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Auditability Update ASMC National Capital PDI Navy Break-Out Session

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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 Fenstermacher Deputy Assistant Secretary of the Navy (Financial Operations) 3 March 2015

2 Agenda FY2015 Navy SBA Audit Status
Game Plan for Full Financial Auditability by FY2017 What’s Left to Do – the Big Rocks Accomplishments to Date Discussion

3 Milestone: Navy’s initial SBA Audit began in December 2014
2015 2016 2017 2019 2018 Assertion Schedule of Budgetary Activity Existence & Completeness Assertions Assertion Full Financial Statements Report to Congress on Full Financial Statement Audit Audit Full Financial Statements Audit Schedule of Budgetary Activity Report Phase October 1 – November 13* Test Phase July 1 – November 11* Planning Phase December 17 – May 20* Control Phase April 16 – August 31* Auditors gain understanding of business operations Audit plan is developed Auditors perform walk-thrus of business processes and internal controls Orgs support with explanations, documentation Auditors develop samples and initiate testing of financial transactions Commands provide key supporting documentation Auditors evaluate test results to determine compliance with financial audit regulations A report of findings is provided to DON Medium Low High Major Activities Command Involvement *All dates are Cotton & Company estimates Auditor Requests for Information (as of 24 Feb) Financial IT Total Delivered to Auditors (Completed) 59 261 320 Still Outstanding 32 298 330 Total Requests 91 559 650

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 DON Addressing NFRs will require collaborative discussions that will shape solutions and probably require resources Corrective actions must be implemented by relevant commands – or the entire Enterprise Audit Notice of Findings and Recommendations (NFRs) will drive Corrective Action Plans (CAPs) Audit findings will identify necessary changes to business processes and systems During 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. Priorities Example of NFR Explain OPR process, and how it is collaborative in nature Example: 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 Activity Crosswalks Statement of Net Cost Posting Logic Analysis ~78% Functional Assessment (Processes/ Controls) Statement of Changes in Net Position ~72% Single Statement Auditability Full Financial Statement Auditability

6 Navy’s game plan to reach full auditability by FY2017
FIAR Dates Navy Dates NDAA Mandate Navy’s game plan to reach full auditability by FY2017 Checkpoints FY15 FY17 FY18 FY16 Oct Nov Dec Jan Feb Sep Mar Apr May Jun Jul Aug SEP Statement of Budgetary Resources (Wave 2) Assertion Financial Statement Audit Begins 9/30 Potential AUP Engagement 3/31 10/1 Assertion* FIAR Navy 9/30** Balance Sheet, Statement of Net Cost, Statement of Changes in Net Position (Waves 3 & 4) General Fund Working 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 Begins 10/1** 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 Checkpoint 01/31 2/28 10/30 The 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 revisions Agreed 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 FIAR 01/31- Employ a confidence checkpoint as a measure to monitor sustainment efforts By 03/30/16 – Any potential AUPs will be engaged The 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 Checkpoint 03/31/16- Potential AUPs will have been engaged by this date. 01/31/17- Confidence Checkpoint WCF BS / SNC /SNP Dates: 10/30/15 Confidence Checkpoint 10/30/16- Confidence Checkpoint Overall, 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 far 30 September 2017 Assert the other seven General Fund/Working Capital Fund statements: WCF SBR GF/WCF Balance Sheet GF/WCF Statement of Net Cost GF/WCF Statement of Changes in Net Position Now thru FY2017 Periodically conduct confidence checkpoints Assess auditability progress to date Re-evaluate timelines/milestones if necessary Get auditor read-outs if necessary on progress Agreed Upon Procedures to dig further if required Audit of all statements begins early in FY2018 Flexible 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 Meet Business Processes Continue remediation and sustainment Search for Enterprise, impactful solutions – e.g., IPP Asset Management Complete Existence and Completeness on General Equipment, OM&S, Real Property Implement valuation strategy Sustain gains Data Management Remediate control deficiencies Continue building out data warehouse/analytics Emphasize Navy ERP capabilities Defense Agency Service Providers Forge ever-closer collaboration – many controls are performed outside Navy! From BSOs’ Perspective Resources and Policy are concerns Many hands on the wheel will be required!

9 Solid Achievements To Date
FIAR Accomplishments Strengthened Controls Over Business Processes As demonstrated by positive results on segment exams Overhaul of Business Systems has begun Controls assessments on major business/financial systems; CAPs must be expedited Navy ERP change backlog tackled Progress in Asset Accountability Existence and Completeness validated for major military equipment, ordnance; progress continues Valuation strategy evolving First Congressional mandate met SBA audit began December 2014 Sense of urgency must continue to meet FY2017 goal

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