Bureau of Medicine and Surgery
2012 Navy Medicine Audit Readiness Training Symposium
Travel: Path to Audit Readiness
June 5th-6th, 2012
Audit Readiness
Context

DoD is required to assert audit readiness for the Statement of Budgetary
Resources (SBR) by the end of Fiscal Year 2014. As part of Navy Medicine’s
audit readiness effort, the Travel business process has been identified as an
assessable unit for which assertion must take place.
Purpose

To discuss the Key Control Objectives (KCOs), Key Supporting Documents
(KSDs), identified gaps and potential corrective actions for Travel.
Outcome

An understanding of the status of the Travel assessable unit, including major
deficiencies and what can be done now at the field level to facilitate a
successful financial statement audit.

Some assessable units may not require field action at this time.
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Travel Scope & Definition
Definition
Includes authorization and payment for
personnel and patient related travel
Assessable Unit Lead/Team
Dave Howell
Mike Brandt
Eric Egger
Assessable Unit Support
Bhavin Patel – bhavpatel@deloitte.com
Chaz Swingle – cswingle@deloitte.com
Q1 FY12 Obligations
$10.4 Million
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Audit Readiness Timeline
FY12
Assessable Units – Wave 2
Max Assertion
Date
Travel
4 SEP 2012
Consumables
3 DEC 2012
Reimbursable Work Orders – Grantor
3 DEC 2012
Reimbursable Work Orders – Performer
(Non-UBO)
1 APR 2013
Military Payroll (including RPN)
1 APR 2013
Contract Administration
1 JUL 2013
Non-Federal Receivables
(UBO/Medical Treatment)
1 JUL 2013
Federal Receivables
(UBO/Medical Treatment)
3 SEP 2013
Civilian Payroll
2 DEC 2013
Financial Reporting
2 DEC 2013
Funds Management (FBWT)
2 DEC 2013
Control Testing Time Period
Q1
Q2
Interim Progress Milestones (90
Days, 50 %, 75 %)
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Q3
FY13
Q4
Q1
Q2
Q3
FY14
Q4
Q1
Q2
Assessable Unit Assertion
4
Audit Readiness Process
Tasks
Work Products
Completed
Document Assessable Units
1
Determine which key business processes are Assessable Units
2 Document Assessable Units through interviews and observation
• Process Narrative
• Process Flowchart
Mar. 1st
Assess Internal Controls
3 Determine control objectives for each Assessable Unit
4 Highlight internal controls in process documentation
• Control Assessment
Mar. 1st
• Key Supporting
Document Matrix
Apr. 16th
• Deficiencies Listing
Apr. 30th
5 Assess whether controls are effective in meeting control objectives
Assess Supporting Documentation
6 Determine what supporting documents exist for each transaction type
7 Assess whether there are any unsupported transactions
Identify and Prioritize Deficiencies
8
Create list of deficiencies for any objectives that are not met or
transactions that are not supported
9 Prioritize deficiency list based on audit criteria
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Key Control Objectives (KCOs)
KCOs – Represent outcomes needed to achieve proper financial reporting and
are a basis by which the effectiveness of control activities can be evaluated.
KCO #
KCO Description
Authorization
1
Amounts do not exceed funding authority
2
All obligations are recorded accurately and are valid
3
All obligations are recorded in the proper period
Reimbursement
4
All disbursements are recorded accurately and are valid
5
All disbursements are recorded in the proper period
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Key Control Objectives (KCOs)
KCO #
KCO Description
6
All obligations and accruals are reviewed for validity, and adjusted
as necessary
Information Technology
7
User access is consistent with assigned rights and privileges in
accordance with Federal Information System Controls Audit
Manual (FISCAM) requirements.
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Key Supporting Documentation
KSDs – Documentation retained to support individual financial transactions and
accounting events.
.
Execution Description of Transaction
Key Supporting
Code
Documentation
540
To record an obligation for authorized
travel
• DD 1610 - Request
and Authorization for
TDY Travel
• DD 1351-2 - Travel
Voucher
510
To record a payable for submitted travel • DD 1351-2
vouchers
610
To record a disbursement for travel
reimbursement
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• DD 1351-2
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Deficiency Types
Material Weakness: A deficiency, or combination of deficiencies, in internal
control, such that there is a reasonable possibility that a material misstatement of
the entity’s financial statements will not be prevented, or detected and corrected
timely.
Significant Deficiency: 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.
Control Deficiency: A deficiency that 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 misstatements in a
timely manner.
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Considerations For Deficiency Type

Quantitative Materiality - Dollar impact or potential impact to the financial
statements

Qualitative Materiality - Non-quantitative factors such as complexity of
transactions, legal or regulatory concern or system deficiencies

Pervasiveness - Number of activities or transactions affected by the
deficiency

Audit Dealbreaker - Issues that prevent an audit from occurring

Existing Guidance - Determining whether current policy or SOP is in place
that meet financial reporting requirement
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Travel Control Deficiencies

Control Deficiency 1 – Outstanding Travel Vouchers

Control Deficiency 2 – Missing Receipts With Travel Voucher

Control Deficiency 3 – Inconsistent Use of Reviewer, Certifier,
and Approver
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Outstanding Travel Vouchers
Issue Detail

Our assessment team noted through interviews with personnel and a review
of prior CLT results that there are instances in which travelers do not file
vouchers in a timely manner upon the completion of their travel.
Organizational guidance mandates that vouchers be submitted within five
days of return from travel. The Defense Travel System (DTS) Standard
Operating Procedure (SOP) has procedures in place for the Defense Travel
Administrator (DTA) to address outstanding vouchers.
Impact on Audit Readiness

When travelers do not files their vouchers upon the completion of their trip
the corresponding payables and disbursements are not recorded in the general
ledger. This causes Obligations Incurred to be overstated and Gross Outlays
to be understated on the Statement of Budgetary Resources.
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Outstanding Travel Vouchers
Path Forward / Activity Actions



Upon completion of travel, traveler should submit voucher within five days in
accordance with the DTS SOP.
The command DTA should run the unsubmitted travel voucher report biweekly from DTS in order to identify outstanding vouchers.
Command DTA should follow up with travellers listed on unsubmitted travel
voucher report to ensure that they submit outstanding vouchers in a timely
fashion.
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Missing Receipts
Issue Detail

Traveler may not submit receipts with the Travel Voucher that support the
amounts reported on that form.
Impact on Audit Readiness

Without receipts, there is incomplete documentation to support the
disbursement of payment for travel costs.
Path Forward / Activity Actions


Reviewer of Travel Voucher should ensure that travel receipts are included as
part of their initial review. Sign-off in DTS should not occur without receipts
included. Refer to DTS SOP Page 27 for further detail.
The Dept. of Navy Office of Financial Operation (FMO) is currently working
with DTS system administrators to develop functionality to run a report that
would provide a list of vouchers that were missing receipts.
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Inconsistent Use of DTS Roles
Issue Detail

The assessment team noted that there is an inconsistent use of roles of
Reviewer, Certifier, and Approver within DTS from command to command.
Impact on Audit Readiness

The lack clearly defined roles between the traveler, reviewer, certifier, and
approver may potentially lead to unauthorized recorded transactions, or a lack
of segregation of duties, leading to potential fraud or abuse of travel funds.
Path Forward / Activity Actions

Ensure that proper roles are assigned in accordance with guidance in the DTS
SOP, and review routing lists for compliance with this guidance.
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Questions?
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