UNCLASSIFIED
UNCLASSIFIED
FY 2023 USSOCOM Financial
Statement Reporting Package
September 30, 2023
UNCLASSIFIED
UNCLASSIFIED
Table of Contents
United States Special Operations Command Financial Statements and Notes as
of September 30, 2023 and 2022………………………………………………………
1
Department of Defense Office of Inspector General Transmittal of Independent
Auditor’s Reports…………………………………………………………………………
60
Grant Thornton Audit Reports…………………………………………………………..
63
Management Response to the Fiscal Year 2023 United States Special
Operations Command Financial Statement Audit Report…………………………...
102
Department of Defense
Other Defense Activities - Tier 2 - US Special Operations Command
CONSOLIDATED BALANCE SHEET
($ in Thousands)
As of September 30, 2023 and 2022
Intragovernmental:
Fund Balance with Treasury (Note 3)
Accounts Receivable, Net (Note 6)
Other Assets (Note 10)
Total Intragovernmental
Other Than Intragovernmental:
Accounts Receivable, Net (Note 6)
Inventory and Related Property, Net (Note 8)
General Property, Plant and Equipment, Net (Note 9)
Advances and Prepayments (Note 10)
Total Other Than Intragovernmental
Total Assets
Stewardship PP&E (Note 9)
Liabilities (Note 11)
Intragovernmental:
Accounts Payable
Advances from Others and Deferred Revenue (Note 15)
Other Liabilities (Notes 13 and 15)
Total Intragovernmental
Other Than Intragovernmental:
Accounts Payable
Federal Employee and Veteran Benefits
Payable (Note 13)
Advances from Others and Deferred Revenue (Note 15)
Other Liabilities (Notes 15, 16 and 17)
Total Other Than Intragovernmental
Total Liabilities
Commitments and Contingencies (Note 17)
Net Position:
Unexpended Appropriations - Funds Other than
Dedicated Collections
Total Unexpended Appropriations (Consolidated)
Cumulative Results of Operations - Funds Other than
Dedicated Collections
Total Cumulative Results of Operations (Consolidated)
Total Net Position
Total Liabilities and Net Position
2023 Consolidated 2022 Consolidated
12,164,116 11,917,506
81,230 49,338
45 45
12,245,391 11,966,889
(11,924) 1,888
3,084,767 2,898,126
3,121,425 3,270,150
274,055 123,253
6,468,323 6,293,417
18,713,714 18,260,306
73,503 48,507
2,341 7,677
4,748 4,086
80,592 60,270
2,527,953 737,928
65,895 66,614
(12) (3,064)
38,623 40,306
2,632,459 841,784
2,713,051 902,054
9,966,324 11,412,380
9,966,324 11,412,380
6,034,339 5,945,872
6,034,339 5,945,872
16,000,663 17,358,252
18,713,714 18,260,306
$ $
$ $
$ $
$ $
$ $
$ $
$ $
$ $
$ $
$ $
Restated
- UNAUDITED
The accompanying notes are an integral part of these statements.
1
UNCLASSIFIED
UNCLASSIFIED
Department of Defense
Other Defense Activities - Tier 2 - US Special Operations Command
CONSOLIDATED STATEMENT OF CHANGES IN NET POSITION
($ in Thousands)
For the periods ended September 30, 2023 and 2022
UNEXPENDED APPROPRIATIONS
Beginning Balances (Includes Funds from Dedicated
Collections - See Note 18)
Prior Period Adjustments:
Beginning Balances, as adjusted
Appropriations received
Appropriations transferred in/out
Other adjustments (+/-)
Appropriations used
Net Change in Unexpended Appropriations (Includes
Funds from Dedicated Collections - See Note 18)
Total Unexpended Appropriations, Ending Balance (Includes
Funds from Dedicated Collections - See Note 18)
CUMULATIVE RESULTS OF OPERATIONS
Beginning Balances
Prior Period Adjustments:
Corrections of errors (+/-)
Beginning Balances, as adjusted (Includes Funds
from Dedicated Collections - See Note 18)
Other adjustments (+/-)
Appropriations used
Non-exchange revenue (Note 20)
Transfers in/out without reimbursement
Imputed financing
Other
Net Cost of Operations (+/-) (Includes Funds from
Dedicated Collections - See Note 18)
Net Change in Cumulative Results of Operations
Cumulative Results of Operations, Ending (Includes
Funds from Dedicated Collections - See Note 18)
Net Position
2023 Consolidated 2022 Consolidated
11,412,380 10,237,420
11,412,380 10,237,420
14,032,864 13,232,204
58,807 38,972
(269,279) (261,582)
(15,268,447) (11,834,634)
(1,446,055) 1,174,960
9,966,325 11,412,380
5,945,872 5,853,554
0 363,933
5,945,872 6,217,487
35 (2,928)
15,268,447 11,834,634
1 2
(528,938) (582,259)
42,707 18,845
168,591 49,076
14,862,376 11,588,985
88,467 (271,615)
6,034,339 5,945,872
16,000,664 17,358,252
$ $
$ $
Restated
- UNAUDITED
The accompanying notes are an integral part of these statements.
2
UNCLASSIFIED
UNCLASSIFIED
Department of Defense
Other Defense Activities - Tier 2 - US Special Operations Command
COMBINED STATEMENT OF BUDGETARY RESOURCES
($ in Thousands)
For the periods ended September 30, 2023 and 2022
Budgetary Resources:
Unobligated balance from prior year budget authority, net
(discretionary and mandatory) (Note 21)
Appropriations (discretionary and mandatory)
Spending Authority from offsetting collections
(discretionary and mandatory)
Total Budgetary Resources
Status of Budgetary Resources:
New obligations and upward adjustments (total)
Unobligated balance, end of year:
Apportioned, unexpired accounts
Unapportioned, unexpired accounts
Unexpired unobligated balance, end of year
Expired unobligated balance, end of year
Unobligated balance, end of year (total)
Total Budgetary Resources
Outlays, Net:
Outlays, net (total) (discretionary and mandatory)
Agency Outlays, net (discretionary and mandatory)
2023 Combined 2022 Combined
2,743,664 2,328,572
14,062,312 13,272,676
385,644 609,461
17,191,620 16,210,709
15,355,016 14,237,543
1,217,382 1,439,730
6,003 12
1,223,385 1,439,742
613,219 533,423
1,836,604 1,973,165
17,191,620 16,210,708
13,575,816 12,471,589
13,575,816 12,471,589
$ $
$ $
$ $
$ $
$ $
- UNAUDITED
The accompanying notes are an integral part of these statements.
3
UNCLASSIFIED
UNCLASSIFIED
Department of Defense
Other Defense Activities - Tier 2 - US Special Operations Command
CONSOLIDATED STATEMENT OF NET COST
($ in Thousands)
For the periods ended September 30, 2023 and 2022
Program Costs (Note 19)
Gross Costs
(Less: Earned Revenue)
Net Program Costs before Losses/(Gains) from Actuarial
Assumption
Changes for Military Retirement Benefits
Net Program Costs Including Assumption Changes
Net Cost of Operations
2023 Consolidated 2022 Consolidated
15,162,788 11,977,296
(300,411) (388,311)
14,862,377 11,588,985
14,862,377 11,588,985
14,862,377 11,588,985
$ $
$ $
Restated
- UNAUDITED
The accompanying notes are an integral part of these statements.
4
UNCLASSIFIED
UNCLASSIFIED
Note 1.
Summary of Significant Accounting Policies - Unaudited
1.
A. Reporting Entity
The U
nited States Special Operations Command (USSOCOM) is comprised of the following Components
and Sub-Unified Commands, whose responsibilities are to ensure their Special Operations Forces (SOF)
are highly trained, equipped and rapidly deployable to support national security interests around the world:
• U.
S. Army Special Operations Command (USASOC)
The US
ASOC is located at Ft. Liberty, North Carolina. The mission of USASOC is to organize, train,
educate, man, equip, fund, administer, mobilize, deploy, and sustain Army SOF to successfully conduct
worldwide special operations, across the range of military operations, in support of regional combatant
commanders, American ambassadors and other agencies as directed.
• Naval Special Warfare Command (NAVSPECWARCOM or NSWC)
The N
AVSPECWARCOM is located at Naval Amphibious Base, Coronado, California. NSWC provides
vision, leadership, doctrinal guidance, resources, and oversight to ensure component maritime SOF are
ready to meet the operational requirements of Combatant Commanders.
• Air Force Special Operations Command (AFSOC)
The
AFSOC is located at Hurlburt Field, Florida. The AFSOC is America’s specialized air power, a step
ahead in a changing world, delivering special operations combat power anytime, anywhere.
• Marine Corps Forces Special Operations Command (MARSOC)
The MA
RSOC is located at Camp Lejeune, North Carolina. The MARSOC, as the U.S. Marine Corps
component of USSOCOM, trains, organizes, equips, and when directed by the Commander of USSOCOM,
deploys task organized, scalable, and responsive U.S. Marine Corps SOF worldwide in support of
Combatant Commanders and other agencies.
• Joi
nt Special Operations Command (JSOC)
The J
SOC is a Sub-Unified Command of USSOCOM. The JSOC is a joint headquarters designed to study
special operations requirements and techniques, ensure interoperability and equipment standardization,
plan and conduct joint special operations exercises and training, and develop joint special operations
tactics.
Per
10 United States Code (USC) 165, “the Secretary of a military department is responsible for the
administration and support of forces assigned by him to a Combatant Command” (i.e., USSOCOM).
Combatant Command Support Agents (CCSA) provides administrative support to the Combatant
Command headquarters, and the subordinate unified command headquarters. Components processes,
controls, and systems, including accounting systems are aligned with their “parent” Service (Army, Navy,
Air Force, Marine Corps); USSOCOM Headquarters element and Sub-Unified Commands’ processes and
controls are aligned with their CCSA.
US
SOCOM, through additional Sub-Unified Commands or Theatre Special Operation Commands
(TSOCs), supports the Geographic Combatant Commands (GCCs). The TSOCs are responsible for
planning special operations throughout their assigned areas of responsibility, planning, and conducting
peacetime joint training exercises, and orchestrating command and control of peacetime and wartime
special operations:
UNCLASSIFIED
UNCLASSIFIED
5
• Theat
er Special Operations Command - Africa (SOCAFRICA)
The S
OCAFRICA is a Sub-Unified Command of USSOCOM under operational control of United States
Africa Command (USAFRICOM), with headquarters in Kelley Barracks, Stuttgart-Mohringen, Germany.
The SOCAFRICA’s primary responsibility is to exercise operational control over theater-assigned or
allocated Air Force, Army, Marine, or Navy SOF conducting operations, exercises, and theater security
cooperation in the USAFRICOM area of responsibility.
• Theat
er Special Operations Command - Central (SOCCENT)
The SOCCENT, in partnership with interagency and international partners, supports the United States
Central Command’s (CENTCOM) and USSOCOM’s objectives by employing special operations to deter
and degrade malign actors, influence relevant populations, and enhance regional partners to protect U.S.
national interests and maintain regional stability. When directed, SOCCENT employs special operations
forces for contingency and crisis response.
• Theat
er Special Operations Command - Europe (SOCEUR)
The S
OCEUR employs SOF across the United States European Command (USEUCOM) area of
responsibility to enable deterrence, strengthen European security collective capabilities and interoperability,
and counter transnational threats to protect U.S. personnel and interests.
• Theat
er Special Operations Command - Korea (SOCKOR)
The S
OCKOR plans and conducts special operations in support of the Commander of United States
Forces/United Nations Commander/Combined Forces Commander in armistice, crisis, and war. The
SOCKOR is a functional Component Command of United States Forces Korea, tasked to plan and conduct
special operations in the Korean theater of operations. The SOCKOR continues to be the only TSOC in
which U.S. and host nation SOF are institutionally organized for combined operations. SOCKOR and
Republic of Korea (ROK) Army Special Warfare Command (SWC) regularly train in their combined roles,
while SOCKOR’s Special Forces detachment acts as the liaison between ROK Special Forces and the U.S.
Special Forces.
• Theat
er Special Operations Command - North (SOCNORTH)
The
SOCNORTH, in partnership with the interagency and regional SOF, synchronizes operations against
terrorist networks and their acquisition or use of weapons of mass destruction, and when directed, employs
fully capable SOF to defend the homeland in depth and respond to crisis. The SOCNORTH is responsive,
capable, and postured to provide scalable SOF options to contribute to the defense of the homeland with
emphasis on counterterrorism, counter weapons of mass destruction-terrorism, and counter transnational
organized crime in Mexico.
• Theater Special Operations Command - Pacific (SOCPAC)
Th
e SOCPAC is a Sub-Unified Command of USSOCOM under the operational control of U.S. Indo-Pacific
Command (USINDOPACOM) and serves as the functional component for all special operations missions
deployed throughout the Indo-Asia-Pacific region. The SOCPAC coordinates, plans, and directs all special
operations in the Pacific theater supporting Commander, USINDOPACOM objectives of deterring
aggression, responding quickly to crisis, and defeating threats to the United States and its interests.
UNCLASSIFIED
UNCLASSIFIED
6
• Theater Special Operations Command - South (SOCSOUTH)
The SOCSOUTH is a Sub-Unified Command of USSOCOM under the operational control of U.S. Southern
Command. The SOCSOUTH is a joint Special Operations headquarters that plans and executes special
operations in Central and South America and the Caribbean.
USSOCOM is a component reporting entity of the Department of Defense (DoD), which is a component
reporting entity and consolidation entity of the Government-wide reporting process. For this reason, some
of the assets and liabilities reported by USSOCOM may be eliminated for the Government-wide reporting
because they are offset by assets and liabilities of another U.S. Government entity. These financial
statements should be read with the realization they are for a component of the U.S. Government.
1.B. Mission of the Reporting Entity
USSOCOM synchronizes the planning of Special Operations and provides SOF to support persistent,
networked and distributed GCC operations to protect and advance our Nation’s interests. Each service
branch has a Special Operations Command that is unique and capable of running its own operations, but
when the different SOF need to work together for an operation, USSOCOM becomes the Joint Command
of the operation.
To achieve this mission, SOF Commanders and staff must plan and lead a full range of lethal and non-
lethal special operations missions in complex and ambiguous environments. Additionally, USSOCOM
accomplishes these missions using four service component Commands, seven TSOCs, and JSOC. SOF
personnel serve as key members of Joint, Interagency, and international teams and must be prepared to
employ all assigned authorities and apply all available elements of power to accomplish the assigned
missions. This mission makes it a unique Unified Combatant Command.
1.C. Basis of Presentation
These financial statements have been prepared to report the financial position, financial condition, and
results of operations of USSOCOM, as required by the Chief Financial Officers Act of 1990, expanded by
the Government Management Reform Act of 1994, Office of the Secretary of Defense (OSD),
Memorandum, “Internal Reporting for USSOCOM Financial Statements”, DoD Financial Statement Audit
Guide, and other appropriate legislation. The accompanying financial statements account for all resources
for which USSOCOM is responsible unless otherwise noted. Accounting standards require all reporting
entities to disclose that accounting standards allow certain presentations and disclosures to be modified, if
needed, to prevent the disclosure of classified information.
To the extent possible, the financial statements have been prepared from the accounting records of
USSOCOM using financial data obtained from the military department financial systems, Army, Navy and
Air Force, and related non-financial system data and in accordance with U.S. Generally Accepted
Accounting Principles (GAAP) for federal entities as prescribed by the Federal Accounting Standards
Advisory Board (FASAB), the Office of Management and Budget (OMB) Circular No. A-136, “Financial
Reporting Requirements”, and DoD Financial Management Regulation (FMR). USSOCOM is unable to fully
comply with all elements of GAAP and the OMB Circular No. A-136, due to limitations of financial and
nonfinancial management processes and systems that support the financial statements. USSOCOM
derives reported values and information for major asset and liability categories largely from nonfinancial
systems, such as inventory and logistic systems. These systems were designed to support reporting
requirements for maintaining accountability over assets and reporting the status of federal appropriations
rather than preparing financial statements in accordance with GAAP. USSOCOM continues to implement
process and system improvements addressing these limitations. USSOCOM’s continued effort towards full
compliance with GAAP for the accrual method of accounting is encumbered by system limitations.
USSOCOM is unable to meet all full accrual accounting requirements. This is primarily because legacy
accounting systems were not designed to collect and record financial information on the full accrual
accounting basis but were designed to record information on a budgetary basis.
UNCLASSIFIED
UNCLASSIFIED
7
1.D. Basis of Accounting
USSOCOM does not have a single accounting system. Therefore, USSOCOM financial statements and
supporting trial balances are compiled from the underlying financial data and trial balances of USSOCOM
components and TSOCs. USSOCOM Service Components’ processes, controls, and systems, including
accounting systems are aligned with their "parent" Service. USSOCOM Headquarters element and Sub-
Unified Commands’ processes and controls are aligned with their CCSA. The underlying data is largely
derived from budgetary transactions (obligations, disbursements, and collections), from nonfinancial feeder
systems, and accruals made for major items such as payroll expenses and accounts payable.
USSOCOM presents the Balance Sheet, Statement of Net Cost, and Statement of Changes in Net Position
on a consolidated basis, less the eliminations, with the exception of revenue eliminations due to system
limitations. The Statement of Budgetary Resources (SBR) is presented on a combined basis, which is the
summation of the Components, and therefore, intradepartmental activity has not been eliminated. The
financial transactions are recorded on a proprietary accrual and a budgetary basis of accounting, except
for issues noted for the Standard Financial System (STANFINS). Under the accrual basis, revenues are
recognized when earned and expenses are recognized when incurred, without regard to the timing of
receipt or payment of cash. Whereas under the budgetary basis, generally the legal commitment or
obligation of funds is recognized in advance of the proprietary accruals and in compliance with legal
requirements and controls over the use of Federal funds.
USSOCOM is continuing to evaluate the effects that will result from fully adopting recent accounting
standards and other authoritative guidance issued by FASAB. The guidance listed below has the potential
to affect the financial statements; however, USSOCOM is currently unable to determine the full impact.
1) Statements for Federal Financial Accounting Standards (SFFAS) 48: Opening Balances for
Inventory, Operating Materials and Supplies, and Stockpile Materials: Issued on January 27, 2016;
Effective for periods beginning after September 30, 2016. USSOCOM plans to utilize deemed cost
to value beginning balances for inventory and related property (I&RP), as permitted by SFFAS 48.
USSOCOM has valued some of its I&RP using deemed cost methodologies, as described in
SFFAS 48. However, systems required to account for historical cost for I&RP in accordance with
SFFAS 3: Accounting for Inventory and Related Property, are not yet fully implemented. Therefore,
USSOCOM is not making an unreserved assertion with respect to this line item.
2) SFFAS 50: Establishing Opening Balances for General Property, Plant, and Equipment: Amending
SFFAS 6: Accounting for Property Plant and Equipment, SFFAS 10: Accounting for Internal Use
Software, and SFFAS 23: Eliminating the Category. National Defense Property, Plant, and
Equipment, and rescinding SFFAS 35: Estimating the Historical Cost of General Property, Plant,
and Equipment Issued on August 4, 2016. Effective Date: For periods beginning after September
30, 2016.
USSOCOM plans to utilize deemed cost to value beginning balances for general property, plant,
and equipment (General PP&E), as permitted by SFFAS 50. USSOCOM has valued some of its
General PP&E using deemed cost methodologies as described in SFFAS 50. However, systems
required to account for historical cost for General PP&E in accordance with SFFAS 6, are not yet
fully implemented. Therefore, USSOCOM is not making an unreserved assertion with respect to
this line item.
3) SFFAS 53: Budget and Accrual Reconciliation: Amending SFFAS 7: Accounting for Revenue and
Other Financing Sources and Concepts for Reconciling Budgetary and Financial Accounting and
SFFAS 24: Selected Standards for the Consolidated Financial Report of the United States
Government, and Rescinding SFFAS 22: Change in Certain Requirements for Reconciling
Obligations and Net Cost of Operations Issued October 27, 2017; Effective for periods beginning
after September 30, 2018.
UNCLASSIFIED
UNCLASSIFIED
8
4) SFFAS 54: Leases: An Amendment to SFFAS 5: Accounting for Liabilities of the Federal
Government, and SFFAS 6, Issued Date: April 17, 2018. The requirements of SFFAS 54 were
deferred to reporting periods beginning after September 30, 2023, under SFFAS 58: Deferral of the
Effective Date of SFFAS 54: Leases: Issued June 19, 2020. Early adoption is not permitted.
For
additional information, see SFFAS 60, Omnibus Amendments 2021: Leases-Related Topics, and
Technical Release 20, Implementation Guidance for Leases and Technical Bulletin 2023-1,
Intragovernmental Leasehold Reimbursable Work Agreements.
The DoD is continuing the actions required to bring its financial and nonfinancial feeder systems and
processes into compliance with GAAP. One such action is the ongoing revision of accounting systems to
record transactions based on the U.S. Standard General Ledger (USSGL). Until all USSOCOM financial
and non-financial feeder systems and processes are GAAP compliant and can collect and report financial
information as required, some of USSOCOM’s financial data will be derived from budgetary transactions or
data from nonfinancial feeder systems.
1.E. Accounting for Intragovernmental and Intergovernmental Activities
Intragovernmental Activities: Treasury Financial Manual (TFM), Volume I, Part 2, Chapter 4700 Agency
Reporting Requirements for the Financial Report of the United States Government, provides guidance for
reporting and reconciling intragovernmental balances. Accounting standards require an entity to eliminate
intragovernmental activity and balances from consolidated financial statements to prevent overstatement
caused by the inclusion of business activity between entity components. Intragovernmental cost and
exchange revenue represent transactions made between two reporting entities within the federal
government. Cost and earned revenue with the public represent exchange transactions made between the
reporting entity and a non-federal entity. USSOCOM cannot accurately identify intragovernmental
transactions by customer because the underlying accounting systems do not track buyer and seller data at
the transaction level. Generally, at the DoD level, seller entities within the DoD provide summary seller-side
balances for revenue, accounts receivable, and unearned revenue to the buyer-side internal accounting
offices. In most cases, the buyer-side records are adjusted to agree with DoD seller-side balances and are
then eliminated. USSOCOM, by way of the DoD, is implementing replacement systems and a standard
financial information structure incorporating the necessary elements to enable USSOCOM to correctly
report, reconcile, and eliminate intragovernmental balances.
While USSOCOM is unable to fully reconcile intragovernmental transactions with all federal agencies,
USSOCOM can reconcile balances pertaining to benefit program transactions with the Office of Personnel
Management (OPM). USSOCOM is taking actions to fully reconcile intragovernmental transactions with all
Federal agencies.
Intergovernmental Activities: Goods and services are received from other federal agencies at no cost or at
a cost less than the full cost to the providing federal entity. Consistent with accounting standards, certain
costs of the providing entity that are not fully reimbursed by USSOCOM are recognized as imputed cost in
the Statement of Net Cost and are offset by imputed financing in the Statement of Changes in Net Position.
Imputed financing represents the cost paid on behalf of USSOCOM by another federal entity. In accordance
with SFFAS 55: Amending Inter-entity Cost Provisions, USSOCOM recognizes the general nature of
imputed costs only for business-type activities and other costs specifically required by OMB, including
employee pension, post-retirement health, and life insurance benefits. Unreimbursed costs of goods and
services other than those identified above are not included in USSOCOM’s financial statements.
The DoD’s proportionate share of public debt and related expenses of the Federal Government is not
included. The Federal Government does not apportion debt and its related costs to federal agencies. The
DoD’s financial statements do not report any public debt, interest, or source of public financing, whether
from issuance of debt or tax revenues.
For additional information, see Note 19, Disclosures Related to the Statement of Net Cost.
UNCLASSIFIED
UNCLASSIFIED
9
1.F. Non-Entity Assets
USSOCOM classifies assets as either entity or non-entity. Non-entity assets are not available for use in
USSOCOM’s normal operations. USSOCOM has stewardship accountability and reporting responsibility
for non-entity assets. An example of a non-entity asset is non-federal accounts receivable.
For additional information, see Note 2, Non-Entity Assets.
1.G. Fund Balance with Treasury (FBwT)
The FBwT represents the aggregate amount of USSOCOM’s available budget spending authority available
to pay current liabilities and finance future authorized purchases. USSOCOM’s monetary financial
resources of collections and disbursements are maintained in the Department of the Treasury (Treasury)
accounts. The disbursing offices of Defense Finance and Accounting Service (DFAS), the Military
Departments, U.S. Army Corps of Engineers (USACE), and Department of State's financial service centers
currently process the majority of USSOCOM's cash collections, disbursements, and adjustments
worldwide. Monthly, each disbursing station reports to the U.S. Treasury on checks issued, electronic fund
transfers, interagency transfers, and deposits. The model of using DoD’s disbursing systems instead of
Treasury’s system is recognized by Treasury as Non-Treasury Disbursing Office (NTDO). DoD is actively
migrating NTDO transactions to Treasury Disbursing Office (TDO) under the TDO Enterprise Strategy
effort. TDO is DoD’s target end state of executing payments and collections directly between DoD and
Treasury using Treasury’s systems and Treasury as the Service Provider. This posture will allow DoD to
achieve FBwT accountability and traceability through daily reconciliation and reporting directly with
Treasury.
In addition, DFAS and the USACE Finance Center submit reports to U.S. Treasury by appropriation on
interagency transfers, collections received, and disbursements issued. The Treasury records these
transactions to the applicable FBwT account.
FBwT and the accompanying liability for deposit funds are not reported by individual Other Defense
Organizations general fund but are reported in the Defense-wide general fund. As such, USSOCOM does
not report deposit fund balances on its financial statements.
For additional information, see Note 3, Fund Balance with Treasury.
1.H. Cash and Other Monetary Assets
USSOCOM does not have any cash reported on the financial statements.
1.I. Investments and Related Interest
USSOCOM does not invest in Securities.
1.J. Accounts Receivable
Accounts receivable from other federal entities or the public include accounts receivable, claims receivable,
and refunds receivable. Allowances for doubtful accounts (estimated uncollectible amounts) due from the
public are based upon factors such as aging of accounts receivable, debtor’s ability to pay, and payment
history.
For additional information, see Note 6, Accounts Receivable, Net.
1.K. Loans Receivable, Net and Loan Guarantee Liabilities
For additional information, see Note 7, Loans Receivable, Net and Loan Guarantee Liabilities.
UNCLASSIFIED
UNCLASSIFIED
10
1.L. Inventories and Related Property
USSOCOM currently does not have any inventory but does have related property.
Related property includes Operating Materials and Supplies (OM&S). OM&S, including munitions not held
for sale, are valued using various valuation methods. During prior years, USSOCOM inappropriately used
the Purchase Method of Accounting for OM&S and expensed all OM&S when procured. During Fiscal Year
(FY) 2021, USSOCOM commenced the adoption of the Consumption Method of Accounting for OM&S.
These efforts are still applicable for FY 2023.
USSOCOM restated its FY 2022 Financial Statements to correct a $373.4 million error identified in the
Inventory and Replated Property, Net line item. For additional information, see Note 8, Inventory and
Related Property and Note 28, Restatements.
1.M. General Property, Plant and Equipment (GPP&E)
USSOCOM generally records General PP&E at the historical cost. When applicable, USSOCOM will
continue to adopt SFFAS 50, which permits alternative methods in establishing opening balances effective
for periods beginning after September 30, 2016.
USSOCOM’s General PP&E is comprised of General Equipment (GE) and Construction-In-Progress (CIP).
Except for Real Property (RP) CIP, USSOCOM does not report any RP.
General PP&E assets are capitalized at historical acquisition cost when an asset has a useful life of two or
more years and when the acquisition cost equals or exceeds USSOCOM’s capitalization threshold.
USSOCOM capitalizes improvements to existing General PP&E assets if the improvements equal or
exceed the capitalization threshold and extend the useful life or increase the size, efficiency, or capacity of
the asset. USSOCOM depreciates all GE on a straight-line basis. USSOCOM does not meet the recognition
criteria to report RP (building, structures, and land) as described in the OUSD (Comptroller (C))
Memorandum, dated September 30, 2015, Accounting Policy Update for Financial Statement Reporting for
Real Property Assets. Therefore, all completed USSOCOM-funded RP CIP projects are transferred and
financially reported by the military departments/components. When it is in the best interest of the
government, USSOCOM provides government property to contractors to complete contract work.
USSOCOM either owns or leases such property, or it is purchased directly by the contractor for the
government based on contract terms. When the value of contractor-procured General PP&E exceeds
USSOCOM’s capitalization threshold, as required by federal accounting standards, USSOCOM reports on
its Balance Sheet.
For additional information, see Note 9, General PP&E, Net.
1.N. Other Assets
USSOCOM conducts business with commercial contractors under two primary types of contracts: fixed
price and cost reimbursable. USSOCOM may provide financing payments to contractors to alleviate the
potential financial burden from long-term contracts. Contract financing payments are defined in the Federal
Acquisition Regulation (FAR), Part 32, as authorized disbursements to a contractor prior to acceptance of
supplies or services by the Government. Contract financing payment clauses are incorporated in the
contract terms and conditions and may include advance payments, performance-based payments,
commercial advances and interim payments, progress payments based on cost, and interim payments
under certain cost-reimbursement contracts.
The Defense Federal Acquisition Regulation Supplement (DFARS) authorizes progress payments based
on a percentage or stage of completion only for construction of RP, shipbuilding, and ship conversion,
alteration, or repair. Progress payments based on percentage or stage of completion are reported as CIP.
Contract financing payments do not include invoice payments, payments for partial deliveries, lease and
rental payments, or progress payments based on a percentage or stage of completion.
UNCLASSIFIED
UNCLASSIFIED
11
For additional information, see Note 10, Other Assets.
1.O. Leases
Lease payments for the rental of equipment and operating facilities are classified as either capital or
operating leases. USSOCOM reports operating leases only; USSOCOM does not hold any capital leases
and is not a lessor in any lease arrangement. An operating lease does not substantially transfer all the
benefits and risk of ownership to USSOCOM. Payments for operating leases are expensed on a straight-
line basis over the lease term.
For additional information, see Note 16, Leases.
1.P. Liabilities
Liabilities represent the probable future outflow or other sacrifice of resources because of past transactions
or events. However, no liability can be paid by USSOCOM absent proper budget authority. Liabilities
covered by budgetary resources are appropriated funds for which funding is otherwise available to pay
amounts due. Budgetary resources include new budget authority, unobligated balances of budgetary
resources at the beginning of the year or net transfers of prior year balances during the year, spending
authority from offsetting collections, and recoveries of unexpired budget authority through downward
adjustments of prior year obligations. Liabilities are classified as not covered by budgetary resources when
congressional action is needed before they can be paid.
For additional information, see Note 11, Liabilities Not Covered by Budgetary Resources.
1.Q. Environmental and Disposal Liabilities
USSOCOM does not report any Environmental Liabilities.
1.R. Other Liabilities
Other liabilities include:
1) Accrued payroll consists of estimates for salaries, wages, and other compensation earned by
employees but not disbursed as of September 30, 2023, and September 30, 2022.
2) Earned annual and other vested compensatory leave is accrued as it is earned and reported on
the Balance Sheet. The liability is reduced as leave is taken. Each year, the balances in the accrued
leave accounts are adjusted to reflect the liability at current pay rates and leave balances. Sick
leave and other types of non-vested leave are expensed when used.
3) SFFAS 51: Insurance Programs, established accounting and financial reporting standards for
insurance programs. OPM administers insurance benefit programs available for coverage to
USSOCOM’s Civilian employees. The programs are available to Civilian employees, but
employees do not have to participate. These programs include life, health, and long-term care
insurance,
• The life insurance program, Federal Employee Group Life Insurance (FEGLI) plan is a term life
insurance benefit with varying amounts of coverage selected by the employee.
• The Federal Employees Health Benefits (FEHB) program is comprised of different types of
health plans that are available to Federal employees for individual and family coverage for
healthcare. Those employees meeting the criteria for coverage under FEHB may also enroll in
the Federal Employees Dental and Vision Insurance Program (FEDVIP). FEDVIP allows for
employees to have dental insurance and vision insurance to be purchased on a group basis.
UNCLASSIFIED
UNCLASSIFIED
12
• The Federal Long Term Care Insurance Program (FLTCIP) provides long term care insurance
to help pay for costs of care when enrollees need help with activities they perform every day,
or have a severe cognitive impairment, such as Alzheimer’s disease. To meet the eligibility
requirements for FLTCIP, employees must be eligible to participate in FEHB. However,
employees do not have to be enrolled in FEHB.
OPM, as the administrating agency, establishes the types of insurance plans, options for coverage,
the premium amounts to be paid by the employees and the amount and timing of the benefit
received. USSOCOM has no role in negotiating these insurance contracts and incurs no liabilities
directly to the insurance companies. Employee payroll withholding related to the insurance and
employee matches are submitted to OPM.
4) Custodial Liabilities represents liabilities for collections reported as non-exchange revenues where
USSOCOM is acting on behalf of another federal entity.
For additional information, see Note 13, Federal Employee and Veteran Benefits Payable and Note 15,
Other Liabilities.
1.S. Commitments and Contingencies
USSOCOM recognizes contingent liabilities on the Consolidated Balance Sheet for those legal actions
where management considers an adverse decision to be probable and the loss amount is reasonably
estimable. These legal actions are estimated and disclosed in Note 17, Commitments and Contingencies.
However, there are cases where amounts have not been accrued or disclosed because the likelihood of an
adverse decision is considered remote, or the amount of potential loss cannot be estimated.
Financial statement reporting is limited to disclosure when conditions for liability recognition do not exist but
there is at least a reasonable possibility of incurring a loss or additional losses. USSOCOM’s risk of loss
and resultant contingent liabilities arise mostly from pending or threatened litigation or claims and
assessments due to contract disputes.
USSOCOM does not have environmental contingencies.
For additional information, see Note 17, Commitments and Contingencies.
1.T. Federal Employee and Veteran Benefits
USSOCOM does not pay military payroll. Therefore, USSOCOM does not report any military retirement
and other federal employment benefits because such liabilities/costs are recorded on the financials
statements of the individual services.
For additional information, see Note 13, Federal Employee and Veteran Benefits Liability
1.U. Revenues and Other Financing Sources
USSOCOM receives congressional appropriations as financing sources for general funds. USSOCOM uses
these appropriations and funds to execute its missions, and subsequently reports on resource usage.
General funds are used for collections not earmarked by law for specific purposes, the proceeds of general
borrowing, and the expenditure of these moneys. DoD general fund appropriations cover costs including
personnel, operations and maintenance, research and development, procurement, and military
construction.
UNCLASSIFIED
UNCLASSIFIED
13
These funds either expire annually or some on a multi-year basis. When authorized by legislation, these
appropriations are supplemented by revenues generated by services provided. USSOCOM recognizes
revenue because of costs incurred for goods and services provided to other federal agencies and the public.
Full-cost pricing is USSOCOM’s standard policy for services provided as required by OMB Circular A-25:
User Charges. Currently, the majority of USSOCOM revenue is recognized due to the system limitations
within General Fund Enterprise Business System – Sensitive Activities (GFEBS-SA), which should be
eliminated.
In accordance with SFFAS 7: Accounting for Revenue and Other Financing Sources and Concepts
for Reconciling Budgetary and Financial Accounting, USSOCOM recognizes non-exchange revenue
when there is a specifically identifiable, legally enforceable claim to the cash or other assets of another
party that will not directly receive value in return.
1.V. Recognition of Expenses
DoD policy requires the recognition of operating expenses in the period incurred. Estimates are made for
major items such as payroll expenses and accounts payable.
In the case of OM&S, operating expenses are generally recognized when the items are purchased, but
recorded as assets later, in accordance with the consumption method. USSOCOM has been working to
input OM&S into the Accountable Property System of Record (APSR), Defense Property Accountability
System (DPAS), and is continuing the analysis to refine the Consumption Method of Accounting.
1.W. Budgetary Resources
The purpose of federal budgetary accounting is to control, monitor, and report on funds made available to
federal agencies by law and help ensure compliance with the law.
The following budgetary terms are commonly used:
Appropriation is a provision of law (not necessarily in an appropriations act) authorizing the expenditure of
funds for a given purpose. Usually, but not always, an appropriation provides budget authority.
Budgetary resources are amounts available to incur obligations each year. Budgetary resources consist of
new budget authority and unobligated balances of budget authority provided in previous years.
Obligation is a binding agreement that will result in outlays, immediately or in the future. Budgetary
resources must be available before obligations can be incurred legally.
Offsetting Collections are payments to the Government that, by law, are credited directly to expenditure
accounts and deducted from gross budget authority and outlays of the expenditure account, rather than
added to receipts. Usually, offsetting collections are authorized to be spent for the purposes of the account
without further action by Congress. They usually result from business-like transactions with the public,
including payments from the public in exchange for goods and services, reimbursements for damages, and
gifts or donations of money to the Government and from intragovernmental transactions with other
Government accounts. The authority to spend collections is a form of budget authority.
Offsetting receipts are payments to the Government that are credited to offsetting receipt accounts and
deducted from gross budget authority and outlays, rather than added to receipts. Usually, they are deducted
at the level of the agency and sub function, but in some cases, they are deducted at the level of the
Government as a whole. They are not authorized to be credited to expenditure accounts. The legislation
that authorizes the offsetting receipts may earmark them for a specific purpose and either appropriate them
for expenditures for that purpose or require them to be appropriated in annual appropriations acts before
they can be spent. Like offsetting collections, they usually result from business-like transactions with the
public, including payments from the public in exchange for goods and services, reimbursements for
UNCLASSIFIED
UNCLASSIFIED
14
damages, and gifts or donations of money to the Government, and from intragovernmental transactions
with other Government accounts.
Outlays are the liquidation of an obligation that generally takes the form of an electronic funds transfer.
Outlays are reported both gross and net of offsetting collections and they are the measure of Government
spending.
1.X. Treaties for Use of Foreign Bases
USSOCOM does not report any treaties for use of foreign bases.
1.Y. Use of Estimates
USSOCOM’s management makes assumptions and reasonable estimates in the preparations of financial
statements based on current conditions, which may affect the reported amounts. Actual results could differ
materially from the estimated amounts. Significant estimates include such items as year-end accruals of
accounts payable.
1.Z. Parent-Child Reporting
USSOCOM receives it’s funding from OSD. USSOCOM is also party to allocation transfers with other DoD
entities as a receiving (child) entity. An allocation transfer is an entity’s legal delegation of authority to
obligate budget authority and outlay funds on its behalf. A separate fund account (allocation account) is
created in the U.S. Treasury as a subset of the parent fund account for tracking and reporting purposes. All
allocation transfers of balances are credited to this account; and subsequent obligations and outlays
incurred by the child entity are charged to this allocation account as they execute the delegated activity on
behalf of the parent entity. Generally, all financial activity related to allocation transfers (e.g., budget
authority, obligations, outlays) is reported in the financial statements of the parent entity.
As of September 30, 2023, and 2022, USSOCOM received allocation transfers from the following agencies:
Defense Acquisitions University (DAU), Defense Threat Reduction Agency (DTRA) and Defense Security
Cooperation Agency (DSCA).
1.AA. Transactions with Foreign Governments and International Organizations
USSOCOM does not report any transactions with Foreign Governments and International Organizations.
1.AB. Fiduciary Activities
USSOCOM does not report any fiduciary activities.
1.AC. Tax Exempt Status
As an agency of the federal government, USSOCOM is exempt from all income taxes imposed by any
governing body whether it is a federal, state, commonwealth, local, or foreign government.
1.AD. Standardized Balance Sheet, the Statement of Changes in Net Position and Related Footnotes
– Comparative Year Presentation
In 2022, the format of the Balance Sheet was changed to reflect more detail for certain line items
(specifically, net position), as required for all significant reporting entities by OMB Circular A-136. This
change does not affect totals for assets, liabilities, or net position and is intended to allow readers of this
Report to see how the amounts shown on the DoD-wide Balance Sheet are reflected on the Government-
wide Balance Sheet, thereby supporting the preparation and audit of the Financial Report of the United
States Government. The presentation of the fiscal year 2022 Balance Sheet and the related footnotes was
modified to be consistent with the fiscal year 2023 presentation. The mapping of U.S. Standard General
UNCLASSIFIED
UNCLASSIFIED
15
Ledger (USSGL) accounts, in combination with their attributes, to particular Balance Sheet lines and
footnotes is directed by the guidance published periodically under TFM, USSGL Bulletins, Section V. The
footnotes affected by the modified presentation and other 2023 updates to the footnote templates are Note
5, Investments; Note 7, Loans Receivable, Net and Loan Guarantee Liabilities; Note 14 Environmental and
Disposal Liabilities and Note 24, Reconciliation of Net Cost to Net Outlays
UNCLASSIFIED
UNCLASSIFIED
16
Note 2.
Non-Entity Assets - Unaudited
Table 2. Non-Entity Assets
As of September 30
2023
Restated
2022
(Amounts in thousands)
1. Non-Federal Assets
A. Accounts Receivable
$
12
$
2
B. Total Non-Federal Assets
$
12
$
2
2. Total Non-Entity Assets
$
12
$
2
3. Total Entity Assets
$
18,713,703
$
18,260,304
4. Total Assets
$
18,713,715,
$
18,260,306
During FY 2023, USSOCOM restated its FY 2022 Financial Statements to correct an error for an
understatement of $373.4 million identified in the OM&S line items. See Note 28 Restatements for additional
information.
SFFAS 1: Accounting for Selected Assets and Liabilities, states assets available to an entity to use in its
operations are entity assets, while those assets not available to an entity but held by the entity are nonentity
assets. While both entity and non-entity assets are to be reported on the financial statements, the standards
require segregation of these asset types. In addition, a liability must be recognized in an amount equal to
non-entity assets (See Note 15, Other Liabilities). Based on this guidance, USSOCOM has stewardship
accountability and reporting responsibility for nonentity assets.
Non-federal Assets - A
ccounts Receivable (Public)
The primary component of nonentity accounts receivable is the public receivable data call adjustment. The
balance reports the interest, penalties, and fines as of September 30, 2023, and September 30, 2022. Each
quarter, a manual input of Treasury Report on Receivables (TROR) informs the entry through a journal
voucher into the Defense Departmental Reporting System (DDRS) to ensure the ending balance of the trial
balance reconciles to the source system. Generally, USSOCOM cannot use these proceeds and must remit
them to the U.S. Treasury unless permitted by law.
UNCLASSIFIED
UNCLASSIFIED
17
Note 3.
Fund Balance with Treasury - Unaudited
Table 3. Status of Fund Balance with Treasury
As of September 30
2023
2022
(Amounts in thousands)
1. Unobligated Balance:
A. Available
$
1,217,382
$
1,439,730
B. Unavailable
619,222
533,436
Total Unobligated Balance
$
1,836,604
$
1,973,166
2. Obligated Balance not yet
Disbursed
$
11,164,827
$
10,738,536
3. Non-Budgetary FBwT:
Total Non-Budgetary FBwT
$
0
$
0
4. Non-FBwT Budgetary
Accounts:
A. Unfilled Customer Orders
without Advance
$
(770,918)
$
(742,437)
B. Receivables and Other
(66,396)
(51,760)
Total Non-FBwT Budgetary
Accounts
$
(837,314)
$
(794,197)
5. Total FBwT
$
12,164,117
$
11,917,505
The Treasury records cash receipts and disbursements on USSOCOM’s behalf; funds are available only
for the purposes for which the funds were appropriated. USSOCOM FBwT consists of appropriation
accounts.
The Status of FBwT reflects the reconciliation between the budgetary resources supporting FBwT (largely
consisting of Unobligated Balance and Obligated Balance Not Yet Disbursed) and those resources provided
by other means. The Total FBwT reported on the Balance Sheet reflects the budgetary authority remaining
for disbursements against current or future obligations.
Unobligated Balance is classified as available or unavailable and represents the cumulative amount of
budgetary authority set aside to cover future obligations. The available balance consists primarily of the
unexpired, unobligated balance that has been apportioned and available for new obligations.
The unavailable balance consists primarily of unobligated appropriation from prior years (expired) that are
no longer available for new obligations.
UNCLASSIFIED
UNCLASSIFIED
18
Due to Coronavirus Aid, Relief and Economic Security (CARES) Act appropriations received during FY
2020, USSOCOM reported additional FBwT over prior years. See Note 29, COVID-19 Activity.
Obligated Balance not yet disbursed represents funds obligated for goods and services but not paid.
Based on Table 3 above, Non-FBwT Budgetary Accounts, such as unfilled customer orders and other
receivables, create budget authority and unobligated balances, but do not record to FBwT as there has
been no receipt of cash or direct budget authority, such as appropriations.
Unfilled Customer Orders Without Advance - Receivables provides budgetary resources when recorded.
FBwT is only increased when reimbursements are collected, not when orders are accepted or have been
earned.
Material discrepancies exist between FBwT as reflected in USSOCOM general ledger and the balance per
U.S. Treasury records. The FBwT reported in the financial statements has been adjusted to reflect
USSOCOM’s balance as reported by Treasury. The difference between FBwT in USSOCOM’s general
ledgers and FBwT reflected in Treasury accounts is attributable to transactions that have not been posted
to the individual detailed accounts in USSOCOM’s general ledger, because of timing differences or the
inability to obtain valid accounting information prior to the issuance of the financial statements. USSOCOM
continues to work with its service provider to determine the accurate total undistributed amount. When
research is completed, these transactions will be recorded in the appropriate individual detailed accounts
in USSOCOM’s general ledger accounts.
UNCLASSIFIED
UNCLASSIFIED
19
Note 4.
Cash and Other Monetary Assets - Unaudited
For more information, see, Note 1.H, Cash and Other Monetary Assets.
UNCLASSIFIED
UNCLASSIFIED
20
Note 5.
Investments and Related Interest - Unaudited
For more information, see, Note 1.I., Investments and Related Interest.
UNCLASSIFIED
UNCLASSIFIED
21
Note 6.
Accounts Receivable, Net - Unaudited
Table 6. Accounts Receivable, Net
As of September 30
2023
Gross Amount Due
Allowance For Estimated
Uncollectibles
Accounts Receivable, Net
(Amounts in thousands)
1. Intragovernmental
Receivables
$
81,243
$
(15)
$
81,228
2. Non-Federal
Receivables (From
the Public)
$
(11,518)
$
(406)
$
(11,924)
3. Total Accounts
Receivable
$
69,725
$
( 421)
$
69,304
As of September 30
2022
Gross Amount Due
Allowance For Estimated
Uncollectibles
Accounts Receivable, Net
(Amounts in thousands)
1. Intragovernmental
Receivables
$
49,338
$
0
$
49,338
2. Non-Federal
Receivables (From
the Public)
$
2,330
$
(442)
$
1,888
3. Total Accounts
Receivable
$
51,668
$
(442)
$
51,226
UNCLASSIFIED
UNCLASSIFIED
22
Gross receivables, including federal receivables, must be reduced to net realizable value by an allowance
for doubtful accounts (estimated uncollectible amounts) in accordance with SFFAS 1 and Technical Bulletin
2020-1, Loss Allowance for Intragovernmental Receivables. Loss allowance recognition for
intragovernmental receivables does not alter the statutory requirements for the debtor agency to make the
payment or for the collecting agency to seek and obtain payment. USSOCOM has opted not to include
federal receivables in the calculation for the allowance. Historically, USSOCOM’s federal aged receivables
have been immaterial and have not been delinquent greater than two years. Additionally, per SFFAS 1,
Losses on receivables should be recognized when it is more likely than not that the receivables will not be
totally collected. USSOCOM’s federal receivables have shown to be more likely to be collected timely.
Accounts receivable represents USSOCOM’s claim for payment from other entities. Claims with other
federal agencies are resolved in accordance with the business rules published in Appendix 5 of Treasury
Financial Manual, Volume I, Part 2; Chapter 4700. USSOCOM uses historical public accounts receivable
data to compute the allowance for doubtful accounts. Amounts with an age greater than two years are
considered doubtful for collection; these amounts are used in the allowance calculation.
USSOCOM does not currently have any cases that have generated an order for criminal restitution.
UNCLASSIFIED
UNCLASSIFIED
23
Note 7.
Loans Receivable, Net and Loan Guarantee Liabilities - Unaudited
For more information, see Note 1.K., Loans Receivable, Net and Loan Guarantee Liabilities.
UNCLASSIFIED
UNCLASSIFIED
24
Note 8.
Inventory and Related Property, Net - Unaudited
Table 8A. Inventory and Related Property
As of September 30
2023
Restated
2022
(Amounts in thousands)
1. Operating Materiel & Supplies, Net
$
3,084,768
$
2,898,127
2. Total Inventory and Related Property, Net
$
3,084,768
$
2,898,127
USSOCOM does not have inventory, seized property, forfeited property, foreclosed property, goods held
under price support and stabilization programs and seized or forfeited digital assets.
See Table 8C., OM&S Categories for further information.
Table 8B. OM&S Categories
As of September 30
2023
OM&S,
Gross Value
Revaluation
Allowance
OM&S, Net
Valuation
Method
(Amounts in thousands)
A. Held for Use
$
2,785,486
$
0
$
2,785,486
Note1
B. Held in Reserve for
Future Use
217,018
0
217,018
Note1
C. Held for Repair
82,264
0
82,264
Note1
D. Excess, Obsolete,
and Unserviceable
87,854
(87,854)
0
NRV
E. Total
$
3,172,622
$
(87,854)
$
3,084,768
UNCLASSIFIED
UNCLASSIFIED
25
As of September 30
Restated
2022
OM&S,
Gross Value
Revaluation
Allowance
OM&S, Net
Valuation
Method
(Amounts in thousands)
A. Held for Use
$
2,659,574
$
0
$
2,659,574
Note1
B. Held in Reserve for
Future Use
166,315
0
166,315
Note1
C. Held for Repair
72,238
0
72,238
Note1
D. Excess, Obsolete,
and Unserviceable
8,238
(8,238)
0
NRV
E. Total
$
2,906,365
$
(8,238)
$
2,898,127
Legend for Valuation Methods:
Note 1: Moving Average Cost, Direct Method, Historical Cost,
Replacement Price and Standard Price
NRV = Net Realizable Value
USSOCOM’s Related Property is comprised of two OM&S asset categories: Munitions and Uninstalled
Aircraft Engines (UAE). USSOCOM is currently reporting fixed wing UAE procured with Major Force
Program (MFP)-11 funds. These asset values will be based on deemed cost. USSOCOM recognizes the
latter is not in compliance with SFFAS 3 in this regard and continues to work towards developing processes
to implement historical cost under the Consumption Method of Accounting.
During FY 2023, USSOCOM restated the FY 2022 financial statements to correct an error due to not
reporting USSOCOM OM&S held at an Army wholesale location. The restatement corrected an
understatement of $373.4 million to USSOCOM’s OM&S line items in FY 2022. See Note 28 Restatements
for further information.
USSOCOM is reporting munitions procured with MFP-11 funds. Further, with Navy concurrence,
USSOCOM reports all munitions assets at the Naval Special Warfare Command (NSWC). Navy transferred
ownership of any Navy-procured MFP-2 funded munitions held by NSWC to USSOCOM for financial
reporting. This is consistent with the policy for reporting General Equipment assets held by NSWC. These
are valued by Moving Average Cost (MAC). All remaining munitions are currently valued using Standard
Price based on annual Execution Price Lists (EPL) or current catalog pricing. USSOCOM continues to work
towards developing processes to implement MAC under the Consumption Method of Accounting.
The values of each OM&S category were determined according to asset condition codes per the DoD
4000.25-2-M, Military Transaction Reporting and Accounting Procedures. Net realizable value is the
estimated amount that can be recovered from selling or disposing of an item less the estimated costs of
completion, holding and disposal. The “net realizable value” for materials classified as Excess, Obsolete,
and Unserviceable is zero. As a result, this balance has been written down to zero with the use of the
OM&S allowance account.
Underlying economic event details pertaining to OM&S have been largely unavailable. This is primarily due
to OM&S tracking issues and system limitations. As of FY 2023, USSOCOM can report OM&S based on
the underlying activities for acquisitions, purchases, disposals, gains, or losses for Munitions and UAE.
UNCLASSIFIED
UNCLASSIFIED
26
Currently, USSOCOM is unaware of any restrictions on the use of OM&S.
USSOCOM is in the process of applying deemed costs methods, in accordance with SFFAS 48 and/or
SFFAS 3, to establish opening balances for OM&S. USSOCOM is currently not making its unreserved
assertion to the completeness, valuation and accuracy of the OM&S beginning balances as of September
30, 2023, and 2022. See above, for additional information related to valuation methods. USSOCOM’s
systems, and the controls related to them, are not effective to support the fair presentation of the recorded
balances in accordance with GAAP.
Both UAE and munitions are aligned to OM&S categories based on Federal Supply Condition Codes as
noted in the respective material management system.
UNCLASSIFIED
UNCLASSIFIED
27
Note 9.
General PP&E, Net - Unaudited
Table 9A. Major General PP&E Asset Classes
As of September 30
2023
Depreciation/
Amortization
Method
Service
Life
Acquisition
Value
(Accumulated
Depreciation/
Amortization)
Net Book
Value
(Amounts in thousands)
1. Major Asset
Classes
A. General
Equipment
S/L
Various
$
4,404,218
$
(2,785,925)
$
1,618,293
B.Construction-in-
Progress
N/A
N/A
1,503,133
N/A
1,503,133
C. Total General
PP&E
$
5,907,351
$
(2,785,925)
$
3,121,426
As of September 30
2022
Depreciation/
Amortization
Method
Service
Life
Acquisition
Value
(Accumulated
Depreciation/
Amortization)
Net Book
Value
(Amounts in thousands)
1. Major Asset
Classes
A. General
Equipment
S/L
Various
$
4,778,255
$
(2,846,725)
$
1,931,530
B.Construction-in-
Progress
N/A
N/A
1,338,620
N/A
1,338,620
C. Total General
PP&E
$
6,116,876
$
(2,846,725)
$
3,270,150
Legend for Valuation Methods:
S/L = Straight Line N/A = Not Applicable
Estimated useful service life is 5, 10, 15, 20, 25 or 30 years depending on the General Equipment categories as
defined in DOD 7000.14-R, Volume 4, Chapter 25.
USSOCOM’s current capitalization threshold is $250 thousand. However, General Equipment assets
initially procured and expensed by the Military services, who have capitalization thresholds of $1,000,000,
and subsequently transferred to USSOCOM remain expensed. Therefore, select USSOCOM General
Equipment assets with an acquisition cost between $250,000 - $999,999.99 are not included in
USSOCOM’s GPP&E balance on the balance sheet. USSOCOM financially reports all capital GPP&E
assets procured with MFP-11 funds for all Components/TSOCs; Plus NSWC, with Navy concurrence, which
includes MFP-2 funded assets. There are no restrictions on the use or convertibility of GPP&E.
UNCLASSIFIED
UNCLASSIFIED
28
USSOCOM does not have acquisition values or acquisition dates for a portion of the GPP&E population
and uses deemed cost methodologies to provide GPP&E values for financial statement reporting purposes.
USSOCOM does have acquisition values for GPP&E acquired in recent years.
Within FY 2023 and FY 2022, accounting adjustments were made to the USSOCOM’s GE assets to ensure
accuracy of values based on ongoing audit remediation efforts. These accounting adjustments were
recognized in gain/loss accounts when auditable data was not available to support restatement of prior
period financial statements.
Throughout FY 2022, USSOCOM worked to continually improve its GE financial reporting process and
data. These efforts continued throughout FY 2023.
Table 9B. Heritage Assets
For the Period Ended
September 30
2023
(physical count)
Categories:
Beginning
Balance
Additions (Deletions)
Ending
Balance
Museum Collection Items
(Objects, Not Including
Fine Art)
8,166
10
(1)
8,175
Museum Collection Items
(Objects, Fine Art)
774
0
0
774
For the Period Ended
September 30
2022
(physical count)
Categories:
Beginning
Balance
Additions (Deletions)
Ending
Balance
Museum Collection Items
(Objects, Not Including
Fine Art)
8,174
0
(8)
8,166
Museum Collection Items
(Objects, Fine Art)
785
0
(11)
774
Heritage Assets
USSOCOM’s policy focuses on the preservation of its heritage assets, which are items of historical, cultural,
educational, or artistic importance. Heritage assets consist of museum collections. The heritage assets do
not relate to USSOCOM mission and are not reported on the financial statements.
Museum Collection Items
Museum collection items are items that have historical or natural significance; cultural, educational, or
artistic (including fine art, items such as portraits and artist depictions or historical value); or significant
technical or architectural characteristics.
During FY 2023, one Heritage asset was removed from the USSOCOM property system, as it was found
to be owned by the Naval Historical and Heritage Command. A total of ten items were added; these included
hull pieces (Historical Metal) of the USS Arizona and three radios from the U.S. Army Signal Corp Museum.
Previously obtained items found and not previously added to the accountable property system included a
UNCLASSIFIED
UNCLASSIFIED
29
jewelry box, Portrait BG William R. “Ray” Peers, Mine Marker German WWII, Experimental Radio OSS
WWII, Unofficial Chairborne Ranger Patch, and Oval Parachute.
Stewardship Land
USSOCOM does not have any stewardship land.
Table 9C. General PP&E, Net ‒ Summary of Activity
For the period ended September 30
2023
2022
(Amounts in thousands)
1. General PP&E, Net beginning of year
$
3,270,150
$
3,576,635
2. Capitalized acquisitions
950,937
560,112
3. Dispositions
(34,910)
(15,487)
4. Transfers in/(out) without reimbursement
(528,978)
(582,308)
5. Revaluations (+/-)
(668,447)
(34,447)
6. Depreciation expense
71,090
(234,355)
7. Other (+/-)
61,584
0.00
8. General PP&E, Net end of year
$
3,121,426
$
3,270,150
UNCLASSIFIED
UNCLASSIFIED
30
Note 10.
Other Assets - Unaudited
Table 10. Other Assets
As of September 30
2023
2022
(Amounts in thousands)
1. Intragovernmental
A. Other Assets
$
45
$
45
B. Total Intragovernmental
$
45
$
45
2. Other than Intragovernmental
A. Outstanding Contract Financing Payments
$
265,873
$
115,376
B. Advances and Prepayments
8,182
7,878
C. Subtotal
274,055
123,254
D. Less: “Outstanding Contract Financing
Payments” and “Advance and Prepayments”
totaled and presented on the Balance Sheet
as “Advances and Prepayments”
(274,055)
(123,254)
3. Total Other Assets
$
45
$
45
Outstanding Contract Financing Payments, a separate classification of advances and prepayments,
includes contract financing payments made in contemplation of the future performance of services, receipt
of goods, incurrence of expenditures or receipt of other assets.
Contract terms and conditions for certain types of contract financing payments convey certain rights to
USSOCOM protecting the contract work from state or local taxation, liens or attachment by the contractors’
creditors, transfer of property, or disposition in bankruptcy. However, these rights should not be
misconstrued to mean that ownership of the contractor’s work has transferred to USSOCOM. USSOCOM
does not have the right to take the work, except as provided in contract clauses related to termination or
acceptance. USSOCOM is not obligated to make payment to the contractor until delivery and acceptance.
Outstanding Contract Financing Payments are estimated future payments to contractors upon delivery and
government acceptance.
Advances and Prepayments are made in contemplation of the future performance of services, receipt of
goods, incurrence of expenditures, or receipt of other assets, excluding those made as Outstanding
Contract Financing Payments.
UNCLASSIFIED
UNCLASSIFIED
31
Note 11.
Liabilities Not Covered by Budgetary Resources - Unaudited
Table 11. Liabilities Not Covered by Budgetary Resources
As of September 30
2023
2022
(Amounts in thousands)
1. Intragovernmental Liabilities
A. Accounts payable
$
850
$
640
B. Total Intragovernmental Liabilities
$
850
$
640
2. Other than Intragovernmental Liabilities
A. Accounts payable
$
142,771
$
161,281
B. Federal employee and veteran benefits
payable
65,155
63,908
C. Other liabilities
400
200
D. Total Other than Intragovernmental
Liabilities
$
208,326
$
225,389
3. Total Liabilities Not Covered by
Budgetary Resources
$
209,176
$
226,029
4. Total Liabilities Covered by Budgetary
Resources
$
2,503,875
$
676,024
5. Total Liabilities
$
2,713,051
$
902,053
Liabilities Not Covered by Budgetary Resources require future congressional action whereas liabilities
covered by budgetary resources reflect prior congressional action. USSOCOM fully expects to receive the
necessary resources to cover these liabilities in future years. See Note 13, Federal Employee and Veteran
Benefits Payable, for additional information related to 2.B., Federal employee and veteran benefits payable,
in the table above.
Non-federal accounts payable not covered by budgetary resources represent amounts that are related to
canceled appropriations. Other than Intragovernmental liabilities are related to legal contingencies. These
amounts will require resources that are funded from future-year appropriations. For additional information,
see Note 17, Commitments and Contingencies.
Intragovernmental Accounts Payable primarily represent liabilities in canceled appropriations, which, if paid,
will be disbursed using current year funds.
Federal Employee and Veteran Benefits Payable consists of benefits that will be paid in the future. For
additional information, see Note 13, Federal Employee and Veteran Benefits Payable.
UNCLASSIFIED
UNCLASSIFIED
32
Note 12.
Debt - Unaudited
USSOCOM does not have Federal Debt and Interest Payable.
UNCLASSIFIED
UNCLASSIFIED
33
Note 13.
Federal Employee and Veteran Benefits Payable - Unaudited
Table 13A. Federal Employee and Veteran Benefits Liability
As of September 30
2023
Liabilities
(Assets Available to Pay
Benefits)
Unfunded Liabilities
(Amounts in thousands)
1. Federal Employee
and Veteran Benefits
Payable (presented
separately on the
Balance Sheet)
65,896
( 741)
65,155
2. Other benefit-related
payables included in
Intragovernmental
Other Liabilities on the
Balance Sheet
5,134
(5,134)
0
3. Total Federal
Employee and
Veteran Benefits
Payable
$
71,030
$
(5,875)
$
65,155
.
As of September 30
2022
Liabilities
(Assets Available to
Pay Benefits)
Unfunded Liabilities
(Amounts in thousands)
1. Federal Employee
and Veteran Benefits
Payable (presented
separately on the
Balance Sheet)
66,614
(2,706)
63,908
2. Other benefit-related
payables included in
Intragovernmental
Other Liabilities on the
Balance Sheet
4,440
(4,440)
0
3. Total Federal
Employee and
Veteran Benefits
Payable
$
71,054
$
(7,146)
$
63,908
.
UNCLASSIFIED
UNCLASSIFIED
34
Other Benefit-Related Payables Included in Intragovernmental Other Liabilities on the Balance
Sheet
Other Benefit-Related Payables Included in Intragovernmental Other Liabilities on the Balance Sheet
includes Employer Contributions and Payroll Taxes Payable. It represents the employer portion of payroll
taxes and benefit contributions for health benefits, retirement, life insurance and voluntary separation
incentive payments.
Federal Employee Ben
efits
Other Benefits includes Accrued Unfunded Annual Leave liabilities and are related to unfunded employee
leave. These amounts will require resources that are funded from future-year appropriations. Unfunded
civilian leave is funded as leave is taken. As of September 30, 2023, there was $65.1 million versus $63.9
million as of September 30, 2022, of accrued unfunded annual leave.
Reconciliation of Beginning and Ending Liability Balances for Military Retirement and Other
Federal Employee Benefits
USSOCOM does not pay military payroll. Therefore, USSOCOM does not report any military retirement
and other federal employment benefits because such liabilities/costs are recorded on the financials
statements of the individual services.
UNCLASSIFIED
UNCLASSIFIED
35
Note 14.
Environmental and Disposal Liabilities - Unaudited
For more additional information, see Note 1.S., Commitments and Contingencies.
UNCLASSIFIED
UNCLASSIFIED
36
Note 15.
Other Liabilities - Unaudited
Table 15A. Other Liabilities
As of September 30
2023
Current
Liability
Non-Current
Liability
Current
Liability
(Amounts in thousands)
1. Intragovernmental
A. Liabilities for non-entity
assets
$
10
$
1
$
11
B. Other liabilities
(397)
0
( 397)
C. Subtotal
( 387)
1
( 386)
D. Other Liabilities reported
on Note 13, Federal
Employee and Veteran
Benefits Payable
5,134
0
5,134
E. Total Intragovernmental
$
4,747
$
1
$
4,748
2. Other than
Intragovernmental
A. Accrued funded payroll
and leave
$
35,076
$
0
$
35,076
B. Withholdings payable
47
0
47
C. Contract holdbacks
3,264
0
3,264
D. Contingent liabilities
0
400
400
E. Other liabilities with related
budgetary obligations
(164)
0
( 164)
F. Total Other than
Intragovernmental
$
38,223
$
400
$
38,623
3. Total Other Liabilities
$
42,970
$
401
$
43,371
As of September 30
2022
Current
Liability
Non-Current
Liability
Total
(Amounts in thousands)
1. Intragovernmental
A. Liabilities for non-entity
assets
$
10
$
(9)
$
1
B. Other liabilities
(356)
0
( 356)
UNCLASSIFIED
UNCLASSIFIED
37
As of September 30
2022
Current
Liability
Non-Current
Liability
Total
C. Subtotal
( 346)
( 9)
( 355)
D. Other Liabilities reported
on Note 13, Federal
Employee and Veteran
Benefits Payable
4,440
0
4,440
E. Total Intragovernmental
$
4,094
$
( 9)
$
4,085
2. Other than
Intragovernmental
A. Accrued funded payroll and
leave
$
33,680
$
0
$
33,680
B. Withholdings payable
203
0
203
C. Contract holdbacks
5,864
0
5,864
D. Contingent liabilities
0
200
200
E. Other liabilities with related
budgetary obligations
359
0
359
F. Total Other than
Intragovernmental
$
40,106
$
200
$
40,306
3. Total Other Liabilities
$
44,200
$
191
$
44,391
Table 15B. Advances from Others and Deferred Revenue (reported separately from Other Liabilities
on the Balance Sheet):
As of September 30
2023
2022
(Amounts in thousands)
A. Intragovernmental
$
2,341
$
7,677
B. Other than Intragovernmental
$
(12)
$
(3,064)
Advances from Others and Deferred Revenue
Advances from Others and Deferred Revenue represent liabilities for collections received to cover future
expenses or acquisition of assets USSOCOM incurs or acquires on behalf of another organization.
Liabilities for Non-En
tity Assets
Intragovernmental liabilities for Non-entity assets represents offsetting liabilities for non-entity assets where
USSOCOM is acting on behalf of another Federal entity. For example, non-entity receivables that, upon
collection, will be remitted to Treasury. For balances reported during FY 2023 and FY 2022, USSOCOM is
reporting penalties, fines, interest as non-entity assets that are payable to the Department of Treasury.
UNCLASSIFIED
UNCLASSIFIED
38
Intragovernmental Other Liabilities
Other Liabilities primarily consists of the liquidation of liabilities with related budgetary obligation
transactions ingested into DDRS from the Naval Sea Systems Command (NAVSEA). The balance is
abnormal due to timing issues and with the original invoice being reported as Non-Federal. NAVSEA is
working to implement new systems and processes that should resolve the issue in the future. This error is
immaterial and does not impact any other line items.
Accrued Funded Payroll and Benefits
Accrued Funded Payroll and Benefits consist of amounts for civilian employee’s payroll and benefits that
are funded out of the current year appropriations. It includes the FEGLI, FLTCIP and FEHB. For additional
information, see Note 1.R., Other Liabilities.
Withholdings Payable
Withholdings Payable is the amount withheld from employees' salaries for taxes, employee benefit
contributions, wage garnishments, and other withholdings. This account does not close at yearend.
Contract Holdbacks
Contract Holdbacks are amounts withheld from grantees or contractors pending completion of related
contracts.
Contingent Liabilities
Contingent Liabilities for FY 2023 includes legal contingent liabilities. For additional information, see Note
17, Commitments and Contingencies.
Non-Federal Other Liabilities
For additional information, see Intragovernmental Other Liabilities, above.
UNCLASSIFIED
UNCLASSIFIED
39
Note 16.
Leases - Unaudited
Entity as Lessee
Capital Leases
For additional information, see Note 1.O., Leases.
Operating Lease
T
able 16. Entity as Lessee - Future Payments Due for Non-Cancelable Operating Leases
As of September 30
2023
Asset Category
Land and Buildings
Equipment
Other
Total
(Amounts in thousands)
1. Federal
Fiscal Year
2024
$
5,541
$
0
$
0
$
5,541
2025
2,519
0
0
2,519
2026
1,161
0
0
1,161
2027
967
0
0
967
2028
0
0
0
0
After 5 Years
0
0
0
0
Total Federal Future
Lease Payments $ 10,188 $ 0 $
0 $ 10,188
2. Non-Federal
Fiscal Year
2024
$
5,449
$
477
$
0
$
5,926
2025
4,304
484
0
4,788
2026
3,587
484
0
4,071
2027
2,620
330
0
2,950
2028
1,714
0
0
1,714
After 5 Years
715
0
0
715
Total Non-Federal
Future Lease Payments $ 18,389 $ 1,775 $
0 $ 20,164
3. Total Future Lease
Payments $ 28,577 $ 1,775 $
0 $ 30,353
UNCLASSIFIED
UNCLASSIFIED
40
D
escription of Lease Arrangements:
T
he future payments due for operating leases disclosed in the “Future Payments Due for Non-Cancelable
Operating Leases” Table are for non-cancelable leases only.
U
SSOCOM gathers operating lease information from all its Components and TSOCs via a data call and
uses the information to populate Note 16. With this data call, it was found that USSOCOM does not have
any leases related to the “Other” category in FY 2023 and FY 2022. USSOCOM only has leases related to
buildings, land, and equipment. Leases related to land and buildings range in date from April 1, 2007, to
September 29, 2029. Equipment leases range in date September 9, 2022, to August 31, 2027.
S
pecifically, USSOCOM has federal facilities leases with terms that range from August 1, 2017, to July 31,
2027.
U
SSOCOM currently has non-federal leases for facilities and equipment. The facilities leases include
modular and Military Information Support Operations (MISO) facilities located at MacDill, Air Force Base
(AFB), Yokota Japan Air Base, Hurlburt Field, and Cannon AFB. The dates for these leases range from
April 1, 2007, to September 29, 2029.
The non-federal equipment leases include multifunctional devices, production copiers, and containers. The
date range for the leases is September 9, 2022, to August 31, 2027.
U
SSOCOM uses the escalation clauses for the future year payments. The escalation clauses are retrieved
from the FY 2023 President’s Budget. The escalation clauses are percentages that reflect the annual future
inflation rates. Each future year operating lease balance is multiplied by the percentage to calculate the
future lease payments.
E
ntity as Lessor
C
apital Leases:
F
or additional information, see Note 1.O., Leases.
Operating Leases:
F
or additional information, see Note 1.O., Leases.
UNCLASSIFIED
UNCLASSIFIED
41
Note 17.
Commitments and Contingencies - Unaudited
USSOCOM is a party in various administrative proceedings, legal actions, and other claims awaiting
adjudication that may result in settlements or decisions adverse to the Federal government. These matters
arise in the normal course of operations; generally related to equal opportunity, and contractual matters;
and their ultimate disposition is unknown. In the event of an unfavorable judgment against the Government,
some of the settlements are expected to be paid from the Treasury Judgment Fund. In most cases,
USSOCOM does not have to reimburse the Judgment Fund; reimbursement is only required when the case
comes under either the Contracts Disputes Act or the No FEAR Act.
Not all claims that may involve USSOCOM in some way are reported. For example, in the case of tort
claims filed against the United States under the Federal Tort Claims Act, our lawyers do not give
substantive attention to, or represent USSOCOM in connection with, such cases. Moreover, USSOCOM
is not authorized to settle and pay tort claims, which authority is reserved to the Military Departments.
In accordance with SFFAS 5: Accounting for Liabilities of the Federal Government, as amended by
SFFAS 12: Recognition of Contingent Liabilities Arising from Litigation, an assessment is made as to
whether the likelihood of an unfavorable outcome is considered probable, reasonably possible, or remote.
USSOCOM would accrue contingent liabilities for material contingencies where an unfavorable outcome is
considered probable, and the amount of potential loss is measurable. The estimated liability may be a
specific amount or a range of amounts. If some amount within the range is a better estimate than any other
amount within the range, the amount recognized, and the range is disclosed. If no amount within the range
is a better estimate than any other amount, the minimum amount in the range is recognized. No amounts
have been accrued for contingencies where the likelihood of an unfavorable outcome is less than probable,
where the amount or range of potential loss cannot be estimated due to a lack of sufficient information, or
for immaterial contingencies. Any presented amounts accrued for legal contingent liabilities would be
included within the contingent liabilities amount reported in Note 15, Other Liabilities.
Table 17. Summary of Legal Contingent Liabilities*
As of September 30
2023
Accrued Liabilities
Estimated Range of Loss
Lower End
Upper End
Legal Contingent Liabilities
Probable
$
400
0
$
0
Reasonably Possible
0
0
9,600
As of September 30
2022
Accrued Liabilities
Estimated Range of Loss
Lower End
Upper End
Legal Contingent Liabilities
Probable
$
200
$
0
$
0
Reasonably Possible
0
7,100
9,600
UNCLASSIFIED
UNCLASSIFIED
42
The amounts in the tables above are consistent with the information summarized on USSOCOM’s
management schedule and legal representation letter. The probable legal contingent liability, with an
estimated loss of $400 thousand, as of September 30, 2023, stems from a contract dispute regarding
changed delivery terms and a termination for convenience. USSOCOM has reported an accrued liability on
the balance sheet associated with this matter.
UNCLASSIFIED
UNCLASSIFIED
43
Note 18.
Funds from Dedicated Collections - Unaudited
USSOCOM does not have any funds from dedicated collections.
UNCLASSIFIED
UNCLASSIFIED
44
Note 19.
Disclosures Related to the Statement of Net Cost - Unaudited
Table 19. Costs and Exchange Revenue by Appropriation Category
As of September 30
2023
Res
tated
2022
(Amounts in thousands)
Operations, Readiness & Support
1. Gross Cost
$
11,448,624
$
8,506,563
2. Less: Earned Revenue
(276,967)
(308,291)
3. Losses/(Gains) from Actuarial
Assumption
Net Program Costs
$
11,171,657
$
8,198,272
Procurement
1. Gross Cost
$
2,952,649
$
2,717,388
2. Less: Earned Revenue
(2,887)
(20,146)
3. Losses/(Gains) from Actuarial
Assumption
Net Program Costs
$
2,949,762
$
2,697,242
Research, Development, Test &
Evaluation
1. Gross Cost
$
925,409
$
757,130
2. Less: Earned Revenue
(20,556)
(24,813)
3. Losses/(Gains) from Actuarial
Assumption
Net Program Costs
$
904,853
$
732,317
Family Housing & Military Construction
1. Gross Cost
$
(163,895)
$
(3,786)
2. Less: Earned Revenue
0
(35,061)
3. Losses/(Gains) from Actuarial
Assumption
Net Program Costs
$
(163,895)
$
(38,847)
Consolidated
1. Gross Cost
$
15,162,787
$
11,977,295
2. Less: Earned Revenue
(300,410)
(388,311)
3. Losses/(Gains) from Actuarial
Assumption
Total Net Cost
$
14,862,377
$
11,588,984
The Statement of Net Cost (SNC) represents the net cost of programs and organizations of USSOCOM
supported by appropriations or other means. The intent of the SNC is to provide gross and net cost
information related to the amount of output or outcome for a given program or organization administered
UNCLASSIFIED
UNCLASSIFIED
45
by a responsible reporting entity. USSOCOM’s current processes and systems capture costs based on
appropriations groups as presented in the schedule above. These appropriations are considered Major
Programs for USSOCOM. The DoD is in the process of reviewing available data and developing a cost
reporting methodology required by SFFAS 4: Managerial Cost Accounting Concepts and Standards for the
Federal Government as amended by SFFAS 55: Amending Inter-Entity Cost Provisions.
The abnormal balance reported under Family Housing & Military Construction, is mainly attributable to the
system migration of Navy-Wide financial systems. Clean up associated with USSOCOM’s Military
Construction Agents’, Naval Facilities Engineering Systems Command (NAVFAC), system migration is on-
going. As a result, NAVFAC Financial Management must manually research and reconcile CIP across
multiple systems to ensure CIP is reported accurately. The estimated timeline for completion of these efforts
is to be determined.
U
SSOCOM recorded prior period adjustments under SFFAS 21: Reporting Corrections of Errors and
Changes in Accounting Principles, Amendment of SFFAS 7, Accounting for Revenue and Other Financing
Sources and SFFAS 48: Opening Balances for Inventory, Operating Materials and Supplies, and Stockpile
Materials, that decreased FY2022 Gross Cost by $9.5 million resulting in a net decrease of $9.5 million to
Net Cost of Operations ending balance. See Note 28 Restatements additional information.
UNCLASSIFIED
UNCLASSIFIED
46
Note 20.
Disclosures Related to the Statement of Changes in Net Position - Unaudited
USSOCOM recorded prior period adjustments under SFFAS 21: Reporting Corrections of Errors and
Changes in Accounting Principles, Amendment of SFFAS 7, Accounting for Revenue and Other Financing
Sources and SFFAS 48: Opening Balances for Inventory, Operating Materials and Supplies, and Stockpile
Materials, that increased FY 2022 Cumulative Results of Operation beginning balance by $363.9 million
and decreased FY 2022 Net Cost of Operations by $9.5 million during FY 2022 resulting in a net increase
of $373.4 million to the FY 2022 year-end Net Position balance. See Note 28 Restatements additional
information.
USSOCOM does not have any funds from dedicated collections.
The FASAB issued SFFAS 48 and SFFAS 50. These standards permit alternative methods in establishing
opening balances and are effective for periods beginning after September 30, 2016. With the adoption of
this methodology, USSOCOM utilizes other gains and losses to capture the adjustments within the
Statement of Changes in Net Position (SCNP). For additional information, see Note 8, Inventory and
Related Property.
Miscellaneous Items primarily includes the current year authority transfers in, and current year authority
transfers out.
The Appropriations Received on the SCNP does not agree with Appropriations (Discretionary and
Mandatory) on the SBR. The difference is due to transfers of current year authority and permanent
reductions to prior year balances.
Table 20. Reconciliation of Appropriations on the SBR to Appropriations Received on the Statement
of Changes in Net Position.
As of September 30
2023
2022
(Amounts in thousands)
Appropriations, SBR
$
14,062,312
$
13,247,241
Miscellaneous Items - Transfers of
(29,448)
(5,692)
Total Reconciling Difference
$
(29,448)
$
(5,692)
Appropriations Received, Statement of
Changes in Net Position $
14,032,864
$
13,241,549
UNCLASSIFIED
UNCLASSIFIED
47
Note 21.
Disclosures Related to the Statement of Budgetary Resources - Unaudited
T
able 21. Budgetary Resources Obligated for Undelivered Orders at the End of the Period
As of September 30
2023
2022
(Amounts in thousands)
1. Intragovernmental:
A. Unpaid
$
263,671
$
760,248
B. Total Intragovernmental
$
263,671
$
760,248
2. Non-Federal:
A. Unpaid
8,399,629
9,304,786
B. Prepaid/Advanced
274,055
123,253
C. Total Non-Federal
$
8,673,684
$
9,428,039
3. Total Budgetary Resources Obligated for
Undelivered Orders at the End of the
Period
$
8,937,355
$
10,188,287
The SBR is presented on a combined basis in accordance with OMB Circular No. A-136; thus, intra-entity
transactions have not been eliminated from the amounts presented. This presentation differs from that of
the other principal financial statements, which are presented on a consolidated basis. For additional details
on the difference between the SCNP and SBR, see Note 20, Disclosures Related to the Statement of
Changes in Net Position.
Net Adjustments to Unobligated Balance, Brought Forward, October 1
There were no material adjustments during FY 2023 to budgetary resources available at the beginning of
the year.
Explanation of Differences Between the SBR and the Budget of the U.S. Governm
ent
USSOCOM’s financial results are consolidated within the DoD general fund financial results. As such,
USSOCOM is not presented separately in the President’s Budget but is instead a part of the DoD’s
reconciliation to the President’s Budget. The DoD 2022 AFR contains a reconciliation between the
budgetary resources, new obligations and upward adjustments, distributed offsetting receipts, and Net
Outlays to the President’s Budget. Included in that reconciliation is an adjustment to include the USSOCOM
to reconcile to the President’s Budget amounts.
Contributed Capital
There was no infusion of capital received in FY 2023, or FY 2022.
Other Disclosures
USSOCOM does not have any permanent indefinite appropriations.
USSOCOM has no legal arrangements affecting the use of unobligated balances.
UNCLASSIFIED
UNCLASSIFIED
48
Note 22.
Disclosures Related to Incidental Custodial Collections - Unaudited
USSOCOM does not have any disclosures related to incidental custodial collections.
UNCLASSIFIED
UNCLASSIFIED
49
Note 23.
Fiduciary Activities - Unaudited
For additional information, see Note 1.AB, Fiduciary Activities
UNCLASSIFIED
UNCLASSIFIED
50
Note 24.
Reconciliation of Net Cost to Net Budgetary Outlays - Unaudited
T
able 24. Reconciliation of the Net Operating Cost & Net Budgetary Outlays
As of September 30
2023
Federal Non-Federal Total
(Amounts in thousands)
1. Net Cost of Operations (SNC)
$
(1,851,534)
$
16,713,910
$
14,862,376
Components of Net Cost Not Part of Net
Budgetary Outlays
2. Change in General property, plant, and
equipment, net
$
0
$
(148,724)
$
(148,724)
3. Change in Inventory and related
property, net
0
186,641
186,641
4. Increase/(decrease) in Assets:
a. Accounts receivable, net
29,406
(13,812)
15,594
b. Other assets
0
150,802
150,802
5. (Increase)/Decrease in Liabilities:
a. Accounts payable
(22,512)
(1,790,025)
(1,812,537)
b. Federal employee and veteran
benefits payable
0
719
719
c. Other liabilities
4,673
(1,368)
3,305
6. Financing Sources:
a. Imputed cost
(42,707)
0
(42,707)
7. Total Components of Net Cost Not Part
of Net Budgetary Outlays
$
(31,140)
$
(1,615,767)
$
(1,646,907)
Miscellaneous Reconciling Items
8. Transfers (in)/out without
reimbursements
$
528,938
$
0
$
528,938
9. Total Other Reconciling Items
$
528,938
$
0
$
528,938
10. Total Net Outlays
$
(1,353,736)
$
15,098,143
$
13,744,407
11. Budgetary Agency Outlays, Net
(Statement of Budgetary Resources)
$
13,575,816
12. Unreconciled Difference
$
168,591
UNCLASSIFIED
UNCLASSIFIED
51
As of September 30
Restated
2022
Federal Non-Federal Total
(Amounts in thousands)
1. Net Cost of Operations (SNC)
$
3,976,415
$
7,612,569
$
11,588,984
Components of Net Cost Not Part of Net
Budgetary Outlays
2. Change in General property, plant, and
equipment, net
$
0
$
(306,486)
$
(306,486)
3. Change in Inventory and related
property, net
0
2,622,268
2,622,268
4. Increase/(decrease) in Assets:
a. Accounts receivable, net
17,701
(476)
17,225
b. Other assets
0
(236,747)
(236,747)
5. (Increase)/Decrease in Liabilities:
a. Accounts payable
77,028
775,683
852,711
b. Federal employee and veteran
benefits payable
0
(2,433)
(2,433)
c. Other liabilities
9,797
9,944
19,741
6. Financing Sources:
a. Imputed cost
(18,845)
0
(18,845)
7. Total Components of Net Cost Not Part
of Net Budgetary Outlays
$
85,681
$
2,861,753
$
2,947,434
Miscellaneous Reconciling Items
8. Transfers (in)/out without
reimbursements
$
582,259
$
0
$
582,259
9. Other
0
(2,598,011)
(2,598,011)
10. Total Other Reconciling Items
$
582,259
$
(2,598,011)
$
(2,015,752)
11. Total Net Outlays
$
4,644,355
$
7,876,311
$
12,520,666
12. Budgetary Agency Outlays, Net
(Statement of Budgetary Resources)
$
12,471,589
13. Unreconciled Difference
$
49,077
UNCLASSIFIED
UNCLASSIFIED
52
Presentational Changes
In 2022, the format of the Balance Sheet was changed to reflect more detail for certain line items
(specifically, net position), as required for all significant reporting entities by OMB Circular A-136. This
change does not affect totals for assets, liabilities, or net position and is intended to allow readers of this
Report to see how the amounts shown on the DoD-wide Balance Sheet are reflected on the Government-
wide Balance Sheet, thereby supporting the preparation and audit of the Financial Report of the United
States Government. The presentation of the fiscal year 2022 Balance Sheet and the related footnotes was
modified to be consistent with the fiscal year 2023 presentation. The mapping of U.S. Standard General
Ledger (USSGL) accounts, in combination with their attributes, to particular Balance Sheet lines and
footnotes is directed by the guidance published periodically under TFM, USSGL Bulletins, Section V. The
footnotes affected by the modified presentation and other 2023 updates to the footnote templates are Note
5, Investments; Note 7, Loans Receivable, Net and Loan Guarantee Liabilities; Note 14 Environmental and
Disposal Liabilities and Note 24, Reconciliation of Net Cost to Net Outlays. For additional information, see
Note 1.AD, Standardized Balance Sheet, the Statement of Changes in Net Position and Related Footnotes
–Comparative Year Presentation.
Other Disclosures
The Reconciliation of Net Cost to Net Outlays demonstrates the relationship between the USSOCOM’s Net
Cost of Operations, reported on an accrual basis on the Statement of Net Cost, and Net Outlays, reported
on a budgetary basis on the SBR. While budgetary and financial (proprietary) accounting are
complementary, the reconciliation explains the inherent differences in timing and in the types of information
between the two during the reporting period. The accrual basis of financial accounting is intended to provide
a picture of the USSOCOM’s operations and financial position, including information about costs arising
from the consumption of assets and the incurrence of liabilities. Budgetary accounting reports on the
management of resources by USSOCOM. Outlays are payments to liquidate an obligation excluding the
repayment to the Treasury of debt principal.
The Unreconciled Difference can be generally attributed to timing differences between the recognition of
expenses/revenues and disbursements/collections on the Statement of Net Cost and SBR. Additionally,
USSOCOM’s diverse business events may be recorded using different, but equally valid, transaction
scenarios. Research is on-going to identify and resolve residual differences.
UNCLASSIFIED
UNCLASSIFIED
53
Note 25.
Public-Private Partnerships - Unaudited
As of September 30, 2023, and 2022, USSOCOM completed an assessment of public-private partnerships
for which USSOCOM may be involved. Upon completion of the assessment, USSOCOM has not identified
any entities that meet the requirements for disclosures under SFFAS 49: Public/Private Partnerships.
UNCLASSIFIED
UNCLASSIFIED
54
Note 26.
Disclosure Entities and Related Parties - Unaudited
Under SFFAS 47: Reporting Entity, agencies are required to disclose information for disclosure entities and
related parties. USSOCOM performed an assessment of potential relationships, which may fall under the
criteria listed within SFFAS 47. Upon conclusion of the aforementioned assessment, USSOCOM did not
identify any disclosure entities or related parties for disclosure in the financial statement footnotes.
UNCLASSIFIED
UNCLASSIFIED
55
Note 27.
Security Assistance Accounts - Unaudited
USSOCOM does not have any Security Assistance Accounts.
UNCLASSIFIED
UNCLASSIFIED
56
Note 28.
Restatements - Unaudited
During Quarter 4, FY 2023, USSOCOM completed a Prior Period Adjustment (PPA), resulting in a
restatement to FY 2022 Financial Statements. The issuance of the FY 2023 financial statements was
considered imminent as it was within 90 calendar days of the restatement. USSOCOM communicated the
PPA with the IPA, Army, DFAS AFS and OUSD FMPR. USSOCOM considered this a correction of an error
per SFFAS 21: Reporting Corrections of Errors and Changes in Accounting Principles and the DoD FMR
Volume 4, Chapter 4 Inventory and Related Property. USSOCOM restated its FY2022 Financial Statements
to correct a $373.4 million error identified in the Inventory and Related Property, Net line item due to
USSOCOM not reporting OM&S stored at an Army wholesale location and previously financially reported
by Army. During FY 2023 USSOCOM performed causative research to determine USSOCOM’s OM&S
held at the Army wholesale location which resulted in the determination of $373.4 million required to be
reported by USSOCOM. USSOCOM determined Inventory and Related Property and Cumulative Results
of Operations were understated by $373.4 million as of year-end September 30, 2022 and Gross Costs
were overstated by $9.5 million due to activity that occurred during FY 2022. USSOCOM processed prior
period adjustments for $363.9 million to restate FY 2022 Inventory and Related Property beginning balance
and $9.5 million for OM&S activity occurring in FY 2022 which also served to restate the beginning and
ending balance of Cumulative Results of Operations. Continued causative research will occur into FY 2024
for the determination of additional OM&S held at the Army wholesale location to be reported by USSOCOM.
As USSOCOM continues to improve its financial reporting of OM&S and deemed cost efforts to determine
estimated costs, PPA’s resulting in restatement may be required in the future until USSOCOM can make
an unreserved assertion over the value of OM&S.
The following notes were impacted by the restatement: Note 2: Non-Entity Assets; Note 8: Inventory and
Related Property; Note 19 Disclosures related to the Statement of Net Cost; Note 20 Disclosures Related
to the Statement of Changes in Net Position; and Note 24 Reconciliation of Net Cost to Net Budgetary
Outlays.
UNCLASSIFIED
UNCLASSIFIED
57
Note 29.
COVID-19 Activity - Unaudited
In response to societal and economic impacts of Coronavirus Disease 2019 (COVID-19), multiple public
laws were enacted to soften the impact of this pandemic on individuals, businesses, and Federal, state,
and local government operations. In FY 2020, one of these public laws had a direct impact on USSOCOM
through the provision of $18.2 million in supplemental appropriations. Additional supplemental funding had
not been received as of September 30, 2023.
Operations and Maintenance
In FY 2023 and FY 2022, USSOCOM incurred costs related to the pandemic that are not reimbursable from
the supplemental funding. USSOCOM direct Operation and Maintenance (O&M) funding has been used
toward COVID-19 related activities.
As of September 30, 2023, there were no new obligations used toward the COVID-19 response. $16
thousand has been disbursed toward the following general program categories: Travel, Equipment,
Supplies, Contracts and Other. Specifically, these resources are being used to purchase PPE supplies and
equipment, cleaning contracts, and medical countermeasures. The total impact of the funding on
USSOCOM's assets, liabilities, costs, revenues, and net position have not been determined.
As of September 30, 2023, USSOCOM has committed and obligated an estimated cumulative total of $55M
million toward the COVID-19 response. Of the $55 million, $54.9 million had been disbursed toward the
following general program categories: Facilities, Travel, Equipment, Supplies, Contracts and Other.
Specifically, these resources are being used to purchase PPE supplies and equipment, pharmaceuticals,
cleaning contracts, additional medical staff, and medical countermeasures. Unpaid obligations as of
September 30, 2023, was $200 thousand. The total impact of the funding on USSOCOM's assets, liabilities,
costs, revenues, and net position have not been determined.
The amounts received and/or used toward COVID-19 related activities are as follows:
Table 29. Budgetary Resources for COVID-19 Activity Funded by COVID-19 Disaster Emergency
Fund (DEF) Codes
UNCLASSIFIED
UNCLASSIFIED
58
For the period ended September 30
2023
2022
(Amounts in thousands)
Unobligated and unexpired balance,
beginning of year
$
648
$
3,774
Less: Obligations
(55)
(3,150)
Expiring funds (-)
(593)
(624)
Outlays, Net (Total)
$
35
$
272
DEF Codes included: M for Families First Coronavirus Response Act (Public Law 116-127), Emergency
N for Coronavirus Aid, Relief, and Economic Security Act (CARES Act) (Public Law 116-136), Emergency
UNCLASSIFIED
UNCLASSIFIED
59
OFFICE OF INSPECTOR GENERAL
DEPARTMENT OF DEFENSE
4800 MARK CENTER DRIVE
ALEXANDRIA, VIRGINIA 22350-1500
November 8, 2023
MEMORANDUM FOR UNDER SECRETARY OF DEFENSE (COMPTROLLER)/
CHIEF FINANCIAL OFFICER, DOD
COMMANDER, U.S. SPECIAL OPERATIONS COMMAND
DIRECTOR, DEFENSE FINANCE AND ACCOUNTING SERVICE
SUBJECT: Transmittal of the Independent Auditor’s Reports on the U.S. Special
Operations Command Financial Statements and Related Notes for FY 2023
and FY 2022
(Project No. D2023-D000FP-0045.000, Report No. DODIG-2024-012)
We contracted with the independent public accounting firm of Grant Thornton, LLP
(Grant Thornton) to audit the U.S. Special Operations Command (USSOCOM) Financial
Statements and related notes as of and for the fiscal years ended September 30, 2023,
and 2022. The contract required Grant Thornton to provide a report on internal control
over financial reporting and compliance with provisions of applicable laws and
regulations, contracts, and grant agreements, and to report on whether USSOCOM’s
financial management systems substantially complied with the requirements of the
Federal Financial Management Improvement Act of 1996. The contract required Grant
Thornton to conduct the audit in accordance with generally accepted government
auditing standards (GAGAS); Office of Management and Budget audit guidance; and the
Government Accountability Office/Council of the Inspectors General on Integrity and
Efficiency, “Financial Audit Manual,” Volume 1, May 2023, Volume 2, May 2023, and
Volume 3, June 2023. Grant Thornton’s Independent Auditor’s Reports are attached.
Grant Thornton’s audit resulted in a disclaimer of opinion. Grant Thornton could not
obtain sufficient, appropriate audit evidence to support the reported amounts within
the USSOCOM Financial Statements. As a result, Grant Thornton could not conclude
whether the financial statements and related notes were presented fairly and in
accordance with Generally Accepted Accounting Principles. Accordingly, Grant
Thornton did not express an opinion on the USSOCOM FY 2023 and FY 2022 Financial
Statements and related notes.
Grant Thornton’s separate report, “ Report of Independent Certified Public Accountants
on Internal Control over Financial Reporting and on Compliance and Other Matters
Required by Government Auditing Standards,” discusses six material weaknesses related
UNCLASSIFIED
UNCLASSIFIED
60
to USSOCOM’s internal controls over financial reporting.
*
Specifically, Grant Thornton’s
report stated that USSOCOM did not:
ensure the effective design and operation of the following internal control
components—control environment, risk assessment, and control activities;
appropriately monitor the Military Departments and Service organizations,
placing overreliance on them to perform processes and internal controls;
fully implement an internal control program over financial reporting and relied
on Service organizations to perform key accounting functions without fully
monitoring or reviewing their work;
develop controls to reconcile Fund Balance with Treasury and did not monitor
its Service organizations’ reconciliation process;
accurately record General Property, Plant, and Equipment, Net on the Balance
Sheet; or
establish and maintain an adequate information system controls environment.
This report also discusses two instances of noncompliance with provisions of applicable
laws and regulations, contracts, and grant agreements. Specifically, Grant Thornton’s
report describes instances in which USSOCOM financial management systems did not
substantially comply with the Federal Financial Management Improvement Act of 1996;
and management’s internal control program did not substantially comply with the
Federal Managers’ Financial Integrity Act of 1982.
*
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting that results in
a reasonable possibility that management will not prevent, or detect and correct, a material misstatement in the financial
statements in a timely manner.
UNCLASSIFIED
UNCLASSIFIED
61
In connection with the contract, we reviewed Grant Thornton’s reports and related
documentation and discussed them with Grant Thornton’s representatives. Our review,
as differentiated from an audit of the financial statements and related notes in
accordance with GAGAS, was not intended to enable us to express, and we do not
express, an opinion on the USSOCOM FY 2023 and FY 2022 Financial Statements and
related notes. Furthermore, we do not express conclusions on the effectiveness of
internal controls over financial reporting, on whether the USSOCOM’s financial systems
substantially complied with Federal Financial Management Improvement Act of 1996
requirements, or on compliance with provisions of applicable laws and regulations,
contracts, and grant agreements. Our review disclosed no instances where Grant
Thornton did not comply, in all material respects, with GAGAS. Grant Thornton is
responsible for the attached November 8, 2023 reports and the conclusions expressed
within the reports.
We appreciate the cooperation and assistance received during the audit. If you have
any questions, please contact me.
FOR THE INSPECTOR GENERAL:
Lorin T. Venable, CPA
Assistant Inspector General for Audit
Financial Management and Reporting
Attachments:
As stated
UNCLASSIFIED
UNCLASSIFIED
62
GT.COM
Grant Thornton LLP is the U.S. member firm of Grant Thornton International Ltd (GTIL). GTIL and each of its member firms
are separate legal entities and are not a worldwide partnership.
General Bryan P. Fenton
Commander
United States Special Operations Command
Report on the financial statements
Disclaimer of opinion
We were engaged to audit the consolidated financial statements of the United States
Special Operations Command (USSOCOM), which comprise the consolidated
balance sheets as of September 30, 2023 and 2022, and the related consolidated
statements of net cost, changes in net position, and the combined statements of
budgetary resources for the years then ended, and the related notes to the
consolidated financial statements.
We do not express an opinion on the accompanying consolidated financial statements
of USSOCOM. Because of the significance of the matters described in the Basis for
Disclaimer of Opinion section of our report, we have not been able to obtain sufficient
appropriate audit evidence to provide a basis for an audit opinion on the consolidated
financial statements.
Basis for disclaimer of opinion
USSOCOM management was unable to provide sufficient appropriate audit evidence
to support the consolidated financial statements, including the inability to:
• Provide a complete universe of transactions to support balances on its financial
statements;
• Reconcile the accounting and non-accounting system general ledger balances to
the trial balance utilized for financial statement preparation;
• Reconcile the Fund Balance with Treasury account balance;
• Assert to the valuation of, and substantiate, Inventory and Related Property, Net,
as well as the valuation of General Property, Plant and Equipment, Net;
• Provide adequate explanations for the nature of, and adequate audit evidence
for, certain transaction types, including, but not limited to, Fund Balance with
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
GRANT THORNTON LLP
1000 Wilson Boulevard, Suite 1500
Arlington, VA 22209-3904
D
703 847 7500
F
703 848 9580
UNCLASSIFIED
UNCLASSIFIED
63
Treasury, Accounts Payable, New Obligations and Upward Adjustments, and
Earned Revenue;
• Provide evidence supporting multiple samples chosen for testing by the audit
team (e.g., classified support and Gross Costs); and,
• Provide the ability to test the operating effectiveness of one sensitive
application’s information systems controls, as well as controls relating to security
management and backup domains.
USSOCOM relies on accounting systems, applications, and micro-applications owned
and maintained by military departments and other defense organizations to account
for the majority of its transactions, including financial data processed by such
organizations, which do not provide sufficient appropriate audit evidence.
As a result of the matters noted above, we are unable to conclude that the
consolidated financial statements taken as a whole are free of material
misstatements.
Emphasis of matter
As discussed in Note 28, the fiscal year 2022 consolidated financial statements have
been restated to correct a misstatement. Our disclaimer of opinion is not modified with
respect to this matter.
Responsibilities of management for the financial statements
Management is responsible for the preparation and fair presentation of the
consolidated financial statements in accordance with accounting principles generally
accepted in the United States of America, and for the design, implementation, and
maintenance of internal control relevant to the preparation and fair presentation of
financial statements that are free from material misstatement, whether due to fraud or
error.
Auditor’s responsibilities for the audit of the financial statements
Our responsibility is to conduct an audit of USSOCOM’s consolidated financial
statements in accordance with auditing standards generally accepted in the United
States of America (US GAAS); the standards applicable to financial audits contained
in Government Auditing Standards issued by the Comptroller General of the United
States; and the Office of Management and Budget (OMB) Bulletin 24-01, Audit
Requirements for Federal Financial Statements and to issue an auditor’s report.
However, because of the matters described in the Basis for Disclaimer of Opinion
section of our report, we were not able to obtain sufficient appropriate audit evidence
to provide a basis for an audit opinion on these financial statements.
We are required to be independent of USSOCOM and to meet our other ethical
responsibilities in accordance with the relevant ethical requirements relating to our
audit.
Other reporting required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report,
dated November 08, 2023, on our consideration of USSOCOM’s internal control over
financial reporting and on our tests of its compliance with certain provisions of laws,
regulations, contracts, grant agreements and other matters. The purpose of that
UNCLASSIFIED
UNCLASSIFIED
64
report is to describe the scope of our testing of internal control over financial reporting
and compliance and the results of that testing, and not to provide an opinion on the
effectiveness of the USSOCOM’s internal control over financial reporting or on
compliance. That report is an integral part of an audit performed in accordance with
Government Auditing Standards in considering USSOCOM’s internal control over
financial reporting and compliance with provisions of laws, regulations, contracts, and
grant agreements.
GRANT THORNTON LLP
Arlington, VA
November 08, 2023
UNCLASSIFIED
UNCLASSIFIED
65
GT.COM
Grant Thornton LLP is the U.S. member firm of Grant Thornton International Ltd (GTIL). GTIL and each of its member firms
are separate legal entities and are not a worldwide partnership.
General Bryan P. Fenton
Commander
United States Special Operations Command
We were engaged to audit, in accordance with auditing standards generally accepted
in the United States of America; the standards applicable to financial audits contained
in Government Auditing Standards issued by the Comptroller General of the United
States (Government Auditing Standards); and Office of Management and Budget
(“OMB”) Bulletin No. 24-01, Audit Requirements for Federal Financial Statements, the
consolidated financial statements of the United States Special Operations Command
(USSOCOM) which comprise the consolidated balance sheet as of September 30,
2023 and 2022, and the related consolidated statements of net cost, changes in net
position, and the combined statement of budgetary resources for the year then ended,
and the related notes to the consolidated financial statements. We have issued our
report, dated November 8, 2023, on these financial statements. The report states that
because of the significance of the matters described in the Basis for Disclaimer of
Opinion paragraph, we were not able to obtain sufficient appropriate audit evidence to
provide a basis for an audit opinion.
Report on internal control over financial reporting
Results of our consideration of internal control over financial reporting
A deficiency in internal control exists when the design or operation of a control does
not allow management or employees, in the normal course of performing their
assigned functions, to prevent, or detect and correct, misstatements on a timely basis.
A material weakness is a deficiency, or a combination of deficiencies, in internal
control, such that there is a reasonable possibility that a material misstatement of the
Agency’s financial statements will not be prevented, or detected and corrected, on a
timely basis. A significant deficiency is a deficiency, or a combination of deficiencies,
in internal control that is less severe than a material weakness, yet important enough
to merit attention by those charged with governance.
Our consideration of internal control was for the limited purpose described in the
Auditor’s Responsibilities for Internal Control over financial reporting section and was
not designed to identify all deficiencies in internal control that might be material
weaknesses or significant deficiencies and therefore, material weaknesses or
significant deficiencies may exist that were not identified. Due to the matters
described in the Basis for Disclaimer of Opinion paragraph included in our financial
statement audit report dated November 8, 2023, we were not able to obtain sufficient
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON
INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON
COMPLIANCE AND OTHER MATTERS REQUIRED BY GOVERNMENT
AUDITING STANDARDS
GRANT THORNTON LLP
1000 Wilson Boulevard, Suite 1500
Arlington, VA 22209-3904
D
703 847 7500
F
703 848 9580
UNCLASSIFIED
UNCLASSIFIED
66
appropriate audit evidence related to internal control, as a basis for designing audit
procedures that are appropriate in the circumstances for the purpose of expressing
our opinion on the consolidated financial statements. However, we identified certain
deficiencies in internal control, described in the accompanying schedule of findings
and responses as items I through VI that we consider to be material weaknesses in
USSOCOMs internal control.
Basis for results of our consideration of internal control over financial reporting
We performed our procedures related to USSOCOM’s internal control over financial
reporting in accordance with auditing standards generally accepted in the United
States of America; Government Auditing Standards; and OMB Bulletin No. 24-01.
Responsibilities of management for internal control over financial reporting
Management is responsible for maintaining effective internal control over financial
reporting (“internal control”), including the design, implementation, and maintenance
of internal control relevant to the preparation and fair presentation of financial
statements that are free from material misstatement, whether due to fraud or error.
Auditor’s responsibilities for internal control over financial reporting
In planning and performing our audit of the consolidated financial statements, we
considered USSOCOM’s internal control as a basis for designing audit procedures
that are appropriate in the circumstances for the purpose of expressing our opinion on
the consolidated financial statements, but not for the purpose of expressing an
opinion on the effectiveness of internal control. Accordingly, we do not express an
opinion on the effectiveness of USSOCOM’s internal control. We did not consider all
internal controls relevant to operating objectives, such as those controls relevant to
preparing performance information and ensuring efficient operations.
Definition and inherent limitations of internal control over financial reporting
An entity’s internal control over financial reporting is a process affected by those
charged with governance, management, and other personnel, designed to provide
reasonable assurance regarding the preparation of reliable financial statements in
accordance with accounting principles generally accepted in the United States of
America. An entity’s internal control over financial reporting provides reasonable
assurance that (1) transactions are properly recorded, processed, and summarized to
permit the preparation of financial statements in accordance with accounting
principles generally accepted in the United States of America, and assets are
safeguarded against loss from unauthorized acquisition, use, or disposition, and
(2) transactions are executed in accordance with provisions of applicable laws,
including those governing the use of budget authority, regulations, contracts and grant
agreements, noncompliance with which could have a material effect on the
consolidated financial statements.
Because of its inherent limitations, internal control over financial reporting may not
prevent, or detect and correct, misstatements due to fraud or error.
Intended purpose of report on internal control over financial reporting
The purpose of this report is solely to describe the scope of our consideration of
internal control over financial reporting and the results of our procedures, and not to
provide an opinion on the effectiveness of USSOCOM’s internal control over financial
reporting. This report is an integral part of an audit performed in accordance with
UNCLASSIFIED
UNCLASSIFIED
67
Government Auditing Standards in considering USSOCOM’s internal control over
financial reporting. Accordingly, this report on internal control over financial reporting
is not suitable for any other purpose.
Report on compliance with laws, regulations, contracts, and
grant agreements and other matters
As part of obtaining reasonable assurance about whether USSOCOM’s consolidated
financial statements are free from material misstatement, we performed tests of its
compliance with selected provisions of applicable laws, regulations, contracts, and
grant agreements consistent with the auditor’s responsibility discussed below, in
accordance with Government Auditing Standards.
Results of our tests of compliance
Due to the matters described in the Basis for Disclaimer of Opinion paragraph
included in our financial statement audit report dated November 8, 2023, we were not
able to obtain sufficient appropriate audit evidence related to management’s
compliance with laws, regulations, contracts and grant agreements which could have
a direct and material effect on the consolidated financial statements. However, the
results of our tests disclosed instances of noncompliance, described in the
accompanying schedule of findings and responses as items VII and VIII, that are
required to be reported under Government Auditing Standards. The objective of our
tests was not to provide an opinion on compliance with laws, regulations, contracts,
and grant agreements applicable to USSOCOM. Accordingly, we do not express such
an opinion.
Under the Federal Financial Management Improvement Act (“FFMIA”), we are
required to report whether USSOCOM’s financial management systems substantially
comply with FFMIA Section 803(a) requirements. To meet this requirement, we
performed tests of compliance with the federal financial management systems
requirements, applicable federal accounting standards, and the United States
Standard General Ledger (“USSGL”) at the transaction level. However, providing an
opinion on compliance with FFMIA was not an objective of our audit, and accordingly
we do not express such an opinion. Our work on FFMIA would not necessarily
disclose all instances of lack of compliance with FFMIA requirements.
The results of our tests of FFMIA Section 803(a) requirements disclosed instances, as
described in the accompanying schedule of findings and responses Section VIII, in
which USSOCOM’s financial management systems did not substantially comply with
the Federal financial management systems requirements, applicable Federal
accounting standards and the application of the USSGL at the transaction level.
Basis for results of our tests of compliance
We performed our tests of compliance in accordance with auditing standards
generally accepted in the United States of America; Government Auditing Standards;
and OMB Bulletin No. 24-01.
Responsibilities of management for compliance
Management is responsible for complying with laws, regulations, contracts, and grant
agreements applicable to USSOCOM.
UNCLASSIFIED
UNCLASSIFIED
68
Auditor’s responsibilities for tests of compliance
Our responsibility is to test compliance with selected provisions of applicable laws,
regulations, contracts, and grant agreements, noncompliance with which could have a
direct and material effect on the financial statements, and to perform certain other
limited procedures. We did not test compliance with all laws, regulations, contracts,
and grant agreements. Noncompliance may occur that is not detected by these tests.
USSOCOM’s response to findings
Government Auditing Standards requires the auditor to perform limited procedures on
USSOCOM’s response to the findings identified in our audit and described in the
accompanying schedule of findings and responses. USSOCOM’s response was not
subjected to the other auditing procedures applied in the audit of the consolidated
financial statements, and accordingly, we express no opinion on the USSOCOM’s
response.
Intended purpose of report on compliance
The purpose of this report is solely to describe the scope of our testing of compliance
with selected provisions of applicable laws, regulations, contracts, and grant
agreements, and the results of that testing, and not to provide an opinion on
compliance. This report is an integral part of an audit performed in accordance with
Government Auditing Standards in considering USSOCOM’s compliance.
Accordingly, this report is not suitable for any other purpose.
GRANT THORNTON LLP
Arlington, VA
November 8, 2023
UNCLASSIFIED
UNCLASSIFIED
69
Grant Thornton LLP is the U.S. member firm of Grant Thornton International Ltd (GTIL). GTIL and each of its member firms are separate
legal entities and are not a worldwide partnership.
Schedule of Findings and Responses
I. Material Weakness - Lack of Adequate Entity-Level Controls
Department of Defense (DoD) Instruction 5010.40 requires DoD entities to comply
with the requirements of the Federal Managers’ Financial Integrity Act of 1982
(FMFIA) and Office of Management and Budget (OMB) Circular A-123 Management’s
Responsibility for Enterprise Risk Management and Internal Control (OMB Circular A-
123). FMFIA requires federal entities to establish internal controls in accordance with
the Government Accountability Office’s (GAO’s) Standards for Internal Control in the
Federal Government (the GAO Green Book). The GAO Green Book defines entity-
level controls as controls that have a pervasive effect on an entity’s internal control
system. Entity-level controls (ELCs) may include controls related to the entity’s risk
assessment process, control environment, service organizations, management
override, and monitoring and may apply across multiple components of internal
control. To determine if an entity’s internal control system is effective, the GAO Green
Book requires management to assess the design, implementation, and operating
effectiveness of the five components and 17 principles (as applicable) of the entity’s
internal control system. Grant Thornton’s internal controls testing covered the five
GAO Green Book components of internal control: Control Environment, Risk
Assessment, Control Activities, Information and Communication, and Monitoring. We
identified deficiencies in three GAO Green Book components and discuss the
identified deficiencies related to two components, Control Environment and Risk
Assessment Activities, below. We discuss the identified deficiencies associated with
Control Activities in detail throughout the remaining sections of this report.
1. Control Environment
The GAO Green Book defines control environment as the foundation for an
internal control system. An entity’s control environment provides the discipline
and structure to help the entity achieve its objectives. The GAO Green Book
identifies five principles associated with an entity’s control environment, two of
which are discussed below: a) Demonstrate Commitment to Integrity and Ethical
Values, and b) Enforce Accountability.
a. Demonstrate Commitment to Integrity and Ethical Values
According to the GAO Green Book, management should establish standards
of conduct to communicate expectations concerning integrity and ethical
values. Management should also establish processes to evaluate
performance against the entity’s expected standards of conduct and address
any deviations in a timely manner.
United States Special Operations Command (USSOCOM) has not corrected
deficiencies related to the ethics program and training for personnel.
Management has not established and implemented a process to coordinate
the standards of conduct from the Headquarters (HQ) USSOCOM-level
across its various military service components and sub-unified commands /
Theatre Special Operations Commands (TSOCs). USSOCOM leverages the
ethical standards established by the various military services, but has not
implemented a process to centrally monitor and enforce compliance across
the USSOCOM enterprise. Specifically:
UNCLASSIFIED
UNCLASSIFIED
70
i. USSOCOM has not developed a process for issuing Standards of
Conduct to newly on-boarded military members, civilians, and
contractors.
ii. USSOCOM has not developed a process to evaluate personnel
performance against expectations set forth in Standards of Conduct.
iii. USSOCOM has not coordinated with the military service departments to
understand whether ethics training is provided to military members and
civilians or whether USSOCOM can leverage military service-provided
training.
b. Enforce Accountability
USSOCOM’s financial team works closely with and relies on the work
performed by service organizations. USSOCOM has not completed
validation efforts over implemented procedures to ensure the timely and
consistent development, review, and update of Memoranda of
Understanding (MOUs)/Memoranda of Agreement (MOAs) with all
USSOCOM’s service organizations. Specifically, several of the MOUs/MOAs
listed in the Special Operations Financial Management Financial Statement
Audit Executive Agreement Inventory Workbook are past due for review.
2. Risk Assessment
The GAO Green Book lists the following four principles that allow management to
address risk assessment internal control objectives: a) Define Objectives and
Risk Tolerances, b) Identify, Analyze, and Respond to Risks (related to achieving
the defined objectives), c) Assess Fraud Risk, and d) Identify, Analyze, and
Respond to Change.
We considered prior year findings and any remediation efforts surrounding the
entity-level control documentation that USSOCOM service components and sub-
unified commands/TSOCs, hereafter referred to as Major Assessable Units
(MAU), provided. We noted the Risk Management and Internal Controls (RMIC)
Deliverables completed by the MAUs do not appropriately support the
assurances made within the MAU Statements of Assurance (SoA) nor do MAUs
provide complete and consistent Deliverables Packages to HQ USSOCOM
RMIC. For several MAU Deliverable Packages reviewed, the MAU stated the
overall evaluation of a system of internal control is operating effectively; however,
the MAU did not perform Test of Design and/or Test of Operating Effectiveness
over key controls, including Complementary User Entity controls (CUECs), Fraud
controls, or ELCs.
3. Control Activities
Grant Thornton evaluated the Control Activities Green Book component of
internal control by performing procedures over identified control activities related
to various financial statement line items. We discuss deficiencies related to
control activities throughout Sections II – VIII of this report.
As noted in the findings related to Control Environment, Risk Assessment, and
Control Activities, management has not effectively designed, implemented, and
placed into operation all components of internal control. This lack of controls inhibits
USSOCOM management’s ability to ensure accurate financial reporting as required
by Federal Accounting Standards Advisory Board and Treasury Guidelines and
UNCLASSIFIED
UNCLASSIFIED
71
represents non-compliance with the FMFIA and OMB Circular A-123. Refer to Section
VII. Material Non-Compliance - Lack of Substantial Compliance with the Federal
Managers’ Financial Integrity Act of 1982.
Recommendations
USSOCOM management should consider taking the following actions:
1. Control Environment
a. Demonstrate Commitment to Integrity and Ethical Values: Implement
and require the following:
i. Design and coordinate an integrated approach leveraging Service-level
regulations, instructions, and training programs to meet USSOCOM-
specific requirements.
ii. Provide annual ethical training (or leverage existing military-service
training) to enable employees to identify and deal with ethical problems.
iii. Leverage military service ethical standards or requirements to ensure
compliance with, at minimum, onboarding or annual ethics
requirements.
b. Enforce Accountability: Follow implemented procedures to review all
MOUs/MOAs in accordance with DoD Guidance and document each review
within the applicable agreement. These MOUs/MOAs should include
responsibilities for authorization, initiation, processing, recording, and
reporting of transactions, as well as expectations of competence to perform
responsibilities. Updates should be made timely to MOUs/MOAs based on
reviews by USSOCOM or if deficiencies are identified by internal or external
auditors. Updates to the responsibilities should be clearly documented within
the MOUs/MOAs.
2. Risk Assessment:
a. Perform a detailed review of ELC documentation, ensure updates to resolve
errors are completed in a timely manner, and ensure the assertions within
the MAU SoAs are appropriately supported.
b. Prioritize existing resources to continue to provide education and training on
the effective completion of the ELC Deliverables Package.
3. Control Activities:
Refer to Sections II – VIII of this report for recommendations related to control
activity deficiencies.
UNCLASSIFIED
UNCLASSIFIED
72
II. Material Weakness - Inadequate Monitoring of Service Organizations
In accordance with FMFIA, management is responsible for establishing and
maintaining internal control to achieve the objectives of effective and efficient
operations, reliable financial reporting, and compliance with applicable laws and
regulations. According to the GAO Green Book, management may engage service
organizations to perform certain operational processes for the entity; however,
management remains responsible for monitoring the effectiveness of internal control
over the assigned processes performed by service organizations. Therefore,
management needs to understand the controls each service organization has
designed, implemented, and operated for the process, as well as understanding how
the third-party internal control system impacts the entity’s internal control system.
According to DoD’s Financial Improvement and Audit Readiness (FIAR) Guidance,
military services performing services for other defense organizations (such as
USSOCOM) are considered service organizations.
An entity’s ability to achieve its internal control objectives is directly impacted by the
reliability of its information systems. USSOCOM relies on feeder systems and general
ledgers owned by the military services or DoD service organizations to process the
majority of its transactions. The responsibility for the design and execution of those
systems, including internal controls and responses to risks, is held largely by the
military services and/or service organizations with minimal input or monitoring from
USSOCOM management. USSOCOM management has not:
1. Documented all MOUs outlining mutual responsibilities and expectations
between USSOCOM and the military services related to the execution of
processes and transactions through third-party systems. While there were
MOUs between USSOCOM and the military services, the agreements were not
all current and did not outline specific responsibilities for authorization, initiation,
processing, and recording of transactions as required by the FIAR guidance. This
can lead to inconsistencies between USSOCOM expectations and the actions
taken by the military services that could result in misstatements to the financial
statements. USSOCOM has not completed validation efforts over implemented
procedures to ensure the timely and consistent development, review, and update
of MOUs/MOAs with all USSOCOM service providers.
2. Developed a monitoring program that consistently evaluates/assesses
actions taken by service organizations on USSOCOM’s behalf. USSOCOM
management did not implement a comprehensive monitoring program to ensure
service organizations meet USSOCOM expectations and fulfill their
responsibilities as outlined within existing MOUs. For example:
a. The majority of Journal Vouchers (JVs) which impact the USSOCOM
financial statements were initiated and posted by USSOCOM’s financial
reporting service organization without direct input or validation by
USSOCOM.
b. Exclusions of feeder file activity from USSOCOM financial statements by the
USSOCOM financial reporting service organization (e.g., auto-excluded
records) were not comprehensively reviewed for validity and/or impact to the
USSOCOM financial statements by USSOCOM personnel.
c. The USSOCOM financial reporting service organization lacked
comprehensive controls to reconcile between the Defense Departmental
UNCLASSIFIED
UNCLASSIFIED
73
Reporting System – Budgetary (DDRS-B) data and accounting and non-
accounting summary data. As such, USSOCOM management was unable to
demonstrate that all relevant financial activity recorded within its general
ledger and feeder systems was appropriately included within the financial
statements prepared by its financial reporting service organization.
3. Taken action to assess the control environment and any associated risks to
USSOCOM occurring at service organizations that do not receive a Service
Organization Controls (SOC 1) report. In most cases, service organizations
undergo examinations of internal controls over systems and processes
supporting their customers. The results of these examinations are documented in
SOC 1 reports and include the independent service auditor’s report, the service
organization’s management assertions, and identified CUECs that users of the
service organization (e.g., USSOCOM) must have in place in order for the service
organization’s internal controls to be effective and relied upon. The SOC 1
reports are made available to the user entities for their analysis and action.
However, not all USSOCOM service organizations undergo examinations of their
controls. A lack of a SOC 1 report does not relieve USSOCOM from its
responsibility to maintain internal control over operations, reporting, and
compliance with laws and regulations, including responsibility for actions taken by
service organizations ultimately impacting the USSOCOM control environment
and USSOCOM financial statements. For those service organizations
significantly impacting USSOCOM’s internal control environment that are not
subjected to SOC 1 examination procedures, USSOCOM management should
obtain assurance regarding internal controls in place at the service organization.
USSOCOM did not develop a process to evaluate the impact of control
environments in place at service organizations that do not receive a SOC 1
report.
4. Identified and evaluated user entity controls that must be in place for
placing reliance on third-party execution of controls. USSOCOM did not
complete a comprehensive review of relevant SOC 1 reports to include an
analysis of CUECs in place that have been validated by USSOCOM
management as operating effectively. Therefore, USSOCOM was unable to
assess whether current controls at USSOCOM HQ, service components, and
sub-unified commands/TSOCs were sufficient to mitigate financial reporting risks.
Our testing indicated that USSOCOM’s oversight body relied on the military services
and other service organizations for the performance of processes and internal
controls without having appropriate monitoring controls in place. This presents a
significant risk to the entity, especially given weaknesses identified in the past by
various auditors related to controls over the military service and service organization
systems. The lack of processes, procedures, and controls at USSOCOM to monitor
the execution by third-parties of processes and related transactions, which form the
basis for USSOCOM financial statements, could lead to misstatements in their
financial statements.
Additionally, due to the decentralized fashion in which USSOCOM financial data is
stored across multiple service organization owned accounting and non-accounting
systems, USSOCOM has been unable to produce a comprehensive listing of
transactions which support the financial statements. This has hindered USSOCOM
management from identifying the nature of and providing adequate support for activity
recorded within the USSOCOM financial statements.
UNCLASSIFIED
UNCLASSIFIED
74
Recommendations
USSOCOM management should consider taking the following actions:
1. Review all MOUs with service organizations as needed and document each
review within the applicable agreement. All MOUs should include specific
responsibilities for the authorization, initiation, processing, and recording of
transactions, as well as expectations of competence to perform responsibilities.
Updates should be made timely to MOUs based on reviews by USSOCOM or if
deficiencies are identified by internal or external auditors. Updates should be
clearly documented within the MOUs.
2. Develop a monitoring program over the activities executed by service
organizations on behalf of USSOCOM. The program should be tailored to each
service organization based on the type of service provided including the
execution of routine financial transactions in military service accounting and non-
accounting systems.
3. Develop processes to gain assurance regarding control environments in place at
services organizations that do not receive a SOC 1 evaluation to determine if
control weaknesses exist that may impact USSOCOM (e.g., review of SoA, Audit
Reports, etc.).
4. Continue to develop procedures and processes surrounding review of all relevant
SOC 1 evaluations. These procedures should include a determination of the
design and implementation of user entity controls that must be in place and an
assessment of those controls on an annual or periodic basis depending on their
impact to the organization’s ability to meets its internal control objectives.
UNCLASSIFIED
UNCLASSIFIED
75
III. Material Weakness - Lack of Appropriate Management Controls over
Financial Reporting
In accordance with OMB Circular A-123 issued under the authority of FMFIA and the
Government Performance and Results Act Modernization Act, management is
responsible for establishing and maintaining internal controls to achieve reliable
financial reporting. According to the GAO Green Book, management is responsible for
implementing and evaluating its internal control system to meet reporting objectives
related to the preparation of reports for use by the entity, its stakeholders, or other
external parties. USSOCOM does not own the majority of systems it uses to process
its transactions; those systems are owned by the military services or other service
organizations. According to the GAO’s Green Book, management may engage
external parties to perform certain operational processes for the entity (e.g., payroll
processing or security services); however, management retains responsibility for
monitoring the effectiveness of internal control over the assigned processes
performed by service organizations. Given the complexity of the financial statement
compilation process, as well as the complex environment in which USSOCOM
operates, USSOCOM relies on service organizations to perform key data functions
without the necessary capability and/or capacity to fully monitor or review their work.
The lack of comprehensive guidance and oversight can result in financial statements
that are unsupported, erroneous, and do not accurately represent USSOCOM’s
financial position. The following control weaknesses were noted related to
USSOCOM’s financial reporting process:
1. Lack of Comprehensive Understanding of Information Systems and
Financial Data. USSOCOM management did not have a full understanding of
the nature of and factors impacting each of its financial statement line item
balances.
2. Lack of Validation Controls over Financial Transactions and Related Data.
USSOCOM management lacked validation controls (i.e., comprehensive control
activities and/or monitoring activities) to verify the:
a. Recording of JVs or adjustments;
b. Manual inclusion of data provided by others into the financial statement
footnotes by USSOCOM management;
c. Recording of routine transactions by USSOCOM’s components and service
organizations;
d. Completeness and accuracy of payroll transactional data;
e. Nature and cause of reconciling payroll transactions;
f. Completeness and accuracy of funding and its related status;
g. Receipt and acceptance of goods and services;
h. Abnormal activities are researched, and errors in the summary balances
affected are investigated and resolved;
i. Completeness and accuracy of USSOCOM’s transactional financial data
used for analysis and reporting; and,
UNCLASSIFIED
UNCLASSIFIED
76
j. Methodology used to record estimated obligations was sufficiently precise
once the actual amount of obligation is known.
The lack of validation controls may have contributed to misstatements, including:
a. JVs executed using improper accounting treatment;
b. Errors in the initial posting of expenses; and,
c. Recording obligations to incorrect periods.
In addition, we noted instances where internal controls were inappropriately
designed because evidence of control performance was not consistently retained
or did not exist.
3. Lack of or Inadequate Support Related to the Existence/Occurrence,
Accuracy, or Completeness of Recorded Transactions or Balances.
USSOCOM management was unable to provide sufficient and adequate
supporting documentation related to at least one of our testing attributes across
the following testing areas:
a. Obligations;
b. Gross Costs;
c. Sensitive Activities. Additionally, Management’s inability to provide timely
access to sensitive information precluded its ability to substantiate the
propriety of its treatment of certain transactions;
d. General Equipment (GE);
e. Construction in Progress (CIP); and,
f. Manual JVs.
4. Control Deficiencies over Accounts Payable and Advances and
Prepayments. USSOCOM was unable to record accounts payable transactions
in an accurate, complete, and timely manner nor provide a listing of assets to
support advances and prepayments data in a consistent manner because of a
lack of appropriate business processes and certain system limitations.
Additionally, neither USSOCOM nor its financial reporting service organization
was able to generate sufficiently detailed accounts payable or advances and
prepayments information which would allow for an effective risk analysis based
on aged invoices or abnormal balances at the invoice, voucher, or vendor level.
Furthermore, there were not comprehensive processes in place to consistently
accrue accounts payable where appropriate.
5. Improper Reporting of Revenue. The majority of the Earned Revenue balance
on the financial statements does not meet the definition of “exchange revenue”
as defined by federal accounting standards. Specifically, Earned Revenue
includes activity between USSOCOM components, which is not properly
eliminated on the face of the Statement of Net Cost (SNC), in accordance with
Statements of Federal Financial Accounting Standards (SFFAS) No.7,
UNCLASSIFIED
UNCLASSIFIED
77
Accounting for Revenue and Other Financing Sources and Concepts for
Reconciling Budgetary and Financial Accounting.
6. Inappropriate Accounting Treatment of Certain Assets. USSOCOM
management was unable to support the assertion that certain assets considered
to be Operating Materials and Supplies (OM&S) were acquired as replacement
parts to be used in the normal course of operations under the Inventory and
Related Property, Net (I&RP) line item, rather than as General Property, Plant
and Equipment (PP&E). Additionally, USSOCOM does not accumulate and
capitalize capital improvement and modification costs affecting military service
reported GE assets funded with Major Force Program (MFP) 11 dollars. As such,
USSOCOM does not financially report the accumulated costs within CIP while the
improvement/modification is ongoing nor record the transfer of the accumulated
costs to the military service financially reporting the base asset once the
improvement/modification is complete.
7. Lack of Completeness over Operating Materials and Supplies. USSOCOM
currently reports two categories of assets as OM&S, Uninstalled Aircraft Engines
(UAE) and munitions, both of which are now treated using the consumption
method of accounting. USSOCOM will ultimately report a third category of
OM&S, the Defense Property Accountability System (DPAS) Remainder, which
consists of repair parts and assemblies, but has not been able to identify a
population of the DPAS Remainder to report on its financial statements.
USSOCOM management has stated USSOCOM does not have a mechanism in
place to identify all the OM&S held for use across the USSOCOM enterprise.
Therefore, USSOCOM was unable to report a complete population of OM&S.
8. Lack of Valuation over Operating Materials and Supplies. USSOCOM
management was unable to make an unreserved assertion over the valuation of
OM&S reported within its Balance Sheet for I&RP, in accordance with the SFFAS
48: Opening Balances for Inventory, OM&S, and Stockpile Materials. USSOCOM
has asserted that it does not have the processes and controls in place to validate
the valuation of OM&S. Due to a lack of processes and controls for identifying
USSOCOM munitions, a material amount of USSOCOM-owned munitions was
reported by a Military Service on its financial statements as of Q2 Fiscal Year
(FY) 2023. USSOCOM executed a Prior Period Adjustment in Q3 FY 2023 to
begin financially reporting the munitions previously reported by the Military
Service and restated the FY 2022 USSOCOM financial statements to correct the
material misstatement. Additionally, USSOCOM relies on the service
organizations in custody of the OM&S assets to perform inventory procedures
and related controls. USSOCOM has not completed efforts to have sufficient
oversight or visibility into inventory procedures performed by the service
organizations over OM&S that is reported on the USSOCOM financial
statements, nor did USSOCOM review any documentation resulting from
inventories conducted by the service organizations.
9. Inability to Substantiate Operating Materials and Supplies. USSOCOM was
unable to support the economic events and underlying transactions related to the
OM&S, a component of I&RP on the balance sheet, specifically pertaining to the
purchases, consumptions, gains, or losses of OM&S. Currently, USSOCOM’s
accounting systems expense OM&S upon acquisition and manually establish the
OM&S balance through a quarterly JV in order to account for OM&S under the
consumption method. Therefore, USSOCOM does not have data or system
UNCLASSIFIED
UNCLASSIFIED
78
capabilities that can substantiate the economic events and underlying
transactions supporting activity.
10. Lack of Compliance with the Accrual Basis of Accounting. Certain
USSOCOM components use legacy accounting systems for the recording of their
daily accounting transactions. These systems were designed for execution and
reporting of agency budgets but not necessarily for financial reporting in
compliance with U.S. Generally Accepted Accounting Principles (GAAP),
including the accrual basis of accounting. Grant Thornton noted one system that
uses certain codes to record an obligation, expense, liability, and disbursement
simultaneously. Through our testing, we noted that USSOCOM service
components and sub-unified commands/TSOCs sometimes use these codes
before any goods or services have been received or accepted. We noted that
recording of the expense and liability before the government has received value
in return for a promise to provide money or other resources may materially
overstate the Gross Costs and Accounts Payable line items. Through testing of
Gross Costs, Grant Thornton noted some USSOCOM feeder systems do not post
the expense and associated accounts payable when goods or services or the
vendor invoice are received. Instead, the expense entry is recorded in
conjunction with the payment made to the vendor. If the receipt of goods or
services occurs in one FY and the payment takes place in the subsequent FY,
this causes a misalignment of the expense to the incorrect FY. USSOCOM lacks
internal controls to ensure the completeness, accuracy, and timeliness of its year-
end balance of Gross Costs and Accounts Payable. Additionally, USSOCOM’s
financial reporting service organization posts JVs on USSOCOM’s behalf based
on the amount of abnormal accounts payable occurring with the recording
disbursements. In certain circumstances, these adjustments were not based on
evidence of the receipt of goods or services.
11. Lack of Controls over Financial Statement Compilation. USSOCOM
management and its financial reporting service organization lack adequate
controls over the financial statement compilation process such as:
a. Data Collection: In order to compile USSOCOM financial statements,
USSOCOM’s financial reporting service organization obtains financial data
from the various accounting and non-accounting systems used by
USSOCOM, commonly referred to as feeder systems. Although the financial
reporting service organization obtains and ingests relevant USSOCOM
financial data into DDRS-B, the data obtained and ingested is at a trial-
balance level and not at the transaction-level. USSOCOM was not able to
provide a complete population of transactional data supporting the financial
statements.
b. Reconciliation: USSOCOM does not have a single centralized accounting
system and instead has financial information recorded across multiple
accounting and non-accounting systems owned by various DoD
components. Monthly, these systems owners submit summary financial
information to USSOCOM’s financial reporting service organization for data
normalization and summarization, referred to as pre-processing, within
DDRS-B. Presently, there are no comprehensive reconciliations performed
between the DDRS-B standardized data (post-processing) and the originally
obtained summarized feeder data.
UNCLASSIFIED
UNCLASSIFIED
79
c. Manual Pre-Processing: Certain pre-processing actions require manual
action by financial reporting service organization personnel. For example,
DDRS-B produces a report that displays feeder file records excluded from
pre-processing. Records may be excluded either manually, if an accountant
recognizes an invalid attribute, or automatically (i.e., auto-excludes) if DDRS-
B has previously been programmed to systematically exclude the record due
to an invalid attribute. Through our testing, we noted a variety of issues with
the internal controls over data exclusions, including failure to review all
instances of auto-excludes for appropriateness and failure to review the
related impact of excluded records to the USSOCOM financial statements.
d. Unsupported Adjustments: USSOCOM’s financial reporting service
organization create JVs for a multitude of reasons (e.g., as a result of a
reconciliation, reclassification, identified errors, etc.). JVs posted within
DDRS-B and DDRS-Audited Financial Statements (AFS) are designated as
either “Supported” or “Unsupported.” Generally, JVs are designated as
supported when transactional details or other appropriate evidence
supporting the amount of the JV is available. Alternatively, transactional
details or other appropriate supporting documentation for JVs designated as
unsupported is either unobtainable or unavailable. Grant Thornton noted that
unsupported JVs were routinely recorded within DDRS-B and DDRS-AFS for
which transactional detail is not obtainable/available. Similar to JVs, Trial
Balance Input Adjustments (TBIAs) are adjustments that can be made within
DDRS-AFS. TBIAs help to allow data from DDRS-B interface into DDRS-
AFS when the opening balances between the two systems do not agree.
While a high-level summary of the issue (e.g., interface errors) can be
provided, TBIAs cannot be connected to the underlying DDRS-B activity,
whether caused by DDRS-B JVs, accounting system information ingested,
non-accounting system information ingested, or specific interface issues.
e. Validation of Disclosures: While much of the USSOCOM financial
statement preparation process is executed by the financial reporting service
organization, USSOCOM management is responsible for the preparation and
review of certain disclosures within the financial statements. While processes
have been implemented by USSOCOM to ensure the validity of data calls
utilized to populate certain footnotes, USSOCOM was unable to fully validate
the data within the data calls. Furthermore, controls in place at USSOCOM
were absent or insufficient to prevent manual errors from causing
misstatements (e.g., identify abnormal balances and/or misstated
disclosures).
f. Conformance with Requirements of OMB Circular A-136: OMB Circular
A-136, Financial Reporting Requirements, specifies requirements for the
form and content of federal financial statements and related disclosures. For
example, USSOCOM financial Statements are not in conformity with the
requirements of OMB Circular A-136 as the Gross Costs are not presented
by major program on the Statement of Net Cost and information in Note 1
Summary of Significant Accounting Policies was duplicated in other
footnotes.
12. Inability to Create a Comprehensive Universe of Transactions. USSOCOM
was unable to provide transaction-level detail supporting financial statement
impact for every non-accounting system and adjustment. Additionally,
USSOCOM does not provide all data elements for the transaction-level details for
UNCLASSIFIED
UNCLASSIFIED
80
one of its sensitive accounting systems. The inability to provide complete
transactional-level data for all accounting and non-accounting systems and for
adjustments impacting USSOCOM’s financial statements prevents USSOCOM
and its Independent Public Accounting (IPA) firm from being able to
comprehensively substantiate the financial statements. Furthermore, the inability
to provide transactional data limits USSOCOM management’s and its IPA’s ability
to understand the various types of activities supporting summarized financial
statements or perform meaningful analysis of differing types of internal and
external factors impacting operations.
Recommendations
USSOCOM management should consider taking the following actions:
1. Lack of Comprehensive Understanding of Information Systems and
Financial Data. USSOCOM management should formally document and
maintain documentation detailing the nature of external and internal factors
impacting all financial statement line items, perform a periodic review of these
factors, and update documentation accordingly. USSOCOM management should
also develop a formalized fluctuation analysis methodology to include analysis of
factors impacting fluctuations deemed to be significant, as well as maintain
documentation that identifies responsible accounting operation mission areas
and points of contact for all financial statement line items, Assessable Units
(AUs), and business activities/events which can be utilized when researching
financial statement line items and fluctuations.
2. Lack of Validation Controls over Financial Transactions and Related Data.
USSOCOM management should include an evaluation of all USSOCOM financial
reporting transactions from inception to reporting, including reconciliations, as
well as activities executed by USSOCOM’s service organizations and USSOCOM
accountants, that impact the financial statements. USSOCOM management
should obtain an understanding of existing financial reporting controls and
monitoring activities, as well as related weaknesses, and appropriately design
and implement controls to mitigate those deficiencies.
3. Lack of or Inadequate Support Related to the Existence/Occurrence,
Accuracy, or Completeness of Recorded Transactions or Balances.
USSOCOM management should continue to work with its service components,
sub-unified commands/TSOCs, and service organizations to ensure supporting
documentation is readily available for inspection by management for the
purposes of performing monitoring controls as well as for audit and other
compliance-related oversight functions. Additionally, USSOCOM should further
develop monitoring controls over recorded transactions, including crosswalks to
feeder systems, to ensure sufficient supporting documentation exists. Policies
and procedures should also address establishing controls to retain evidence.
USSOCOM should implement processes for monitoring the total actual
obligations incurred when support becomes available, compare actuals to the
related estimates, set thresholds for assessing the accuracy of the estimates, and
improve its estimation methodology where the accuracy of estimates used falls
below the established thresholds. USSOCOM Management should implement
new and strengthen existing controls over the receipt and acceptance of goods
and services, timely provisioning of sensitive information, and Gross Costs and
New Obligations and Upward Adjustments transactions.
UNCLASSIFIED
UNCLASSIFIED
81
4. Control Deficiencies over Accounts Payable and Advances and
Prepayments. USSOCOM management should work with its financial reporting
service organization and relevant system owners to obtain USSOCOM Accounts
Payable and Advances and Prepayments data and related support for balances
represented in the USSOCOM financial statements on a timely basis. USSOCOM
should also develop a process and procedures to routinely obtain schedules of
Accounts Payable and Advances and Prepayments that can be summarized at
the vendor, voucher, and/or invoice level and develop a risk management
process. Additionally, management should develop a strategy and compensating
controls, recognizing system limitations, that will enable USSOCOM to record
Accounts Payable transactions timely, completely, and accurately.
5. Improper Reporting of Revenue. USSOCOM should implement a manual
control to eliminate intra-USSOCOM revenue transactions and perform a detailed
analysis of the Earned Revenue line-item balance that provides sufficient
documentation of and support for any necessary adjustments to USSOCOM’s
financial statements.
6. Inappropriate Accounting Treatment of Certain Assets. USSOCOM
management should complete an analysis that determines whether certain
assets that lose their identity through incorporation into an end-item once utilized
are appropriately categorized as materials (a component of OM&S) or as PP&E
and make related adjustments to its accounting records as appropriate.
Additionally, USSOCOM should accurately accumulate and capitalize MFP-11
funded capital improvements and modifications to GE assets, including MFP-2
funded assets that are reported by the military services. USSOCOM should
ensure that once MFP-11 funded capital improvements and modifications are
complete, procedures are in place to appropriately record the transfer and
acceptance of the cost to the military service financially reporting the base asset.
7. Lack of Completeness over Operating Materials and Supplies. USSOCOM
management should continue efforts to identify and record OM&S within
Accountable Property Systems of Record (APSRs). Additionally, USSOCOM
should develop and implement processes to ensure service components and
sub-unified commands/TSOCs account for USSOCOM OM&S within APSRs that
would allow for the identification of a complete population of USSOCOM’s OM&S
assets. USSOCOM should also perform and document an analysis over the
entire population of USSOCOM OM&S in accordance with the DoD Financial
Management Regulation (FMR).
8. Lack of Valuation over Operating Materials and Supplies. USSOCOM
management should develop a comprehensive plan, including milestones, to
implement SFFAS guidance. USSOCOM management should develop,
document, and implement controls over the valuation of OM&S. Additionally,
USSOCOM should develop and document an understanding of the inventory
procedures performed by service organizations over OM&S held outside of
USSOCOM and perform oversight to ensure inventory procedures over OM&S
held outside of USSOCOM are effectively performed.
9. Inability to Substantiate Operating Materials and Supplies. USSOCOM
management should develop, document, and implement procedures and system
capabilities to substantiate the purchases, consumption, gains, or losses of
OM&S in the year the activity occurs to support the OM&S balance. Additionally,
UNCLASSIFIED
UNCLASSIFIED
82
USSOCOM management should ensure JVs appropriately reflect the underlying
economic events.
10. Lack of Compliance with the Accrual Basis of Accounting. USSOCOM
management should adopt policies and procedures to recognize expenses and
liabilities only upon receipt and acceptance of goods and/or services.
Additionally, USSOCOM should adopt general ledger systems designed to
comply at the transaction level with U.S.GAAP, including the accrual basis of
accounting. Furthermore, until compliant systems can be adopted, USSOCOM
should evaluate whether legacy systems can be used without modification or be
modified to comply with the accrual basis of accounting. USSOCOM
management should work with system owners to establish processes that ensure
appropriate recording of economic events in a timely manner after they occur.
USSOCOM should establish cut-off procedures to minimize the volume of
transactions that are not recorded in the proper period and perform an analysis to
determine which business processes result in a misalignment of receipt and
acceptance of goods or services and recordation of the related expense and
payable. Management should use the analysis to perform a cost/benefit
determination over the possible variances across FYs. Finally, USSOCOM
should implement a control to estimate the amount of unrecorded expenses at
year-end and post an accrual entry to ensure the alignment of expenses to the
proper FY.
11. Lack of Controls over Financial Statement Compilation. USSOCOM
management should continue to work with its financial reporting service
organization to obtain an understanding of all actions taken by the organization
for the compilation and preparation of USSOCOM financial statements.
USSOCOM management should identify related risks and design monitoring
activities, which would allow them to perform appropriate oversight over the
financial reporting service organization’s actions. Additionally, USSOCOM
management should design and implement controls that validate the accuracy of
information manually included within the financial statements and related notes
by USSOCOM personnel, to include conformity with OMB Circular A-136.
12. Inability to Create a Comprehensive Universe of Transactions. USSOCOM
management should develop processes and procedures to obtain and provide to
its IPA a full transactional population, or alternative documentation, which
substantiates balances presented in the USSOCOM financial statements.
Additionally, USSOCOM should develop and document a detailed understanding
of the various types of activities supporting summarized financial statement
balances, as well as perform an analysis of differing types of internal and external
factors impacting operations.
UNCLASSIFIED
UNCLASSIFIED
83
IV. Material Weakness – Lack of Adequate Controls over the Fund Balance with
Treasury Reconciliation Process
Fund Balance with Treasury (FBwT) represents the aggregate amount of funds on
deposit with the U.S. Department of the Treasury (Treasury). Treasury maintains
agencies’ FBwT account balances in its Central Accounting Reporting System
(CARS). Reconciliation of agencies’ FBwT general ledger accounts to the balances
held by Treasury is a key internal control process, which ensures the accuracy of the
government’s receipt and disbursement data. Therefore, Treasury Financial Manual
(TFM) Chapter 5100, Section 5125, requires agencies to implement effective and
efficient reconciliation processes and perform timely reconciliations between their
FBwT general ledger accounts and Treasury’s CARS Account Statement.
USSOCOM is considered an Other Defense Organization (ODO). ODOs are entities
authorized by the Secretary of Defense to perform select consolidated support and
service functions to the DoD on a Department-wide basis. Office of the Under
Secretary of Defense, Comptroller allots funds from appropriations to USSOCOM and
other ODOs, including Operations and Maintenance, Procurement, and Research,
Development, Test, and Evaluation, among others. Similarly, Treasury aggregates the
FBwT information for ODOs at a summary level in a single Treasury account, U.S.
Treasury Index (TI) 97. The Treasury account does not provide identification and
account balances of the separate ODOs sharing the U.S. Treasury account.
Disbursing offices across DoD are responsible for processing disbursements and
collections on behalf of the ODOs. The disbursements and collections processed by
each disbursing office are compiled each month by USSOCOM’s financial reporting
service organization. The financial reporting service organization’s HQ Accounting
and Reporting System (HQARS) consolidates the disbursement and collection
information received from disbursing offices for each ODO FBwT account. HQARS
then reports the disbursement and collection to Treasury’s CARS. Because Treasury
only identifies the ODOs at the aggregate TI-97-level, the information sent to Treasury
is provided at an aggregated level and does not identify the specific ODO responsible
for the disbursements and collections.
To assist ODOs in performing the monthly-required FBwT reconciliation between their
general ledger FBwT accounts and the information in CARS, the financial reporting
service organization developed the Cash Management Report (CMR). This report is
an output of the CMR Tool, which takes information gathered from HQARS to
generate the CMR. The CMR is comprised of consolidated disbursement and
collection data from HQARS as well as ODO funding data from the Program Budget
Accounting System (PBAS), Electronic Funds Distribution (EFD), and various DoD
disbursing offices. The CMR identifies FBwT balances for each ODO at the limit-level.
Limits are four-character codes that help identify, manage, and report the financial
activity of each ODO.
Finally, the financial reporting service organization performs a series of reconciliations
of the CMR to identify and resolve variances between the general ledger accounting
systems and the Treasury records for each ODO. These reconciliations were
performed using Advancing Analytics (Advana) as the source system for reconciling
FBwT. While the financial reporting service organization and Office of the Secretary of
Defense have implemented controls designed to identify and resolve these variances,
no controls have been implemented to ensure that the variances are resolved in a
timely manner.
UNCLASSIFIED
UNCLASSIFIED
84
Evaluation of FBwT Reconciliation Results
During our testing of the results of the USSOCOM FBwT reconciliation process, we
identified the following weaknesses:
1. Unidentified Differences. USSOCOM’s financial reporting service organization
uses an Access database to prepare the TI-97 General Fund FBwT Workbook
(TI-97 Audit Workbook), which displays TI-97 expenditure data and the partially
reconciled FBwT balance for each ODO accounting system detail and the CMR.
The TI-97 Audit Workbooks also display unidentified differences/reconciling items
and variance balances for each ODO. The financial reporting service organization
uses a number of different terms to distinguish among the various types of
unidentified differences (e.g., Unallocated Funds, Processing and Subhead
Errors, Unvouchered Intragovernmental Payment and Collection, and Treasury
variances). The disbursing offices that process USSOCOM collections and
disbursements are unable to produce a universe of transactions and supporting
documentation for certain types of FBwT variances. This is true for all disbursing
offices outside of those that belong to USSOCOM’s financial reporting service
organization.
Based on testing performed as of September 30, 2023, unidentified differences
between the CMR and USSOCOM accounting system detail included within the
TI-97 Audit Workbook amounted to $34.8 billion. This represents the absolute
value of transactions that could not be reconciled between the CMR, which
reflects balances at Treasury, and USSOCOM accounting system detail. Of this
amount, USSOCOM has identified TI-97 Suspense accounts as posing the
highest risk of being attributable to USSOCOM but have not implemented a
mechanism by which to assess the significance of these amounts at a defined
frequency.
2. Unreconciled Differences. A significant portion of the USSOCOM FBwT
account balance is attributable to appropriated funds prior to FY 2013 or FY
2015, depending on the type of appropriation. To date, USSOCOM has not
completed corrective actions to reconcile this data. For FY 2023, Grant Thornton
did not receive the FBwT Beginning Balance Analysis to calculate the FBwT
differences or perform controls walkthrough in the area.
3. Out-of-Scope Appropriations. USSOCOM management was unable to provide
support validating USSOCOM’s right to the Out-of-Scope Appropriations. For FY
2023, Grant Thornton did not receive the FBwT Beginning Balance Analysis to
calculate the FBwT differences or perform internal controls walkthroughs in the
area.
In addition to not receiving the FBwT Beginning Balance Analysis, Grant Thornton did
not receive the documentation necessary to complete a FBwT variance aging
analysis. FBwT reconciliations for ODOs are complex due to multiple individual ODOs
comprising TI-97; each ODO fund balance in the U.S. Treasury accounts is
indistinguishable from the fund balances of the other ODOs. This has resulted in the
identification of unsupported FBwT transactions. Grant Thornton identified that
USSOCOM lacks monitoring over its financial reporting service organization as it
relates to FBwT and that controls and documentation around the process were
insufficient. Significant FBwT variances may continue to age over 60 business days.
Through testing of the FBwT CMR differences, Grant Thornton identified transactions
that were not recorded to the correct general ledger within 60 business days.
UNCLASSIFIED
UNCLASSIFIED
85
Additionally, testing of items from the Q1 Statement of Differences (SoD) universe of
transactions (UoT) identified seven transactions that did not clear within 60 business
days. Furthermore, due to ongoing remediation activities related to FBwT suspense
accounts, Grant Thornton did not perform suspense testing in FY 2023, and therefore
could not conclude that conditions identified in FY 2022 were remediated. These
conditions were related to samples for which management could not provide
supporting documentation or could not support the Line of Accounting (LOA) and/or
the owner entity, and transactions that were erroneously recorded to the Army
General Fund LOA. The existence of material unidentified differences between
USSOCOM’s FBwT balance and balances reported by Treasury, as well as material
unsupported aged balances, increases the risk that USSOCOM’s FBwT is misstated.
Recommendations
USSOCOM management should consider taking the following actions:
1. Evaluation of FBwT Reconciliation Results.
USSOCOM management should continue to work with its financial reporting
service organization and other relevant organizations to:
a. Further investigate and resolve unidentified and unreconciled differences
resulting from the FBwT reconciliation process;
b. Design and implement controls over the FBwT reconciliation process
including timely resolution of FBwT differences; and,
c. Obtain and maintain adequate support for amounts recorded as funding
transactions within the USSOCOM FBwT account.
UNCLASSIFIED
UNCLASSIFIED
86
V. Material Weakness – Lack of Adequate Controls over General Equipment and
Construction in Progress
In accordance with OMB Circular A-123 issued under the authority of FMFIA,
management is responsible for establishing and maintaining internal control to
achieve the objectives of effective and efficient operations, reliable financial reporting,
and compliance with applicable laws and regulations. A subset of the categories of
objectives is the safeguarding of all assets. Management designs an internal control
system to provide reasonable assurance regarding the prevention or prompt detection
and correction of unauthorized acquisition, use, or disposition of an entity’s assets.
USSOCOM reported on its September 30,
2023, Balance Sheet a total of $3.1 Billion
in PP&E, Net. The balance represents GE and CIP. USSOCOM is in the process of
implementing SFFAS 50, Establishing Opening Balances for General Property, Plant,
and Equipment. However, USSOCOM management had not yet completed the
necessary steps to make an unreserved assertion over its balance of PP&E within the
Balance Sheet.
In addition, during our testing related to existence and completeness of USSOCOM
GE, and procedures over CIP, we noted the following internal control weaknesses:
General Equipment
1. Incomplete Recording of Accountable Assets. USSOCOM’s acquisition office
did not complete the recording of all of its accountable property within the APSRs
by the end of FY 2023.
2. Inability to Support Historical Acquisition Cost. As originally designed, the
Global Combat Support System-Army (GCSS-Army), one of the APSRs used by
USSOCOM, does not track historical acquisition cost. Instead, the system
assigns current sales price as noted within the current asset catalog. Additionally,
USSOCOM management was unable to provide sufficient documentation to
support the recorded acquisition cost for certain assets inspected during our
testing.
3. Lack of Adequate Controls over Existence, Completeness, and Valuation.
During our testing, we identified errors related to the existence, completeness,
and valuation of GE sampled that included incomplete financial reporting of GE,
inadequate evidence to support existence of the asset, as well as acquisition
cost, acquisition date, and useful life not supported by documentation.
Additionally, we identified errors related to the improper inclusion of certain GE
assets that were not procured by USSOCOM or were not USSOCOM GE assets.
We also noted a lack of timeliness in recording GE assets acquired/transferred-in
in the APSR. Furthermore, USSOCOM management did not produce a detailed
listing of GE that separately displays transfers in, transfers out, additions, and
disposals (all of which have a financial statement impact) from internal transfers
(which are non-impactful to the financial statements) for all GE assets. As a
result, USSOCOM management could not conduct appropriate reviews of the
changes in composition of GE balances.
Construction in Progress
1. Inability to Support Capitalized Construction Costs. USSOCOM’s
construction agent was unable to complete or validate remediation efforts over
UNCLASSIFIED
UNCLASSIFIED
87
the completeness of Standard Accounting, Budgeting, and Reporting System
(SABRS)/Command Financial Management System (CMFS), or review and
validate CIP execution/projects migrated from Standard Accounting and
Reporting System (STARS)/Facilities Information System (FIS) to SABRS/CFMS.
In prior years, we noted USSOCOM’s inability to provide documentation for
sampled CIP projects to validate the proper inclusion or exclusion of capitalized
construction costs within the CIP balance. As such, the conditions noted in prior
years remain applicable.
2. Unresolved Variances in CIP Data. USSOCOM and its construction agent
cannot validate the completeness and accuracy of USSOCOM-funded CIP
transactions executed by the construction agent. There are large, unsupported
variances in CIP data, including USSOCOM-funded CIP that is reported on the
USSOCOM financial statements that have not been resolved.
The decentralized nature of USSOCOM operations and long-standing use of property
accountability systems that were not designed for financial reporting purposes,
coupled with USSOCOM management’s reliance on its components without proper
monitoring controls in place and inadequate property controls at USSOCOM, has led
to the control weaknesses noted. These weaknesses could further delay USSOCOM
management’s efforts to assert to the value of PP&E, Net as reported on the Balance
Sheet.
The above noted internal control issues could lead to material misstatements to
USSOCOM’s financial statements.
Recommendations
USSOCOM management should consider taking the following actions:
General Equipment
1. Incomplete Recording of Accountable Assets. USSOCOM management
should enforce controls that ensure its acquisition office maintains its APSRs up-
to-date with accurate counts and develops milestones which ensure all
accountable assets are added to the APSRs.
2. Inability to Support Historical Acquisition Cost. USSOCOM management
should continue efforts towards preparing to assert to its balance of PP&E, Net
for its eventual implementation of SFFAS 50, to include establishing a reliable
method to maintain the acquisition cost data for all USSOCOM GE.
3. Lack of Adequate Controls over Existence, Completeness, and Valuation.
USSOCOM management should continue to develop and revise its internal
controls to ensure accurate recording of the GE and Accumulated Depreciation
account balances. USSOCOM should also develop, document, and implement
policies and procedures that ensure GE data, including acquisition date and
useful life in the APSR, is up to date and changes are made in a timely manner;
continue efforts to obtain historical acquisition cost documentation for assets; and
complete alternative processes to establish acquisition cost and date when
historical documentation is not available. USSOCOM management should
enforce controls to ensure acquisitions/transfers-in of GE assets are recorded in
the APSR in the period in which the transaction occurs. Additionally, USSOCOM
management should develop processes and procedures to prepare a listing of
UNCLASSIFIED
UNCLASSIFIED
88
GE that separately identifies transfers in/out, additions, and disposals from
internal transfers to support analysis of GE.
Construction in Progress
1. Inability to Support Capitalized Construction Costs. USSOCOM management
should design and implement controls to ensure accumulated CIP project costs
have appropriate supporting documentation that is retained and readily available
for review. USSOCOM management should also design and implement controls
to ensure the validation of removal of asset values upon acceptance of the
transfers by the military services.
2. Unresolved Variances in CIP Data. USSOCOM management should work with
the construction agent to continue the ongoing data clean-up efforts to validate
the CIP costs for completeness and accuracy, manually research and reconcile
CIP costs across multiple systems, and ensure the construction agent can
execute timely and accurate transfers to the military services upon completion of
CIP projects.
UNCLASSIFIED
UNCLASSIFIED
89
VI. Material Weakness – Lack of Adequate Controls over Information Systems
Environment
In accordance with the Federal Managers’ Financial Integrity Act of 1982 and the
requirements of the OMB Circular A-123 Management’s Responsibility for Internal
Control, USSOCOM management is responsible for establishing and maintaining
internal controls to achieve specific internal control objectives related to operations,
reporting, and compliance. This includes establishing information systems (IS)
controls, as management relies extensively on information systems for the
administration and processing of its programs, to both process and account for their
expenditures, collections, and disbursements, as well as for financial reporting. Lack
of internal controls over these environments could compromise the reliability and
integrity of USSOCOM’s data and increases the risk of misstatements, whether due to
fraud or error.
Our audit included the evaluation of SOC reports that are significant to USSOCOM,
as well as an evaluation of eight (8) applications utilized by USSOCOM for the
following purposes: Funding, FBwT, Procurement and Financial Reporting. Our
evaluation covered security management controls, logical access controls,
configuration management controls, segregation of duties controls, and contingency
planning / backup controls. The eight (8) applications in our scope include the
following:
• CMR Tool
• EFD
• General Accounting and Finance System (GAFS)
• General Fund Enterprise Business System – Sensitive
Activities (GFEBS-SA)
• GCSS
• HQARS
• Navy Standard Accounting and Reporting System
(NSABRS)
• PBAS
Most information system deficiencies identified in FY 2023 remain consistent with
prior years, and in the aggregate, these deficiencies have been evaluated as a
Material Weakness. We noted the following deficiencies during our testing:
Security Management. Appropriate security management controls provide
reasonable assurance of the efficacy of the security of an information system control
environment. Such controls include, among others, security management programs,
periodic assessments, and validation of risks and security control policies and
procedures. We noted the following deficiencies during our testing:
1. CMR Tool
a. Security policies and procedures were not updated to reflect current
operating conditions.
2. EFD
a. A process to track vulnerabilities to remediation had not been
formalized.
3. GFEBS-SA
UNCLASSIFIED
UNCLASSIFIED
90
a. A process for extending Plan of Actions and Milestones (POA&Ms)
that exceed remediation timeframes was not documented or
implemented.
b. Vulnerabilities were not tracked to remediation.
c. Key supporting documentation was not provided to validate that
closed POA&Ms were reviewed and approved prior to closure, and
continuous monitoring results were reviewed and approved.
d. Policies and procedures did not accurately depict operations.
4. HQARS
a. A sampled POA&M was not reviewed in a timely manner.
5. NSABRS
a. Third-Party agreements were not updated to reflect the current
environment.
Lack of review of third-party agreements increases the risk that (a) modifications or
amendments to responsibilities and controls may go undetected, and (b) required
updates are not documented and implemented. Without formalized and
comprehensive security management policies and procedures, management is
unable to adequately monitor the system’s security posture or identify vulnerabilities in
the environment. Furthermore, the inability to track and monitor vulnerabilities to
remediation in accordance with timelines increases the risk that known weaknesses
are not addressed, and further increases the risk to confidentiality, integrity, and
availability of data. Lack of review of POA&Ms on a regular basis increases the risk
that remediation of known weaknesses may exceed their due dates. Additionally,
insufficient evidence to support the design and operating effectiveness of controls
inhibits the ability to conclude on whether controls have been appropriately designed
and whether those controls were operating effectively during the audit period. The
issues presented above may increase the risk of financial systems being
compromised and may result in the unauthorized processing, use, modification, or
disclosure of financially relevant transactions or data.
Logical Access / Segregation of Duties. Access controls limit or detect
inappropriate access to computer resources, protecting them from unauthorized
modification, loss, and disclosure. Such controls include identification and
authentication mechanisms, authorization controls, protection of system resources,
and audit and monitoring capabilities. Furthermore, Segregation off Duties controls
provide reasonable assurance that incompatible duties are effectively segregated.
Such controls include segregation of incompatible duties and responsibilities and
related policies, and control of personnel activities through formal operating
procedures, supervision, and review. We noted the following deficiencies during our
testing:
1. CMR Tool
a. Audit logging and monitoring of user activity was not performed.
b. Comprehensive periodic access reviews were not completed.
c. A system generated listing of users, to include the date each user
was provisioned access to the application, could not be provided.
2. EFD
a. Formalized process to monitor for suspicious activity was not
implemented for the whole audit period. Specifically, the audit
logging tool was not configured to log required audit events.
UNCLASSIFIED
UNCLASSIFIED
91
b. Mechanisms to track system users (including contractors) that were
terminated or had transferred and no longer required access were
not in place.
c. Provisioning documentation did not capture all roles that were
requested.
d. A comprehensive review of authorized user access for sampled
months was not performed.
3. GFEBS-SA
a. Access provisioning procedures were not followed.
b. Reaffirmation process for privileged users was not documented and
implemented.
c. Audit logging tool was not configured to monitor and log user
activity within the database.
d. Timely review and closure of the audit logging tool cases was not
performed. Furthermore, the audit logging tool has limited data
retention.
e. A complete listing of privileged users that were deprovisioned could
not be generated.
f. The system was not configured to meet the latest Security
Technical Implementation Guide (STIG) standards for select
authentication and password configurations.
g. Users were provisioned a role with segregation of duty (SoD)
conflicts without an approved waiver.
4. NSABRS
a. Users were granted unauthorized access.
b. Access reviews were not complete.
c. Could not provide documentation of reviews to validate terminated
and transferred users’ no longer had access.
5. PBAS
a. Access reviews were not comprehensive and complete.
b. User listing used for account management activities was
incomplete.
An incomplete understanding of application privileges and/or unauthorized access
increases the risk that users can perform activities within the system in excess of their
job responsibilities. Without the ability to generate a listing of users with create dates
for the application, management and the auditor is unable to validate that the
provisioning process was adhered to for new users. Without a complete and
comprehensive access review or a complete deprovisioned users listing, users may
retain inappropriate access to the application or users' access may not be
commensurate with their current job duties, resulting in continued inappropriate
access to perform unauthorized activities, least privilege, and SoD concerns. Lack of
a comprehensive monitoring tool, lack of a log review process, and uncomprehensive
audit logs increases the risk that the threatening activity is not addressed in a timely
manner. Without comprehensive monitoring for SoD violations, users may have
access to perform incompatible functions within GFEBS-SA or have access to
privileges outside of what is needed to perform their job responsibilities. Improperly
configured password and inactivity settings can increase the risk that an unauthorized
user gains access to the system.The issues presented above may increase the risk of
financial systems being compromised and may impact the confidentiality, integrity and
availability of information maintained in the systems.
UNCLASSIFIED
UNCLASSIFIED
92
Configuration Management. Appropriate configuration management controls
provide reasonable assurance that changes to information system resources are
authorized, and systems are configured and operating securely and as intended.
Such controls include effective configuration management policies, plans, and
procedures, as well as proper authorization, testing, approval, and tracking of all
configuration changes. We noted the following deficiencies during our testing:
1. CMR Tool
a. A system generated population of changes that were applied to the
CMR application could not be provided.
b. Periodic monitoring of changes was not performed.
2. EFD
a. A system generated listing of configurable changes related to the
application could not be provided.
b. Controls to validate that changes migrated to production were
authorized and validated were not designed and implemented.
3. GFEBS-SA
a. Changes were not made in accordance with policy.
b. The latest STIG standards were not used to perform baseline
scans.
c. The process for validating transports was not implemented.
d. Policies and procedures did not accurately depict operations.
e. Not all Internet Protocol (IP) addresses were included in the
vulnerability scan.
4. NSABRS
a. An audit log of direct data changes could not be provided.
b. Program changes were not authorized, validated, and approved in
accordance with policies.
c. Change management logs were not reviewed timely.
Well-established configuration management controls prevent unauthorized changes
to the application and provide reasonable assurance that systems are configured and
operating securely and as intended. Included in these configuration management
controls is the ability to systematically track all changes that were modified and
migrated to the production environment and validate that all changes migrated to
production are authorized and valid. Further, without the ability to associate changes
with change management documentation, there is an increased risk that
unauthorized, inappropriate, or untested changes may be introduced into the
application without detection. Without appropriate controls to document, validate and
authorize changes, there is an increased risk that unauthorized, inappropriate, or
untested changes may be introduced into the application without detection.
Additionally, without a timely review of baseline monitoring reports, unauthorized
changes can be implemented into production. Furthermore, without reviewing and
implementing the latest system security settings, application settings may not be
enforced or secure, which could lead to an increased risk that the confidentiality,
integrity, and availability of data in GFEBS-SA is compromised. Also, without
formalized and comprehensive policies and procedures, management is not able to
help ensure personnel are operating and supporting the system as designed.
Furthermore, incomplete scanning of the application for vulnerabilities increases the
risk that critical vulnerabilities go undetected and unresolved which in turn increases
the risk of systems being compromised. These issues may impact the confidentiality,
integrity, and availability of the system and related financial data.
UNCLASSIFIED
UNCLASSIFIED
93
Contingency Planning / Backup Controls. Controls provide reasonable assurance
that contingency planning (1) protects information resources and minimizes the risk of
unplanned interruptions and (2) provides for recovery of critical operations should
interruptions occur. Such controls include steps taken to prevent and minimize
potential damage and interruption. We noted the following deficiencies in our testing:
1. GFEBS-SA
a. Backup logs are not retained for the duration of the audit period.
If application data is not retained for archival purposes, there is an increased risk that
the application would not be restored in the event of a data loss or outage. This may
increase the risk of financial systems being compromised and may result in
unavailability of data.
Scope Limitation(s):
1. GFEBS-SA
a. Grant Thornton was unable to test the operating effectiveness of
GFEBS-SA information systems controls, as well as controls
relating to security management and backup domains, due to an
imposed scope limitation.
Lack of a comprehensive systems audit may increase the risk that weaknesses are
not identified, reported, and remediated in a timely manner. Unidentified weaknesses
could increase the risk of financial statement misstatements, errors, and fraud. The
issue presented above may increase the risk of financial systems being compromised
and may result in the unauthorized processing, use, modification, or disclosure of
financially relevant transactions or data.
Recommendations
USSOCOM management, including USSOCOM’s Chief Information Officer (CIO) and
system service organizations, should work to enforce and monitor the implementation
of corrective actions as follows:
Security Management
1. CMR Tool
a. Update, implement and disseminate security management policies
and procedures in accordance with National Institute of Standards
and Technology (NIST) standards.
2. EFD
a. Identify resources to prioritize the remediation of vulnerabilities in a
timely manner in accordance with existing policy and processes.
3. GFEBS-SA
a. Establish a process to obtain signature approval and document risk
acceptance with POA&Ms that exceed remediation timelines.
b. Implement a control to validate that all identified vulnerabilities are
tracked and remediated timely.
c. Work with the U.S. Army to discuss and agree upon the scope of
the GFEBS-SA information systems testing in a timely manner to
facilitate the FY 2024 audit.
d. Design and implement policies and procedures to be reflective of
current operating conditions.
4. HQARS
UNCLASSIFIED
UNCLASSIFIED
94
a. Address manpower and workload constraints to assist in the timely
review of open POA&Ms.
5. NSABRS
a. Validate that the review of third-party agreements occurs in
accordance with the agreement requirements.
Logical Access / Segregation of Duties
1. CMR Tool
a. Establish processes to perform a review of user activity to include
defining thresholds for suspicious activity to be investigated and
performing a review of user activity.
b. Implement its process of performing periodic access reviews.
c. Retain evidence of the monthly recertifications, to include: the
system generated listing of users, the query used to generate the
system generated listing of users, and review evidence so that
users that were provisioned during the period can be easily
identified.
2. EFD
a. Implement audit logging and monitoring controls in accordance with
formal policies and procedures, as well as review and document
security logs on a periodic basis.
b. Implement its process to track all users that have been terminated
and/or transferred.
c. Implement a process to ensure all systematic user roles provisioned
within the application are documented and approved within the
provisioning documentation.
d. Continue to refine its access recertification process.
3. GFEBS-SA
a. Implement controls to ensure all systematic user roles provisioned
within the application are documented, approved, and aligned
appropriately within the provisioning documentation in accordance
with policy.
b. Develop a process to perform a comprehensive review on a
periodic basis of privileged user roles.
c. Implement a process to configure audit logging tools to monitor and
log user activity within the database and review such security logs
on a periodic basis.
d. Design and implement formalized timeframes for when audit log
cases must be reviewed and closed, and establish a mechanism to
retain audit log case data for archival purposes.
e. Develop the capability to systematically generate and retain a listing
of privileged users that are deprovisioned.
f. Establish a process to download the latest STIGS applicable to
GFEBS-SA from the Defense Information Systems Agency (DISA)
DoD Cyber Exchange repository to ensure the application maintains
the most updated configuration baseline.
g. Implement the requirements of the weekly SoD violations control
that is specified in its policies.
4. NSABRS
a. Enforce access provisioning policies and procedures.
UNCLASSIFIED
UNCLASSIFIED
95
b. Perform complete periodic recertification of user access for
continued appropriateness of access.
c. Develop a mechanism to track all users that have been terminated
or transferred.
5. PBAS
a. Work in conjunction with DISA to perform comprehensive user
reviews on a periodic basis.
b. Use a new script to generate user listings for account administration
activities.
Configuration Management
1. CMR Tool
a. Formalize its process of running the baseline hash reports (reports
that will identify if a change was made to the production baseline by
comparing the production baselines on two different dates) on a set
frequency, which may be used to provide a system generated listing
of changes made to the application.
b. Formalize its process of running the baseline hash reports on a set
frequency to support configuration baseline monitoring for the
application.
2. EFD
a. Establish a methodology to systematically track all configuration
changes that are migrated to production and produce a complete
and accurate listing of all configuration changes for both internal
and external audit purposes that will support closer monitoring and
management of the configuration management process.
b. Develop, document, implement, and enforce requirements and
processes to periodically validate that all configuration items
migrated to production are authorized and valid.
3. GFEBS-SA
a. Implement a control to ensure that each configuration item is
requested, developed, tested, and approved prior to implementation
into production in accordance with policies and procedures.
b. Design and implement a process to ensure the latest security
settings are reviewed and applied to the system.
d. USSOCOM should work with the U.S. Army to discuss and agree
upon the scope of the GFEBS-SA information systems testing in a
timely manner to facilitate the FY 2024 audit.
c. Design and implement policies and procedures to be reflective of
current operating conditions.
d. Implement a process to ensure all production servers are scanned
for vulnerabilities.
4. NSABRS
a. Implement a method to demonstrate that all direct data changes are
authorized.
b. Provide change management documentation that supports the
traceability of the changes.
c. Enforce procedures to perform a timely review of the monitoring
reports in accordance with policies.
Contingency Planning / Backup Controls.
UNCLASSIFIED
UNCLASSIFIED
96
1. GFEBS-SA
a. Configure the backup utility to retain backup data for a greater
period of time.
Scope Limitation(s)
1. GFEBS-SA
a. Work with the U.S. Army to discuss and agree upon the scope of
the GFEBS-SA information systems testing in a timely manner to
facilitate the FY 2024 audit.
UNCLASSIFIED
UNCLASSIFIED
97
VII. Material Non-Compliance - Lack of Substantial Compliance with the Federal
Managers’ Financial Integrity Act of 1982
DoD Instruction 5010.40 requires DoD entities to comply with the requirements of the
FMFIA and the requirements of OMB Circular A-123. The FMFIA and OMB Circular
A-123 require federal entities to establish internal controls in accordance with the
GAO Green Book, conduct evaluations of their internal controls, and annually prepare
a SoA regarding the agency’s systems of internal accounting and administrative
controls.
Although we have noted some progress, USSOCOM has not yet fully implemented a
formal internal control program that would allow it to substantially comply with the
FMFIA and the related OMB Circular A-123 requirements.
As a result, USSOCOM management did not ensure substantial compliance with the
FMFIA. Specific examples of USSOCOM’s non-compliance with the FMFIA are
included in material weaknesses noted in Sections I through VI of this report.
In addition to those control deficiencies that were noted as part of the material
weaknesses referenced above, we identified additional deficiencies that impacted
USSOCOM’s compliance with the FMFIA:
a. USSOCOM did not provide process documentation supporting the
implementation of controls.
b. USSOCOM’s (buyer-side) data is adjusted, or replaced, using seller-side
data submitted from other organizations due to USSOCOM’s inability to
reconcile.
c. USSOCOM has not formally implemented a control to monitor FBwT related
balances that may be applicable to USSOCOM.
Recommendations
USSOCOM management should continue to design and fully implement a formal
internal control program that meets FMFIA and OMB Circular A-123 requirements.
During this process, USSOCOM should be mindful to do the following:
a. Document processes and specific control activities within USSOCOM and
document and monitor control activities at service organizations that impact
USSOCOM’s financial statements;
b. Work with all stakeholders to ensure processes and controls are in place to
affirm the completeness and accuracy of buyer-side data and eliminate the
usage of seller-side data replacements; and,
c. Coordinate with its financial reporting service organization to establish
processes and controls for researching and reviewing FBwT differences.
UNCLASSIFIED
UNCLASSIFIED
98
VIII. Material Non-Compliance - Lack of Substantial Compliance with the Federal
Financial Management Improvement Act of 1996
The Federal Financial Management Improvement Act of 1996 (FFMIA) requires that
agencies establish and maintain financial management systems that substantially
comply with the following three FFMIA Section 803 (a) requirements: Federal
Financial Management System requirements, applicable Federal accounting
standards, and the United States Standard General Ledger (USSGL) at the
transaction level. USSOCOM management has acknowledged that they do not
comply with the requirements of the FFMIA.
Because of matters described in the Basis for Disclaimer of Opinion paragraphs
included in our financial statement audit report dated November 8, 2023, we were not
able to obtain sufficient appropriate audit evidence related to USSOCOM
management’s substantial compliance with FFMIA Section 803 (a) requirements.
The majority of USSOCOM’s transactions are processed through and reside in each
of the military services' components' and/or service organization financial systems,
depending on the Combatant Command Support Agent of the USSOCOM service
component or sub-unified command. Based on our inspection of the Department of
the Air Force, Department of the Army, Department of the Navy, and United States
Marine Corps FY 2022 annual financial reports, we noted that each of the
departments and the United States Marine Corps are not in compliance with the
requirements of FFMIA. In turn, this affects USSOCOM’s ability to substantially
comply with the requirements of the FFMIA. In addition, we noted the following
instances of non-compliance through the execution of our audit procedures:
1. Federal Financial Management System requirements. Due to issues with
internal controls over security management, logical access, configuration
management, and backups, financial systems did not meet Federal Financial
Management System requirements.
2. Applicable Federal Accounting Standards. USSOCOM did not comply with
applicable federal accounting standards in multiple instances such as:
a. USSOCOM management has asserted that, currently, it does not have
adequate controls in place to validate the completeness and accuracy of the
value reported within its Balance Sheet for PP&E.
b. Intra-entity revenue was recorded as exchange revenue within certain
accounting systems.
c. No reports could be generated which would allow for the assessment of risk
related to aged invoices and abnormal balances at the invoice or vendor
level.
d. Processes are not in place to consistently accrue accounts payable in all
instances.
e. USSOCOM could not attest to the completeness of the OM&S balance on
the financial statements and full application of the consumption method of
accounting of the OM&S.
UNCLASSIFIED
UNCLASSIFIED
99
f. USSOCOM management has asserted that it does not have the processes
and controls in place to validate the valuation of OM&S and, therefore, could
not make an unreserved assertion over the value reported within its balance
sheet for I&RP.
g. A certain USSOCOM information system is not designed for compliance with
the accrual basis of accounting and USSOCOM lacks the policies and
controls to ensure compliance with the accrual basis of accounting.
h. USSOCOM management was unable to support classification of certain
Class 2 component item assets as OM&S, rather than PP&E.
i. There are certain Military Standard Requisitioning and Issue Procedures
supply bulk transactions and summary transactions recorded within the
General Accounting and Finance System for which underlying support was
unavailable.
j. USSOCOM management could not provide a listing of assets supporting the
balance for the Advances and Prepayments line item.
3. USSGL at the Transaction Level. USSOCOM data is recorded across multiple
accounting and non-accounting systems, some of which are not USSGL
compliant at the transaction level. Monthly, systems owners submit summary
financial information to USSOCOM’s financial reporting service organization for
data normalization and summarization, referred to as pre-processing, within
DDRS-B. During pre-processing, non-USSGL compliant summary information is
converted so that it complies with USSGL requirements. However, the resulting
USSGL compliant information cannot be comprehensively reconciled to original
source information. Furthermore, USSGLs exist within the DDRS trial balance
that are in an abnormal balance status. As a result, USSOCOM management is
unable to validate the adequacy of the conversion and compliance with this
requirement.
Recommendations
USSOCOM management should consider taking the following actions:
1. Consider transitioning to a stand-alone general ledger accounting system that
complies with the requirements of the FFMIA. A transition to a modern and
compliant system would eliminate USSOCOM’s dependency on service
organization systems that are non-compliant with federal financial system
requirements, federal accounting standards, and the USSGL at the transaction-
level. The transition would also eliminate the need for extensive and complex
adjustments/reclassifications of financial data that are prone to errors.
USSOCOM management should also continue to work with the Office of the
Under Secretary of Defense Comptroller to develop alternative methods of
producing the USSOCOM financial statements.
2. Alternatively, USSOCOM management should work with their service
organizations to develop corrective actions for long-standing system control
weaknesses and to ensure that internal controls are in place for every step of the
compilation process executed by its financial reporting service organization,
including:
UNCLASSIFIED
UNCLASSIFIED
100
a. Develop and implement comprehensive reconciliation controls/processes to
ensure that all USSOCOM data ingested into DDRS-B is ingested at the
accurate amount and to the appropriate accounts;
b. Develop processes/procedures to obtain a full transactional population;
c. Conduct assessments to ensure compliance with:
i. TFM USSGL at the transaction level; and,
ii. Applicable federal accounting standards;
d. Develop, implement, and monitor the effectiveness of security controls to
ensure compliance with NIST and DoD Instruction requirements; and,
e. Develop a comprehensive plan, including milestones, to implement both
SFFAS and DoD Guidance in a timely manner.
3. Further, design and implement adequate controls and monitoring activities over
USSOCOM’s compliance with the FFMIA according to OMB Circular A-123,
Appendix D, Compliance with the Federal Financial Management Improvement
Act of 1996.
UNCLASSIFIED
UNCLASSIFIED
101
UNCLASSIFIED
UNCLASSIFIED
102
