1. AUDITING IN THE FEDERAL GOVERNMENT
SHOW SLIDE 1: Auditing In The Federal Government
SECTION I.
ADMINISTRATIVE DATA
All Courses Including This Lesson
Course Number Version Course Title
01 Auditing In The Federal Government
Task(s) Task Number Individual
Taught(*) or
Academic Hours
The academic hours required to teach this lesson are as follows:
Resident
Hours/Methods
0.1 Introduction
0.8 Conference / Discussion
0.0 Demonstration
0.0 Practical Exercise (Performance)
0.1 Summary
1.0 Total Hours
Test Lesson Number
Testing(to include test review)
Hours -0 hrs
Lesson Number -
Prerequisite Lesson(s)
Lesson Number
Lesson Title
Identify Commercial Vendor Services
Clearance Access
Security Level: Unclassified
Requirements: There are no clearance or access requirements for the lesson.
Foreign Disclosure Restrictions
FD5. This product/publication has been reviewed by the product developers in coordination with the Fort Jackson Soldier Support Institute foreign disclosure authority. This product is releasable to students from all requesting foreign countries without restrictions.
Instructor Requirements
Must meet physical qualifications IAW AR
Materials Required
Instructor Materials:
Lesson plan slides, DFAS-IN Regulation 37-1, DFAS-IN-MANUAL FY, Instructor copy
Student Materials:
Summary Sheet
Classroom, Training Area, and Range Requirements
General Purpose Classroom - 25 Seats
Instructional Guidance
Note: Before presenting this lesson, instructors must thoroughly prepare by studying this lesson and identified reference material.
Also, provide the students with situational awareness of the Operational Environment (OE) variables and actors.
Proponent Lesson Plan Approvals
Name Rank Position Date
Harris, Norman CTR Writer/Developer xx-xxx-xxxx
Bonig, Reid GS-12 Chief - FMITD xx-xxx-xxxx
Davis, Bobby LTC FM-DOT xx-xxx-xxxx
Zellars, Eric COL Commandant xx-xxx-xxxx
NOTE: Incorporate the political, military, economic, social, information, infrastructure, and physical environment and time (PMESII&PT) into each lesson and classroom work as appropriate. Instructor will illustrate them with appropriate examples from the Current Operating Environment (COE) as it pertains to the lesson.
Motivator: As a resource manager, it is important to know where and how your organization fits into Planning, Programming, Budgeting and Execution process.
To succeed, you must know the DoD, DA, and ASA(FM&C) organization structures. Knowledge of these structures will enhance your understanding of how resources are allocated and how resource management structures influence or facilitate resource allocation.
Review and analysis is an internal look; Audit is an external look
What Auditing Does:
- Evaluates management’s past actions.
- Evaluates a program’s performance and financial position.
- Provides the commander with information for decision making purposes
Examples of reasons for conducting audits and some information provided by Audit Reports.
- Auditing a Contracting Agency on a major installation because other Installation’s contractors have substantially lower costs.
- The U.S. Army is doing a lot of cutbacks based partially upon what Auditors find and information provided to senior leadership
Remember the auditor is “here to help”
Where can you get most of this information - GAO (Yellow Book).
Emperors New Clothes
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2. Terminal Learning Objective
Action:
Conditions:
Standard:
Identify Auditing for the Federal Government.
Given a summary sheet containing AR 10-2, AR 10-5, AR 11-7, AR 36-5, and slides
With 80% accuracy:
Identify and define auditing; state the four types of auditing; verify the auditing standards and structure of the federal gov’t; determine internal review and audit compliance, it’s mission, responsibilities, and compare command and audit relations.
SHOW SLIDE 2: STATE TERMINAL LEARNING OBJECTIVES
Safety Requirements:  Everyone is responsible for safety. A thorough risk assessment must be completed prior to every mission or operation.
Risk Assessment Level: Low
Environmental Considerations: NOTE: It is the responsibility of all Soldiers and DA civilians to protect the environment from damage.
Environmental protection is not just the law but the right thing to do. It is a continual process and starts with deliberate planning. Always be alert to ways to protect our environment during training and missions. In doing so you will contribute to the sustainment of our training resources while protecting people and the environment from harmful effects.
Evaluation: Students will take a comprehensive test at the end of Week 1. Students must score 80% or higher and International officers must score 70% or higher.
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3. Army Audit Agency (AAA) at Work
“In God we trust, all others we audit.”
SHOW SLIDE 3: AAA AT WORK
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4. FINANCIAL MANAGEMENT SCHOOL
What is an Audit
A systematic process that
provides a comprehensive,
independent, and objective
evaluation with clear
communicated results.
SHOW SLIDE 4: What is an Audit
Note: Have students go to page one of the Auditing Summary Sheet, and follow along with slides.
Systematic Process - where Auditors follow established procedures as per published regulatory guidelines - well planned and thought out (can know areas that they will look at and how)
- needs to have a logical flow
Needs to be comprehensive - so large in scope or content
Need to be independent - where audits are performed by a disinterested party not a part of the command structure - not inspecting your boss
Objective - where findings and recommendations are based upon objectivity and are not subject to one’s interpretation, thus alleviating any doubt as to what are the standards by which an audit is conducted.
Audits provide a good sense of information so we need to communicate the results - the most Important document is the Audit Report
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5. FINANCIAL MANAGEMENT SCHOOL
Types of Audits
Financial
Performance
Contract
Computer-generated data
SHOW SLIDE 5: Types of Audits
4 types
1st type is Financial Audit - Verify the credibility of Financial Reports IAW regulations and identify problem areas
- Overall - the Army is trying to get Auditable financial statements
Performance Audit - Measures effectiveness/efficiency of management or a program. Are we complying with laws and regulations or accomplishing mission requirements - usually things such as maintenance, training, ARTEP, and APFT.)
Contract Audit - Normally done by the Defense Contract Audit Agency (DCAA) - Are the contracts abiding by the contracting rules (could be the FAR - federal Acquisition Regulation)
- Also determine compliance with the terms and conditions of the contract
Computer generated data audit - assessing the adequacy of the system controls to determine data integrity - basically placing dummy information in and see if it is processed correctly
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6. FINANCIAL MANAGEMENT SCHOOL
Audit Standards
Independence of auditors
Qualifications & competence of audit team
Due professional care
Quality control
SHOW SLIDE 6: Audit Standards
The Comptroller General establishes standards of Government Auditors.
The four standards for Auditors are:
a. Qualifications. The staff assigned to conduct the audit should collectively possess adequate professional proficiency for the tasks required.
b. Independence. The audit organization and the individual auditors should be independent both organizationally and personally, and should maintain an independent attitude and appearance.
c. Due Professional Care. Due professional care should be used in conducting the audit and in preparing related reports.
d. Quality Control. Each audit organization conducting audits should have an appropriate internal quality control system in place and undergo an external quality control review. This will ensure that the organization and its personnel comply with professional standards and applicable legal and regulatory requirements.
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7. FINANCIAL MANAGEMENT SCHOOL
Phases of an Audit
Planning
Which areas to audit
How and where
Review
Materiality
Significance
Report
Objective, findings, recommendations (when appropriate)
Monetary and nonmonetary benefits
SHOW SLIDE 7: Phases of an Audit
There are three major phases to audits within the federal government. They are:
Planning Phase. Identifying which areas should be audited after considering regulatory and statutory requirements, concerns of management and Congress, internal controls, and high-risk areas.
- Which areas to audit
- How and where
b. Review Phase. Doing the Audit - Gathering evidence that will support conclusions. Statistical sampling is often used when it is not feasible to review all data.
Two overriding concerns when conducting the review are materiality and significance.
(1) Materiality means that the misstatement or exclusion of information would change or influence the judgment of someone relying on that information.
(2) Significance is the importance of an item, event, or piece of information in relation to the objective of the audit.
c. Report. Most important phase. All audits require a conclusion - a final written report that includes:
- the objective of the audit / the findings / and recommendation when appropriate.
- Recommendations should include potential monetary and nonmonetary benefits. Financial audit reports have very specific areas that must be addresses.
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8. Government Accountability
Office (GAO)
Independent, nonpartisan arm of Congress headed by Comptroller General.
Assists Congress in legislative and oversight responsibilities.
Reviews federal operations.
Renders legal decisions and advice.
Issues Generally Accepted Governmental Auditing Standards (GAGAS).
SHOW SLIDE 8: Government Accountability Office (GAO)
Non-partisan - Headed by the Comptroller General, a non-political appointment
Checks on Executive Branch
Issue Governmental auditing standards
- GAGAS - Generally Accepted Government Auditing Standards
- Listed in the “Yellow Book”
Can render “legal advice” on auditing
- “Red book” - decisions by Comptroller General
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9. FINANCIAL MANAGEMENT SCHOOL
DoD Inspector General
(DoDIG)
Assistant IG-Audit Office of the Assistant Inspector General for Auditing (OAIG-AUD).
Financial compliance audits.
Evaluation of economy, efficiency, and effectiveness.
Audit areas: inter-service, internal OSD, Joint Chiefs of Staff, and Security Assistance Program.
SHOW SLIDE 9: DoD Inspector General (DoDIG)
??? Auditor general of DOD
Works on Joint Audits
They do the audit of Army financial Statements????????
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10. Defense Contract Audit
Agency (DCAA)
Reports to USD (C).
Audits DoD components for procurement and contract administration.
Provides reimbursable contract audit service to several government agencies.
SHOW SLIDE 10: Defense Contract Audit Agency (DCAA)
Reports to USD (C) - DOD level
Performs audits on procurement and contract administration.
Reviews contracts that fall under DOD
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11. Army Audit Agency (AAA)
Audits Army staff and Army activities.
Audits may be agency-initiated, DA-directed, or command-requested.
Normally multi-location audits.
Reorganization into 4 areas:
Acquisition and Materiel Management
Forces and Financial Management
Installations Management
Policy and Operations Management
SHOW SLIDE 11: Army Audit Agency (AAA)
Headed by the Auditor General of the Army - Mr.. Gene Reardon
CDR’s may request an audit - ex MACOM may want to know why spending at Ft. Hood is greater than at Ft. Sill on Child Care services).
Has been delegated authority to do Auditing of Army Financial Statements.
AAA has been reorganized into 4 areas.
AAA motto
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12. Internal Review and Audit
Compliance (IRAC)
DA/MACOM/Installation level.
Belongs to Commander; tailored to the command.
Commander's troubleshooter.
Reports directly to command group.
Audits and Internal Reviews:
Nonappropriated Funds (NAF)
Appropriated funds
Consultant services
SHOW SLIDE 12: Internal Review and Audit Compliance (IRAC)
Internal Review and Audit Compliance (IRAC) - works for CDR, internal to organization - so doesn’t belong to AAA. Found at MACOM HQ and installation level
It’s a tool in his pocket - can say - I want a look at my Impact credit cards - IRAC - go do it
Doesn’t work for DRM - reports directly to Command group
IRAC is best one to ID problems before others do - Provides commanders with quick response or “trouble shooting” capabilities
Also does reviews in specific areas (NAF…)
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13. FINANCIAL MANAGEMENT SCHOOL
IRAC Audit Compliance
Functions
Administrative support to external audit agencies.
Audit coordination.
Command reply coordination.
Follow-up corrective action.
Audit trends follow-up.
SHOW SLIDE 13: IRAC Audit Compliance Functions
What IRAC officially does????
- Coordinates with external audits
- Helps with scheduling of activities audits
Command reply coordination - Works the Reclaima - makes statement of what the Inspected Command thinks
- Works issues found during inspection (Alibis)
Ensures “follow up” - did we get it fixed?
FULL SCOPE AUDITS – Provide an in-depth evaluation of an activity, function, mission, or project. Audit scope is broad and usually the most informative and time consuming.
EXAMINATIONS AND ADVISORY SERVICES – Provide limited scope examinations and other services such as studies, analyses, information gathering, cost analysis, internal control reviews, and various consulting services.
QUICK REACTION REVIEW – Address specific time-sensitive critical issues and provide the commander or management an answer under short timeframes.
Internal review services are based on objectives that usually include one or more of the following criteria:
Compliance with laws and regulations.
Financial operations.
Economy and efficiency.
Program results.
Internal reviews can identify specific problems, the cause of the problems, the impact of problems on operations, and recommendations to correct the problems.
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14. FINANCIAL MANAGEMENT SCHOOL
IRAC “Should Not…”
Establish accounting policy.
Accomplish routine operational tasks.
Augment an operational element.
STOP
SHOW SLIDE 14: IRAC “Should Not…”
Establish Accounting policy - must be independent
Accomplish - too important to use for other areas
Augment - (e.g. - help clear backlog) - lose independence / can’t be objective anymore - works directly for CDR
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15. Check On Learning Q. How many phases in an audit? What are they?
Q. IRAC uses the commander’s needs and installation circumstances to do what?
Q. True / False: Command reply coordination is part of IRAC’s audit compliance functions?
Q. True / False: Establish accounting policy is not part of IRAC’s audit compliance functions?
Slide 15
Check on Learning 15

16. Terminal Learning Objective
Action:
Conditions:
Standard:
Identify Auditing for the Federal Government.
Given a summary sheet containing AR 10-2, AR 10-5, AR 11-7, AR 36-5, and slides
With 80% accuracy:
Identify and define auditing; state the four types of auditing; verify the auditing standards and structure of the federal gov’t; determine internal review and audit compliance, it’s mission, responsibilities, and compare command and audit relations.
SHOW SLIDE 16: STATE TERMINAL LEARNING OBJECTIVES
11/4/2019
FINANCIAL MANAGEMENT SCHOOL