Navy Audit Readiness … FIAR is Your Friend

Emblem     With concerted efforts throughout the Navy, we are well on our way towards meeting former Secretary of Defense Leon Panetta’s 2014 Audit Readiness goals. 

     Using a crawl, walk, run approach to building necessary skill sets, making needed process changes, modifying our business systems, and developing tools necessary to achieve a business environment capable of supporting annual financial audits, the Department of the Navy (DoN) is out in front of the Department of Defense’s (DoD) Financial Improvement/Audit Readiness (FIAR) efforts. 

 DoN demonstrated significant progress by …

     *  Receiving unqualified audit opinions in appropriations received for ships, submarines, Intercontinental Ballistic Missiles (ICBMs), satellites, aircraft and the E-2D Advanced Hawkeye Major Defense Acquisition Program (MDAP).

     *  Bringing the U.S. Marine Corps Statement of Budgetary Resources audit to a successful conclusion, the first service to do so!

     *  Asserting and bringing under examination by an independent public audit (IPA) firm two of Navy’s business segments material to audit; civilian pay and transportation of people.

     *  Asserting Reimbursable Work Orders-Performer and Grantor processes are ready for examination.

     DoN’s audit readiness strategy focuses on evaluating business processes to ensure the design and operating effectiveness of their internal controls comply with federal financial standards; correcting identified internal control deficiencies; ensuring that internal controls remain effective through continual monitoring, testing, and auditing; and retaining key supporting documentation demonstrating proper execution of business processes for inspection at all levels.  All this throughout nine business processes, or “segments”:

     *  Reimbursable Work Orders (RWO) Grantor and RWO Provider, RWOs represent the execution of inter-governmental agreements

     *  Civilian Pay (CIVPAY), paying civilian personnel

     *  Transportation of Things (ToT), transporting logistical material

     *  Supply Requisitioning (MILSTRIP), purchasing goods and services from the governmental supply system

     *  Financial Statement Compilation and Reporting (FSCR), compiling financial statements

     *  Contract/Vendor Pay (CVP), paying for contract and vendor services

     *  Military Pay, paying military personnel

     *  Transportation of People (ToP), TDY Travel process using the Defense Travel System

     *  Fund Balance with Treasury (FBWT), the process of reconciling DON disbursements and collections with Treasury’s records.

     Once asserted as audit ready, an Independent Public Accounting (IPA) firm will conduct an examination of the segments to validate management’s assertion.  As we continue on our journey towards auditability, three main themes emerged from our discovery phase.

     *  Significant process changes are required at all levels to fix, and in some cases implement, financial controls.

     *  Not all of our financial systems are fully integrated or compliant with financial audit standards.

     *  Significant engagement is required from our functional community and shared service providers (DFAS, DLA, and DCMA to name just a few).

     The Navy’s Supply community, both officer and enlisted, are uniquely positioned as key members of the Navy’s audit preparation team.  Audit readiness is in our “DNA.”  The receipts our Logistics Specialists, Ship’s Servicemen, and Culinary Specialists “circle, sign, and date,” are critical documents IPA teams examine.  Findings from the shipboard flight deck pay audits performed by our afloat supply teams directly impact Sailors’ pay, transactions that might be identified for review by an IPA. 

     The access procedures our disbursing shops and post office operations use demonstrate solid financial controls to an IPA team.  Notably, the Naval Supply Systems Command has taken the leadership role in three of Navy’s critical financial business segments: MILSTRIP, ToP, and ToT.Number1

     As Navy Logisticians, we view our supply chains in a holistic fashion.  The DoN must now bring that viewpoint to our financial processes and systems.  As noted by Mr. Dennis Taitano, Deputy Assistant Secretary of the Navy (DASN) Financial Operations, “Auditability is all about traceability of data.” 

     Through the execution of its audit readiness strategy, the Navy is improving business processes that will enhance the accuracy of financial transactions and produce reliable financial statements that will withstand the scrutiny of an audit.  The Navy remains committed to meet the Secretary of Defense’s Fiscal Year 2014 Audit Readiness Goals.  DoD’s FIAR methodology points the way, our Navy supply team will be key enablers to Navy’s audit readiness success.

 By Capt. James Patton, SC, USN, Assistant Director (OASN (FM&C) FMO-A), Office of Financial Operations