1. Please use the following two slides as a template for your presentation at NES. Internal Audits: How to Plan and Perform Roy De Lauder, CPPM, CF Property Manager General Dynamics Advanced Information Systems

2. Today’s Topics Why Audit? What is an Audit? How to do an Internal Audit? –Who?; What?; When?; Where? Can you describe your Internal Audit process?

3. Drivers for a Systems Analysis? Find out health of system Identify and Correct problems ASTM standards Organization’s policies and procedures Contractual Requirement (FAR) May save money?

4. Why audit? Is there another choice? Assume –Benefits? –Down side? Audit or Systems Analysis –Benefits –Down side?

5. Benefits of Assuming Assume

6. Benefits of Audits Audit or Systems Analysis –Health of Property Control System –Areas for improvement Opportunities for better, faster, cheaper, smarter –Contractual obligation –Educate and train

7. Downside of Audits Audit or Systems Analysis –Have to plan for –More expensive than assuming –Possibility of Panic Attacks Expectation management

8. External vs. Internal Audit? External? Internal?

9. Acquisition Receiving Identification Records Movement Storage Inventory Reports Consumption Utilization Maintenance Subcontractor Control Disposition Close-out Life Cycle of Property Risk/liability Analysis Property Management

10. Audit or Systems Analysis? “ A property audit is a systematic, objective review and evaluation of an organization’s property control system, which includes the organization’s established procedures and its application of, implementation of, and compliance with those procedures.” Management may think that they have the right procedures…

12. Key is Written Procedures Written procedures form foundation of Property Control System. –It is in these procedures that every employee will find precisely what is required of him in use, maintenance, and preservation of property. Equally indispensible is the consistent, conscientious application of those procedures. Written procedures that are not followed are functionally equivalent to no procedures at all.

13. Audit Process State the audit’s objectives. Define the attributes or transactions to be tested. Define the population. Specify an acceptance/rejection rate Determine the sampling method. Select the sample(s). Perform the audit. Analyze the defects.

14. Audit Process (cont) Generalize from sample to population. Determine the status of the process that is under review. Issue the report. Educate and Train while correcting the problems?

15. Internal Audit Planning Develop annual audit plan. –What sites / facilities will be audited. –When will the audit(s) take place. –What will be included in the scope of each audit? –On site or remote? –How long will each audit take? –What resources will be needed? Select Lead Auditor –Rotation within management team. Select Audit Team / Support 15

16. Internal Audit Planning (cont) Audit tools –Procedure / Instructional document(s) that clearly defines: Whom will be audited / interviewed? What will be audited? What questions will be asked to whom? What data / information will be audited? Where will the data / information come from? 16

17. Acquisition Receiving Identification Records Movement Storage Inventory Reports Consumption Utilization Maintenance Subcontractor Control Disposition Close-out Life Cycle of Property Risk/liability Analysis Property Management

18. Determining Audit Universe Listing of contracts being reviewed –DCMA oversight? –Prime or Subcontractor? –Status: Active / In closeout? –Property Clauses. –Government Furnished Property? –Where is work being performed? –Period of Performance dates. 18

19. Determining Audit Universe (cont) Listing of subcontracts –Property clauses. –Government and / or Company owned Furnished property? –Status: Active / In closeout? –Subcontract Administrators. 19

20. Internal Audit Preparations Key Stakeholders –Program Managers. –Contract Administrators. –Subcontract Administrators. –Receiving / Shipping Personnel. –Storeroom / Material Control Personnel. –Purchasing. –Property Custodians. –Property Specialist. 20

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22. The Ethics of Systems Analysis The value of a system analysis wholly depends on the knowledge, integrity, independence, objectivity, and impartiality of the auditor, whether the auditor is an outside contractor or an employee. Particularly when an organization is undergoing public scrutiny, the conduct of the auditors must be above reproach.

23. Can you describe your Internal Audit System?

24. My Internal Audit system? Xxxx, Inc. has had an internal audit program since October 2007. Our internal audit program reviews & documents the condition of our Property Control System. –Our model was the DCMA PMSA audit. –The audit is conducted by _____ Certified Professional Property Managers (CPPM) touching all the business processes on the attached chart.

25. Acquisition Receiving Identification Records Movement Storage Inventory Reports Consumption Utilization Maintenance Subcontractor Control Disposition Close-out Life Cycle of Property Risk/liability Analysis Property Management

26. My Internal Audit System (cont) Our internal audit consists of interviews, checklists, artifacts, samples, and management reviews. The methods & results of our internal audits are reviewed with external auditors when they visit.

27. Questions? ???

28. Questions? ??? What do you do when you fail an Internal Audit?