DoD Financial Improvement and Audit Readiness FIAR Overview

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DoD Financial Improvement and Audit Readiness
(FIAR) Overview
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Agenda

• FIAR Background
• Financial Improvement and Audit Readiness
  Strategy and Approach
• FIAR Way Forward

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FIAR Background

• Financial Improvement and Audit Readiness (FIAR)
  Plan, first issued in 2005 to address GAO High
  Risk Area
• While the Plan has evolved because of lessons
  learned and progress made the goals of the FIAR
  Plan remain the same
• Provide timely, reliable, accurate, and relevant
  financial information to decision makers.
• Sustain improvements through an effective
  internal control program.
• Produce auditable financial statements.

Continuous Improvement in DoD Plan to Address the
High Risk Area
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FIAR BackgroundFIAR Status and Plans
Today, over 1/3rd of the DoDs Assets
Liabilities have a clean audit
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FIAR Strategy

• Program Management
• FIAR Plan
• Consistent, standard DoD-wide approach
• Transparency
• Monitors progress
• Enterprise Transition Plan
• Modernization of business and financial systems
• Business and financial initiatives (e,g., UID,
  SFIS)
• Best Business Practices
• Shared efficiencies

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FIAR Approach

• Auditors perspective
• Recognition of the breadth of process, control,
  and system improvements required
• Component financial and functional improvement
  plans
• Standard objectives
• Integrated with systems modernization
• Accountability
• Monitoring progress
• OMB Cir. A-123, Appendix A for Discovery,
  Correction, and Sustainment

Comprehensive approach to achieve auditability
and FM improvement through systems, process, and
control improvements
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FIAR Approach Appendix A Testing Integration
Financial Statement Assertion
Audit Readiness Validation
Audit Readiness Sustainment
Financial Statement Audit
Discovery Correction
Segment Assertion
Appendix A Testing

• Integrate Appendix A testing with the testing
  needed to
• Identify auditability gaps in Discovery
• Confirm implementation of resolutions in
  Correction
• Validate effectiveness of controls to support
  Assertion
• Verify continual improvement in Sustainment and
  Audit

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FIAR Approach Business Processes Improvement

• Financial Transactions occur in the course of
  Business Processes
• Financial Reporting relies on internal controls
  within Business Processes to ensure Financial
  Transactions are properly recorded

Internal Control Over Financial Reporting ensures
auditability
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FIAR Approach Way Forward

• Introduction of Auditors Perspective and
  Approach Continuous auditor assessment against
  financial statement assertions vice only at
  completion of improvement efforts

• Financial Statement Assertions Valuation,
  Completeness, Existence, etc.
• Key Control Objectives and Capabilities
• Provide a criterion for evaluating whether the
  entity's control procedures in a specific area
  provide reasonable assurance that a misstatement
  or omission in that relevant assertion is
  prevented or detected by controls on a timely
  basis.
• Control Activities
• Are activities that management relies on to
  prevent and detect material financial errors
  and misstatements and to ensure compliance with
  applicable laws and regulations
• Detective (e.g., reconciliations)
• Preventative (e.g., supervisory reviews or
  approvals)
• Safeguarding (e.g., controlled access)

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FIAR Approach Way Forward

• Critical Path to Auditability Identify the
  critical audit issues and success factors and
  measure against them
• FIAR Guidance Methodology/Approach Provides
  roadmap to prepare for a successful audit
• Independent Validations of Audit Readiness
  Verify audit readiness before proceeding to
  audits and examinations
• Address Challenges
• Resources for FIAR Component resource
  constraints impede progress
• Functional Community Buy-In Achieving FIAR
  goals is not solely the responsibility of the
  Financial Community
• Systems Modernizing DoD systems is critical to
  achieving and sustaining the FIAR goals

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FIAR Approach Way Forward

• Solution Focus
• Concentrate efforts on solutions to audit
  impediments

Overcoming Impediments Requires Leadership
Resource Commitments
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Conclusion

• Achieving improved financial information and
  auditability dependent on
• Senior Leadership commitment
• Functional community tactical plans and
  progressnot just a financial community problem
• Successful deployment of ERPs (e.g., GFEBS, Navy
  ERP, DEAMS)
• Effective internal control program and controls
• Maintaining readily available transaction
  documentation
• Accurate and documented opening balances

The Impediments are Significant DoD is Executing
Strategies to Achieve Auditability
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