The Department of Defense (DoD) has failed its fiscal year 2024 annual audit, marking the seventh consecutive year without achieving a clean financial assessment.

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The findings, released late Friday, examined $4.1 trillion in assets and $4.3 trillion in liabilities.

Despite the failing grade, the DoD highlighted what it described as incremental progress in financial accountability.

The audit, conducted by the DoD Office of Inspector General in conjunction with an independent accounting firm, evaluated 28 entities within the department.

This year’s audit included fewer entities than last year due to the consolidation of Special Operations Command under a broader review.

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Out of the 28 entities, nine received an “unmodified audit opinion,” indicating that their financial statements were fairly presented and adhered to accounting standards.

This represents an improvement from last year, which saw only eight entities achieving a clean audit.

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One entity received a “qualified opinion,” meaning there were some misstatements, but not significant enough to undermine the financial statements.

Fifteen entities received “disclaimers,” meaning auditors were unable to determine if their financial statements were accurate.

Three entities— the Marine Corps, the Defense Logistics Agency’s National Defense Stockpile Transaction Fund, and the DoD Office of Inspector General— still have audits pending, leaving their ratings undetermined.

As a result, the DoD as a whole received a “disclaimer” opinion, effectively a failing grade.

“This result was not a surprise, and I know that on the surface it doesn’t sound like we’re making progress. However, that is not the case,” Michael McCord, Under Secretary of Defense and Chief Financial Officer, told reporters.

“Momentum is on our side, and throughout the Department, there is strong commitment—and belief in our ability—to achieve an unmodified audit opinion.”

The audit highlighted ongoing challenges in the department’s financial management, particularly in accounting for physical materials such as equipment and property.

McCord noted progress in reconciling fund balances, or what he described as “balancing the checkbook,” but added that significant hurdles remain in tracking tangible assets.

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“We made more progress on the funding than we have on the property,” McCord stated.

Under the FY28 National Defense Authorization Act, the DoD is required to achieve a clean audit by 2028.

McCord acknowledged that meeting this mandate at the current pace is unlikely but expressed optimism that maintaining continuity in the audit process under the incoming Trump administration could help accelerate progress.

“I would not fundamentally change strategy,” McCord said. “I would give some deference or lean in direction of keeping telling the team … doing what they’re doing and then adjust at the margins.”

Earlier Friday, the DoD Inspector General released its FY25 Oversight Plan, outlining six key challenges facing the department: increasing military readiness, strengthening alliances, protecting critical infrastructure, building the future force, improving quality of life for military families, and bolstering financial management.

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The report specifically flagged issues with inadequate financial controls, outdated data management systems, and a lack of skilled workers as barriers to effective financial oversight.

“These challenges require collaboration between the DoD’s financial management and operational leaders to implement the policies, processes, procedures, and systems needed to strengthen the DoD’s control environment and mitigate budget and personnel needs,” the oversight report stated.

As the DoD grapples with its ongoing financial management challenges, officials emphasized the importance of staying the course while seeking incremental improvements.

Whether the department can meet its 2028 deadline for a clean audit remains uncertain, but leadership expressed a commitment to addressing persistent weaknesses in its financial systems.