1. US Army Corps of Engineers Civil Works Audit: Journey to an Opinion Briefing for: ASMC PDI National Capital Region
March 6, 2008

2. Agenda Audit History Key Assertion Milestones
Assertion Process - Key Dates
FY 2006 Audit
FY 2007 Audit
Lessons Learned

3. USACE Audit History
FY93 to FY96 – AAA issued Disclaimers for all statements
FY97 – AAA issued Unqualified Opinion on Southwest Division statements
FY98 to FY00 – AAA issued Disclaimers for all statements
FY01 to FY05 – DoDIG took over audit responsibility and issued disclaimers
Issued numerous reports citing problems in CIP, Building and Structures, Equipment, Depreciation, Accounts Receivables and Payables, FBWT, Compilation and Systems Security

4. Key Milestones to Readiness
June 9, 2004 – DoDIG/USACE Memorandum of Agreement (MOA) on support for older assets
October 2004 – AAA Validation Review of “Other Statements”
April 2005 – CG’s “Get Well Plan”
November 2005 – AAA Validation Review of Balance Sheet
December 15, 2005 – USACE Assertion of Readiness

5. DoDIG/USACE MOA Support for Older Assets
Purpose: develop alternative methods to support the acquisition and capitalized improvements for real and personal property
Signed June 9, 2004 by DoDIG and USACE in coordination with GAO
Allowed for use of other internal documentation to support values of older assets (i.e. engineer estimates and legacy system conversion spreadsheets)

6. FY2005 “CFO Get Well Plan”
Identify Regional CFO lead for CFO Compliance
Train regional Project Delivery Team (PDT) leaders
Regional CFO Leaders form Regional PDTs to ensure all districts complete corrective actions NLT 31 Jul 05
Regional PDT’s validate corrective actions are completed
MSC/Center Commanders assert MSC readiness to CG NLT 30 Sep 05
AAA/HQUSACE validation reviews at selected Districts

7. Validation Process Non Balance Sheet (Completed October 2004)
Performed by AAA
Reviewed all business cycles (Purchase, Billing, Budget, and Payroll cycles.)
Balance Sheet (Completed November 2005)
Review of CFO Balance Sheet corrective actions
Both conclusions supported assertion of readiness.

8. Assertion of Readiness Timeline
8 December 2005 – USACE Audit Committee unanimously recommended FY 2006 audit
16 December 2005 – LTG Strock , Chief of Engineers, approved and signed assertion package
2 February 2006 – Assertion package endorsed by Review and Prioritization Committee
15 February 2006 – Executive Steering Committee (ESC) briefed on assertion package
16 March 2006 – ESC approved USACE assertion to move forward with FY 2006 audit
20 March 2006 – Request for proposal released to contractors
28 April 2006 – Contract awarded to PwC
15 May 2006 – Entrance conference and audit kickoff
·   USACE had hoped to move into audit in this area but based on DODIG validation some work is left to be done.
DODIG Found while progress is being made we still had outstanding issues to correct in the PP&E areas.
 Corps /DODIG have agreed on appropriate corrective actions for Balance Sheet. Most open issues deal with PP&E (which represents about 80% of the Balance Sheet.)
 Corps goal is to have all corrective actions done and internally validated by September 30, 2005.
 CG has signed out a “get well plan” emphasizing internal checks for readiness and additional training for the districts.
DODIG continuing to work with USACE and upon completion DODIG will validate corrective actions
DODIG validation would set Corps up for FY 2006 audit of the Balance Sheet.
USACE had received $7M in appropriation for FY 2005 audit which will be used upon readiness.

9. FY 2006 PwC Audit Facts
PwC started work in May 2006 ended February 2007
Several subcontractors
Morgan Franklin (PPE), Grant Thornton (CIP and Payroll), Reznick (Accounts Payable)
130 – 200 DoDIG and Team PwC auditors
Numerous Corps support staff (all levels)
DoDIG provided oversight and “opinion issuer”
Extensive systems security review of CEFMS
14,616 sample items tested
·   USACE had hoped to move into audit in this area but based on DODIG validation some work is left to be done.
DODIG Found while progress is being made we still had outstanding issues to correct in the PP&E areas.
 Corps /DODIG have agreed on appropriate corrective actions for Balance Sheet. Most open issues deal with PP&E (which represents about 80% of the Balance Sheet.)
 Corps goal is to have all corrective actions done and internally validated by September 30, 2005.
 CG has signed out a “get well plan” emphasizing internal checks for readiness and additional training for the districts.
DODIG continuing to work with USACE and upon completion DODIG will validate corrective actions
DODIG validation would set Corps up for FY 2006 audit of the Balance Sheet.
USACE had received $7M in appropriation for FY 2005 audit which will be used upon readiness.

10. FY 2007 PwC Audit Facts
PwC started in March 2007 ended December December 2007
No subcontractors
50 – 60 DoDIG and Team PwC auditors
Limited Corps support staff
Extensive systems security review of CEFMS
4,396 sample items tested

11. Material Weakness’s Entity-Wide Controls
- Quality Assurance/ Risk Assessments and Monitoring
Property, Plant and Equipment
Placing assets in service
Supporting documentation issues
Reconciliation controls
Accounts Payable and Receivables
Accruals, Cost Share, Long Term Agreements
Contingent Liabilities
Katrina disclosures
Environmental Liabilities
FY08-10 CCG Chapter 2 - Resources and Chapter 3 - CMR Metrics Files on Corps Intranet (17 Aug 07)
Chapter 2 - Resources Updates Include:  Manpower, ED&M, PRIP, Support to Nationalized Employees, NSPS, MP Sustainable Design and Development, CW Value Engineering/Value Management, CW Enterprise Geographic Information System, and CECI Staff Support Services.
Chapter 3 – Identifies USACE Measures of Success (metrics) that will be followed during Fiscal Year 08.

12. Report Status
DoDIG will issue Qualified opinion for FY 2006 & 2007 (anticipated March 2008)
Qualifier involves Property Memorandum of Agreement
Working to resolve qualifier in 2Q08
DoDIG will review 100% of top 300 projects
Upon completion Qualifier will be resolved

13. Audit Lessons Learned Know the rules of audit before asserting
Don’t get a late start on a 1st year audit (10-12 months necessary)
Funding is a major issue to consider for audit planning
Ensure audit standards of success are clear between the agency, IPA and IG
Takes an extraordinary amount of time and commitment from management at all levels
USACE Audit Committee meets on a monthly basis to ensure audit issues are addressed timely and audit stays on schedule.

14. Questions
Notes