How the Pentagon’s financial audit will help win wars

In about four weeks, despite all the progress being made, we will likely hear that the Pentagon has again failed its annual financial audit. But the headlines will also likely miss the most important point: the warfighting benefits that are accumulating now as a result of the audit. Far from a mere compliance exercise, the cultural and technological changes required to pass an audit are the same ones necessary to keep U.S. forces dominant.

For the Defense Department to pass its audit, it must account for more than dollars. It must track the vast array of things the military uses: munitions, spare parts, fuel, real estate. Moreover, it must track the condition of these things: In the shop? Ready for use? In the field? And it must do so accurately and in real time. All this requires comprehensive changes. Cyber security must be improved, systems integrated, processes and automation deployed to ensure the accuracy of data, and more.

Undaunted, DOD has attacked these problems with resolve and money. Over the past five years, the department has spent more than $4 billion to improve visibility and transparency. Efforts to pass the audit have helped integrate data from finance, logistics, and readiness systems, breaking down longstanding silos and making it possible to see across the entire defense enterprise. What was once a cumbersome and time-consuming process—yielding outputs that were neither timely nor reliable—has become more streamlined.

These changes are already yielding benefits. By improving visibility into resources, the DoD has made strides in ensuring that the right resources are available at the right time and that limited dollars are not put toward duplicative capabilities.

But the benefits go far beyond the record-keeping necessary for a clean financial bill of health. By improving the flow of data, the audit effort is helping to ensure U.S. military dominance into the future.

Tomorrow’s victories will increasingly depend on decision advantage: the ability to make faster and better decisions than adversaries by harnessing accurate, reliable, and timely data. This is why the Pentagon is working to link all warfare domains through its CJADC2 efforts, enabling data to flow seamlessly between platforms.

Imagine a scenario in the Indo-Pacific where tensions between the U.S. and a near-peer adversary, such as China, have escalated, making the ability to close the kill chain quickly and effectively paramount. U.S. forces use intelligence assets—ranging from satellites and UAVs to cyber intelligence—to rapidly identify and track enemy movements. This sensor data is then transmitted to a CJADC2 command center, where it is fused into a single operational picture. Commanders then use this data for targeting, which also shows what strike assets—fighter jets, ships, or missile systems—are ready for deployment. As U.S. forces use precision-guided munitions to strike the enemy fleet, cyber capabilities are also deployed to protect U.S. systems and disable enemy communications. Finally, UAVs conduct a battle damage assessment, providing commanders with immediate feedback on the success of the mission.

The data integration promoted by the audit promises to enable commanders—from small units up to unified commands—to access information about the availability and the condition of munitions, vehicles, equipment, parts, and supplies. As the above example illustrates, this visibility is essential for warfighting, as it allows commanders to allocate resources effectively. A unified, enterprise-wide view will enable them to move with speed and surety, whether responding to emerging threats or executing long-term strategic operations. Accurate, real-time data on asset quantities, condition, and location will enable the use of automation, data analytics, and AI in decision-making and execution.

There remains much work to be done before this vision comes to pass. The improvements to date will only yield full operational benefits if they are integrated into real-time decision-making processes that can adjust to the demands of fast-moving, contested environments.

This requires cultural change. The entire defense enterprise must shift from a compliance-driven, labor-intensive audit remediation mindset to one focused on mission outcomes. But this is already taking place. Historically, data transparency and integration across the defense enterprise were counter-cultural. The audit has pushed the DoD toward greater transparency, data integration, and enterprise-wide standards.

One key to finishing the transformation is making sure the audit is viewed not as simply a financial matter but as commanders’ business. By emphasizing the warfighting value, the DoD can ensure that audit remediations contribute not only to closing financial documentation gaps but also to closing kill chains with the speed and exactness required in today’s complex battlespace. 

We’ve spent great treasure to gain extensive knowledge about our adversaries—even though they are never 100 percent knowable—but we have much to gain by improving knowledge about ourselves in a way that provides operational relevance, an effort that is completely within our control. In many ways, no matter if DoD ever “passes” a full financial statement audit, if remediation is done right, it is a step toward remedying this imbalance, creating the visibility we need to know ourselves better and improving our ability to fight and win.

Elaine McCusker is a senior fellow at the American Enterprise Institute. She previously served as acting undersecretary of defense (comptroller) for the U.S. Defense Department, where Mark Easton had served as deputy chief financial officer. Greg Little is a senior counselor for Palantir