Department of Defense

1

• Department of Defense
• Fiscal Year 2008
• Agency Financial Report
• Managers Internal Control Program (MICP)
• and Check It Campaign Conference
• December 17, 2008
• Lydia Moschkin
• Director, Financial Reporting
  Analysis
• Office of the Secretary of Defense
  (Comptroller)

2
Discussion

• Agency Financial Report (AFR) Overview
• Financial Reporting Changes
• AFR MICP Links
• Conclusion

3
Agency Financial Reporting

• Agency Financial Report
• Deputy Secretarys Transmittal Letter
• Section 1 Managements Discussion and
  Analysis
• Section 2 Financial Information
• Section 3 Other Accompanying Information
• Web-based access
• www.defenselink.mil/comptroller/afr
• DoDAFR_at_osd.mil

4
DoD Financial Statement
5
DoD Financial Statement
6
Deputy Secretary of Defense AFR Transmittal
Letter
7
Financial Reporting Changes

• Citizens Report
• 25-page summary replaces the Performance and
  Accountability (PAR) Highlights piloted FY 2007
• Performance data highlights as measured by
  mission goals
• Snap Shot
• 2-page executive summary required in 2008 by all
  CFO Agencies
• Mission, Organization, Personnel
• Budget, Performance, Financial snap shots
• Synopsis of top 5 performance measures only

8
Financial Reporting Changes(Continued)

• Annual Performance Report (APR)
• FY 2008 submitted separately, APR available
• January 15, 2009
• In FY 2007, submitted along with the
  Congressional Budget Justification
• In FY 2006, submitted with the financial
  statements
• Executive Office of the President (EOP) Program
• Security Assistance reported separately from the
  DoD
• Available in Other Accompanying Information and
  on the DoD Comptroller Web site

9
AFR MICP Links

• Management Discussion Analysis
• DoD Annual Assurance Statement
• Certification Letters
• Other Accompanying Information
• DoD Inspector General Management and Performance
  Challenges
• Summary of Management Assurances and Financial
  Statement Audit
• Federal Managers Financial Integrity Act (FMFIA)
• Check It Program Update
• Management Assurances and Financial Statement
  Audit
• Summary of Improper Payments Reporting

10
DoD Annual Assurance Statement
11
Certification Letters

• Established by Memorandum of the Deputy Secretary
  January 2008
• Alignment with tenets of the Sarbanes-Oxley Act
  of 2002
• Requirements
• Component Head signs financial statement
  certification letter to demonstrate specific
  involvement and responsibility
• Confirm Component is developing and implementing
  actions in their financial management improvement
  plans to comply with the A-123 guidance
• Update Financial Management Leadership Council
  quarterly on the status of these actions

12
Certification Memorandum from the Deputy
Secretary
13
Management Challenges

• Summary of Management and Performance Challenges
• are identified by the DoD Inspector General
• are reported in the AFR, as required by the
  Reports Consolidation Act of 2000
• 7 Reported for FY 2008
• Financial Management
• Acquisition Processes and Contract Management
• Joint Warfighting and Readiness
• Information Assurance, Security, and Privacy
• Health Care
• Equipping and Training Iraqi and Afghan Security
  Forces
• Nuclear Enterprise
• New in Fiscal Year 2008

14
Management Assurances and Financial Statement
Audit

• Material Weaknesses
• Primary Discovery Methods
• Auditor-identified weaknesses
• Management-identified weaknesses
• OMB Circular A-123, Managements Responsibility
  for Internal Control (Appendix A)
• Controls over financial reporting
• Compliance with financial-related laws and
  regulations
• Continuing progress

15
Financial Statement Audit

• Auditor Identified Weaknesses
• FY 2008 Material Weaknesses
• the Usual Suspects
• 13, continued from prior year
• Significant Deficiencies
• Contingent Legal Liabilities, continued from
  prior year
• Cash and Other Monetary Assets, no longer
  recognized as a significant deficiency

16
13 Auditor-Identified Material Weaknesses

• Audit Opinion Disclaimer
• Accounts Payable
• Accounting Entries
• Environmental Liabilities
• Government Property in the Possession of
  Contractors
• Intragovernmental Elimination
• Operating Materiels and Supplies
• Reconciliation of Net Cost of Operations to
  Budget
• Statement of Net Cost
• Financial Management Systems
• Fund Balance with Treasury
• General Property, Plant and Equipment
• Inventory
• Accounts Receivable

17
17 Management-Identified Weaknesses

• Financial Reporting Material Weaknesses
• Valuation of PPE Military Equipment
• Real Property Assets
• Environmental Liabilities
• Health Care
• Fund Balance with Treasury
• Accounts Receivable
• Inventory Valuation
• Operating Materiels and Supplies
• Accounts Payable
• Personal Property General PPE
• Financial Reporting Compilation
• Financial Reporting of Intragovernmental
  Eliminations

18
17 Management-Identified Weaknesses

• Overall Operations (Nonfinancial) Material
  Weaknesses
• Management of Information Technology and
  Assurance
• Personal Security Investigations
• Contracting
• Certain Audits Do Not Meet Professional Standards
• Conformance with Financial Management System
  Requirements
• DoD Financial Management Systems and Processes,
  Nonconformance

19
Conclusion

• Another year of continuing improvements
• MICP a key component of financial improvements
• AFRs partnership with MICP mission essential
• financial stewardship responsibility an integral
  part of the Departments mission to defend the
  nation

20

• Questions?