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Mr. Mark E. EastonDeputy Chief Financial OfficerUnder Secretary of Defense (Comptroller) and Chief Financial Officer
FY 16-17: Agency Priority Goal
Financial Statement Audit Readiness
Priority Goal
Goal Overview
Problem / Opportunity:
Valuing and accurately reporting over $2.2 trillion in assets, reporting over $2.4 trillion liabilities, and preparing full financial statements for audit. Audit readiness priorities expand from budgetary data reported on the Statement of Budgetary Resources (SBR) to all financial transactions reported on the Balance Sheet, Statement of Net Cost, and statement of Change in Net Position.
Relationship to Strategic Goal and Objective:
Achieving audit readiness supports the DoD Strategic Goal to Reform and Reshape the Defense Institution, and the Strategic Objective to improve financial processes, controls, and information via audit readiness.
Congressional Highlights:
As addressed in the NDAA (starting with 2010), directed requirements related to:
- The development of a plan that includes interim objectives and a schedule of milestones for each military department and for the defense agencies, supporting audit readiness goals, to include improvements and business systems modernization efforts necessary for the DoD to consistently prepare timely, reliable, and complete financial management information.
- Developing a plan that should include corrective actions for any identified weaknesses or deficiencies to include identifying near- and long-term measures for resolving any such weaknesses or deficiencies; assign responsibilities within the DoD to implement such measures; specify implementation steps for such measures; and provide timeframes for implementation of such measures.
- The Financial Improvement and Audit Readiness Plan describing specific actions to be taken and the costs associated with ensuring that the financial statements of the DoD are validated as ready for audit not later than September 30, 2017. Upon the conclusion of FY 2018, the Secretary of Defense shall ensure that a full audit is performed on the financial statements of the DoD for such FY. The Secretary shall submit to Congress the results of that audit not later than March 31, 2019.
Laws, Regulations, and Policies:
- Federal Financial Management Improvement Act of 1996 (FFMIA)
- OMB Circular No. A-123, Management's Responsibility for Enterprise Risk Management and Internal Control
- National Defense Authorization Act
- Chief Financial Officers Act of 1990
- Government Management Reform Act of 1994
- DoD Financial Management Regulation
- Financial Accounting Standards Advisory Board (FASAB) Handbook of Accounting Standards and other pronouncements
Key Barriers and Challenges:
The size, diverse functional scope of business operations and frequently non-standard, decentralized execution of support operations makes this an extremely challenging endeavor.
Valuation of Assets: Valuation of General Property, Plant, and Equipment and of Inventory and Related Property is critical. Many of the Department’s assets were acquired decades ago and before there was a requirement to produce financial statements. As a result, the acquisition (cost) documents required for supporting valuation and audit are often no longer available. The Department must use alternative valuation methods.
Fund Balance with Treasury: Due to the size of the Department’s budget and the enormous amount of funds expended and collected, the number of accounting transactions that must be reconciled between the Department’s accounts and Treasury is very large and complex, compounded by nonstandard data, weak system controls, and edits at the end of the process instead at the beginning.
Universe of Transactions: Providing complete universes of transactions is especially challenging for the Components because of the numerous accounting systems used to initiate and record transactions as well as hundreds of feeder systems where most transactions originate. Components must verify that open obligations for all active and expired appropriations (beginning balances) are supported before starting SBR and full financial statement audits.
IT Systems: The Department has nearly 500 individual IT systems relevant to audit. Meeting the needs of the auditors requires too many manual workarounds and stretches limited resources even more thinly. These systems are costly to maintain and result in substantial IT control issues. To efficiently audit the Department, auditors must be able to rely on the IT environment. The more systems DoD uses, the more difficult the task becomes.
Environmental Liabilities: The Department has not been able to provide assurance that clean-up costs for all of its ongoing, closed, and disposal operations are identified, consistently estimated, and appropriately reported. Additionally, the Department is not able to consistently report environmental liability disclosures and supporting documentation is not properly maintained and readily available for all environmental sites.
Mitigation Efforts:
A strategy has been implemented that includes close engagement with standards setters and audit community such as the DoD Office of the IG, the Federal Accounting Standards Advisory Board (FASAB), and independent public accounting firms to define cost efficient solutions for audit “show stoppers.” In addition, the Department has collaborated with Independent Public Accountants and the FASAB to issue policies governing Existence, Completeness, and Rights. Further, the Department has established working groups to address critical capabilities needed for audit and is in the process of developing detailed implementation plans. The Department will continue to assess risks against these critical capabilities and adjust corrective actions accordingly.
Critical Capabilities Include:
• Critical systems internal controls that impact financial statements
• Fund Balance with Treasury Reconciliation
• Complete Universe of Accounting Transactions
• Property Existence, Completeness, Rights and Valuation
• Environmental Liabilities
• Unsupported Journal Vouchers
The OUSD(C) is partnering with the DoD CIO, DCMO, and DFAS to establish a comprehensive Department-wide solution for risks related to the identified critical capabilities to ensure the Department’s financial statements are complete, accurate, and fully supported by financial transactions.
Strategies
The implementation plan to address the critical path tasks, corrective actions, and corresponding initiatives include ongoing monitoring and reporting of achieving milestones including Reporting Entity Audit Readiness Assertion, Validation, and Audit/Examination Start for each critical path area.
As the Department reinforced the importance of internal controls over areas of significant risk, the OUSD(C) FIAR Directorate responded by updating the FIAR Guidance and issuing memos related to property valuation and information technology controls. Further, the OUSD(C) FIAR Directorate deployed a Notice of Finding and Recommendation tracking database to monitor corrective actions.
Targeted Efficiencies: This initiative supports statutory compliance intended to enhance public confidence and trust along with providing accurate and timely information for decision-making. Experience has demonstrated that there is measurable value that accrues from strengthening business processes, systems and controls.
Internal Partners: Senior leaders and technical experts from OUSD(C), the MilDeps, Defense Agencies, DoD Office of the IG. To facilitate the successful implementation of the audit readiness plans and enterprise-wide initiatives, working groups and reporting platforms with the aforementioned stakeholders have been established to evaluate these capabilities and ensure Department-wide policies and processes are revised / implemented as necessary.
External Partners: Senior leaders and technical experts from U.S. Department of Treasury, the Federal Accounting Standards Advisory Board, and independent public accounting firm consultants.
Primary Governance Organizations: Financial Improvement and Audit Readiness (FIAR) Governance Board
Published DoD Functional or Component Strategic Plans and/or Studies: Critical Capability Plan results for all Components as addressed during the FIAR Governance Boards every 60 days.
Published Performance / Progress Reports: FIAR Plan Status Report, published semi-annually in May and November. http://comptroller.defense.gov/fiar/plan.aspx
Evidence Building: As Components identify progress measures and financial reporting policy and requirements are identified, the OUSD(C)/ODCFO FIAR teams assess the current strategies in plan to ensure key critical capability areas (and subset/more focused areas within), are measured with consistent criteria and prioritized based on the materiality of deficient areas identified. As audits and exam results are identified by the public accounting firms and DoD IG, deficient areas are prioritized and systemic weaknesses are identified to again ensure the correct policies and strategies are implemented.
Progress Update
FY16 Q1 Progress Update
Universe of Transactions, Reconciliations to GL Systems, Schedule of Budgetary Activity - Many DoD Components have completed this reconciliation in preparation for FY16 audits and examinations.
Universe of Transactions, Reconciliations to GL Systems, Statement of Budgetary Resources and Balance Sheet - Reconciliations have been performed by a few DoD components for certain asset types.
Universe of Transactions, Reconciliations from feeder source systems to the GL, Schedule of Budgetary Activity - Feeder systems have been ranked/prioritized by level of importance.
Universe of Transactions, Reconciliations from feeder source systems to the GL, Statement of Budgetary Resources and Balance Sheet - Reconciliations have been performed by a few DoD components for certain asset types.
Journal Vouchers, Unsupported - Memorandums of Understanding were developed between the reporting entities and the service provider for Journal Vouchers (JVs) prepared by service providers. Root cause analysis of several JV types was performed.
Mission Critical Assets Existence and Completeness Baseline, General Equipment - Developed a draft strategy for government equipment in the hands of contractors (government furnished and contractor acquired).
Mission Critical Assets Existence and Completeness Baseline, Real Property - Initiated walkthrough of processes managed by service providers and established requirements for corrective actions; performed initial inventory of assets and supporting documentation requirements; prioritized assets to baseline.
Mission Critical Assets Existence and Completeness Baseline, Internal Use Software - Established guidance with FASAB to allow for a zero beginning balance of IUS and go-forward methodology for capturing asset balances.
Mission Critical Assets Existence and Completeness Baseline, Inventory, Operating Materials and Supplies - Completed initial physical inventory for certain operating materials and supplies and identified corrective action plan requirements.
FY16 Q2 Progress Update
Universe of Transactions, Reconciliations to GL Systems, Schedule of Budgetary Activity - Many DoD Components have completed this reconciliation in preparation for FY16 audits and examinations.
Universe of Transactions, Reconciliations to GL Systems, Statement of Budgetary Resources and Balance Sheet - Many DoD Components have completed this reconciliation in preparation for FY16 audits and examinations. Assessments/actions to implement additional reconciliation requirements are ongoing.
Universe of Transactions, Reconciliations from feeder source systems to the GL, Schedule of Budgetary Activity - Feeder systems have been ranked/prioritized by level of importance.
Universe of Transactions, Reconciliations from feeder source systems to the GL, Statement of Budgetary Resources and Balance Sheet - Reconciliations have been performed by a few DoD components for certain asset types.
Journal Vouchers, Unsupported - Memorandums of Understanding were developed between the reporting entities and the service provider for Journal Vouchers (JVs) prepared by service providers. Root cause analysis of several JV types was performed. Draft corrective actions have been developed based on analysis.
Fund Balance with Treasury, DoD's timely clearing of all overaged unmatched disbursements and collection transactions -
Generally, DFAS and agencies continue to work together to:
- Properly identified the necessary purchase order funding and source document information required for transactions necessary to properly identify obligation and source data (these areas are aligned to the Office of the Deputy Chief Financial Officer (ODCFO) Procure to Pay and G-Invoicing initiatives)
- Addressing enterprise resource planning/target system conversion issues regarding proper loading of appropriation information to ensure proper posting of disbursements (these areas area aligned to the Joint Test Interoperability Command and Standard Line Of Accounting (SLOA) validation service initiatives).
Progress on specific supporting initiatives:
- SLOA validation service was completed for SCS in January 2016.
- Direct Treasury Disbursing, which specifically addresses where currently non-standard processes and inaccurate data for in-transits that must flow through various systems, was piloted by Army and DLA. The Office of the Joint Chief of Staff organization went live for Direct Treasury Disbursing.
Fund Balance with Treasury, DoD's timely clearing of overaged all in-transit disbursements and collection transactions -
Given there are various agencies and transactions that contribute to the overaged in-transits, the progress is numerous:
- Missing/insufficient obligation data, specifically funding documents to customers for obligations, was obtained
- Timing of cross disbursement data has corrected itself for some of the current transactions (and will continue to do so on a monthly basis as cross disbursement data is delayed, although end state goal is direct Treasury disbursing)
Mission Critical Assets Existence and Completeness Baseline, General Equipment - Developed a draft strategy for government equipment in the hands of contractors (government furnished and contractor acquired).
Mission Critical Assets Existence and Completeness Baseline, Real Property - Initiated walkthrough of processes managed by service providers and established requirements for corrective actions; performed initial inventory of assets and supporting documentation requirements; prioritized assets to baseline.
Mission Critical Assets Existence and Completeness Baseline, Internal Use Software - Several Components have made progress. Established guidance with FASAB to allow for a zero beginning balance of IUS and go-forward methodology for capturing asset balances.
Mission Critical Assets Existence and Completeness Baseline, Inventory, Operating Materials and Supplies - Completed initial physical inventory for certain operating materials and supplies and identified corrective action plan requirements.
FY16 Q3 Progress Update
Universe of Transactions, Reconciliations to GL Systems, Schedule of Budgetary Activity - Many DoD Components have completed this reconciliation in preparation for FY16 audits and examinations.
Universe of Transactions, Reconciliations to GL Systems, Statement of Budgetary Resources and Balance Sheet - Several large Components made big strides towards their completion which in turn raised the overall completion percentage for this metric.
Universe of Transactions, Reconciliations from feeder source systems to the GL, Schedule of Budgetary Activity - Some components have completed this metric this quarter and the others are making progress towards completion. One military department and one defense agency extended their completion dates beyond their initial target date and have yet to reach the 100% completion targets this quarter. The military department did not meet the target date as they are working on developing a strategy to reconcile and report sensitive activities. The defense agency did not meet the target date as they are waiting to achieve basic system functionality by one of the more complex TI-97 entities.
Universe of Transactions, Reconciliations from feeder source systems to the GL, Statement of Budgetary Resources and Balance Sheet - Several components made impactful strides towards their completion goal which positively impacted the overall completion percentage of this metric. One military department extended their completion date beyond their initial target date and has yet to reach the 100% completion targets this quarter. The same military department’s general fund account did not meet the target date as they are working on developing a strategy to reconcile and report sensitive activities. This military department’s working capital fund did not meet the target date as they are still working to develop and implement an inventory reconciliation solution.
Journal Vouchers, Unsupported - Many DoD components have provided implementation plans to address Journal Voucher eliminations. Identifying necessary system change requests are required to correct posting logic and automation issues.
Fund Balance with Treasury, DoD's timely clearing of all overaged unmatched disbursements and collection transactions - The Office of the Deputy Chief Management Officer (ODCMO) worked with the Defense Finance and Accounting Service (DFAS) to identify outstanding and overaged unmatched disbursements by DoD Component. This was done for all components.
Fund Balance with Treasury, DoD's timely clearing of overaged all in-transit disbursements and collection transactions - The Office of the Deputy Chief Management Officer (ODCMO) worked with the Defense Finance and Accounting Service (DFAS) to identify outstanding and overaged unmatched disbursements by DoD Component. This was done for all components.
Mission Critical Assets Existence and Completeness Baseline, General Equipment - Documented or obtained an asset listing of the General Equipment (GE) including Military Equipment (ME) assets that the Defense Agency has financial reporting responsibility over, and reconciled that data to the General Ledger (GL). Documented or obtained as-is environment documentation including systems, processes descriptions, org charts, and a statement to process analysis. Performed materiality analysis and identified programs in process likely to include Construction in Progress (CIP). Two military departments and two defense agencies extended their completion dates beyond their initial target date and have yet to reach the 100% completion targets this quarter.
Mission Critical Assets Existence and Completeness Baseline, Real Property - Based on validated existence and completness data, established a baseline valuation prioritization and tactical plan. Documented or obtained as-is environment documentation including systems, processes descriptions, organization charts, and statement to process analysis. Obtained Occupancy and Sustainment cost data, and assessed asset listing against it to determine financial reporting responsibility; and then reconciled the RP assets (CIP included) that the Defense Agency has financial reporting responsibility over to the General Ledger. Two military departments and four defense agencies have extended their completion dates beyond their initial target date and have yet to reach the 100% completion targets this quarter.
Mission Critical Assets Existence and Completeness Baseline, Internal Use Software - Continued to implement the Internal Use Software (IUS) write-off strategy for baseline by Q4 FY 2016. One military department and one defense agency extended their completion dates beyond their initial target date and have yet to reach the 100% completion targets this quarter.
Mission Critical Assets Existence and Completeness Baseline, Inventory, Operating Materials and Supplies - Based on validated Existence and Completeness data, established baseline valuation prioritization and a tactical plan. Documented process in preparation for assertion testing. Two military departments and one defense agency extended their completion dates beyond their initial target date and have yet to reach the 100% completion targets this quarter.
Additional details will be available in the November 2016 Financial Improvement and Audit Readiness Plan Status Report (FPSR): http://comptroller.defense.gov/fiar/plan.aspx
FY16 Q4 Progress Update
Components continue to strengthen controls; improve cooperation across multiple DoD entities; reduce the number of outdated, stove-piped systems; perform update to data coding and interfaces to ensure general ledger accounts are accurate and complete and transactions are tied to the correct accounts; resolve the systemic issues of reducing journal vouchers and manual corrections; implement methodologies for consistent and relative valuation of our property and other assets; and determine the universe of transactions to include ensuring detailed supporting transactions are properly reconciled to support accurately recording transactions in the general ledgers.
Unsupported journal vouchers have been a self-reported material weakness since 2007. Remediating this challenge requires significant changes in the Department’s processes and how systems record accounting transactions. Although process changes and systems fixes are being identified and tracked, addressing journal vouchers in the near-term is very labor intensive, placing further demands on limited resources.
The Department negotiated a one-time exception with the Federal Accounting Standards Advisory Board (FASAB), allowing DoD to forgo the valuation of existing land and software. However, for some categories of property, the Department must continue to ensure all property assets are properly recorded in property systems, valued, and supported. To address this challenge, the Department must automate solutions to capture the full cost of acquiring and maintaining assets. Contracts must be structured in such a way that the full cost of property can be readily determined, and automated solutions must be implemented to ensure that the cost of property is recorded and reconciled in both the general ledger and the property sub-ledger. Sustainable solutions must also be in place before the Department is allowed to execute the one-time exception.
The Department conducted extensive training and collaboration efforts with the Components and Agencies for the implementation of G-invoicing. Dashboards were created and interim reports were distributed on progress to date. In addition, the percentage of systems and data exchanges assessed for compliance against the Standard Fiscal Information Structure (SFIS) has progressed well, and target systems continue to be assessed by DoD’s Joint Interoperability Certifier (JITC). Also, the FM community continued to reduce legacy financial management systems by retiring 11 systems in fiscal year 2016.
Specific Performance Measure Progress:
Universe of Transactions, Reconciliations to GL Systems, Schedule of Budgetary Activity - All large Defense agencies and several mid-sized and smaller agencies have completed this reconciliation in preparation for FY16 audits and examinations. However, several mid-sized and smaller agencies have not completed this metric measurement area and the overall progress between Q3 and Q4 was not substantial enough to meet the goal.
The Components that have not completed this measurement area include: U.S. Special Operations Command (USSOCOM), Defense Security Cooperation Agency (DSCA), Office of the Chairman of Joint Chiefs of Staff (JCS), DoD Education Activity (DoDEA), and Washington Headquarters Services (WHS).
In partnership with CIO, DCMO, and OUSD(C), the Department is taking a new approach to UoT. OUSD(C). The Department experienced a delay in acquisition and funding for the enterprise UoT solution. However, funding has been received and the solution will be implemented in FY18.
Universe of Transactions, Reconciliations to GL Systems, Statement of Budgetary Resources and Balance Sheet - Components are continuing to progress at a rate aligned with the target completion date for this metric measurement area.
Universe of Transactions, Reconciliations from feeder source systems to the GL, Schedule of Budgetary Activity - Several components made impactful strides towards their completion goal which positively impacted the overall completion percentage of this metric.
Universe of Transactions, Reconciliations from feeder source systems to the GL, Statement of Budgetary Resources and Balance Sheet - Several components made impactful strides towards their completion goal which positively impacted the overall completion percentage of this metric.
Journal Vouchers, Unsupported - Many DoD components have provided implementation plans to address JV eliminations. Identifying necessary system change requests required to correct posting logic and automation issues. These Components include Marine Corps, Army, Air Force, Navy, DISA, DLA, DHP, TRANSCOM, SOCOM, DARPA, MDA, DTRA, JCS, DSCA and WHS.
As a result of a memo issued from DoD's Service Provider, unsupported JVs were not prepared for Q1 FY2016 and Q2 FY2016 unless necessary to submit reports. The increase in JVs for Q3 FY2016 and Q4 FY2016 is due to unsupported JVs being once again prepared for all customers.
Fund Balance with Treasury, DoD's timely clearing of all overaged unmatched disbursements and collection transactions - Unmatched disbursements are decreasing at a rate ahead of the metric goal which positively impacted the overall completion percentage of this measurement area. Work Groups and Tiger Teams are continuously working to reduce unmatched transactions.
The Office of the Deputy Chief Management Officer (ODCMO) worked with the Defense Finance and Accounting Service (DFAS) to identify outstanding and overaged unmatched disbursements by DoD Component. This was done for all components.
Fund Balance with Treasury, DoD's timely clearing of all overaged in-transit disbursements and collection transactions - Overaged intransit disbursements and collection transactions are decreasing at a rate ahead of the metric goal which positively impacted the overall completion percentage of this measurement area. DoD Components are continuing to identify root causes and resolve discrepancies in a timely manner.
The Office of the Deputy Chief Management Officer (ODCMO) worked with the Defense Finance and Accounting Service (DFAS) to identify overaged intransit disbursements and collection transactions, by DoD Component. This was done for all components.
Mission Critical Assets Existence and Completeness Baseline, General Equipment - Components are progressing but not at a rate parallel or ahead of the target for this metric measurement area.
Components are continuing to document and obtain an asset listing of the General Equipment (GE) (including Military Equipment (ME) assets that the Defense Agency has financial reporting responsibility over, and reconcile that data to the General Ledger (GL). Components are continuing to document and obtain as-is environment documentation including systems, processes descriptions, org charts, statement to process analysis. Components are continuing to perform materiality analysis and identify programs in process likely to include CIP.
Existence testing for smaller Defense agencies has been completed and CAPs have been developed. CAPs are in the process of being implemented and validation will occur in Q1 of FY 2017.
The Components that have not completed this measurement area include: Army (both GF and WCF), Marine Corps (GF), Air Force (both GF and WCF), USSOCOM, DISA (both WCF and GF), WHS and DTRA.
Mission Critical Assets Existence and Completeness Baseline, Real Property - Several components made impactful strides towards their completion goal which positively impacted the overall completion percentage of this metric.
Mission Critical Assets Existence and Completeness Baseline, Internal Use Software - Several components made impactful strides towards their completion goal which positively impacted the overall completion percentage of this metric. However the overall progress between Q3 and Q4 was not substantial enough to meet the goal.
Smaller Defense agencies are continuing the process of documenting Standard Operating Procedures and developing a comprehensive list of current software assets.
The Components that have not completed this measurement area include: Army (GF), Marine Corps (GF), Air Force (both GF and WCF), DLA (WCF) and DISA (WCF and GF).
Mission Critical Assets Existence and Completeness Baseline, Inventory, Operating Materials and Supplies - A large Defense agency decreased its General Fund and Working Capital Fund completion percentages from the prior quarter’s results. This decreased the overall metric area completion percentage. Majority of the larger and mid-sized Defense agencies have not completed this metric measurement area and the overall progress between Q3 and Q4 was not substantial enough to meet the goal.
Based on validated E&C data, Components are continuing to establish baseline valuation prioritization and a tactical plan. Components will continue to document processes in preparation for assertion testing.
Existence testing for smaller Defense agencies has been completed and CAPs have been developed. CAPs are in the process of being implemented and validation will occur in Q1 of FY 2017.
The Components that have not completed this measurement area include: Army (both GF and WCF), Navy (both GF and WCF), Marine Corps (GF), Air Force (both GF and WCF), USSOCOM, DISA (both GF and WCF), WHS, and MDA.
Performance Information Gaps: Information reported is as of September 2016. There is no missing or incomplete information as of this date.
Additional details will be available in the November 2016 Financial Improvement and Audit Readiness Plan Status Report (FPSR): http://comptroller.defense.gov/fiar/plan.aspx
Next Steps
Overview
With less than two years to go before the FY2018 audit begins, this year the Department prioritized our audit readiness strategy on those critical areas that have the most impact on the Department's ability to achieve its overall audit readiness goals. By doing so, the Department isolated these critical path areas, determined a critical path timeline for achieving milestones related to these areas, and now the Department is measuring progress against those milestones. Examples of these areas include identifying and reconciling the universe of financial transactions, creating greater transparency and resolution of journal vouchers, and developing and implementing a valuation methodology for property asset (such as equipment and buildings). In terms of "next steps," each Component within the Department has identified clear and measureable interim milestones, coupled with targeted completion dates of these milestones (by quarter) through the end of FY2017.
As these were new targets at the close of FY15, measurement information did not become available until FY16, thus creating the "baseline" for future measurements. Additionally, as the Department set these as the "critical path areas," the Department expects accelerated attention to these areas, and for the associated issues to be resolved prior to the start of the FY2018 audit.
FY16 Q1 Next Steps
Universe of Transactions, Reconciliations to GL Systems, Schedule of Budgetary Activity - Perform root cause analysis on posting errors and implement reconciliations for remaining general ledger systems (Q3 FY2016)
Universe of Transactions, Reconciliations to GL Systems, Statement of Budgetary Resources and Balance Sheet - Identify Populations of Beginning Balances and Execute Interface Control Agreements with system owners (Q2 FY2016); Develop Reconciliation Capabilities (Q4 FY2016)
Universe of Transactions, Reconciliations from feeder source systems to the GL, Schedule of Budgetary Activity - Perform root cause analysis on posting errors and implement reconciliations for remaining feeder systems and enhance feeder system to general ledger system interface capabilities.
Universe of Transactions, Reconciliations from feeder source systems to the GL, Statement of Budgetary Resources and Balance Sheet - Identify Populations of Beginning Balances and Execute Interface Control Agreements with system owners, to include property systems of record (Q2 FY2016); Define Requirements for Data Reconciliations (Q3 FY2016); Develop Reconciliation Capabilities (Q4 FY2016)
Journal Vouchers, Unsupported - Service providers to develop corrective action plans to resolve instances of unsupported Journal Vouchers (Q3 FY2016); initiate implementation of system change requests required to correct posting logic and automation issues (Q3 FY2016)
Mission Critical Assets Existence and Completeness Baseline, General Equipment - Complete Existence, Completeness, and Rights testing; Perform Deemed Cost valuation; Determine universe of contractor acquired property (Q2 FY 2016)
Mission Critical Assets Existence and Completeness Baseline, Real Property - Perform ongoing testing of controls; develop corrective action plans, as needed.
Mission Critical Assets Existence and Completeness Baseline, Internal Use Software - Write off existing IUS balances (Q4 FY 2016); Complete IUS accountability guidance (Q4 FY 2016)
Mission Critical Assets Existence and Completeness Baseline, Inventory, Operating Materials and Supplies - Develop financial reporting reconciliation with existing accountable inventory records; Conduct monthly testing for internal controls over inventory (Q1 FY 2017); Identify and implement corrective actions (Q3 FY 2016); Finalize service provider agreements (Q3 FY 2016).
FY16 Q2 Next Steps
Universe of Transactions, Reconciliations to GL Systems, Schedule of Budgetary Activity - Perform root cause analysis on posting errors and implement reconciliations for remaining general ledger systems (Q3 FY2016)
Universe of Transactions, Reconciliations to GL Systems, Statement of Budgetary Resources and Balance Sheet -
- Identify root cause analysis of significant issues as identified by internal assessment and independent audit (Q3 2016).
- Design Corrective Action Plans (CAPs) related to Reconciling financial statement balances and supporting balances with transaction level detail (Q3 2016).
- Implement CAPs to include training relevant accounting personnel (Q2 2017).
Universe of Transactions, Reconciliations from feeder source systems to the GL, Schedule of Budgetary Activity - Perform root cause analysis on posting errors and implement reconciliations for remaining feeder systems and enhance feeder system to general ledger system interface capabilities.
Universe of Transactions, Reconciliations from feeder source systems to the GL, Statement of Budgetary Resources and Balance Sheet -
- Identify root cause analysis of significant issues as identified by internal assessment and independent audit (Q3 2016).
- Design Corrective Action Plans (CAPs) related to Reconciling financial statement balances and supporting balances with transaction level detail (Q3 2016). Implement CAPs to include training relevant accounting personnel (Q2 2017).
Journal Vouchers, Unsupported -
- Service providers to develop corrective action plans to resolve instances of unsupported Journal Vouchers (Q3 FY2016)
- Components and system owners will initiate implementation of corrective actions to include system change requests required to correct posting logic automation issues (Q3 FY2016).
Fund Balance with Treasury, DoD's timely clearing of all overaged unmatched disbursements and collection transactions -
- The components and agencies are to submit their implementation strategies for G-invoicing, build requirements for general terms and conditions, and identify FY17 and 18 estimated systems requirements. Army, Navy and Air Force have submitted plans for implementation.
- In an effort to address the current issues enterprise wide with respect to lack of complete/proper data, the ODCFO (as coordinated with the agencies) is in the process of establishing complete data schema for interfaces via G-invoicing
Fund Balance with Treasury, DoD's timely clearing of overaged all in-transit disbursements and collection transactions - Cash accountability target state initiatives are under way for direct treasury disbursing.
Mission Critical Assets Existence and Completeness Baseline, General Equipment - Complete Existence, Completeness, and Rights testing will be completed in Q3 2016. Developing, implementing, and validating a process for Construction-in-Progress by Q2 2017.
Mission Critical Assets Existence and Completeness Baseline, Real Property - Perform ongoing testing of controls; develop corrective action plans, as needed. Develop and implement policy updates and corresponding improvements to business processes and SOPs.
Mission Critical Assets Existence and Completeness Baseline, Internal Use Software -
- “Write off” existing IUS balances (Q4 FY 2016)
- Develop and implement IUS accountability guidance (Q4 FY 2016)
Mission Critical Assets Existence and Completeness Baseline, Inventory, Operating Materials and Supplies -
- Refine financial reporting reconciliation with existing accountable property systems of record
- Conduct monthly testing for internal controls over inventory (Q2 FY 2016)
- Identify and implement corrective actions (Q3 FY 2016)
- Finalize service provider agreements (Q3 FY 2016).
FY16 Q3 Next Steps
Universe of Transactions, Reconciliations to GL Systems, Schedule of Budgetary Activity - Research Q2 FY16 differences and obtain and reconcile Q3 FY16 detailed transactions to trial balances. (Q4 FY16)
Universe of Transactions, Reconciliations to GL Systems, Statement of Budgetary Resources and Balance Sheet - Demonstrate reconciliation capability for sample inventory and related property population. Reconcile Tier 4 & 5 systems. Export populations of transaction details to the server. Fully reconcile transaction data for all remaining financial statement accounts. (Q4 FY16)
Universe of Transactions, Reconciliations from feeder source systems to the GL, Schedule of Budgetary Activity - Complete feeder to core accounting system interfaces. Develop data reconciliations. (Q4 FY16)
Universe of Transactions, Reconciliations from feeder source systems to the GL, Statement of Budgetary Resources and Balance Sheet - Design corrective action plans to correct general ledger account balances. Complete draft quantitative drill down 1st iteration. Develop data reconciliations. (Q4 FY16)
Journal Vouchers, Unsupported – Research and root cause analyses are being performed to address Unsupported Journal Vouchers. (Q1 FY17)
Fund Balance with Treasury, DoD's timely clearing of all overaged unmatched disbursements and collection transactions - DoD Components and service providers to identify root causes of outstanding overaged unmatched disbursement (UMD) transactions and develop processes to reconcile UMD transactions and reduce the number and age of outstanding reconciling items (Q1 FY2017). Complete reconciliations with all trading partners and general ledger accounts at the transaction detail level (Q3 FY18).
Fund Balance with Treasury, DoD's timely clearing of overaged all intransit disbursements and collection transactions - DoD Components and service providers to identify root causes of outstanding, overaged in transit transactions and develop processes to reconcile intransit transactions and reduce the number and age of outstanding reconciling items (Q1 FY17); Complete reconciliations with all trading partners (Q2 FY18).
Mission Critical Assets Existence and Completeness Baseline, General Equipment - Implement interim process for Construction in Progress (CIP). Complete wall to wall physical inventories. Perform existence and completeness (E&C) testing to validate corrective actions. Some Components to be completed by Q4 FY16.
Mission Critical Assets Existence and Completeness Baseline, Real Property - Develop and strengthen general documentation standards for nonrecurring journal vouchers. Strengthen and document process and control over recording and booking of assets. Some Components to be completed by Q4 FY16.
Mission Critical Assets Existence and Completeness Baseline, Internal Use Software - Continue to implement the IUS write-off strategy for baseline by Q4 FY16.
Mission Critical Assets Existence and Completeness Baseline, Inventory, Operating Materials and Supplies - Achieve physical count of 95% of inventory balance (by value) at industrial operations sites. Perform wall to wall physical inventories. Perform E&C testing to validate corrective actions. Some Components to be completed by Q4 FY16.
Additional details will be available in the November 2016 Financial Improvement and Audit Readiness Plan Status Report (FPSR): http://comptroller.defense.gov/fiar/plan.aspx
FY16 Q4 Next Steps
Over the next year, the Department must support a number of concurrent activities, including ongoing audits, fixing issues identified in earlier audits, and planning for future audits—all simultaneously. Management must ensure financial statements are ready and presented accurately and an audit infrastructure is in place to support the independent public accounting firm audit. The Department will continue develop processes and controls to reconcile transactions posted to the Department’s FBWT accounts with the Department of Treasury’s records. Plans include (1) tracking and reconciling collection/disbursement activity from the core financial systems and associated feeder systems to the Department’s general ledgers and to Treasury accounts and (2) developing an auditable FBWT reconciliation process, to include implementation of internal controls that ensure reconciling differences are resolved in a timely and accurate manner.
Additionally, Components are unable to collect, exchange, and reconcile buyer and seller intragovernmental transactions, resulting in adjustments that cannot be verified or substantiated. To improve this process reporting entities will perform gap analysis on key processes, build and enter GT&C’s agreements in G-Invoicing system. Components’ entities will also fund, design, and build all accounting system interfaces in alignment with Treasury’s G-Invoicing release schedule.
Components will continue to improve real property processes, controls and supporting documentation by completing floor-to-book and book-to-floor baseline reconciliation of real property, thus supporting existence and completeness rights and obligations. Additionally, Components will document go-forward processes and control environment for all lifecycle processes to include, acquisition (and construction in progress (CIP)), inventory, reconciliation with financial statements, and disposal.
The OUSD(C) has requested JITC to test additional accounting systems to encompass material financial and accounting activity across the DoD. In addition, the OUSD(C) will establish a portfolio management governance process to ensure legacy systems are retired on schedule. 11 systems are planned for retirement in FY17.
Specific Performance Measure Next Steps:
Universe of Transactions, Reconciliations to GL Systems, Schedule of Budgetary Activity - Components will continue to work towards completion of metric requirement.
Universe of Transactions, Reconciliations to GL Systems, Statement of Budgetary Resources and Balance Sheet - Army plans to obtain hardware server space for detailed transaction data, in the process of migrating transaction detail from legacy to general ledger systems, and has identified system changes necessary to enhance GFEBS for audit readiness (comprehensive completion date (Q4 FY17). Navy has established plans to continue identifying detailed data sets. The Department continues to build a capability to support Defense-wide financial statement reconciliations. Existence of UoT is scheduled to be in place by Q2 FY17.
Universe of Transactions, Reconciliations from feeder source systems to the GL, Schedule of Budgetary Activity - Navy will develop data reconciliations in preparation for implementation in Q4 FY 17. Marine Corps will complete feeder to core accounting interfaces. The Department will continue to develop reconciliation capabilities for Defense-wide appropriations.
Universe of Transactions, Reconciliations from feeder source systems to the GL, Statement of Budgetary Resources and Balance Sheet - Army (GF) will work to gather all required data and will have reconciled data completed in time for auditor requests from transaction populations in January 2018. Marine Corps will also complete feeder to core system reconciliations for all required feeder and source systems. Air Force (WCF) will demonstrate reconciliation capability for sample inventory and related property populations. TRANSCOM will document reconciliations, identify variances for feeder recons and perform root cause analysis. The Department will continue to develop reconciliation capabilities for Defense-wide appropriations.
Journal Vouchers, Unsupported – Research and root cause analyses are being performed to address Unsupported Journal Vouchers (Q1 FY2017).
Fund Balance with Treasury, DoD's timely clearing of all overaged unmatched disbursements and collection transactions - DoD Components and service providers will identify root causes of outstanding, overaged unmatched disbursement (UMD) transactions and develop processes to reconcile UMDs transactions and reduce the number and age of outstanding reconciling items (Q1 FY2017).
Fund Balance with Treasury, DoD's timely clearing of overaged all in-transit disbursements and collection transactions DoD - Components and service providers will identify root causes of outstanding, overaged in-transit transactions and develop processes to reconcile in-transit transactions and reduce the number and age of outstanding reconciling items (Q1 FY2017); Complete reconciliations with all components and service providers (Q2 2018).
Mission Critical Assets Existence and Completeness (E&C) Baseline, General Equipment - Army is implementing business processes to identify the government furnished equipment (GFE) population in its Accountable Property Systems of Record (APSRs). Corrective action plans are scheduled to be completed Q1 FY17 Marine Corps will migrate GFE to an APSR, complete wall to wall physical inventories, and complete E&C testing to validate corrective actions. Air Force will work towards completion of E&C and rights for GFE, special tooling/special test equipment and research, development, and engineering equipment (Q1 FY17). The US Special Operations Command (SOCOM) will determine processes and perform book-to-floor and floor-to-book assessments to validate the existence, completeness, rights, and presentation baseline for assets (Q1 FY17).
Mission Critical Assets Existence and Completeness Baseline, Real Property - Army will continue documenting business processes for capturing and reporting real property. Army will also continue to implement corrective action plans (Q1 FY17). Navy is wrapping up the development of an alternative inventory methodology in coordination with the Naval Facilities Engineering Command and will be finalizing and executing the methodology. Marine Corps will strengthen and document processes and controls over the recording and booking of assets. Air Force will update the APSR with all major findings and changes for remaining installations.
Mission Critical Assets Existence and Completeness Baseline, Internal Use Software (IUS) - Army will continue to follow OSD guidance to establish a $0 baseline for existing IUS, continue to assess materiality of IUS, and document IUS business processes. The Army will also identify IUS from all Program Executive Offices and continue to monitor system change requests that will improve the accuracy of IUS records. Navy will identify projects currently under development that will need to be capitalized after opening balances are established.
Mission Critical Assets Existence and Completeness Baseline, Inventory, Operating Materials and Supplies (OM&S) - Army is working to develop a template for inventory reconciliations at each plant/physical location and will continue discovery work for program owned assets and assets that are located on contractor operated sites. Army will also continue to implement corrective actions identified through monthly testing. Army is also planning to achieve a physical count of 95% of the inventory balance (by value) at industrial operations sites while working to develop a template for inventory reconciliations at each plant/physical location. Navy will continue to perform quantitative assessments on unrecorded assets to develop a complete population. Air Force will establish OM&S (contractor managed/possessed) baseline by obtaining asset level data from contractors (Q1 FY17).
Additional details will be available in the November 2016 Financial Improvement and Audit Readiness Plan Status Report (FPSR): http://comptroller.defense.gov/fiar/plan.aspx
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Performance Indicators
Fund Balance with Treasury: DoD’s timely clearing of overaged all in-transit disbursements and collection transactions
Journal Vouchers, unsupported: DoD’s progress to decrease unsupported support for budgetary and proprietary journal vouchers (adjustments).
Fund Balance with Treasury: DoD’s timely clearing of all overaged unmatched disbursements and collection transactions
Existence and Completeness of Mission Critical Assets: DoD’s complete established baseline for recording and classification of: General Equipment
Universe of Transactions, Reconciliations to general ledger (GL) systems: DoD’s complete GL system reconciliations for Schedule of Budgetary Activity
Universe of Transactions, Reconciliations from feeder source systems: DoD’s complete feeder source system reconciliations for Statement of Budgetary Resources and Balance Sheet
Existence and Completeness of Mission Critical Assets: DoD’s complete established baseline for recording and classification of: Real Property
Universe of Transactions, Reconciliations to general ledger (GL) systems: DoD’s complete GL system reconciliations for Statement of Budgetary Resources and Balance Sheet
Universe of Transactions, Reconciliations from feeder source systems: DoD’s complete feeder source system reconciliations for Schedule of Budgetary Activity
Existence and Completeness of Mission Critical Assets: DoD’s complete established baseline for recording and classification of internal use software
Existence and Completeness of Mission Critical Assets: DoD’s complete established baseline for recording and classification of inventory and operating material and supplies
Contributing Programs & Other Factors
Contributing Programs for Strategic Objectives/Performance Goals: The OUSD(C) is leading enterprise-wide initiatives, addressing immediate audit readiness challenges, specifically in the areas of:
- Funds Distribution of Defense-wide Appropriations
- Funds Balance with Treasury Reconciliation and Cash Accountability
- Property and Inventory Valuation
- Transportation of Things
- Intra-governmental Transactions
- Sensitive Activities
- Universe of Transaction for Defense with Appropriations
- Service Provider Audit Readiness
- DoD Financial Manager Certification Program
Activities: Support the enterprise-wide initiatives; Continue to monitor audit readiness activities and progress; Begin to develop corrective action plans for SBA audit/exam findings.
No Data Available
