Presentation on theme: "Auditability Update ASMC National Capital PDI Navy Break-Out Session"— Presentation transcript:
1 Auditability Update ASMC National Capital PDI Navy Break-Out Session Ms. Karen FenstermacherDeputy Assistant Secretary of the Navy (Financial Operations)3 March 2015
2 Agenda FY2015 Navy SBA Audit Status Game Plan for Full Financial Auditability by FY2017What’s Left to Do – the Big RocksAccomplishments to DateDiscussion
3 Milestone: Navy’s initial SBA Audit began in December 2014 20152016201720192018Assertion Schedule of Budgetary ActivityExistence & Completeness AssertionsAssertion Full Financial StatementsReport to Congress on Full Financial Statement AuditAudit Full Financial StatementsAudit Schedule of Budgetary ActivityReport PhaseOctober 1 – November 13*Test PhaseJuly 1 – November 11*Planning PhaseDecember 17 – May 20*Control PhaseApril 16 – August 31*Auditors gain understanding of business operationsAudit plan is developedAuditors perform walk-thrus of business processes and internal controlsOrgs support with explanations, documentationAuditors develop samples and initiate testing of financial transactionsCommands provide key supporting documentationAuditors evaluate test results to determine compliance with financial audit regulationsA report of findings is provided to DONMediumLowHighMajorActivitiesCommand Involvement*All dates are Cotton & Company estimatesAuditor Requests for Information(as of 24 Feb)FinancialITTotalDelivered to Auditors (Completed)59261320Still Outstanding32298330Total Requests91559650
4 Command Roles – During Audit and Beyond Commands provide information and documentation during an audit. However, active audit participation does not end with the Audit Report. Weaknesses must be corrected., and corrective actions must be sustained.Notice of Findings and Recommendations (NFRs) – Why do they matter?NFRs outline weaknesses and concerns that need to be addressed by the DONAddressing NFRs will require collaborative discussions that will shape solutions and probably require resourcesCorrective actions must be implemented by relevant commands – or the entire EnterpriseAudit Notice of Findings and Recommendations (NFRs) will drive Corrective Action Plans (CAPs)Audit findings will identify necessary changes to business processes and systemsDuring the audit, respond promptly to auditors’ requests for documentation – Know your business and document it!NFRs can have a wide impact on the DON Enterprise. CAP implementation will require:Navy action on NFRs: promptly implementing CAPs.Progress on CAPs will be noted during successive audits.PrioritiesExample of NFRExplain OPR process, and how it is collaborative in natureExample: NFRs on Navy/USMC Reimbursable Work Order processes spurred move toward a DON-wide automated solution -- Invoice Processing Platform (IPP)
5 On to FY2017: Validated SBA entries will support lines on the three other statements Work performed to prepare the SBA for audit can be leveraged for the other three financial statements – providing momentum toward the FY 2017 goal of full financial statement auditability- % Applicability to Additional Statements -~49%Balance Sheet~39%Schedule of Budgetary ActivityCrosswalksStatement of Net CostPosting Logic Analysis~78%Functional Assessment (Processes/ Controls)Statement of Changes in Net Position~72%Single Statement AuditabilityFull Financial Statement Auditability
6 Navy’s game plan to reach full auditability by FY2017 FIAR DatesNavy DatesNDAA MandateNavy’s game plan to reach full auditability by FY2017CheckpointsFY15FY17FY18FY16OctNovDecJanFebSepMarAprMayJunJulAugSEPStatement of BudgetaryResources(Wave 2)AssertionFinancial StatementAudit Begins9/30Potential AUP Engagement3/3110/1Assertion*FIARNavy9/30**Balance Sheet, Statement of Net Cost, Statement of Changes in Net Position(Waves 3 & 4)General FundWorking Capital Fund*Navy’s intent is to iteratively build beginning balances each year starting with FY15. This approach per OUSD(c) must be approved by GAO and DODIG. Navy dates are contingent upon Beginning Balance approach being approved, and are reflected above with the Navy Date icon.**Navy’s intent is to forego examinations and initiate full financial statement audit in accordance with NDAA of 2010.Financial Statement Audit Begins10/1**Confidence checkpoints will occur to assess progress to date made for audit readiness tasks performed. Tasks and timelines will be re-evaluated and, if needed, revised.Confidence Checkpoint01/312/2810/30The dates above are tentative dates as we are still working to finalize our full financial statement auditability strategy. Once the strategy is complete, we will make changes to the dates as needed.The timeline reflects tentative dates to meet FIAR requirements for incremental progress toward auditability of the SBR, and other three financial statements Balance Sheet, Statement of Net Cost, and Statement of Changes in Net Position.We have developed an integrated approach to achieve full financial statement auditability for the General Fund and Working Capital Fund. The strategy for both funds will utilize the same mechanisms to ensure progress toward readiness milestones, to include:Confidence checkpoints to ensure progress is measuring at expected levels as work is performed. This measure will allow the Navy to consistently evaluate tasks and timelines, and if needed, make revisionsAgreed Upon Procedures to strengthen readiness posture, if issues cannot be resolved through planned readiness activities (i.e. corrective actions and substantive testing).As we walk through this plan, you will notice we have planned employment of confidence checks and potential engagement of AUPs throughout our effort to reach financial statement audit readiness in lieu of undergoing individual examinations. Our intent is to forego examinations and initiate full financial statement audit in accordance with the NDAA of 2010.General Fund SBR Dates:9/30 - SBR is planned for assertion as required by FIAR01/31- Employ a confidence checkpoint as a measure to monitor sustainment effortsBy 03/30/16 – Any potential AUPs will be engagedThe FIAR date to the begin audit of the SBR is 10/1/16. However, we plan to postpone the audit of the SBR. We will employ another confidence check by 01/31/17 to measure sustainment of SBR AR efforts and re-assert the SBR with the other financial statement by 9/30/17. Again, our intent is to forego examinations and initiate full financial statement audit by 10/1/17, which will include the SBR.BS, SNC, SCNP Dates:The process to meet readiness of the other three financial statements is similar to the SBR.As we implement our strategy a confidence check is planned to occur by 2/28/16.FIAR requires readiness of the remaining statements by 9/30/16. However, the Navy plans full financial statement assertion by 9/30/17. As a measure to ensure we are on-track to meet this goal, a confidence check will be employed by 10/30/16, and any AUPs will be engaged t 3/31/17.The Navy plans to assert readiness of the Working Capital Fund financial statements on schedule with the General Fund financial statements on 9/30/17 and initiate financial statement audit by 10/1/17.WCF SBR Dates:01/31/16 – Confidence Checkpoint03/31/16- Potential AUPs will have been engaged by this date.01/31/17- Confidence CheckpointWCF BS / SNC /SNP Dates:10/30/15 Confidence Checkpoint10/30/16- Confidence CheckpointOverall, we plan to assert readiness of the General Fund and Working Capital Fund Full financial statements by 9/30/17 in accordance with the NDAA of 2010; and initiate the financial statement audit by 10/1/17.
7 What the Chart Says -- Game Plan Highlights 30 September 2015 Assert General Fund Statement of Budgetary Resources (SBR)Build on Schedule of Budgetary Activity (SBA) work so far30 September 2017Assert the other seven General Fund/Working Capital Fund statements:WCF SBRGF/WCF Balance SheetGF/WCF Statement of Net CostGF/WCF Statement of Changes in Net PositionNow thru FY2017Periodically conduct confidence checkpointsAssess auditability progress to dateRe-evaluate timelines/milestones if necessaryGet auditor read-outs if necessary on progressAgreed Upon Procedures to dig further if requiredAudit of all statements begins early in FY2018Flexible approach to maximize audit readiness by the end of FY2017
8 Many hands on the wheel will be required! On The To-Do List --Challenges To MeetBusiness ProcessesContinue remediation and sustainmentSearch for Enterprise, impactful solutions – e.g., IPPAsset ManagementComplete Existence and Completeness on General Equipment, OM&S, Real PropertyImplement valuation strategySustain gainsData ManagementRemediate control deficienciesContinue building out data warehouse/analyticsEmphasize Navy ERP capabilitiesDefense Agency Service ProvidersForge ever-closer collaboration – many controls are performed outside Navy!From BSOs’ PerspectiveResources and Policy are concernsMany hands on the wheel will be required!
9 Solid Achievements To Date FIAR AccomplishmentsStrengthened Controls Over Business ProcessesAs demonstrated by positive results on segment examsOverhaul of Business Systems has begunControls assessments on major business/financial systems; CAPs must be expeditedNavy ERP change backlog tackledProgress in Asset AccountabilityExistence and Completeness validated for major military equipment, ordnance; progress continuesValuation strategy evolvingFirst Congressional mandate metSBA audit began December 2014Sense of urgency must continue to meet FY2017 goal