Office of the Under Secretary of Defense (Comptroller)
“ASMC National PDI May 2014”
Audit Readiness- Are You Ready for
The Big One?
Ms. Margo Sheridan-OUSD, Mr. Thomas
Steffans-Army, Mr. Steven Quentmeyer –
Navy, Mr. Stephen Herrera-USAF, Ms.
Simone Reba-DLA,
Army Progress, Challenges, and Way Ahead
Progress by Assessable Unit
Statement of Budgetary Resources (SBR)
 Appropriations Received: Received an unqualified
opinion on $232B Appropriations Received.
 SBR Processes Exams 1 & 2: Received a qualified
opinion in late 2011 on the first audit exam (“mock
audit” of financial activity conducted in GFEBS at
select installations.
 SBR Process Exam 3: SBR assertion, covering all
current year activity and appropriations, non-legacy
GF activity in GFEBS, CEFMS, GCSS-Army, LMP and
feeder systems. Results validated by KPMG audit
report, issued in April 2014.
Existence and Completeness (E&C)


OM&S E&C Quick Wins: Achieved positive audit
opinion from DoD IG in 2012 on 17% of Army’s
missile assets, including the Javelin, Hellfire, and
TOW assets.
Real Property E&C Quick Wins: Received clean audit
opinion from IPA on first external Real Property
audit at 23 installations. The exams covers
approximately 50% of the value of Army’s RP assets
Enterprise Resource Planning
(ERP) Systems
 Developing reconciliation solutions to ensure feeder
system data reconciles to the general ledger
Accountability & Audit Readiness: Sustaining Army’s Strength
Challenges
FY 2015 SBA Audit
 Service support and
involvement
 Detailed reconciliations
to general ledger
 Universe of transactions
and completeness of
populations
Audit Etiquette
(SBR and E&C)
 Responsiveness and
flexibility to audit
requests
 Knowledge sharing with
Audit Readiness
Directorate
 Review of testing results
and development of
corrective actions
ERP Systems
 Change management:
Ability to follow auditcompliant processes and
standards
 Improved training
Way Ahead




SBR
SBA assertion, June 2014
Monthly manual internal
control and substantive
testing
Review of SSAE 16 systems
end user controls with
DFAS
Control implementation
and sustainment
E&C
 GE E&C Audit Report,
October 2014
 Full assertion of Real
Property and OM&S in
September 2014
 Regular tracking of RP
metrics with ACSIM
detailing command
execution of corrective
actions
ERP
 Implementing corrective
actions related to Exam II and
Exam III findings
2
Change Management and Audit Readiness
Full Audit Readiness
FY 2017
On a path to meet audit readiness goals
Supporting Efforts for Change Management
Sustaining continuous leadership
 SECDEF directive
 Active engagement and directive
memoranda from SA, CSA,
ASA(FM&C)
 Army Audit Readiness Strategy
Building a competent workforce
 Command Audit Readiness Guide
 Army Knowledge Online Audit
Readiness Site
 Audit readiness training
 FIP Report newsletter
Accountability & Oversight
 SES performance plan requirement
 Army governance
 In-Process Reviews (GS-14/15)
 Audit Committee Meetings
(SES/GO)
 Internal Review Workgroup
 Participation in OSD Governance
Achieving and Sustaining Audit Readiness
Conduct periodic (e.g., monthly) testing of key internal controls
Examine test results: Are key controls in place and operating as designed?
Develop, implement, and monitor corrective action plans
Conduct follow-up testing to verify remediation of controls
Address findings and recommendations from IPA / DoD OIG examinations and audits
Accountability & Audit Readiness: Sustaining Army’s Strength
3
DON Audit Readiness Progress and Remaining Requirements
USMC Assessable Unit
Audit Result
Date
FY 2012 SBA
 Clean Opinion
DEC 2013
SUCCESSES
DON SBA
Assessable Unit
Examination
Result
Appropriations Received
 Clean Opinion
AUG 2012
E-2D Advanced Hawkeye
Major Defense Acquisition
Program
 Clean Opinion
JUL 2012
Civilian Pay
Transportation of People
(DTS TDY Travel)
 Clean Opinions
MAR 2013
Reimbursable Work Orders
(Performer and Grantor)
Military Pay
Funds Balance with
Treasury
Supply Requisitioning
 Under IPA
SBA
REMAINING
Contract/Vendor Pay
Asserted: JAN 2013
Exam ECD: AUG 2014
Examination
 Under IPA
 Under DoDIG
Examination
 Asserted, Pending
Examination
Pending OUSD(C)
FIAR Assertion
Package Review
Date
 Clean Opinions
JAN 2012
Aircraft
 Clean Opinion
MAY 2012
Ordnance
Navy Small Boats
Asserted: APR 2013
Exam ECD: DEC 2014
Examination
Result
Ships
Submarines
Trident Missiles
Satellites
Asserted: MAR 2013
Exam ECD: JUN 2014
Examination

DON Wave 3
Assessable Unit
Date
 Asserted, Under
Examination
 Asserted, Pending
Examination
Asserted: FEB 2013
CONUS Exam Complete: MAR 2014
OCONUS Exam ECD: SEP 2014
SEP 2013
Asserted: DEC 2013
Uninstalled Aircraft
Engines
 Asserted, Pending
Examination
NOV 2013
Asserted: MAR 2014
DON SBA
Assessable Unit
Projected Assertion Date
Financial Reporting
SEP 2014
Status
•
-4-
Dependent on DFAS’ Control Environment (90% of Key Controls owned by
DFAS); Implementing Journal Voucher (JV) CAPs and conducting follow-on
training with Commands
DON Challenges and Way Ahead
Way Ahead
Challenge
Organization
Policies and
Procedures
Tools and
Technology
Staffing
Change
Management
• Expansive enterprise
• Coordination with stakeholders internal to the
DON and external to the DON
• Continue DON leadership engagement
across the enterprise
• Operationalize audit response infrastructure
• DOD and DON policy and guidance do not
always reinforce audit standards
• Complex and varied business processes
• Enhance DON policies and coordinate with
OSD on policy development
• Develop Cycle Memos and implement
process standardization
• Legacy systems were not designed or
deployed with audit in mind
• Complexity of reconciling the transaction
universe
• Execute greater IT governance
• Address enterprise-wide IT deficiencies
• Implement infrastructure to enhance
reconciliation processes
• Limited resources to support competing
priorities
• Limited organic capabilities in audit,
accounting, data analytics and IT
• Increase capacity to support FIAR efforts
• Build organic capabilities and redeploy
resources
• Conduct ASN(FM&C) roadshows to engage
• Auditability focused process changes may
Command military leadership
increase workload until institutionalized
• Functional levels not fully aware of their impact • Continue to use “Functional Leads” to
champion audit readiness efforts
on audit readiness
-5-
Air Force Audit Status

Schedule of Budgetary Activity (SBA) Assertion – 30 Jun 14

Existence & Completeness of Mission Critical Assets Assertion – 30 Jun 16

Discovery substantially complete – implementing corrective actions

Engaging functional owners in corrective actions and sustainment activities

Significant progress made correcting IT control deficiencies

Focus efforts on addressing audit “dealbreakers” thru 30 Sep 14

Ensure completeness of financial transactions through implementation of
SBR ART to reconcile feeders systems to the general ledger

Ensure journal vouchers (JV) are adequately validated and supported –
address root cause in order to eliminate as many JVs as possible

Continue implementation and monitoring of internal controls, supporting
documentation and complimentary user entity control considerations

Design, implement, test and sustain NEW corrective actions – new normal
Accountability from Flightline to Bottomline
6
Air Force Audit Status

Legacy environment and lack of data standardization requiring manual data
calls, cross-walks and reconciliations
 Reliance on Service Providers to have an audit ready system and process
environment
 Depth of audit readiness expertise – exams have helped
 Retention of documentation supporting controls and transactions
consistently





Develop an audit support infrastructure – People, process & technology
Define/refine roles & responsibilities and establish communication protocol
Increased awareness of audit process after recent exams – many Air Force
deficiencies relate to “back to basics” activities (easy fixes)
Fix the low hanging fruit now…properly fill out & maintain 2875s, 577s, sign
and date reconciliations and comply with existing policies and procedures
Train
“
Accountability from Flightline to Bottomline
7
DLA Audit Readiness At A Glance
Business Cycles
Acquire to Retire
•
•
•
2,500 pieces of capital general equipment
20,000 pieces of real property at 600+ sites
131 ($600M) Depreciable Internal Use Software
Assets
Hire to Retire
•
26,000+ people paid ($2.6B payroll)
Order to Cash
•
•
$40+ Billion in annual sales
100,000+ orders received per day
Procure to Pay
•
•
$40+ Billion in Agency-wide Obligations
9,000+ contracting actions per day
Plan to Stock
•
•
$20 Billion in inventory (supply centers)
$6 Billion in disposal inventory
Financial Reporting
•
•
1,000 Journal Vouchers worth $63 Billion
200+ key financial reconcilations
Fund Balance
•
$1.5 Billion in Working Capital Fund cash
Technical Infrastructure
•
•
13 Financial Systems (9 Service Provider)
EBS (Core Financial System)
•
•
•
•
53 IT General Controls
1,233 Fed Fin Mgmt Improvement Act
217 Business Process Controls
89 High Priority Interfaces
8
DLA Audit Readiness Impediments & Actions
Focus Area
1
ERP’s
2
Data
Retrievability
The Challenge
Customization
Volume
How We Conquered
•
•
PCMs/testing
Attack known problems at
the start
•
•
•
Blood, sweat, tears
Get the right guy
Explore new tools
•
•
•
Panetta letter
Performance Ratings
Making the financial
connections
3
Tone at Top
Stakeholders didn’t
see value
4
Stewardship
Approach
What’s it mean
to me?
•
Focused communications
5
Standardization
Perceived reduction of
control/independence
•
•
•
SOPs
End-to-End training
Dummy Proofing
6
Programmatic
Focus
Left schedule/priority
up to Business Cycles
•
•
Project manager
Improved
tools/measurements
7
Audit
IDed problems for as
far as they could get
•
Audit Consult
9