Bureau of Medicine and Surgery
2012 Navy Medicine Audit Readiness Training Symposium
Key Audit Issues in Civilian Payroll
June 4th, 2012
Key Audit Issues – Civilian Payroll
Context

Department of Defense (DoD) is required to assert audit readiness for its
Statement of Budgetary Resources (SBR) by the end of Fiscal Year 2014. As a
part of this effort, Civilian Payroll has been identified as a business process
that materially affects the SMA-Navy SBR.
Purpose

This will serve as open dialogue session regarding the key issues identified in
successfully asserting Audit Readiness in Civilian Payroll. Solutions will be
proposed for visibility and discussion where applicable.
Outcome

An understanding of the status of Civilian Payroll audit issues, including
expectations for field level actions to facilitate successful completion of the
Navy Medicine audit readiness plan.
FOR OFFICIAL USE ONLY
2
Civilian Payroll Scope & Definition
Sub-Processes
•
•
•
•
•
Assessable Unit Lead/Team
Ms. Kimberly McIntire
Ms. Mitzi Cruz
Ms. Terry Carey
Assessable Unit Support
Bhavin Patel – bhavpatel@deloitte.com
Chaz Swingle – cswingle@deloitte.com
Q1 FY12 Disbursements
$313 Million
Hiring
Time & Attendance
Payroll Processing
Personnel Management
Employee Separation
FOR OFFICIAL USE ONLY
3
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 %)
FOR OFFICIAL USE ONLY
Q3
FY13
Q4
Q1
Q2
Q3
FY14
Q4
Q1
Q2
Assessable Unit Assertion
4
Key Considerations
when Auditing Payroll
Accurate Employee Records: An auditor will want to ensure that an
organization has the proper procedures in place to accurately collect and record
changes to employee pay scale, benefit elections, etc.
Complete Time & Attendance Information: An auditor will test the controls
in place for the time certification process within an organization, to validate that
time is accurately recorded, and proper documentation is retained.
Correctly Processed Payroll: An auditor will review documents such as a
SAS70 or SSAE 16 to ensure that payroll is being processed correctly by third
party service providers.
Assurance over Payroll Interfaces: An auditor will want to ensure that
processed payroll data is entered into the general ledger correctly.
FOR OFFICIAL USE ONLY
5
How an Auditor will
Audit Payroll
 Assessing
and testing internal controls to determine if they are designed
effectively to mitigate the risk of material misstatement:
 Reviewing that timesheets are properly certified
 Reviewing for authorization of employee personnel record changes (SF-52)
 Reviewing SAS70 or SSAE16 for effective payroll processing controls
 Validating that processes are in place to reconcile processed payroll data
received to payroll data included in general ledger.
 Performing substantive testing to ensure that supporting documentation is
available to confirm transaction balances:
 Reviewing support is available for leave or overtime included on time sheets
 Validating that amounts on SF-52s are consistent with Master Employee
Record (MER)
 Recalculating payroll amounts in Gross Pay File
 Re-performing payroll reconciliations.
FOR OFFICIAL USE ONLY
6
Audit Readiness Team process for
identifying potential audit issues
 Assessing
internal controls within each assessable business process to
ensure that they meet certain “Key Control Objectives”:
 Accounting transactions are properly authorized
 Accounting transactions are for correct amounts
 Accounting transaction occur in the proper period
 Assessing internal controls within each assessable business process to
determine if they are designed and operating effectively to mitigate the
risk of material misstatement:
 Design Effectiveness – Is the process set up correctly to prevent errors
 Operating Effectiveness – Is the process being executed correctly to
prevent errors
 Validating that each transaction type within a business process has an
identified and available “Key Supporting Document”.
FOR OFFICIAL USE ONLY
7
Civilian Payroll at Navy Medicine
A
high-level view of the business process was able to be captured.
 Process
touches all departments of Navy Medicine.
 Wide variation exists in the process from activity to activity.
 Need
to validate & standardize processes across Navy Medicine.
 Lack
of a consistent access to systems data & capabilities seems to drive many
audit issues:
 SLDCADA
 DCPS
 CHOOSE
(Treasury Dept.)
 Dept.
of Navy is in process of performing same standardization of civilian
payroll across sub-commands; alignment with that plan is critical.
FOR OFFICIAL USE ONLY
8
Civilian Payroll Working Group
Working Group Details



Held April 30 – May 4 at BUMED HQ.
Comprised of personnel in multiple positions, from multiple activities and
regions.
Objectives were to address high priority civilian payroll process weaknesses.
Results



Standard Time & Attendance process
Updated Time & Attendance Instruction was vetted through attendees to
ensure requirements could be met by all Activities
Reconciliation was decided on:


MER to SLDCADA
Gross Pay File to Work Year Personnel Cost (WYPC), Treasury, and the general ledger
(STARS-FL)
FOR OFFICIAL USE ONLY
9
Civilian Payroll Material Weaknesses

Material Weakness 1: Lack of Reconciliation Between the
Standard Accounting and Reporting System – Field Level
(STARS-FL), Defense Civilian Pay System (DCPS), and Treasury

Material Weakness 2: Time & Attendance Inconsistencies
General Causes:
 Lack of Standard Processes; No SOP
 Availability of Data
 Multiple Error Possibilities
FOR OFFICIAL USE ONLY
10
Reconciliation in
Payroll Processing
Issue Detail



No standardized reconciliation occurring at Navy Medicine between Gross
Pay File transmitted by DCPS, STARS-FL, and Treasury.
Reconciliation is required to ensure that amounts included in Gross Pay File
are being accurately recorded in STARS-FL, as well as at Treasury.
Reconciliation should be performed on a bi-weekly pay period basis.
Path Forward



Activities will be responsible for reconciling the Master Employee Record
(MER) to SLDCADA and the Gross Pay File (GPF) to the general ledger
(STARS-FL) and Work Year Personnel Cost (WYPC).
Regions will be responsible for reconciling the GPF to the general ledger,
WYPC, and Treasury.
Standardized SOP for Payroll Reconciliation to be drafted by August 2012.
FOR OFFICIAL USE ONLY
11
Time & Attendance
Issue Detail



Variations exist across the enterprise in how Time & Attendance is recorded
and certified.
Over time certification processes have shifted at the field level on a varying
basis, creating no standard process.
Some activities have a decentralized process; others are centralized.
Path Forward



Decentralize, Decentralize, Decentralize
Timekeeping instruction updated to ensure requirements could be met by all
activities.
Work with SLDCADA to have standardized profile (when possible) across
Navy Medicine
FOR OFFICIAL USE ONLY
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In The Mean Time…….

DECENTRALIZE!

Communication (up and down the chain)


Work in progress
CIVPAY Audit Toolkit





Check sheet for timekeeping (employee, supervisor, CSR/SA)
Draft of Timekeeping instruction
Accrual basics
Region Recon tool
Activities Recon tool
13
FOR OFFICIAL USE ONLY
Questions?
FOR OFFICIAL USE ONLY
14
Bureau of Medicine and Surgery
2012 Navy Medicine Audit Readiness Training Symposium
Key Audit Issues in Consumables
June 4th, 2012
Key Audit Issues – Consumables
Context

Department of Defense (DoD) is required to assert audit readiness for its
Statement of Budgetary Resources (SBR) by the end of Fiscal Year 2014. As a
part of this effort, Consumables has been identified as a business process that
materially effects the SMA-Navy SBR.
Purpose

This will serve as open dialogue session regarding the key issues identified in
successfully asserting Audit Readiness in Consumables. Solutions will be
proposed for visibility and discussion where applicable.
Outcome

An understanding of the status of Consumables audit issues, including
expectations for field level actions to facilitate successful completion of the
Navy Medicine audit readiness plan.
FOR OFFICIAL USE ONLY
16
Consumables Scope/Definition
Definition
This assessable unit involves the request,
acquisition (including purchase cards),
receipt, maintenance and invoicing of
Operating Materials & Supplies
The major business processes include:
• Requisition Execution
• Source of Goods/Obligation
• Receipt/Acceptance
• Disbursements
• De-obligations
Assessable Unit Lead/Team
CAPT James Poindexter
David Hamblett
Assessable Unit Support
Kevin Norman – knorman@deloitte.com
Kim Mackey – kimackey@deloitte.com
Q1 FY12 Obligations
$ 223M
FOR OFFICIAL USE ONLY
17
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 %)
FOR OFFICIAL USE ONLY
Q3
FY13
Q4
Q1
Q2
Q3
FY14
Q4
Q1
Q2
Assessable Unit Assertion
18
Key Considerations
when Auditing Consumable Goods
Making Accurate Payments: An auditor will want to validate that an
organization has the proper procedures in place to ensure that payments made
for consumable goods are for the right quantity at the most up-to-date price.
Standardized Receipt: An auditor will test the controls in place across the
organization to ensure that there is standardization in the receipt process for
consumable goods. Proper standard receipt and documentation of receipt are
critical to ensure that payments aren’t made if goods aren’t received.
Proper Classification: An auditor will review accounting transactions to ensure
that consumable goods are expensed, not capitalized, and are recorded in the
right amount, in the proper period, with the appropriate financial detail.
FOR OFFICIAL USE ONLY
19
How an Auditor will
Audit Consumables
 Assessing
and testing internal controls to determine if they are designed
effectively to mitigate the risk of material misstatement:
 Review that orders are appropriately authorized
 Review that processes are in place to appropriately record receipt, and
maintain proof of receipt documentation
 Review controls in place to ensure disbursements are accurately recorded for
consumables received
 Validate that a reconciliation occurs between order and disbursement
 Performing substantive testing to ensure that supporting documentation is
available to confirm transaction balances:
 Review support of packing slips and DD250 to support disbursements
 Validating that the order amount matches the total obligation amount
 Re-performing calculation of disbursement amounts
FOR OFFICIAL USE ONLY
20
Consumables at Navy Medicine
 Process
is well documented related to DMLSS, we may not have enough detail
related to non-DMLSS and Purchase Card controls.
 Warehousing
of consumables seems to be well controlled but does add an extra
step to process which has the potential to increase risk.
 (e.g.,
receipt vs. acceptance)
 Understanding
the variation in Defense Medical Logistics Standard Support
(DMLSS) capabilities across organization may affect controls. New DMLSS
functionality (e.g., multiple appropriations) and training will help as commands
come on board.

Navy Medicine Spend Analysis shows an increase in e-commerce. Continued
decrease in the use of GCPC for purchasing medical supplies and use as a
method of payment will improve audit readiness.
FOR OFFICIAL USE ONLY
21
Consumables Material Weaknesses

Material Weakness 1: Inconsistent use of the Disbursement
Reconciliation Tool (DRT) in DMLSS
General Causes:

Uniform Compliance
Reliance on Systems Controls

Material Weakness 2: Inadequate proof of receipt

General Causes:


Lack of standardized documentation & process
Multiple control points
FOR OFFICIAL USE ONLY
22
Inconsistent Use of the
DRT in DMLSS
Issue Detail



The Audit Readiness team identified transactions where the Disbursement
Reconciliation Tool (DRT) was not used.
The DRT is an enhanced business process within DMLSS that compares the
dollar amount of goods received in DMLSS to the dollar amount disbursed in
STARS-FL (EC610).
If the DRT is not used, amounts disbursed in STARS-FL may differ from the
receipt amount recorded in DMLSS and will not be reviewed/reconciled.
Impact on Audit Readiness

The DRT is considered a critical control activity as it provides management
with a systematic monitoring tool to identify and resolve errors between the
logistics system and the system of record. Inconsistent use may cause
misstatements in ‘Gross Outlays’ on the Statement of Budgetary Resources to
go undetected.
23
FOR OFFICIAL USE ONLY
Inconsistent Use of the
DRT in DMLSS
Path Forward

Obligation balance in DMLSS must match FASTDATA:

DRT’s must be reviewed and corrective action taken to ensure that proper
obligation authority is maintained in DMLSS:




Use the Disbursement Reconciliation Tool to identify problem disbursements, not
passing the ‘DRT Check’:



Processed DRT’s update current year funds in DMLSS
Research variances before processing
Ensure disbursements posted to STARS-FL are received in DMLSS
DRT’s posted to tab 3, “Errors – Part 3”, may indicate obligations not in DMLSS or
changes to the LOA after the initial obligation
DRT’s posted to tab 4, “Open – Part 4”, have not been fully receipted in DMLSS
Know and use the Disbursement Reconciliation Tool:



Require users to complete DRT eLearning course at:
https://jml149.dmlss.detrick.army.mil/resourcecenter (select E-learning Category)
Correct problems or procedures to ensure Transaction Excellence
FOR OFFICIAL USE ONLY
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Inadequate Proof of Receipt
Issue Detail


The Assessable Unit team noted several Activities that do not keep packing
slips or other similar shipping documentation on file.
Packing slips/shipping documentation should be maintained in order to
validate that items received are correctly entered into DMLSS.
Impact on Audit Readiness



If packing slips/shipping documents are not retained on file, there is no proof
of receipt of consumable goods.
Accuracy of the transactions in the general ledger can not be validated
without this proof of receipt.
Could result in incorrect amounts being recorded to accounts payable or
disbursed to vendors, which could potentially lead to over- or understatement
of either amount on the Statement of Budgetary resources
FOR OFFICIAL USE ONLY
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Inadequate Proof of Receipt
Path Forward

Document receipt of goods and retain the evidence:




Perform spot checks to ensure compliance:




All material ordered receives proof of receipt
Develop a retention strategy to accommodate decentralized receiving practices
Electronic data retention is optimal, but not required
All documents must be accessible/retrievable
Test to ensure document matches DMLSS receipt and accounts payable in STARS-FL
Ensure receipts are electronically processed in DMLSS in a timely manner
Document receipt when final acceptance is not obtained:


Note when item is received at central location but not accepted by end user
Ensure appropriate resolution and proper documentation is provided for any returned
material
FOR OFFICIAL USE ONLY
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Questions?
FOR OFFICIAL USE ONLY
27
Bureau of Medicine and Surgery
2012 Navy Medicine Audit Readiness Training Symposium
Key Audit Issues in Contracts Administration
June 4th, 2012
Key Audit Issues –
Contracts Administration
Context

Department of Defense (DoD) is required to assert audit readiness for its
Statement of Budgetary Resources (SBR) by the end of Fiscal Year 2014. As a
part of this effort, Contracts Administration has been identified as a business
process that materially effects the SMA-Navy SBR.
Purpose

This will serve as open dialogue session regarding the key issues identified in
successfully asserting Audit Readiness in Contracts Administration. Solutions
will be proposed for visibility and discussion where applicable.
Outcome

An understanding of the status of Contracts Administration audit issues,
including expectations for field level actions to facilitate successful
completion of the Navy Medicine audit readiness plan.
FOR OFFICIAL USE ONLY
29
Contract Administration
Scope/Definition
Definition
Involves managing the establishment,
maintenance and modification, vendor pay,
and closeout of contracts. Major business
processes include:
• Execute requisition
• Source of goods
• Receipt and acceptance
• Disbursement
• Contract close-out
Assessable Unit Lead/Team
CAPT James Poindexter
Bert Hovermale
Assessable Unit Support
Kevin Norman – knorman@deloitte.com
Kim Mackey – kimackey@deloitte.com
FY12 Q1 Obligations
$ 390M
FOR OFFICIAL USE ONLY
30
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 %)
FOR OFFICIAL USE ONLY
Q3
FY13
Q4
Q1
Q2
Q3
FY14
Q4
Q1
Q2
Assessable Unit Assertion
31
Key Considerations
when Auditing Contracts
Making Accurate Payments: An auditor will want to validate that an
organization has the proper procedures in place to ensure that payments made for
contracted goods or services are for the proper amount, are recorded to the
proper accounting period, and that there are controls in place to properly
authorize all payments.
Proper Accounts Payable Cut-Off: Auditors will specifically review goods or
invoices receipted around financial reporting cut-off periods (end of quarter, end
of year) to ensure that accounts payable reported at cut-off dates are accurate,
represent valid amounts due to vendors, and recorded in the correct period.
Anti-Deficiency Act Considerations: Auditors will perform specific procedures
to ensure that disbursements can be traced back to their corresponding
obligations, and that they don’t exceed those obligations, that those obligations
don’t exceed commitments, and that commitments don’t exceed apportioned
funding authority.
32
FOR OFFICIAL USE ONLY
How an Auditor will
Audit Contracts
 Assessing
and testing internal controls to determine if they are designed
effectively to mitigate the risk of material misstatement:
 Review that commitments have been properly authorized, including a
funding authority check to ensure against over-obligation of funds
 Review of proper separation of duties for receipt and acceptance of
invoices for disbursement
 Review of controls in place to match disbursements to obligations
 Review of proper authorization of any modification or de-obligation
(contract closeout)
 Performing substantive testing to ensure that supporting documentation
is available to confirm transaction balances:
 Review support of commitments by matching to SF2276 or similar
 Match amounts on contracts to obligation in STARS-FL
 Support disbursement amounts by checking against invoices
FOR OFFICIAL USE ONLY
33
Contracts Administration
at Navy Medicine
 Business
process is well documented, with few gaps. There are some areas where
roles are not well defined, such as receipt of goods.
 System
controls related to Wide Area Work Flow (WAWF), Funds Administration
and Standardized Document Automation (FASTDATA), and Standard
Procurement System (SPS) are an area that need additional focus; may need more
information on user access and profile controls. Basic controls are in place.
 We
need better visibility over DFAS financial processes to better understand the
controls in place to ensure that obligations and disbursements are recorded
accurately and completely.
 Areas
of higher risk include unauthorized commitments, SPS deployment and
use, and the use of Non-DoD contracts or assisted contracts.
FOR OFFICIAL USE ONLY
34
Contracts Administration
Material Weaknesses

Material Weakness 1: Inadequate proof of receipt
General Causes:

Lack of Compliance with Established Guidance for Receipt &
Disbursement

Material Weakness 2: Inadequate documentation to support
Closed Contracts
General Causes:


Full Implementation of Contract Closeout SOP
Access to Documentation
FOR OFFICIAL USE ONLY
35
Inadequate Proof of Receipt
Issue Detail



The Assessable Unit Team identified transactions of purchased goods, where
the proof of receipt was insufficient, not retained for recordkeeping, or was
not generated at time of delivery.
Without proof of receipt, it is difficult to determine whether goods have been
received in accordance with the contracted statement of work.
Additionally, the proof of receipt is required to verify the quantity or services
invoiced to the quantity or services actually received.
Impact on Audit Readiness


Proof of receipt documents are key supporting documents used to ensure that
accounts payable are recorded properly and for the correct amount.
Lack of the appropriate type of receipt document could cause disbursements
to be made for which no actual goods were received, overstating Gross
36
Outlays.
FOR OFFICIAL USE ONLY
Inadequate Proof of Receipt
Path Forward

Have a conversation and come to agreement on the following:

What constitutes adequate proof of receipt documentation:








For supplies and equipment? The packing slip
For services? Timesheets for PSCs per COR SOP section 3.2.4, page 69
Check invoicing clause in the contract for any special requirements
Where and in what format should it be stored?
How long should you keep it?
What do you need to make this happen?
What does the COR SOP say (section 3.2.4, page 69)?
Document the conversation and take the agreed upon action
FOR OFFICIAL USE ONLY
37
Inadequate documentation
to support Closed Contracts
Issue Detail



Based on prior testing, many contracts lacked evidence of communication by
the vendor that the final invoice had been delivered prior to closing contracts.
Also, there were contracts closed that lacked the required DD1594 or other
similar required forms.
Additionally, the process is designed so that forms are completed prior to deobligations being posted to STARS-FL, and there is no check that these
transactions are posted accurately.
Impact on Audit Readiness

Lack of sufficient documentation for closed contracts means that deobligations could be posted incorrectly, causing an understatement of the
‘Unobligated Balances Available’ line item.
FOR OFFICIAL USE ONLY
38
Inadequate documentation
to support Closed Contracts
Path Forward


The Contracts Administration Assessable Unit Team will develop a “due
diligence standard” that describes the efforts required of the contract closeout
team to obtain contractor consent before consent is presumed.
Revise the Contract Closeout SOP to make the following steps clear:





CHECK to see if there are still funds on the contract
DEOBLIGATE any remaining funds using the SF-30 and procedures in the SOP
CHECK AGAIN to ensure the deobligation was posted correctly
COMPLETE the Contract Completion Statement (DD 1594) using the procedures in the
SOP
Contracting officers must ensure there is a properly completed SF 1594 in
every closed contract.
FOR OFFICIAL USE ONLY
39
Questions?
FOR OFFICIAL USE ONLY
40
Bureau of Medicine and Surgery
2012 Navy Medicine Audit Readiness Training Symposium
Other Key Audit Issues
June 4th, 2012
Other Key Audit Areas & Issues
Context



FY2014 is the deadline for DoD to assert audit readiness for its Statement of
Budgetary Resources (SBR) (business processes)
Navy Medicine is working on ten assessable units in total
We have covered three and will now discuss audit issues identified in other
areas.
Purpose
This will serve as open dialogue session regarding the key issues identified in
successfully asserting Audit Readiness in for Navy Medicine. Solutions will be
proposed for visibility and discussion where applicable.
Outcome
 An understanding of the status of other key audit issues, including
expectations for field level actions to facilitate successful completion of the
Navy Medicine audit readiness plan.

FOR OFFICIAL USE ONLY
42
Material Weaknesses
and Other Audit Issues

Material Weakness 1: Unfilled customer orders are not being
recorded for Federal and Non-Federal Receivables

Material Weakness 2: Receivables not recorded until collections
are received for Federal/Non-Federal Receivables and RWO-P
transactions

Material Weakness 3: Supporting documentation for the
disbursements associated with RWO-Grantor transactions is not
adequate or missing
Other Audit Issues:
 DD577 Policy, Usage & Retention
 Document Retention & Audit Response to Document Requests
FOR OFFICIAL USE ONLY
43
Unfilled customer orders
are not recorded
Issue Detail




An amount for unfilled customer orders is not recorded in STARS-FL
Recording an amount for unfilled customer orders establish reimbursable
authority for the Activity
Not recording unfilled customer orders means that a cost transfer is necessary
at the time of collection
This is a departure from GAAP and the audit standards
Impact on Audit Readiness


Authority to provide services is not reflected on the financial statements
timely
“Change in Unfilled Customer Order" line item on the SBR is materially
misstated
FOR OFFICIAL USE ONLY
44
Unfilled customer orders
are not recorded
Path Forward


Develop formal Corrective Action Plan(s)
Potential Solutions:
 Federal Receivables:
 Consider changing the process to have customers prepay for services
with a reconciliation at year-end

Non-Federal Receivables:
 Evaluate the ability to derive and record expected authority from
services covered by OHI
FOR OFFICIAL USE ONLY
45
Receivables are not recorded until
collections are received
Issue Detail




Account Receivable amounts are not recorded in STARS-FL until collections
occur
Various DoD and TMA policies provide conflicting guidance and that do not
satisfy accounting standards
DOD Comptroller policy states all DHP-funded activities should record a
receivable when a claim is established
This is a departure from GAAP and the audit standards
Impact on Audit Readiness


Accounts receivable balances are not recorded or are not recorded in the
proper accounting period
The SBR is materially misstated
FOR OFFICIAL USE ONLY
46
Receivables are not recorded until
collections are received
Path Forward



Develop formal Corrective Action Plan(s)
Potential solutions may vary between Federal and Non-Federal processes
Solution should include two key phases:
 Phase One: Address guidance conflicts and deficiencies to establish a
GAAP compliant, achievable, sustainable ‘to-be’ business process
 Phase Two: Develop plan for implementing ‘to-be’ process across the
organization, including:
 Timeline for implementation
 Actions necessary to implement new process
 Roles and responsibilities for affective personnel
 Reporting requirements to document process with Audit Readiness
PMO
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Lack of supporting documentation
for RWO disbursements
Issue Detail




RWO disbursements are initiated by the Performer agency and processed by
DFAS with minimal direct Navy Medicine oversight
RWO disbursements are being made without supporting documentation for
the receipt of goods/services
A process to verify correct recording of RWO disbursements is not currently
defined or in place
Disbursements related to RWO-G were $36 Million in Q1 of FY12
Impact on Audit Readiness

Transactions cannot be validated by an auditor
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Lack of supporting documentation
for RWO disbursements
Path Forward


Develop formal Corrective Action Plan(s)
Potential solutions must include:
 Standardized and accessible key supporting documents for disbursements
 Coordination with trading partners to ensure that documentation includes
a valid quantified measure of cost for services provided
 A defined process to obtain and review supporting documents from
service providers
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Lack of consistent policy for
DD-577 usage & retention
Issue Detail



The DD-577, Appointment Record, is used to identify and maintain a record
of certifying and accountable officers
DD-577 usage is generally high across Navy Medicine Activities
Navy Medicine does not have a standard policy for the use, management and
retention of the DD-577
Impact on Audit Readiness


Authorization of transactions by accountable officers’ will be a key measure
of auditability for each business process within Navy Medicine
Naval Audit Service audit readiness spot checks included reviewing DD-577s
for all transactions selected
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Lack of consistent policy for
DD-577 usage & retention
Path Forward


Develop formal Corrective Action Plan(s)
Potential solutions include:
 Developing and implementing Navy Medicine Guidance for DD-577s
 Define all roles requiring a DD-577
 Determine retention requirements and responsibilities
 Identify the renewal process, including considerations for change of
activity leadership
 Create a standardized annual review process
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Inconsistent Documentation
Retention & Response
Issue Detail



DOD, DON, TMA, and others have provided inconsistent and conflicting
guidance on document retention
A standard process for the maintenance and retrieval of documents in
response to an audit does not exist
Inconsistent document retention methods and practices across Navy
Medicine
Impact on Audit Readiness


Providing supporting documentation for testing is critical to a financial
statement audit
DOD FIAR has highlighted availability of audit documentation as a potential
audit deal breaker
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Documentation Request Results
FY11 Documentation Request Results
FY12 Documentation Request Results
60%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
50%
40%
30%
20%
80%
17%
2%
<3
4-10
>10
10%
0%
Submission Timeline (in days)

Business Processes Included:



Contracts Administration
Civilian Payroll
486 Total Items Requested
50%
11%
39%
<3
4-10
>10
Submission Timeline (in days)

Business Processes Included:





Contracts Administration
Non-Federal Receivables
Reimbursable Work Orders (G & P)
Travel
Funds Management
681 Total Items Requested
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Inconsistent Documentation
Retention & Response
Path Forward


Develop formal Corrective Action Plan(s)
Potential solutions include:




Key Supporting Document matrix (created by execution code for each SBR
assessable unit)
Navy Medicine specific document retention policy
Developing a standardized process for documentation request response, including
chain of command and response timeline requirements
Consideration for an electronic data repository solution
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Questions?
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Moving Forward


Assessable Unit presentations on Tuesday and Wednesday will
discuss more identified deficiencies in depth, with a specific
focus on actions that regions and activities can take to remediate
potential audit issues.
The Audit Readiness Team at BUMED HQ will need continued
support from regions and activities related to the following tasks:



Development of audit ready solutions to be implemented via formal
Corrective Action Plans.
Timely response to testing documentation requests.
We need support from each and every one of you to promote
the change to a culture of auditability within Navy Medicine.
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