R 311825Z JAN 13

ALCGFINANCE 006/13
SUBJ: MONTHLY FINANCIAL AUDIT STATUS UPDATE - JANUARY 2013
A. COMDT COGARD WASHINGTON DC 311408Z DEC 12/ALCGFINANCE 056-12
1. This is the sixteenth in a monthly series of ALCGFINANCE messages
intended to improve financial audit communications and information
sharing throughout the Coast Guard.
2. Current Status:
	A. On December 20, 2012, the President signed into law the DHS Audit
Requirement Target (DART) Act of 2012 (Public Law 112-217), which
mandates DHS obtain an unqualified audit opinion in FY 2013.
(http://beta.congress.gov/bill/112th-congress/senate-bill/1998/text).
	B. The fiscal year (FY) 2013 audit is scheduled to begin shortly.
Coast Guard audit remediation teams are continuing their efforts,
focusing on correcting material weaknesses in Real Property, Personal
Property, and Environmental Liabilities. Expectations are high
following the achievement of our qualified opinion in FY 2012.
Regardless of the public law, we should prepare for additional
scrutiny in FY 2013 as the auditors will continue to probe deeper and
expand their focus to cover additional areas. It is essential that we
continue high levels of coordination and cooperation between field
units, field service and logistics centers, and headquarters
elements.
3. Audit 101
	A. This month will be the second of a two part series on property
asset capitalization. Last months newsletter, reference A, focused on
the definition of capitalization and real and personal property
capitalization thresholds. This month will focus on the concept of
improvements to existing real and personal property.
	B. Improvements are defined as changes to existing real/personal
property which either allow the asset to be used for a longer period
of time (useful life) or improve/enlarge the assets capability.
Various events that affect assets (e.g., technological advances,
inoperability, damage, or changes in mission requirements) may result
in the need for an improvement to an asset. For example, the recent
upgrades to newer, more powerful engines for the Coast Guards MH-65
Dolphin helicopter fleet are considered improvements to the existing
asset (the helicopters) because the new engines increased the useful
life and maximized capability.
	C. When the improvement occurs, if the historical cost of the
improvement meets the capitalization threshold of the asset being
improved, the improvement is capitalized. As we explained in
reference A, capitalization of improvements involves spreading the
cost of the asset/improvement over the remaining useful life of the
base asset, and capitalization thresholds vary depending on the asset
class. In the example we previously used, the engine upgrades to the
MH-65 fleet were capitalized because their value as improvements to
the base asset (the helicopter) exceeded the capitalization threshold
minimum amount for aircraft.
	D. During capitalization, the cost of the improvement is recorded
and begins depreciating the following month. The cost of the asset is
depreciated over the remaining useful life. If the improvement
extends the life of the base asset, the cost is depreciated over the
updated useful life.
4. Audit Tips
	A. In preparation for the upcoming March inventory, consider
creating and employing an inventory picture book, a best practice
noted from field visits.
	1. Take pictures of assets where they are located, along with the
tag, serial number, or other identifying features. Print the pictures
on standard letter paper and combine into logical collections stored
with the inventory listing. This information can be inserted into
clear page protectors in a binder, added to a two-hole punch file
folder with one or more parts, dropped into an accordion folder, or
kept using another system.
	2. During the inventory, the collection can be used by the inventory
team to help quickly located and identify assets and the necessary
identifying information.
	B. Use of an inventory picture book not only helps cut down on the
time to inventory assets, it aids in ensuring all assets are properly
recorded on the inventory listing as part of the floor-to-record
inventory.
5. Ms. Margo Sheridan, Director of Financial Operations/Comptroller,
sends.
6. Internet release authorized.