The Marine Corps was established on November 10, 1775, to provide security to naval vessels and boarding parties and to conduct limited land engagements in support of naval operations. In fiscal year 2012, the Marine Corps reported that it had about 198,000 active duty marines, 39,000 reservists, and 22,000 civilian employees. At any given time, approximately 30,000 marines are deployed in operations supporting the nation’s defense or military operations other than war. The Commandant of the Marine Corps has overall responsibility for Marine Corps operations, including the operating forces and supporting bases, air stations, and installations. To support its core mission, the Marine Corps received $28.7 billion in General Fund appropriations for fiscal year 2012—or 16.6 percent of the Department of the Navy’s appropriations. Figure 1 shows the amounts of the Marine Corps’ appropriations, including allocations of funds from appropriations shared with the Navy. The Marine Corps’ efforts to achieve audit readiness for its budgetary data were conducted within DOD’s overall high-risk environment. GAO’s High-Risk Series includes DOD risks related to weaknesses in financial management operations, business transformation, and business system modernization. DOD has acknowledged that long-standing weaknesses in its internal controls, business systems, and processes have prevented it from demonstrating that its financial statements are reliable, including information on budgeted spending reported in its SBR. Our February 2015 High-Risk Series updates on DOD financial management, business transformation, and systems modernization reported that the department had made limited progress in resolving long-standing weaknesses in these areas. DOD has undertaken several financial management improvement initiatives over the years to address weaknesses in business systems, processes, and controls through its FIAR strategy, semiannual FIAR Plan Status Reports, and financial management reform methodology contained in the FIAR Guidance. DOD also spends billions of dollars annually to maintain key business processes and operations and acquire modern systems that are fundamental to achieving its business transformation goals, including systems that support key functions, such as personnel, financial management, health care, contract management, acquisition, supply chain, and logistics. However, progress in making system and process improvements has been slow, and weaknesses in these areas have adversely affected the efficiency and effectiveness of DOD operations and hindered DOD’s ability to achieve financial audit readiness. While the department has made some progress toward demonstrating leadership commitment and developing capacity and action plans in all three areas, DOD continues to face challenges in monitoring corrective actions and demonstrating progress. In August 2013, we reported that DOD risk management policies associated with preparing auditable financial statements through the FIAR Plan are not in accordance with widely recognized guiding principles for effective risk management. For example, DOD has not addressed key risks associated with its component agencies’ reliance on service providers for significant aspects of their financial operations and their inability to maintain documentation to support transactions. In addition, DOD has continued to identify a department-wide need for qualified and experienced personnel—not only at working levels, but also in senior leadership positions—as a risk to achieving its financial management improvement and audit readiness goals. Because our related reports include numerous recommendations to DOD for addressing these and other financial management and audit readiness weaknesses, we are not making additional recommendations related to these matters in this report. The Marine Corps initially asserted that it was ready to undergo an audit of its fiscal year 2009 General Fund SBR on September 15, 2008. However, after reviewing the status of the Marine Corps audit readiness efforts, on April 10, 2009, the DOD OIG reported that the Marine Corps’ assertion of audit readiness was not accurate and that the documentation supporting its assertion was not complete. Although the Marine Corps made progress toward audit readiness during fiscal year 2009, the DOD OIG reported that a number of issues led auditors to conclude that an audit of the Marine Corps’ fiscal year 2009 SBR would not have positive results. For example, the OIG stated that after 3 months of extensive effort by the Marine Corps, adequate supporting documentation was received for only 74 percent of the sampled budgetary transactions. The DOD OIG reported that unless the issues were resolved, the risk of a disclaimer of opinion would be high. The DOD OIG also reported that the Marine Corps had identified remediation activities that needed to be accomplished before an audit of its SBR was undertaken. The DOD OIG suggested that the Marine Corps consider requesting an audit of its fiscal year 2010 SBR. The OIG subsequently contracted for assistance from an audit firm in performing an audit of the Marine Corps’ fiscal year 2010 SBR. Because the Marine Corps asserted SBR audit readiness at the beginning of fiscal year 2010, it was not subject to DOD’s May 2010 FIAR Guidance, which required each DOD component to review its processes and controls to identify needed corrective actions and develop a financial improvement plan with roles, responsibilities, and milestone dates for completing actions on assessable units as part of a component-level, overall financial improvement and audit readiness plan. In September 2011, we reported that the DOD OIG issued a disclaimer of opinion on the Marine Corps’ fiscal year 2010 SBR because the Marine Corps could not provide documentary support for transactions in a timely manner, and support for transactions was missing or incomplete. We also reported that the Marine Corps experienced difficulty identifying and providing complete populations of transactions that the auditors could confirm and use as a basis for substantive testing. In addition, the DOD OIG reported that the Marine Corps did not have adequate processes, systems, and controls over accounting for and reporting on the use of budgetary resources. Further, the Marine Corps could not provide evidence that reconciliations for key accounts and processes, such as the reconciliation (or matching) of payments (outlays) to bulk (estimated) obligations for shipments of household goods recorded in its Military Personnel appropriation account, were being performed. The OIG reported that Marine Corps management had not asserted that all corrective actions from eight previously identified material weaknesses had been completed. These weaknesses included, among others, deficiencies in financial management systems and deficiencies in controls over Fund Balance with Treasury and unobligated balances. During its fiscal year 2011 SBR audit effort, the Marine Corps again experienced difficulty in identifying complete populations and providing supporting documentation for samples of transactions selected by the auditors for testing. In November 2011, the DOD OIG issued a disclaimer of opinion on the Marine Corps’ fiscal year 2011 SBR, basically for the same reasons as the fiscal year 2010 disclaimer. However, based on discussions with DOD Comptroller, Navy, and Marine Corps officials after the audit report was issued, the OIG decided to give the Marine Corps additional time to provide audit documentation that had not been obtained during the original time frame of the audit. Consequently, on December 29, 2011, the OIG extended the audit of the Marine Corps’ fiscal year 2011 SBR to March 31, 2012. Despite the extended testing period, the Marine Corps was still unable to provide timely and relevant supporting documentation necessary for completing audit procedures to determine whether the Marine Corps’ fiscal year 2011 SBR was presented fairly. As a result, the DOD OIG’s November 2011 disclaimer of opinion on the Marine Corps’ fiscal year 2011 SBR was not amended. For fiscal year 2012, the DOD OIG continued as the auditor with responsibility for issuing the audit opinion and contracted with an audit firm for assistance in performing an audit of the Marine Corps’ budgetary activity reported on a current year General Fund schedule, beginning with fiscal year 2012 appropriations. The Marine Corps’ fiscal year 2012 General Fund Schedule is an interim, DOD component-level special report intended to provide a building block to an SBR audit through audits of consecutive fiscal year schedules of budgetary activity. The schedule of budgetary activity, like the SBR, is designed to provide information on budgeted spending authority as outlined in the President’s Budget, including budgetary resources, availability of budgetary resources, and how obligated resources have been used. The SBR and the schedule of budgetary activity aggregate account-level information reported in the Standard Form (SF)-133, Report on Budget Execution and Budgetary Resources, and summarize budgetary data reported in the Program and Financing schedules in the subsequent President’s Budget. Both the SBR and the schedule of budgetary activity consist of four separate, but related, sections that provide information about budgetary resources, the status of budgetary resources, changes in obligated balances, and outlays for major budgetary accounts. However, instead of covering the full range of SBR activity on current and expired appropriations that have not canceled, the first-year Schedule of Budgetary Activity covers only activity on current fiscal year appropriations. Subsequent fiscal year Schedules of Budgetary Activity would include activity in subsequent years’ appropriations, building toward an SBR. For example, in the second year, the fiscal year 2013 Schedule of Budgetary Activity would include fiscal year 2013 budgetary activity related to fiscal year 2012 and 2013 appropriations. Budgetary Resources. This section of a first-year schedule of budgetary activity shows total budgetary resources made available to the agency for obligation during the current fiscal year only. It consists of new budget authority, reimbursements, and other income. The first-year schedule of budgetary activity does not include unobligated amounts from prior periods, commonly referred to as beginning balances. In contrast, the SBR includes unobligated amounts available from prior reporting periods; transfers available from prior year balances; and adjustments, such as recoveries of prior year obligations. In addition, the SBR includes all other information provided in this section of the schedule of budgetary activity. Status of Budgetary Resources.