FSTAR 101:FSTAR 101:The Coast Guard’s Audit The Coast Guard’s Audit
Readiness PlanReadiness Plan
RDML K. Taylor | DHS CFO Brief | 25 JAN 2010
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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)
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Size (Materiality) Matters
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CG in DOT CG in DHS in 2010CG is 18% of DHS AssetsCG is 41% of DHS Liabilities
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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
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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”
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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
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Coast Guard Audit Readiness Strategy
Size
Scope
System
Sustainability
Focus on those items most material to the DHS Balance Sheet
Attack the items that can be remediated outside of current financial system limitations
‘Fix it once’ Remediate the root causes of the issue, not just a ‘quick fix’. To get through a current year audit
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Divide the world of work into “Assessable Units”
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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)
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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.
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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
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MAP Focus Areas
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• 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
FY11 Focus Areas
• 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
FY12 Focus Area
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CG-85: Office of FinancialCG-85: Office of FinancialManagement Transformation & Compliance Management Transformation & Compliance
Office Chief: Dale Amidon Office Chief: Dale Amidon Deputy (CG-85D): CDR Jim Passarelli Deputy (CG-85D): CDR Jim Passarelli Office Manager: CWO2 Dave Casteel Office Manager: CWO2 Dave Casteel
CG-851: Internal Controls CG-851: Internal Controls Division Chief: Susan Seyfried Division Chief: Susan Seyfried
Deputy: CDR Tony AlaridDeputy: CDR Tony Alarid
CG-852: Audit Remediation CG-852: Audit Remediation Division Chief: CDR Jason CollinsDivision Chief: CDR Jason Collins
Accounts & Payroll TeamAccounts & Payroll TeamLCDR Tuan LuongLCDR Tuan Luong
Civilian PayrollCivilian PayrollWes Johnson Wes Johnson
Military HR/PayrollMilitary HR/PayrollWes JohnsonWes Johnson
Accounts Payable & ReceivableAccounts Payable & ReceivableLCDR Colin CampbellLCDR Colin Campbell
Femi EsoimemeFemi EsoimemeStatement of Net CostStatement of Net Cost
Laila Grassley Laila Grassley
PP&E TeamPP&E TeamLCDR Bobby HartLCDR Bobby Hart
Personal PropertyPersonal PropertyLT Josh ZikeLT Josh Zike
Construction In ProgressConstruction In ProgressLT Ron MillspaughLT Ron Millspaugh
Real PropertyReal PropertyVeronica ChristenVeronica Christen
ElectronicsElectronicsLT Christian Hernaez Internal Use SoftwareInternal Use Software
LT Josh ZikeLT Josh ZikeOM&S/Repairable SparesOM&S/Repairable Spares
LT Ron MillspaughLT Ron MillspaughEnvironmental LiabilityEnvironmental Liability
LTJG Riley MatscoLTJG Riley Matsco
Accounts & PayrollAccounts & Payroll
AP & AR AP & AR John BowerJohn Bower
Civilian PayrollCivilian PayrollLCDR Jeff FerlautoLCDR Jeff FerlautoMilitary Payroll Military Payroll
LCDR Jeff FerlautoLCDR Jeff FerlautoActuarial Medical LiabilitiesActuarial Medical Liabilities
LCDR Jeff FerlautoLCDR Jeff FerlautoFBwTFBwT
John BowerCLL & InvestmentsCLL & Investments
CDR Tony AlaridCDR Tony Alarid
General Ledger / Financial ReportingGeneral Ledger / Financial Reporting
General Ledger/Financial ReportingGeneral Ledger/Financial ReportingJohn BowerJohn Bower
Statement of Net Cost Statement of Net Cost Rena WearRena Wear
Change in Net PositionChange in Net PositionJohn BowerJohn Bower
Statement of Budgetary ResourcesStatement of Budgetary ResourcesAkram MarufAkram Maruf
PP&E PP&E
Personal Property Akram Maruf
Environmental LiabilitiesCDR Tony Alarid
Real PropertyAkram Maruf
Construction In ProgressRena Wear
OM&S/Repairable SparesRena Wear
GL & Financial Reporting TeamLCDR Amy FlorentinoLCDR Amy Florentino
FBwT & General LedgerLCDR Amy Florentino
LT Melissa CooperPhil Faries (CG-8C)
Actuarial Medical LiabilitiesDCMS-831/CG-852
Change in Net PositionLCDR Colin Campbell
Statement of Budgetary ResourcesLCDR David Hatchett (CG-83)LCDR David Hatchett (CG-83)
Karen MayeKaren Maye
Policy & CommunicationsLT Tom Baker (CG-85)LT Tom Baker (CG-85)
ITGC/Application ControlsLCDR FerlautoLCDR Ferlauto
Other
Government Charge CardsTBD
IPERA MonitoringRena Wear
SAS 70 ReviewsGS-9
Statement of AssuranceSusan Seyfried
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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…..
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Questions?
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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