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USACE Perspectives on Asserting Audit Readiness

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Title: USACE Perspectives on Asserting Audit Readiness


1
USACE Perspectives on Asserting Audit Readiness
AMSC National Capital Region Mini-PDI 9 March
2006
Mike Walsh, CPA Finance and Accounting
Officer HQUSACE 202-761-1858 Michael.E.Walsh_at_hq02.
usace.army.mil
2
Purpose
  • To provide an overview of the CFO Act
    requirements and discuss the
  • FY 2006 USACE assertion of audit readiness.

3
Agenda
  • CFO Act Overview
  • USACE CFO Audit
  • Discovery Phase
  • Validation Phase
  • Assertion of Readiness
  • USACE Lessons Learned

4
CFO Act Overview
5
Chief Financial Officers Act of 1990
  • Established agency Chief Financial Officers
  • Required
  • Annual submission of audited financial
    statements.
  • Agencies to develop and maintain an integrated
    accounting and financial management system.
  • Integration of accounting and budgetary
    information.
  • Major Goals
  • Provide quality information for management.
  • Improve financial systems and accounting data.
  • Enhance internal controls.

6
Government Management Reform Act of 1994
  • Sister act to CFO Act
  • Required all Federal agencies to submit audited
    financial statements, beginning 1996.
  • Anticipated benefits
  • Reduce inaccurate financial data
  • Improve financial management reporting

7
Federal Financial Management Act of 1996
  • Requires Federal Agencies to
  • Comply with Federal System requirements and
    accounting standards.
  • Apply US Government Standard General Ledger at
    the transaction level
  • Assess internal management controls

8
Presidents Management AgendaImprove Financial
Management
  • Getting to Yellow
  • Unqualified Audit opinion.
  • Meet accelerated reporting deadlines.
  • No significant Anti-Deficiency violations.
  • No material internal control weaknesses.
  • Getting to Green
  • Meet all yellow criteria plus
  • Financial information used by management to
    inform decision making and continuously expand
    the scope of its routine data use.

9
Presidents Management Agenda
Current Status Progress
USACE RED YELLOW
Overall (26 Agencies) 8/26 - Green 1/26 - Yellow 17/26 - Reds 18/26 - Green 7/26 - Yellow 1/26 Red
10
The Goal..
  • Quality Information for Decision-Makers.
  • Cleaning up our books will lead to greater
    credibility with Congress, Customers and the
    Public.
  • Integrating financial and functional systems is
    the key to quality information.
  • Quality information will enable better decision
    making and resource management.

11
USACE CFO Audit
12
Financial Statements
US Army Corps of Engineers
PRIVATE SECTOR
GOVERNMENTAL
Balance Sheet
Balance Sheet
Assets Liabilities OE/SE
Assets Liabilities Net Position
Revenues -Expenses Net Income
Cost -Revenues Net Cost of OPNS
Income Statement
Statement of Net Cost
Cash Flow Analysis
Statement of Changes in Net Position
Changes from Beginning of FY
No equivalent Government Statement
Stockholders Equity
Statement of Budgetary Resources
Budget Authority in, Obligations incurred, Outlays
No Private Sector Equivalent
Statement of Financing
Reconciles Obligations incurred to Net Cost
One Corps Serving The Army and the Nation
13
Types of Audit Opinions
  • Unqualified - Statements are fairly presented and
    materially correct (favorable).
  • Qualified - Statements are fairly presented and
    materially correct except for stated conditions
    (favorable).
  • Disclaimer - Auditors unable to determine if
    information is fairly presented (not favorable).
  • Adverse - Statements arent fairly presented or
    materially correct (not favorable).

14
USACE Audit History
  • FY93 to FY00 AAA issued disclaimers for all
    statements.
  • FY97 AAA issued unqualified opinion on pilot
    test of Southwest Division statements.
  • FY01 to FY05 DoDIG took over audit
    responsibility and issued disclaimers.
  • Issued numerous reports citing problems in CIP,
    Building and Structures, Equipment, Depreciation,
    Accounts Receivables and Payables, FBWT,
    Compilation and Systems Security.

15
DODIG Audit Phases
  • Discovery and Correction Phase
  • Develop improvement plans implement corrective
    actions establish audit committees develop
    systems strategy.
  • Validation Phase
  • Obtain comment from OIG document processes
    identify controls and systems ensure auditable
    universe of transactions and availability of
    supporting documents.
  • Assertion
  • Results of validation and reports agree with
    engagement and management representation letters.
  • Assessment
  • OIG Oversight Independent Public Auditors (IPA).
  • Audit
  • OIG Oversight IPA.

16
Discovery Phase
17
Discovery Phase(Major Hurdles)
  • Fully Integrated Accounting System
  • Buildings and Structures
  • Construction in Progress
  • Land
  • Funds Balance With Treasury
  • Accounts Receivable
  • Accounts Payable
  • Financial Statement Compilation

18
Corps Financial Management
Real time management and funds control
Source data entry
CEFMS
Electronic Signatures for less paper better
internal control.
Multi-level processing
Compliance with Statutory and Regulatory
requirements and the elimination of separate
accounting departments
Civil
Corps of Engineers Financial Management Systems
Military
Network
Revolving Fund
CEFMS DATABASE
Reimbursable
19
DODIG MOA on Support for Assets
  • Purpose develop alternate methods to support
    the acquisition and capitalized improvements for
    real and personal property.
  • Signed June, 9, 2004 by both IG and USACE in
    coordination with GAO.
  • Allowed for use of other internal documentation
    to support values of older assets (i.e. engineer
    estimates and legacy system conversion
    spreadsheets.)

20
CFO Information Papers
  • HQUSACE developed CFO info papers to address
    each DODIG audit deficiency.
  • 11 topic areas.
  • Ensure field activities know what the
    requirements are.
  • Track progress on corrective actions.
  • Ensure USACE and DODIG on same page regarding
    required corrective actions.
  • Used monthly feedback to manage process and
    ensure continued Command oversight.

21
FY2005 CFO Get Well Plan
  • Identify Regional CFO lead for CFO Compliance.
  • Train regional PDT leaders.
  • Regional CFO Leaders form Regional PDTs to ensure
    all districts complete corrective actions NLT 31
    Jul 05.
  • Regional PDTs validate corrective actions are
    fully complete.
  • MSC/Center Commanders assert MSC readiness to CG
    NLT 30 Sep 05.
  • AAA/HQUSACE validation reviews at selected
    Districts.

22
Validation Phase
23
AAA Validation Review of Other Statements
  • AAA completed validation review of the non
    Balance Sheet other statements in October 2004.
    Plan developed collectively with USACE, DODIG
    and OSD(C).
  • AAA Validation Objective Review of selected
    Civil Works financial statements (Statements of
    Net Cost, Changes in Net Position, Budgetary
    Resources, and Financing) to assist management in
    determining whether those statements are ready
    for an assessment.

24
AAA Validation Review of Other Statements
  • AAA areas of review
  • The Budget Cycle.
  • The Purchasing Cycle.
  • The Billing Cycle.
  • The Payroll Cycle.
  • Financial Statement Reporting.

25
AAA Validation Review of Other Statements
  • AAA validation conclusion Our review didnt
    disclose any material deficiencies that would
    preclude an assessment of the financial
    statements. Although we found some weaknesses
    in controls and posting errors in our sampled
    transactions, we believe that these weaknesses
    and errors wouldnt materially affect the
    financial statements.

26
AAA Validation Review Balance Sheet
  •  
  • AAA completed validation review of the Balance
    Sheet in November 2005.
  • AAA Audit Objective Has the Corps corrected the
    nine balance sheet deficiencies identified from
    previous audits?
  • AAA visited 6 USACE districts to ensure all
    corrective actions were completed. USACE HQ RM
    added 2 other sites.

27
AAA Validation Review Balance Sheet
  •  
  • AAA validation conclusion Based on our review,
    the Corps has corrected all balance sheet
    deficiencies with the exception of the Accounts
    Payable/Accruals issue area.
  • of sample unsupported
  • CIP - .9
  • A/R - .02
  • A/P- 4.2
  • Equipment - .1
  • Buildings and Structures - .2
  • Land - .1

USACE has issued guidance to require standard
support form for all accruals.
28
Assertion Phase
29
Assertion Package
  • Explanation of corrective actions
  • Organization charts
  • FISCAM reviews
  • Description of all
  • hardware and software
  • Description of financial
  • reporting process
  • IT network description
  • Systems documentation
  • Systems certifications
  • Assertion letter
  • Cycle memos of all business processs
  • General ledger and subsidiary ledgers
  • Evidential matter
  • Summary of validation review
  • Completion of all Financial Improvement Plans
  •  

30
USACE Audit AssertionKey Events
  • 30 Sep 2005 - All District / Division Commander
    submitted assertion letter that individual
    Command had completed actions.
  • November 2005- Positive results on AAA validation
    reviews.
  • 8 December 2005 - Recommended unanimously by
    USACE Audit Committee (also includes DODIG and
    OSD.)
  • 16 December 2005 Assertion package signed by
    USACE.
  • 2 February 2006 - Package endorsed by Review and
    Prioritization Committee.
  • 15 February 2006 - ESC approved USACE assertion
    package.
  •  

31
USACE Lessons Learned
  • Must Haves
  • Integrated financial management system.
  • Command emphasis.
  • Teaming with the auditor.
  • Standardize business processes.
  • Strong audit committee.
  • Proper training at field level.
  • Develop timeline and stick to it.

32
Compliance is Not an Option
CFO Compliance Needs You
Accountants Cant Do It Alone !
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