fiscal Year 2002 (Public Law 107–107; 10 U.S.C. 113 note);".

Subsec. (e)(2). Pub. L. 115–91, §1002(e)(3)(B)(ii), redesignated par. (3) as (2). Former par. (2) redesignated (1).

Pub. L. 115–91, §1002(e)(2)(B), struck out ", United States Code," after "title 31".

Subsec. (e)(3). Pub. L. 115–91, §1002(e)(3)(B)(ii), redesignated par. (3) as (2).

Pub. L. 115–91, §1002(e)(2)(A), struck out ", United States Code" after "title 31".

Change of Name

Committee on Oversight and Government Reform of House of Representatives changed to Committee on Oversight and Reform of House of Representatives by House Resolution No. 6, One Hundred Sixteenth Congress, Jan. 9, 2019.

Transparency of Accounting Firms Used To Support Department of Defense Audit

Pub. L. 115–232, div. A, title X, §1006, Aug. 13, 2018, 132 Stat. 1947, as amended by Pub. L. 116–92, div. A, title X, §1011, Dec. 20, 2019, 133 Stat. 1577, provided that:

"(a) In General.—For all contract actions (including awards, renewals, and amendments) occurring more than 180 days after the date of the enactment of this Act [Aug. 13, 2018], the Secretary of Defense shall require any accounting firm providing financial statement auditing or audit remediation services to the Department of Defense in support of the audit required under section 3521 of title 31, United States Code, to provide the Department with a statement setting forth the details of any disciplinary proceedings with respect to the accounting firm or its associated persons before any entity with the authority to enforce compliance with rules or laws applying to audit services offered by accounting firms.

"(b) Treatment of Statement.—A statement setting forth the details of a disciplinary proceeding submitted pursuant to subsection (a), and the information contained in such a statement, shall be—

"(1) treated as confidential to the extent required by the court or agency in which the proceeding has occurred; and

"(2) treated in a manner consistent with any protections or privileges established by any other provision of Federal law."

§240e. Audits: use of commercial data integration and analysis products in preparing audits

(a) Deployment of Data Analytics Capabilities.—The Secretary of Defense shall use competitive procedures under chapter 137 of this title to procure or develop technologies or services, including those based on commercially available information technologies and services to improve data collection and analyses to support preparation of auditable financial statements for the Department of Defense.

(b) Use of Funding and Resources.—The Secretary of Defense may use science and technology funding, prototypes, and test and evaluation resources as appropriate in support of deployment of technologies and services as described in subsection (a).

(Added and amended Pub. L. 115–91, div. A, title X, §1002(f)(1), (2), Dec. 12, 2017, 131 Stat. 1541, 1542, §254a; renumbered §240e, Pub. L. 115–232, div. A, title X, §1002(a)(1)(A), Aug. 13, 2018, 132 Stat. 1945.)

Codification

Text of section, as added by Pub. L. 115–91, is based on text of subsecs. (a) and (b) of section 1003 of Pub. L. 114–328, div. A, title X, Dec. 23, 2016, 130 Stat. 2380, which were formerly set out in a note under section 2222 of this title, prior to repeal by Pub. L. 115–91, div. A, title X, §1002(f)(3), Dec. 12, 2017, 131 Stat. 1542.

Amendments

2018Pub. L. 115–232 renumbered section 254a of this title as this section.

2017—Subsec. (a). Pub. L. 115–91, §1002(f)(2)(A), substituted "of this title" for "of title 10, United States Code," and struck out ", as soon as practicable," after "develop".

Subsec. (b). Pub. L. 115–91, §1002(f)(2)(B), substituted "deployment of technologies and services as described in subsection (a)" for "this deployment".

§240f. Audits: selection of service providers for audit services

The Department of Defense shall select service providers for auditing services based on the best value to the Department, as determined by the resource sponsor for an auditing contract, rather than based on the lowest price technically acceptable service provider.

(Added and amended Pub. L. 115–91, div. A, title X, §1002(g)(1), (2), Dec. 12, 2017, 131 Stat. 1542, §254b; renumbered §240f, Pub. L. 115–232, div. A, title X, §1002(a)(1)(A), Aug. 13, 2018, 132 Stat. 1945.)

Codification

Text of section, as added by Pub. L. 115–91, is based on text of section 892 of Pub. L. 114–328, div. A, title VIII, Dec. 23, 2016, 130 Stat. 2324, which was formerly set out as a note under section 2331 of this title, prior to repeal by Pub. L. 115–91, div. A, title X, §1002(g)(3), Dec. 12, 2017, 131 Stat. 1542.

Amendments

2018Pub. L. 115–232 renumbered section 254b of this title as this section.

2017Pub. L. 115–91, §1002(g)(2), struck out "and audit readiness services" after "auditing services".

Notification Requirement for Certain Contracts for Audit Services

Pub. L. 115–91, div. A, title X, §1007, Dec. 12, 2017, 131 Stat. 1545, provided that:

"(a) Notification to Congress.—If the Under Secretary of Defense (Comptroller) makes a written finding that a delay in performance of a covered contract while a protest is pending would hinder the annual preparation of audited financial statements for the Department of Defense, and the head of the procuring activity responsible for the award of the covered contract does not authorize the award of the contract (pursuant to section 3553(c)(2) of title 31, United States Code) or the performance of the contract (pursuant to section 3553(d)(3)(C) of such title), the Secretary of Defense shall—

"(1) notify the congressional defense committees [Committees on Armed Services and Appropriations of the Senate and the House of Representatives] within 10 days after such finding is made; and

"(2) describe any steps the Department of Defense plans to take to mitigate any hindrance identified in such finding to the annual preparation of audited financial statements for the Department.

"(b) Covered Contract Defined.—In this section, the term 'covered contract' means a contract for services to perform an audit to comply with the requirements of section 3515 of title 31, United States Code."

§240g. Defense Business Audit Remediation Plan

(a) In General.—The Secretary of Defense shall maintain a plan, to be known as the "Defense Business Systems Audit Remediation Plan". Such plan shall include a current accounting of the defense business systems of the Department of Defense that will be introduced, replaced, updated, modified, or retired in connection with the audit of the full financial statements of the Department, including a comprehensive roadmap that displays—

(1) in-service, retirement, and other pertinent dates for affected defense business systems;

(2) current cost-to-complete estimates for each affected defense business system;

(3) dependencies both between the various defense business systems and between the introduction, replacement, update, modification, and retirement of such systems; and 1

(4) the amount spent by the Department on operating and maintaining financial management systems during the preceding five fiscal years; and

(5) the amount spent by the Department on acquiring or developing new financial management systems during such five fiscal years.


(b) Report and Briefing Requirements.—

(1) Annual report.—Not later than June 30, 2020, and annually thereafter, the Secretary of Defense shall submit to the congressional defense committees an updated report on the Defense Business Systems Audit Remediation Plan under subsection (a).

(2) Semiannual briefings.—Not later than January 31 and June 30 each year, the Secretary shall provide to the congressional defense committees a briefing on the status of the Defense Business Systems Audit Remediation Plan. Such briefing shall include a description of any updates to the defense business systems roadmap referred to in subsection (a).


(c) Defense Business System.—In this section, the term "defense business system" has the meaning given such term in section 2222(i)(1)(A) of this title.

(Added Pub. L. 116–92, div. A, title X, §1002(a), Dec. 20, 2019, 133 Stat. 1570; amended Pub. L. 116–283, div. A, title X, §1005(a), Jan. 1, 2021, 134 Stat. 3837.)

Amendments

2021—Subsec. (a)(4), (5). Pub. L. 116–283 added pars. (4) and (5).

1 So in original. The word "and" probably should not appear.

§240h. Annual report on auditable financial statements

(a) In General.—Not later than January 30 of each year, the Secretary of Defense shall submit to the congressional defense committees a report that includes a ranking of all of the military departments and Defense Agencies in order of how advanced each such department and Agency is in achieving auditable financial statements, as required by law. In preparing the report, the Secretary shall seek to exclude information that is otherwise available in other reports to Congress.

(b) Bottom Quartile.—Not later than June 30 of each year, the head of each of the military departments and Defense Agencies that were ranked in the bottom quartile of the report submitted under subsection (a) for that year shall submit to the congressional defense committees a report that includes the following information for that military department or Defense Agency:

(1) A description of the material weaknesses of the military department or Defense Agency.

(2) The underlying causes of such weaknesses.

(3) A plan for remediating such weaknesses.

(4) The total number of open audit notices of findings and recommendations (hereinafter referred to as "NFRs") for the most recently concluded fiscal year and the preceding two fiscal years, where applicable.

(5) The number of repeat or reissued NFRs from the most recently concluded fiscal year.

(6) The number of NFRs that were previously forecasted to be closed during the most recently concluded fiscal year that remain open.

(7) The number of closed NFRs during the current fiscal year and prior fiscal years.

(8) The number of material weaknesses that were validated by external auditors as fully resolved or downgraded in the current fiscal year over prior fiscal years.

(9) A breakdown by fiscal years in which open NFRs are forecasted to be closed.

(10) Explanations for unfavorable trends in the information under paragraphs (1) through (9).

(Added Pub. L. 116–92, div. A, title X, §1004(a)(1), Dec. 20, 2019, 133 Stat. 1572.)

§240i. Annual report on unfunded priorities

(a) In General.—Not later than 10 days after the date on which the budget of the President for a fiscal year is submitted to Congress pursuant to section 1105 of title 31, the Under Secretary of Defense (Comptroller) shall submit to the Secretary of Defense, the Chairman of the Joint Chiefs of Staff, and the congressional defense committees a report on unfunded priorities of the Department of Defense related to audit readiness and remediation.

(b) Elements.—(1) Each report under subsection (a) shall include, for each unfunded priority covered by such report, the following:

(A) A summary description of such priority, including the objectives to be achieved if such priority were to be funded (whether in whole or in part).

(B) The additional amount of funds recommended in connection with the objectives identified under subparagraph (A).

(C) Account information with respect to such priority, including, as applicable, the following:

(i) Line item number, in the case of applicable procurement accounts.

(ii) Program element number, in the case of applicable research, development, test, and evaluation accounts.

(iii) Sub-activity group, in the case of applicable operation and maintenance accounts.


(2) The Under Secretary shall ensure that the unfunded priorities covered by a report under subsection (a) are listed in the order of urgency of priority, as determined by the Under Secretary.

(c) Unfunded Priority Defined.—In this section, the term "unfunded priority", with respect to a fiscal year, means an activity related to an audit readiness or remediation effort stemming from a relevant requirement under the Chief Financial Officer Act 1 (Public Law 101–576), chapter 9 of title 31, or this chapter that—

(1) is not funded in the budget of the President for that fiscal year, as submitted to Congress pursuant to section 1105 of title 31;

(2) is necessary to address a shortfall in an audit readiness or remediation activity; and

(3) would have been recommended for funding through the budget referred to in paragraph (1) if—

(A) additional resources had been available for the budget to fund the program, activity, or mission requirement; or

(B) the program, activity, or mission requirement had emerged before the budget was formulated.

(Added Pub. L. 116–283, div. A, title X, §1005(b)(1), Jan. 1, 2021, 134 Stat. 3837.)

References in Text

The Chief Financial Officer Act, referred to in subsec. (c), probably means the Chief Financial Officers Act of 1990, Pub. L. 101–576, Nov. 15, 1990, 104 Stat. 2838. For complete classification of this Act to the Code, see Short Title of 1990 Amendment note set out under section 501 of Title 31, Money and Finance, and Tables.

1 See References in Text note below.

[§§251 to 254b. Renumbered §§240a to 240f]