“Gearing up for an audit affects more than just the resource management community,” said James Watkins, deputy assistant secretary of the Army for Financial Operations. “It affects contracting, payroll, acquisition, logistics and other business functions. The Army is changing the way it does business and people all over the organization are seeing the impact.”
The Statement of Budgetary Resources, or SBR, is the statement that shows the money the Army has received in a fiscal year and outlines how it spent that money. In fiscal year 2011, for instance, the Army had more than $335 billion in budgetary resources to account for.
The Department of Defense is the last remaining federal agency with financial operations that cannot muster an independent audit. Secretary of Defense Leon Panetta has described the situation as “unacceptable” in testimony to Congress.
In 2009, Congress mandated that DOD obtain a clean audit opinion of all of its financial statements by 2017. In October 2011, Panetta announced that DOD, including all of the services, would move up the timeline to obtain a clean opinion on its SBR by 2014.
The Office of the Assistant Secretary of the Army (Financial Management & Comptroller) is leading the effort to get the Army audit ready and to meet all of the deadlines.
“Responsible stewardship of taxpayer resources and operating business processes within an effective control environment are consistent with high standards of military readiness and support Army values,” said Chief of Staff of the Army Gen. Ray Odierno in a message sent to general officers in April. The message stressed the importance of audit readiness efforts.
In order to meet the deadlines, the Army is testing and improving the internal controls it has in place to ensure business processes are executed properly and to minimize a risk of error on the financial statements. Examples of internal controls are:
— signing and dating a receiving report or invoice to prove goods or services actually received were compared to the items or invoice ordered
— reviewing standard operating procedures for certain business processes annually to ensure they align with generally accepted accounting principles and DOD and Army policies
— having the proper forms on file to show that someone has the authority to sign off on a business transaction
When it comes time for a financial statement audit, auditors will select a sample of transactions for each business process, request documentation to support the transactions, and review the documentation to ensure that transactions were executed properly. If the documented evidence does not exist or the documentation does not properly support the transactions, the result could be an unfavorable audit opinion.
“We know people are doing good work. But they need to have the documentation in place to prove it,” said Watkins.
Teams from the Assistant Secretary of the Army (Financial Management & Comptroller) Office of the Secretariat, or OASA(FM&C), have been visiting installations and evaluating business processes. Along with the SBR business processes, teams have been looking at the management of assets, including military equipment, general equipment, operating materials and supplies, and real property. Teams coordinate with internal review offices to examine business processes and implement corrective actions.
The OASA(FM&C) has rolled out a series of resources, including checklists, handbooks, and training courses. The resources are meant to help everyone across the Army understand the importance of audit readiness and review the internal controls that need to be in place to obtain a clean audit opinion.
Online training courses through the Army Learning Management System have also begun to roll out. Currently the overview module is available explaining audit readiness efforts in more detail.