IG audit reveals gaps in DOD’s accounting for government property used by contractors

The Pentagon’s reporting on its government property in the possession of contractors (GPIPC) needs improvement, according to a watchdog audit that warns this issue could result in faulty financial records. 

GPIPC refers to both federally-furnished and contractor-acquired equipment or other property that the government owns, but can authorize vendors to use while performing on certain contracts — like aircraft parts for a repair deal.  

“Although the [Department of Defense] has a corrective action plan (CAP) that, if implemented, should enable the DOD to provide a complete and accurate balance of GPIPC assets, the actions to implement the CAP were ineffective,” officials from the Pentagon’s Office of Inspector General wrote in the results of a new audit.

Released on Monday, the review was conducted by the OIG to assess the effectiveness of the DOD’s actions “to remediate the financial statement material weakness” related to reporting GPIPC. Such weaknesses arise when companies’ internal controls fail — and they can lead to errors in crucial financial reports.

In their audit, OIG officials suggest that the government’s actions to resolve the DOD financial statement material weaknesses were ineffective for several reasons. For example, assessors found that the Pentagon’s Acquisition and Sustainment directorate and the Comptroller/Chief Financial Officer did not direct the use of the Government Furnished Property (GFP) Module, and that DOD components haven’t updated their Accountable Property Systems of Record to directly interface with that module.

“The unremedied GPIPC material weaknesses within the DOD components have a negative impact on the DOD agency‑wide financial statements. The DOD components’ inability to accurately account for GPIPC will continue to impede the DOD’s ability to achieve an unmodified audit opinion by [fiscal year] 2028,” the audit states. “Accurate financial statements enable Congress and the public to assess how the DOD spends its money, help the DOD improve its operations, identify vulnerabilities in information technology and other systems, and prevent wasteful practices.”

Among multiple recommendations, OIG officials are urging Pentagon leadership to issue guidance that requires department components to use the GFP Module for their inventory management of GPIPC — and work with them to implement the tool and its necessary interfaces.

Notably, the OIG’s post of this audit is light in details compared to many prior publications by the watchdog.

In response to questions on Monday, a spokesperson from the office told DefenseScoop: “The release of the DOD OIG’s findings will appear in the full report — which is on the horizon. The DOD OIG’s recommendations and the DOD’s response will be included.”

Pentagon spokespersons did not immediately respond to DefenseScoop’s request for comment.