0. FSTAR 101: Assistant Commandant For Resources
The Coast Guard’s Audit Readiness Plan
Assistant Commandant For Resources
RDML K. Taylor | DHS CFO Brief | 25 JAN 2010
Financial Management Modernization | RDML Taylor | 29 APR 10

1. Coast Guard Financial Management
Principle Issues
CG accounting operations policies, procedures and processes which are not in accordance with Generally Accepted Accounting Principals (GAAP) standards
Multiple General Ledgers
General Ledgers non-US Standard General Ledger (USSGL) Compliant
Lack of a standard line of accounting
Unable to address the following major functional gaps in a cost-effective manner in the current environment:
Centralized funds control
Three-way matching of good receipt
Payment management
Automated processing of Intergovernmental Payments and Collections (IPACs)

2. Size (Materiality) Matters
Our results to date and projections for FY11
FY07 – Disclaimer on all line items
FY08 – Supported the accuracy of the balance for 6% of CG Balance Sheet: Investments & Contingent Legal Liabilities (CLL)
FY09 – Supported the accuracy of the balance for 55% of CG Balance Sheet: Investments, CLL & Actuarial Pension Liability (APL)
FY10 – Supported the accuracy of the balance for >70% of CG Balance Sheet: Investments, Contingent Legal Liabilities, Actuarial Pension Liability, Actuarial Medical Liability, PP&E (Personal Property & OM&S), FBwT (Military & Civilian Payroll – 3 out of 6 Agency Location Codes (ALCs)
FY11 – will be able to support additional balances for Construction in Progress (CIP) an Real Property for PP&E Line Item, Internal Controls for Military & Civilian Payroll, and be able to prove accuracy & non-material misstatement of AP, AR, FBWT, BRM and SBR to support almost 100% of balance sheet
Will get DHS a “Qualified Opinion “ for FY11 Total Balance sheet assets plus liabilities is $66.9B
CG in DOT CG in DHS in 2010
CG is 18% of DHS Assets
CG is 41% of DHS Liabilities
Assistant Commandant For Resources 2

3. Coast Guard Audit Readiness Approach
Financial Management Modernization is the backbone of the Coast Guard Modernization
Efforts are inextricably linked
Marks a turning point for the USCG to achieve timely, accurate, reliable, visible and transparent financial information Critical to decision makers
Must actively transform our financial management processes and systems using a deliberate phased approach.
We must:
Consolidate financial management activities to create centers of expertise and reduce potential internal control issues
Establish a preeminent culture of internal controls
Institutionalize a governance architecture to:
Enhance advocacy
Provide optimal resource allocation
Enable an enduring audit readiness posture
Assistant Commandant For Resources

4. FSTAR 1.0 Development
Initial Financial Strategy for Transformation and Audit Readiness (FSTAR) 1.0 published in March 2007
High-level strategy and schedule to address material weaknesses
Contained FY07 financial corrective actions published in DHS ICOFR Playbook
DHS OIG Performance Audit (OIG-08-73) concluded plan did not contain detailed milestones articulating path from current to desired state.
Many Mission Action plans (MAPs) with thousands of milestones – “like trying to boil the ocean”
Assistant Commandant For Resources

5. Audit Readiness Planning Team (ARPT)
Cross-functional team of senior CG & DHS financial experts chartered in APR 08
Charged with addressing root cause conditions of material weaknesses & developing action plans
Disaggregated financial statement line items into a set of assessable units (AU) for purposes of conducting risk assessments
Resulting assertion matrix indicates whether the ability to provide an assertion for each AU is significantly constrained by current system deficiencies
CG estimated only 13 – 15% of the 139 AUs can be asserted to without successfully addressing systems deficiencies
Incorporated a risk based approach w/realistic timelines for remediation
Developed FSTAR 2.0
Assistant Commandant For Resources

6. Coast Guard Audit Readiness Strategy
Scope
Divide the world of work into “Assessable Units”
Size
Focus on those items most material to the DHS Balance Sheet
‘Fix it once’ Remediate the root causes of the issue, not just a ‘quick fix’. To get through a current year audit
Sustainability
Improved the “Tone at the Top.”
The Coast Guard CFO and Deputy CFO met weekly with each of the MAP teams to assess progress, mitigate risks, and identify potential roadblocks.
As a result, timely responses to risks associated with MAP remediation efforts and completion were addressed. 
A successful example of this is when the Fund Balance with Treasury MAP was in danger of missing critical milestones, the CFO sent a senior member of his staff to the Coast Guard Pay and Personnel Center in Topeka, Kansas to get the project back on track.
Established the Financial Management Accounting Oversight Board (FMAOB). 
It is comprised of the Coast Guard’s senior Certified Public Accountants and includes the DHS Director of Financial Management. 
The purpose of the Board is to provide recommendations to the CFO, Senior Assessment Team (SAT) and EMC-ICARB on the proper accounting treatment for complex transactions and provide recommendations around aligning Coast Guard accounting policy and guidance to federal best practices and standards. 
Most notably, in FY 2009, the Board provided recommendations for and approved the calculation of the Actuarial Pension Liability Materiality Threshold, which was a critical step in asserting to the balance at the end of FY 2009. 
CFO Technical Authority.
Providing the CFO with this authority allows for the consistent and timely application of federal financial management standards across the enterprise. 
This has improved the standardization of common processes throughout the Coast Guard, bringing them in compliance with generally accepted accounting principles.
Comptroller
The Comptroller will ensure the reliability of financial reporting and validate that timely corrective actions are taken providing greater effectiveness and efficiency of operations by strengthening accountability.
Attack the items that can be remediated outside of current financial system limitations
System 6

7. MAP Focus Areas 2003-2011: Consolidated (DHS) Balance Sheet Audit
Get the ‘balance’
Work toward internal controls
Includes Statement of Custodial Activity (SCA)
2012 Forward: Full Scope Audit
Statement of Budgetary Resources (SBR)
Statement of Net Costs (SNC)
Statement of Change in Net Position (SCNP)
Internal Controls Over Financial Reporting (ICOFR)
Assistant Commandant For Resources

8. Coast Guard Balance Sheet
FY07 – Disclaimer on all line items FY08 – Supported the accuracy of the balance for 6% of CG Balance Sheet: Investments & Contingent Legal Liabilities (CLL) FY09 – Supported the accuracy of the balance for 55% of CG Balance Sheet: Investments, CLL & Actuarial Pension Liability (APL) FY10 – Supported the accuracy of the balance for >80% ($53B) of CG Balance Sheet: Investments, Contingent Legal Liabilities, Actuarial Pension Liability, Actuarial Medical Liability, PP&E (Personal Property & Construction in Progress), FBwT (Military & Civilian Payroll – 3 out of 6 Agency Location Codes (ALCs) FY11 – Supported the accuracy of the balance for 91% of CG Balance Sheet: FBwT (Non-Payroll), Accounts Payable, Accounts Receivable). FY12 – Goal is to support 100% of the Balance Sheet adding Real Property, Internal Use Software and Environmental Liabilities.
Assistant Commandant For Resources

9. Coast Guard Audit Readiness Progress
High Risk, High Materiality
FBwT (Cash)
Support $5.6B Non-Pay Balance &
Support $200M Payroll Balance
Personal Property
Support the $5.1B Existence, Completeness & Valuation
Actuarial & Other Liabilities
Support the $35B Pension Balance
Support the $8.6B Medical Balance
Support the $1.3B CLL Balance
Internal Controls
Removed Material Weaknesses for Actuarial Liabilities & MilPay
Our results to date and projections for FY11
FY07 – Disclaimer on all line items
FY08 – Supported the accuracy of the balance for 6% of CG Balance Sheet: Investments & Contingent Legal Liabilities (CLL)
FY09 – Supported the accuracy of the balance for 55% of CG Balance Sheet: Investments, CLL & Actuarial Pension Liability (APL)
FY10 – Supported the accuracy of the balance for >70% of CG Balance Sheet: Investments, Contingent Legal Liabilities, Actuarial Pension Liability, Actuarial Medical Liability, PP&E (Personal Property & OM&S), FBwT (Military & Civilian Payroll – 3 out of 6 Agency Location Codes (ALCs)
FY11 – will be able to support additional balances for Construction in Progress (CIP) an Real Property for PP&E Line Item, Internal Controls for Military & Civilian Payroll, and be able to prove accuracy & non-material misstatement of AP, AR, FBWT, BRM and SBR to support almost 100% of balance sheet
Will get DHS a “Qualified Opinion “ for FY11 Total Balance sheet assets plus liabilities is $66.9B
Assistant Commandant For Resources 9

10. MAP Focus Areas FY11 Focus Areas FY12 Focus Area
Military HR Internal Controls
Civilian HR Internal Controls
Actuarial Medical Liabilities
Environmental Liabilities
Accounts Payable
Accounts Receivable
Fund Balance with Treasury
(Non Payroll)
IT General Controls
Capitalized Property
CIP
Real Property
Major Electronic Systems
Operating Materials & Supplies
Military HR Internal Controls
Civilian HR Internal Controls
Actuarial Medical Liabilities
Environmental Liabilities
Statement of Budgetary Resources
Statement of Net Costs
Accounts Payable
Accounts Receivable
Fund Balance with Treasury
(Non Payroll)
IT General Controls
Capitalized Property
Personal Property
CIP
Real Property
Major Electronic Systems
Operating Materials & Supplies
Assistant Commandant For Resources

11. CG-85: Office of Financial Management Transformation & Compliance
Office Chief: Dale Amidon
Deputy (CG-85D): CDR Jim Passarelli
Office Manager: CWO2 Dave Casteel
Policy & Communications
LT Tom Baker (CG-85)
CG-851: Internal Controls
Division Chief: Susan Seyfried
Deputy: CDR Tony Alarid
CG-852: Audit Remediation
Division Chief: CDR Jason Collins
Accounts & Payroll Team
LCDR Tuan Luong
Civilian Payroll
Wes Johnson
Military HR/Payroll
Accounts Payable & Receivable
LCDR Colin Campbell
Femi Esoimeme
Statement of Net Cost
Laila Grassley
Accounts & Payroll
AP & AR
John Bower
Civilian Payroll
LCDR Jeff Ferlauto
Military Payroll
Actuarial Medical Liabilities
FBwT
CLL & Investments
CDR Tony Alarid
General Ledger / Financial Reporting
General Ledger/Financial Reporting
Statement of Net Cost
Rena Wear
Change in Net Position
Statement of Budgetary Resources
Akram Maruf
PP&E
Personal Property
Akram Maruf
Environmental Liabilities
CDR Tony Alarid
Real Property
Construction In Progress
Rena Wear
OM&S/Repairable Spares
PP&E Team
LCDR Bobby Hart
Personal Property
LT Josh Zike
Construction In Progress
LT Ron Millspaugh
Real Property
Veronica Christen
Electronics
LT Christian Hernaez
Internal Use Software
OM&S/Repairable Spares
Environmental Liability
LTJG Riley Matsco
ITGC/Application Controls
LCDR Ferlauto
GL & Financial Reporting Team
LCDR Amy Florentino
FBwT & General Ledger
LT Melissa Cooper
Phil Faries (CG-8C)
Actuarial Medical Liabilities
DCMS-831/CG-852
Change in Net Position
LCDR Colin Campbell
Statement of Budgetary Resources
LCDR David Hatchett (CG-83)
Karen Maye
Other
Government Charge Cards
TBD
IPERA Monitoring
Rena Wear
SAS 70 Reviews
GS-9
Statement of Assurance
Susan Seyfried

12. Why Do I Care?
It’s not about Passing the Audit, it’s about doing our jobs IAW Federal Standards.
The audit is merely a trigger
It’s not extra work, it’s work we’ve been required to do, but failed to do
You can’t know what you need if you don’t know what you have
From the OMB Reviewer: the CG is not a candidate for budget growth until they can pass the audit (paraphrasing)
Auditors heading your way…..
Assistant Commandant For Resources

13. Questions?
CDR Jim Passarelli CG-85D (202) Learn more about Auditing, Internal Controls and Financial Statements at:
Assistant Commandant For Resources