Achieving Auditability: Role of the Acquisition Community

1
Achieving Auditability Role of the Acquisition
Community

• DIA Financial Executive Accounting Operations
  and Special Projects
• May 15, 2007

2
Contents

• Why Strive for Auditability?
• Roadmap to Auditability
• Strategy and Governance
• Governance Structure
• Acquisition Processes are Key to the Auditability
  Strategy
• Procure-to-Pay Overview
• Acquisition Business Events and Financial
  Transactions
• Auditability Focus (People, Process Management,
  Systems)
• Summary of Auditor Inquiries
• Appendix A - Typical Control Breakdowns Relevant
  to Acquisition Events

3
1) Why Strive for Auditability?

• We are striving to achieve auditability because
  it
• Helps with compliance with relevant laws,
  regulations, and guidance
• CFO Act, FFMIA, FMFIA, OMB A-123, OMB A-11,
  Prompt Payment Act, FAR
• Promotes effective financial stewardship and
  credibility
• Optimizes Warfighter support and internal
  operational efficiency
• Allows for more effective decision making
• Aligns with stakeholder priorities (ODNI, OSD)

4
2) Roadmap to Auditability

• Cross-functional communication is essential.

5
3) Strategy and Governance

• Develop and follow a strategy for auditability
• Create The Roadmap
• Communicate the Roadmap often
• Establish a governance structure to initiate and
  sustain organizational commitment
• Establish and ensure cross-functional buy-in and
  commitment
• Establish a centralized program management office
  to coordinate auditability efforts
• Estimate resources needed for auditability

6
4) Governance Structure
OMB
OSD
ODNI
Congress
Laws Regulations
Stewardship Funding Requirements
Compliance
Compliance
Director Deputy Director, DIA
Guidance
Issues/Status
Audit Committee
Compliance
Compliance
Functional Offices
Execute Monitor
Input
Corrective Action Plans
Prior Audits Assessments
Process Management
7
5) Acquisition Processes are Keyto the
Auditability Strategy
C O O R D I N A T I O N
Internal External Stakeholders
8
5) Acquisition Processes are Keyto the
Auditability Strategy (cont.)

• Acquisition business events drive many financial
  transactions
• Actions taken at the beginning of the Acquisition
  or Procure-to-Pay process are reflected in the
  financial statement line items
• An agency cannot achieve auditability without
  reliable and well-controlled acquisition
  processes

9
6) Procure to Pay ProcessOverview
Example Process Cycle Procure-to-Pay
Statement of Budgetary Resources
Statement of Budgetary Resources
Statement of Budgetary Resources
Statement of Budgetary Resources
Statement of Budgetary Resources
Statement of Net Cost
Financial Statement
Statement of Financing
Balance Sheet
Balance Sheet
Balance Sheet
Business Events
Receipt of Goods/Services
Disbursement of Funds
Purchase Requisition
Purchase Order
Invoice
Financial Events
Commitment
Obligation
Expenditure/Payable
Payment
Closeout
Note The beginning of the acquisition process
starts with the budget and planning stage, which
has no effect on the financial statements.
However, the planning process is fundamental to
the entire Procure-to-Pay lifecycle.
10
7) Acquisition Business Events and Financial
Transactions

• The following slides provide additional details
  on how acquisition business events relate to
  financial transactions
• Commitments/Funds Certification
• Obligations
• Payments
• De-Obligations

11
Business Event Commitments/Funds Certification
12
Business EventCommitments/Funds Certification
13
Business Event Obligations
14
Business Event Obligations
15
Business Event Invoices/Payments
16
Business Event Invoices/Accruals
17
Business Event Payments
18
Business Event De-obligation
19
Business Event De-obligation
20
8) Auditability Focus People

• Create a working group with representatives from
  Acquisitions and Finance to
• Develop corrective action plans
• Develop resource estimates to execute corrective
  action plans
• Execute plans and report progress
• Financial personnel should have an understanding
  of acquisition processes and related business
  events
• Acquisition personnel should have an
  understanding of how their processes impact the
  financial statements and auditability
• Contracting Officer Representatives (CORs) play
  an important role in ensuring that funds are
  available, goods/services are received, and
  payments are timely and proper

21
8) Auditability Focus Process Management

• Document financial management processes to
• Identify key control points
• Help staff understand the processes
• Facilitate auditors inquiries for documented
  processes
• Sustain processes by
• Documenting and maintaining desk procedures
• Providing staff training as needed
• Developing a culture of continuous improvement
• Periodically reassess processes to ensure that
  they are
• Still relevant to meet the mission requirements
• Operating as intended
• Effective and efficient

22
8) Auditability Focus Systems

• System should track costs of purchased goods and
  services upon government acceptance
• System should be integrated with core financial
  system
• Adequate system reports and edits should be
  established to minimize the risk of errors (i.e.
  duplicate payments)
• Accurate reporting of trading partner data
• Limit the dependency of off-line reports or
  databases to obtain financial or management data
• Note For a comprehensive list of acquisition
  system requirements, see the JFMIP
  Acquisition/Financial System Interface
  Requirements, issued in by the FSIO/JFMIP
  (SR-02-02).

23
9) Summary of Auditor Inquiries

• Compliance with relevant laws and regulations
• Federal laws (i.e. Prompt Payment Act)
• Regulations (i.e. DoD FMR, FAR, etc)
• Agency policies and procedures
• Internal Controls
• Compliance with internal policies and procedures
• The design and effectiveness of controls
• Financial Reporting
• Material misstatement
• Supporting documentation and reconciliations
• Timeliness

24
Questions?
25
Presenter Information
Mr. Tim Soltis Defense Intelligence Agency Office
of the Chief Financial Executive (202)
231-2844 timothy.soltis_at_dia.mil Ms. Juanita
Galbreath Defense Intelligence Agency Office of
the Chief Financial Executive (202)
231-4750 Juanita.Galbreath_at_dia.mil
26
Appendix A Typical Control Breakdowns Relevant
to Acquisition Events

• Not obtaining reimbursement for agency assigned
  military personnel detailed to other Federal
  agencies outside of DoD
• Using the wrong appropriation to perform incoming
  reimbursable orders
• Not formally accepting all incoming requests for
  reimbursable goods or services in writing
• Not providing a copy of the acceptance back to
  the requesting agency as required

27
Appendix A Typical Control Breakdowns Relevant
to Acquisition Events

• Obligations not recorded in the system
• Creates false impression of funds availability
• Causes unmatched invoices (expenses) and/or
  disbursements
• Lack of Determination and Finding statements,
  which are required for all interagency
  transactions
• Could lead to improper use of appropriation
  and/or Economy Act violations

28
Appendix A Typical Control Breakdowns Relevant
to Acquisition Events

• Economy Act challenges Transactions involving
  certain goods and services that fall subject to
  the Economy Act are not justified
• Prepayments Liquidations of obligations for
  goods or services that have not been received by
  the purchasing agency should be recorded as
  advances/pre-payments