In April 2025, the Office of Inspector General released a report (GAO-25-108191) to address the most urgent financial management challenges currently facing the Dept of Defense (DOD) which includes an accelerated timeline for Government Property.
While the Pentagon has certainly made progress over the years, the US Government Accountability Office (GAO) emphasized that much more needs to be done, especially when it comes to action plans and demonstrating tangible results.
This is not a new issue. The DoD has been on the GAO’s High-Risk List since 1995 due to longstanding vulnerabilities in its financial management systems. Despite incremental improvements, the DoD has struggled for decades with their financial management and is the only major federal agency to have never obtained a “Clean Audit Opinion” on its financial statements.
Increased Pressure from Congress
Congress raised the stakes by passing the 2024 National Defense Authorization Act (NDAA) which sets a clear target: the DoD must obtain an unmodified (or “clean”) audit opinion by December 31, 2028.
In response, the Pentagon has begun to formalize its approach—identifying priority areas, developing strategies, and creating roadmaps to address critical audit impediments.
Furthermore, the Inspector General has identified 17 scope-limiting material weaknesses that are significant roadblocks to DOD’s clean audit opinion goal. While the DOD has developed a timeline for addressing these weaknesses (see figure), the GAO has cautioned that the department must move with more urgency.
Government property in the possession of contractors
Government Contractors should note the emphasis and the new accelerated timeline being put on Government Property in the possession of contractors. It’s being highlighted here in this GAO report as one of the top priority scope-limiting material weaknesses that directly impacts audit outcomes. According to DOD, it plans to remediate this material weakness by fiscal year 2026.
Government property in the possession of contractors
According to DOD OIG, DOD did not have adequate internal controls to account for and reconcile its government property provided to contractors for performance of a contract. Also, DOD could not provide sufficient documentation to support the existence and completeness of its government property in possession of contractors. This created a scope limitation because the auditors could not perform sufficient procedures to conclude on the balances… DOD plans to remediate this material weakness by fiscal year 2026.
What this means for Government Contractors
A2B Tracking has reported many times before – that government property in the possession of contractors is in the Defense audit spotlight. In response to the Congressional mandate to achieve a clean audit opinion by 2028, the DOD Inspector General has established a firm timeline for remediating Government property in the possession of contractors by the end of FY2026.
For those in the GovCon community, the message is clear: accountability for government property is under increased scrutiny. As the DOD accelerates its audit efforts, contractors who manage Government Property must ensure that they are meeting all contract obligations and that they are doing everything they can to stay in compliance.
FAR 52.245-1 requires that contractors need to have a system of internal controls to manage government property. Additionally, DFARS 252.242-7005 requires an adequate Government Property Management System as part of the contractor’s overall business systems compliance. If your contract includes either clause, now is the time to review your internal procedures and make sure they align with federal requirements.
A2B Tracking’s Government Property Management solution is built to support contractors to maintain full compliance to FAR 52.245-1. If you have questions, or want to speak with one of our Government Property management experts, we’re here to help. Feel free to reach out to us here.
