Financial Improvement and Audit Readiness Plan Overview Mr' David McDermott Acting Director, Financi

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Financial Improvement and Audit Readiness Plan
OverviewMr. David McDermottActing
Director,Financial Improvement and Audit
Readiness
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Goals

• Improve financial information and reporting
• Prepare the Components and the Department for
  successful audits

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Approach

• The FIAR Plan employs an incremental,
  prioritized approach to
• Improve policies and processes,
• Strengthen internal controls, and
• Resolve material weaknesses
• Learn from others approaches, challenges, and
  success
• in synch with Enterprise Transition Plan
  solutions.

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Challenges

• DoD financial improvement encompasses an
  unprecedented scope and complexity
• Over 3,000 worldwide locations
• Over 4,000 IT systems
• 3 million employees
• 5.2 million inventory items
• 1.4 trillion in Assets
• 2.0 trillion in Liabilities
• 581 billion in operational costs

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Consolidated Balance Sheet

• Assets
• Fund Balance with Treasury
• 327B - 24
• Cash Other Monetary Assets
• 2B - lt1
• Accounts Receivable
• 11B - 1
• Inventory and OMS
• 232B - 17
• Real Property
• 100B - 7
• Military Equipment Valuation
• 345 - 25
• Other Assets
• 29B - 2

• Liabilities
• Accounts Payable
• 29B - 2
• Environmental Liabilities
• 70B - 4
• Medicare-Eligible Retiree Health Care Fund
• 538B - 28
• Military Retirement Health Care
• 299B - 15
• Other Liabilities
• 44B - 2

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Key Success Factor

• Plan is supported and monitored by DoD
  senior leaders.
• Deputy Secretary of Defense designated the
  Plan a DoD-wide high priority, approves each
  update/version, and monitors progress
• Military Department Secretaries and Defense
  Agency Directors approve their Components
  portion of the Plan
• Under Secretary of Defense (Comptroller)/CFO
  and Deputy CFO review monthly progress
• Functional senior leaders (e.g., DUSD(IE),
  monitor portions of the Plan
• FM Leadership Council decides Plan priorities
  and monitors progress

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Incremental Approach

• Focus Areas
• Fund Balance with Treasury
• Accounts Receivable
• Inventory
• OMS
• Real Property
• Military Equipment
• Medicare-Eligible Retiree Health Care Fund
• Accounts Payable
• Environmental Liabilities

2010 Assets
2006 Assets
Liabilities
Liabilities
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FIAR Plan Composition

• FIAR Plan consists of
• Key milestone plans organized by Balance Sheet
  line items
• 5 Phase process
• A-123 requirements
• Component Financial Improvement Plans with tasks
  to accomplish FIAR key milestones
• Enterprise Transformation Plan(ETP) solution key
  milestones

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Phased Methodology
Discovery Correction
Validation
Assertion
Assessment
Audit

• Discovery Correction Deficiencies
  identified and corrected (includes policies,
  processes, internal controls, and systems)
• Validation Confirmation of completed
  corrections, ability to sustain, and audit
  readiness
• Assertion Management asserts audit
  readiness to OIG
• Assessment OIG performs limited review
• Audit OIG audits the organizations
  financial information

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Accomplishments

• Corps of Engineers FY 2006 financial statements
  being audited
• Audit readiness being evaluated by IG, DoD
• Defense Logistics Agency Contingent Legal
  Liability
• Ready for audit readiness evaluation
• Navy Nuclear Ships and Submarines Environmental
  Liabilities
• Completed baseline for Military Equipment and
  revised acquisition and financial policies
• Significant progress made in identifying and
  valuing Environmental Liabilities

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March Plan Highlights

• Business capabilities framework for integrating
  the ETP with the FIAR Plan
• Spotlight on Other Financial Improvement Efforts
• Other Defense Organizations
• U.S. Special Operations Command
• Defense Advanced Research Projects Agency
• Defense Information Systems Agency
• Missile Defense Agency
• Defense Security Service
• Meeting Federal Requirements
• The Chief Financial Officers Act
• The National Defense Authorization Act OMB
  Circular A-123, Appendix A
• The GAO High Risk Series

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March Plan Highlights
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Next Steps

• Standup DoD Audit Committee
• Complete DoD audit strategy
• Expand identification of dependencies on BTA
  solutions and critical financial and business
  systems