The firm Ernst and Young found the agency could not account for $800m (£572m), according to Politico.
The money was reportedly used for military construction projects and computer systems.
DLA confirmed failure to properly track its spending, but said there was no "loss of accountability".
"DLA concurs with Ernst and Young's assessment of our failure to properly account for and track funding to specific construction projects," a DLA spokeswoman told the BBC.
"While there were shortcomings in documentation, there was no loss of accountability of real property or associated funding."
She said that the DLA was the first agency of its size and complexity in the department to undergo an audit and that they "did not anticipate achieving a 'clean' audit opinion in the initial cycles".
The spokeswoman said the DLA, which was founded during World War II, is already taking steps to improve.
"As stewards of the American taxpayers' dollars, our goal is to make significant progress towards compliance during the FY 2018 audit cycle," she said.
The Defence Department, which has an annual budget of $700bn, has reportedly never undergone a full audit.
President Donald Trump and congressional Republicans advocate billions of dollars in additional funding for the department.
According to the report, the audit raises concerns about how the agency handles its budget.
"If you can't follow the money, you aren't going to be able to do an audit," said Republican Senator Chuck Grassley.
The DLA is one of the largest agencies in the Pentagon, employing 25,000 people with an annual budget of $40bn, according to Politico.
The Pentagon's annual budget exceeds half-a-trillion dollars.
Of the unaccounted money, $465m was found to be used for construction projects for the Army Corps of Engineers and other agencies, the report said.
The agency also failed to produce documentation for $100m of computer systems.
The report covers the fiscal year that ended in September 2016.
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