The Top 5 Challenges of DoD’s Audit Readiness Program
Several years ago, the Department of Defense implemented a program called Financial Improvement and Audit Readiness (FIAR) in order to position the department to have auditable financial statements to to better support decisions regarding the allocation and use of resources. The FIAR program goals are:
- By September 30, 2014, the General Fund Statement of Budgetary Resources (SBR) should be audit ready
- By June 30, 2016, validate the existence (i.e., ensure that recorded assets exist) and completeness (i.e., managed/stored assets are recorded in the ledger) of mission critical assets
- By September 30, 2017, all DoD financial statements should be audit ready
With less than three months to achieve the goal for an audit-ready SBR, the DoD is working aggressively to implement corrective actions. Although the list of challenges is expansive, the following five challenges are chief among them:
- Implementing and sustaining internal controls. Services and other Defense organizations (ODOs) still encounter significant issues identifying risks and implementing internal controls within information systems, especially for micro-applications
- Beginning balances. Although the beginning balances don’t have to be asserted until FY 2017, services and ODOs have to undertake a significant data clean-up effort as well as ensure that internal controls remain effective over the course of multiple fiscal years
- Asset valuation. Assigning net book value to the portfolio of tangible assets is among the greatest challenges for all DOD agencies primarily because of the variety and complexity of the portfolio
- Human capital. Attracting experienced audit and accounting professionals capable of supporting audit readiness and audit processes continues to be difficult for DoD
- Budget uncertainty. Many of the aforementioned challenges can be minimized with the assignment of additional resources. However, funding levels are constantly changing throughout the department, which directly affects program support.
While most of the identified challenges will continue throughout the program, the DoD should ensure each challenge has a mitigating strategy throughout the department.
On a brighter note, there have been significant accomplishments within the program. As of May 2014, the Marine Corps and six ODOs have received unmodified opinions on their FY 2013 Statement of Budgetary Activity. Additionally, there are 23 examinations underway.
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