Time for a financial overhaul at the Defense Department

Published by Federal News Network on June 11, 2025

The Defense Department faces a well-known, ongoing challenge managing its vast financial ecosystem. With a budget of more than $850 billion, it’s the largest and most complex financial operation in the federal government. Yet it has never passed a clean audit. To overcome this, DoD must move beyond incremental change and adopt the kinds of digital solutions already driving transformation in leading private-sector enterprises.

Following a ritual that coincides with the inauguration of a new President, the Government Accountability Office presented its biennial High-Risk List to Congress. Boasting of having contributed to savings of almost $70 billion in the last year alone, GAO highlighted areas where progress remained insufficient and once again flagged defense financial management as a top concern. Despite progress, like the Marine Corps earning a clean opinion, chronic weaknesses remain. The inability to track assets or reconcile expenditures in real time leads to avoidable waste, fraud and abuse.

Defense Secretary Pete Hegseth’s pledge to pass a clean audit within four years is both ambitious and achievable, but only if DoD retools how it manages its finances. That means using process intelligence and advanced AI not only to diagnose problems, but to systematically fix them.

One place to start: building a digital twin of DoD’s financial operations. A digital twin creates a real-time, end-to-end view of financial processes, from invoice to audit trail. This helps pinpoint where to embed robotic process automation to eliminate manual bottlenecks and then apply agentic artificial intelligence, which enables systems to take proactive action, like flagging and correcting errors, without constant human intervention.

The Army, with its complex logistics and procurement chains, would be a logical pilot. By mapping workflows and identifying pain points, leaders could apply these tools to automate vendor payments, streamline reconciliations and reduce improper payments — laying a blueprint for enterprise-wide rollout.

DoD can also target audit-heavy functions like obligation tracking, fund certification and contract closeout. These are labor-intensive today, but ripe for automation. AI tools can flag missing documentation in real-time, dramatically reduce cycle times and shift audit teams toward strategic oversight instead of document chasing.

There’s precedent for this approach. One state government saved over $1 billion by applying similar process intelligence tools across procurement and finance. At DoD’s scale, even a 1% improvement could unlock billions in value.

Moreover, integrating siloed data sets, especially in components like the Defense Finance and Accounting Service (DFAS) or the Defense Logistics Agency (DLA), would improve reporting consistency and help generate live financial dashboards. That allows commanders and CFOs alike to monitor spend and spot anomalies before they become audit failures.

In an era of workforce constraints, these technologies also help reallocate talent. Staff who once manually reconciled transactions can instead focus on fraud detection, scenario planning and cross-functional process redesign.

Financial modernization isn’t just a compliance issue. It’s a mission readiness issue. A digitally intelligent financial system supports faster resourcing for equipment, personnel and operational priorities. It ensures warfighters get what they need without delay or red tape.

Achieving a clean audit isn’t about checking a box. It’s about proving to Congress, taxpayers and our service members that every dollar is accounted for and used wisely. With the right tools, DoD can finally break through decades of inefficiency and deliver the kind of financial stewardship the mission demands.