Sandhills Chapter Audit Update 23 August 2017 Accountability & Audit Readiness: Sustaining Army’s Strength Office of the Assistant Secretary of the Army (Financial Management & Comptroller) (OASA(FM&C))

Army Full Financial Statement Critical Capabilities Progress Army Progress – OSD Critical Capabilities – As of 10 August 2017 Army General Fund Full Financial Statement Audit Readiness Army Working Capital Fund Full Financial Statement Audit Readiness

Audit Lifecycle Continuum Expected Audit Opinion Disclaimer Adverse Modified Unmodified** Complete Army Universe of Transactions Balance Cash Account with Treasury Support System Adjustments Universe of Transactions Support for Transactions Standard Business Processes Posting Logic & Adjustments Audit Opinion Alignment of Service Providers Accountabilty and Valuation of Assets and Liabilties Audit Assess Sustain! Demonstrate Audit Readiness Develop* System Controls Annual Internal Control Over Financial Reporting (ICOFR) Activities (OMB A-123) Effective systems, People and Efficient Processes Army’s current opinion lags behind it’s progress moving forward in audit, currently Army has received a disclaimer for FY15 and FY16, it is expected that the outcome of the FY17 will also be a disclaimer Internal Controls Audit Findings Control Optimization and Realization Governance & Management Service Providers *Critical Capabilities (deal-breakers) identified by the Office of the Under Secretary of Defense (Comptroller) (OUSD(C) to undergo an audit ** Successful Audit (unmodified opinion) may take many years for agencies as large and complex as Army Current Army Activities

Army Approach to Auditability The Army has taken a progressive approach to full financial statement auditability aimed at continuously increasing momentum towards full financial statement audit In FY15 and FY16, Army underwent audits of our Schedule of Budgetary Activity (SBA) In FY17, Army moved to audit of the full Statement of Budgetary Resources (SBR) The Army is also currently undergoing audits of two major asset groups: General Equipment and Operating Materials and Supplies Army is only Military Department undergoing a full SBR audit The Army believes strongly that meaningful progress is spurred through the rigor of audit scrutiny

Army Approach to Auditability (Continued) The Army continues to remediate FY15 & FY16 audit findings A thorough prioritization assessment was conducted and each finding was assigned to an accountable Corrective Action Plan Development Owner Corrective action plan progress is tracked and reported to Army leadership bi-weekly by Senior Responsible Officials The Army established the Business Mission Area Champion (BMAC) audit committee to provide strategic oversight for Army audit readiness efforts The BMAC was established to ensure accountability at the highest levels and within the organizations with direct control over areas critical to audit success

FY17 Audit Priorities Universe of Transactions and Reconciliations Budget Execution and Improvement Asset Valuation Posting Logic and Data Categorization Universe of Transactions and Reconciliations Existence Completeness Fund Balance with Treasury (FBwT) Environ-mental and Disposal (EDL) Journal Vouchers Information Technology General Controls (ITGC)

Expectations for FY18 and Beyond KPMG expects to issue the FY18 audit requests in January KPMG is making connections between the SBR and Balance Sheet line items Anticipate similar walk-throughs and focus on internal controls and substantive testing First time audit of the Balance Sheet - auditors will be in learning mode

Expectations for FY18 and Beyond (Continued) Integration of Property, Plant & Equipment (Real Property and General Equipment), Inventory & Related Property (Operating Materials & Supplies) and Environmental and Disposal Liabilities into KPMG’s annual audit plan Expect to see frequent visits to FORSCOM, IMCOM, ARNG, USAR, PEOs, Depots, etc. sites to conduct business process interviews, conduct existence and completeness testing, and perform internal controls testing

Challenges Though Army remains committed to achieving audit success, some significant challenges remain: Fiscal Uncertainty Audit requirements compete for resources alongside weapons systems and readiness activities Complex system environment Number of legacy systems and interfaces results in significant reconciliation issues Numerous system changes need to occur in GFEBS to support auditability.

Challenges (Continued) Significant challenges remain: Building and sustaining a culture of auditability: Audit is not always viewed as a “Warfighting” need Increase participation in leadership and governance support, starting with the “tone at the top”

The Way Ahead Complete an audit of the full Statement of Budgetary Resources in FY17 Continue to hold ourselves and our teams accountable for corrective actions Continue to enhance partnerships with stakeholders Maintain central location for data to support reconciliation of financials with feeder systems Enhance governance, outreach and communications

The Way Ahead (Continued) Establish and implement strong internal controls for the physical inventories of assets Complete validation and execution of FY15 - FY17 corrective action plans Continue to standardize business processes Expand technical skills for a proficient work force

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