The Big Challenge for Audit Readiness: Property, Plant and Equipment at the United States Coast Guard

1. The Big Challenge for Audit Readiness: Property, Plant and Equipment at the United States Coast Guard Margo Sheridan, CDFM, Comptroller, U S Coast Guard Presented to: American Society of Military Comptrollers Washington, DC Chapter July 2012 RDML K. Taylor | DHS CFO Brief | 25 JAN 2010

2. Agenda • Why PP&E audit readiness is important • Life cycle of property • Business lines impacted by property • Types of property and associated challenges • Relationships with liabilities, costs, and budgets • Where we are, where we are going

3. WARNING: This is an Audience Participation Event

4. PERCV • Audit Assertions: management representations embodied in the financial statements: • Presence and disclosure • Existence • Rights and Obligations • Completeness • Valuation • Most audit work is done to prove these assertions • Obtain and evaluate evidence Reference: FAM section 235.02

5. Life Cycle of Property Assistant CommandantFor Resources • Identify need • Conduct research & development • Program and budget for acquisition • Acquire/build • Place in use • Repair/maintain/upgrade • Dispose

6. Baseline Business Processes • Budget formulation to execution • Request to procure • Procure to pay • Reimbursable management • Bill to collect • Grants management • Acquire to dispose • Record to report Scope System

7. Why is PP&E important to you? Assistant CommandantFor Resources • You can’t know what you need if you don’t know what you have • Major equipment and construction projects are itemized in legislation and must be discretely tracked in execution • Both accountants and budgeteers must report expenditures for equipment and other property • Age, location, and condition of PP&E matter to operational units and commanders—mission effectiveness • It is not about the audit—it is about stewardship and public trust that we will preserve resources

8. Why is Capitalized PP&E a problem? Assistant CommandantFor Resources • In the beginning … a purchase request was issued, a requisition launched, a MIPR created • Object class – 25**? 26**? 31**/32**? • LOA – who validates? Certifier? Fund manager? Procurement official? Accounting technician? Property manager? • Critical paperwork is misplaced: purchase order/ contract, evidence of ownership, receiving report, invoice • Direct and indirect costs incurred to place PP&E in use are difficult to identify and document

9. Why is Capitalized PP&E a problem?(cont.) Assistant CommandantFor Resources • Other challenges: • easements, software, items installed on leased equipment, property transfers, surveys, deployments, upgrades • Environmental liabilities—while in use, during repair/upgrade, at disposal Internal Controls

10. What information is needed to book a property asset? • Acquisition/construction cost • Date acquired or placed in service/BOD • Useful life • Dimensions/configuration • Location • Composition • Unique identifier code/VIN • /HIN/bumper number • Disposal value (if any)

11. What if key data points are missing? • Refer to SFFAS 3, 6, 10, 35, and AAPC Technical Release 13 • Options: • Date in service (DIS): VIN/HIN, mid-month or mid-year convention • Valuation: PRV indexed to DIS (deflation of current replacement), appraisal, expenditure information, budget/appropriation data • Don’t forget property in contractors’ possession

12. Environmental Liabilities • SFFAS 5 & 6, AAPC Technical Releases 2 & 10 • Most property has associated environmental liabilities that is probable and measurable • Buildings – lead paint, asbestos, stored materials • Vehicles, vessels, mission equipment – CARC paint, mercury, phosphorescent paints, zinc oxide, lead, fiberglass • Land and ranges – lead, unspent munitions, petroleum products, chemicals, underground water contamination

13. Questions?? Assistant CommandantFor Resources