Title: USACE Perspectives on Asserting Audit Readiness
1USACE 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
2Purpose
- To provide an overview of the CFO Act
requirements and discuss the - FY 2006 USACE assertion of audit readiness.
3Agenda
- CFO Act Overview
- USACE CFO Audit
- Discovery Phase
- Validation Phase
- Assertion of Readiness
- USACE Lessons Learned
4CFO 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.
6Government 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
-
7Federal 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
8Presidents 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.
9Presidents 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
10The 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.
11USACE CFO Audit
12Financial 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).
14USACE 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.
15DODIG 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.
16Discovery Phase
17Discovery 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
18Corps 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
19DODIG 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.)
20CFO 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.
21FY2005 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.
22Validation Phase
23AAA 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.
24AAA Validation Review of Other Statements
- AAA areas of review
- The Budget Cycle.
- The Purchasing Cycle.
- The Billing Cycle.
- The Payroll Cycle.
- Financial Statement Reporting.
25AAA 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. -
26AAA 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.
27AAA 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.
28Assertion Phase
29Assertion 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
-
30USACE 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. -
31USACE 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.
32Compliance is Not an Option
CFO Compliance Needs You
Accountants Cant Do It Alone !