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FSTAR 101: The Coast Guard’s Audit Readiness Plan

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

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FSTAR 101: The Coast Guard’s Audit Readiness Plan

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  1. FSTAR 101: The Coast Guard’s Audit Readiness Plan Assistant CommandantFor Resources RDML K. Taylor | DHS CFO Brief | 25 JAN 2010

  2. 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)

  3. Size (Materiality) Matters Assistant CommandantFor Resources CG in DOT CG in DHS in 2010 CG is 18% of DHS Assets CG is 41% of DHS Liabilities 2

  4. Coast Guard Audit Readiness Approach Assistant CommandantFor Resources • 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

  5. FSTAR 1.0 Development Assistant CommandantFor Resources • 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”

  6. Audit Readiness Planning Team (ARPT) Assistant CommandantFor Resources • 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

  7. Coast Guard Audit Readiness Strategy Divide the world of work into “Assessable Units” Scope 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 Attack the items that can be remediated outside of current financial system limitations System 6

  8. MAP Focus Areas Assistant CommandantFor Resources • 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)

  9. Coast Guard Balance Sheet Assistant CommandantFor Resources • 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.

  10. Coast Guard Audit Readiness Progress Assistant CommandantFor Resources • 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 9

  11. MAP Focus Areas Assistant CommandantFor Resources FY11 Focus Areas FY12 Focus Area • 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 • 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

  12. 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-852: Audit Remediation Division Chief: CDR Jason Collins CG-851: Internal Controls Division Chief: Susan Seyfried Deputy: CDR Tony Alarid Accounts & Payroll Team LCDR Tuan Luong Civilian Payroll Wes Johnson Military HR/Payroll Wes Johnson Accounts Payable & Receivable LCDR Colin Campbell Femi Esoimeme Statement of Net Cost Laila Grassley 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 LT Josh Zike OM&S/Repairable Spares LT Ron Millspaugh Environmental Liability LTJG Riley Matsco Accounts & Payroll AP & AR John Bower Civilian Payroll LCDR Jeff Ferlauto Military Payroll LCDR Jeff Ferlauto Actuarial Medical Liabilities LCDR Jeff Ferlauto FBwT John Bower CLL & Investments CDR Tony Alarid General Ledger / Financial Reporting General Ledger/Financial Reporting John Bower Statement of Net Cost Rena Wear Change in Net Position John Bower Statement of Budgetary Resources Akram Maruf PP&E Personal Property Akram Maruf Environmental Liabilities CDR Tony Alarid Real Property Akram Maruf Construction In Progress Rena Wear OM&S/Repairable Spares Rena Wear GL & Financial Reporting Team LCDR Amy Florentino FBwT & General Ledger LCDR Amy Florentino 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 ITGC/Application Controls LCDR Ferlauto Other Government Charge Cards TBD IPERA Monitoring Rena Wear SAS 70 Reviews GS-9 Statement of Assurance Susan Seyfried

  13. Why Do I Care? Assistant CommandantFor Resources • 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…..

  14. Questions? Assistant CommandantFor Resources • CDR Jim Passarelli • CG-85D • (202) 372-3459 • Learn more about Auditing, Internal Controls and Financial Statements at: • https://collab.uscg.mil/lotus/mypoc?uri=dm:0d33288048f0ed30b0e9baea03115258&verb=view

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