Insight by KPMG

The team effort that led to the Marines’ clean audit triumph

By achieving a clean financial audit for the first time ever, the Marine Corps can provide accountability, transparency and validity for their spending.

The Marine Corps celebrated a much sought after milestone in February: obtaining an unmodified audit opinion for fiscal 2023.

This two-year effort proved that the corps’ 2023 financial statements “present a true and fair reflection of the Marine Corps’ financial information,” which is about $46 billion in total assets.

While audits say there still are seven areas where the Marines still need to improve, Greg Koval, the assistant deputy commandant for resources for the Marine Corps, said this historic feat means, for maybe the first time ever, they can provide accountability, transparency and validity for their spending.

“It gives us transparencies into the cost of production, and in the future, it means the tracking of the cost of maintenance for many of our weapons system platforms,” Koval said on the discussion Marine Corps Milestone: Unqualified Audit Insight. “What it does over time is allow us to really plan, program, budget, execute better and identify those programs, where maybe they cost a little bit more, a little bit less, get those funds to the right place more timely so that we’re better able to execute and give the warfighter what they need to execute the mission. Ultimately on the financial side, we’re here to support them, help them and give them everything they need. So when they deploy, they’ve got the best solution, the best weapons systems they can have at that point in time.”

Like most of the Defense Department, the Marine Corps has been under pressure from Capitol Hill for decades to achieve a clean audit and has been putting more significant resources and focus on the challenges since 2017.

Marines new general ledger system

The Marines came close previously to a clean audit before the 2023 opinion. For example in 2012, the Marines thought it had achieved a “favorable opinion,” only for the DoD inspector general to reverse that decision in 2015.

DoD, as a whole, is targeting fiscal 2028 to achieve a clean financial opinion.

The Marines success demonstrates that it is possible for the largest organizations in DoD to successfully align their data, systems and processes to achieve this goal.

“At the beginning of this journey, we moved to a new general ledger. We had what we called SABRS, which was known and loved across the Marine Corps for over three decades. We took everybody off of that accounting system and moved into this new modern enterprise resources planning (ERP) system, which had its set of challenges. We basically adopted a system that smaller DoD components used, and some of our business processes were new to the system, new to the process, so there was a huge learning curve there,” Koval said. “That learning curve didn’t just impact the financial folks, but they impacted supply and procurement. There were times where we were working hard to pay vendors on time because the system wasn’t working as our old system did. But I think it really brought some additional discipline and internal controls to the financial processes that ultimately helped us understand some of our procurement and logistic processes a little bit better. It really kind of opened our aperture on some of the costs that we were incurring, who we were paying, and it gave us that additional transparency and visibility into the data.”

That major shift in the way the Corps did business, Koval said, really kicked the entire effort into gear by providing the financial team with the agility needed to understand and improve its data.

For any agency or large organization, the big data challenge can be daunting, said Joe Nave, principal federal finance transformation lead for KPMG, which helped the Marines achieve the clean audit opinion.

Analyze and assess risks

“You had to sift through the business processes across the board for geographically dispersed organizations such as the Marine Corps. You look at all of the integration across the rest of the DoD and the different partners outside of the spectrum that the Marine Corps has operational control over, and you start to look at how complex and complicated those processes can really be. From our perspective, it was helping them analyze, assess risk, boil down a couple of them and get the activities that we really needed to accomplish down to a finite list, where we could really focus our efforts and help them move some of these big rocks associated with the material weaknesses and audit deficiencies,” Nave said. “I think over time, you look at the way that the workforce is structured and having to do 100% of the day job, and then you add in some of these audit priorities and you add in some of the samples, we’ve really had to look at ways to modernize and automate those processes to help facilitate quicker reviews, quick requests, quality control ease, and make sure that we’re set up for success and able to respond efficiently and effectively to the audit.”

Nave said moving to the new ERP accounting system played a significant role in helping the Corps adapt processes and procedures as the needs change during the modernization process.

“I like dash boarding as a way to make sure that our clients have the insight that they need to see in real-time where progress is being made, and where progress is being made against those discrete buckets [of goals],” he said. “Then usually, we like tiger teams to assess progress against that. These small, mobile, tactical units, if you will, are going out and solving these problems with brute force, and then focusing on the sustainment of that. That really gets us to our end goal of a modified opinion and being able to continue that modified opinion, year in and year out, layering in that automation and modernization to those tiger team efforts.”

Auditors say the Marines still had seven material weaknesses to resolve.

Koval said a lot of those were on the property side and the need to better integrate data from disparate systems.

“What the audit did for us was really bring those organizations closer together. It broke down a lot of the walls and communications in the way that we work with each other,” he said. “Now, supply, logistics, procurement and accounting all have a better understanding of what we do, how we impact each other and what needs to change to make the organization more efficient, effective and to save costs, frankly, going forward.”

Going forward, among the Marines’ goals are to continue to build upon the previous two-year effort to further integrate processes and systems to make them a more efficient organization.

Nave said the Marine Corps now are set up for long term sustainment because of the process and procedural changes they’ve made and for audit response overall.

The key lessons learned from the Marines’ experience that other military services and organizations can heed, Nave said, is adaptability, being comfortable with the plan, and understanding that plans will change over time.

“We really want systems working for us, not against us. We want to make sure that our IT environment is squared away. We want to make sure that all of the interfaces or feeder systems that we have are clearly laid out. And we’ve looked at the complexity of those different processes and made sure that those all make sense,” he said. “So it is really just a rationalization of your portfolio and trying to make the sandbox smaller. First make sure everything’s in the sandbox, and then what can you do to make it smaller? Then I think leadership must set the tone from the top, cascading that information down and emphasizing the importance. Whether it’s an audit or any other objective you’re trying to accomplish, having that buy-in and tone from the top has been critical.”

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