R 231943Z MAR 12

ALCGFINANCE 011/12
SUBJ: MONTHLY FINANCIAL AUDIT STATUS UPDATE - MARCH 2012
A. ALCOAST 533/11
B. ALCGFINANCE 043/11
1. THIS IS THE SIXTH IN A MONTHLY SERIES OF ALCGFINANCE MESSAGES
INTENDED TO IMPROVE FINANCIAL AUDIT COMMUNICATIONS AND INFORMATION
SHARING THROUGHOUT THE COAST GUARD.
2. CURRENT STATUS:
	A. THE FISCAL YEAR (FY) 2012 AUDIT READINESS EFFORT CONTINUES. THE
DHS OFFICE OF THE INSPECTOR GENERAL (OIG) HAS AGAIN CONTRACTED THE
PUBLIC ACCOUNTING FIRM KPMG TO CONDUCT THE FINANCIAL AUDIT. AN AUDIT
ENTRANCE CONFERENCE WAS HELD ON 22 MARCH TO FORMALLY KICK-OFF THE
AUDIT AND PROVIDED BY CLIENT (PBC) REQUESTS ARE ALREADY FLOWING.
	B. THE MARCH 2012 CAPITALIZED PROPERTY PHYSICAL INVENTORY WAS
COMPLETED THIS MONTH. BRAVO ZULU TO FIELD UNITS FOR INVENTORYING
INTERNAL USE SOFTWARE (IUS) FOR THE FIRST TIME, THE RESULTS HAVE BEEN
TERIFFIC.  THERE WILL BE MUCH ADMINISTRATIVE CLEAN-UP FROM THIS
FIRST-TIME INVENTORY, SO I ASK YOU TO CONTINUE TO COORDINATE WITH THE
COMDT (CG-844) AND FINCEN TO RECONCILE ASSET RECORDS IN THE ORACLE
FIXED ASSETS MODULE.
3. MONTHLY AUDIT TIPS:
	A. FIELD UNITS HAVE DONE AN EXCELLENT JOB VALIDATING UNDELIVERED
ORDERS BUT THERE IS STILL WORK TO BE DONE. THE IMPORTANCE OF
RECONCILING TRANSACTION DATA BETWEEN PROCUREMENT AND THE FINANCIAL
SYSTEM HAS BEEN EMPHASIZED IN PREVIOUS MESSAGES (SEE REFERENCE B). AS
SOON AS A FINANCIAL TRANSACTION IS COMPLETED AND THE FINAL
EXPENDITURE IS PROCESSED, UNIT MANAGERS (OBLIGATION AUTHORITIES, AFC
AND ATU MANAGERS, UNIT FINANCIAL MANAGERS) SHOULD VERIFY THAT NO
OBLIGATED BALANCE (ALSO CALLED AN UNDELIVERED ORDER, OR UDO) REMAINS
IN FPD OR THE CORE ACCOUNTING SYSTEM.
	B. GENERAL REQUIREMENTS FOR THE VALIDATION OF UDOS: MANAGERS SHOULD
COORDINATE EFFORTS TO VALIDATE OBLIGATIONS QUARTERLY, UTILIZING THE
OPEN OBLIGATION VALIDATION APPLICATION (OOVA). ALL INFORMATION
SUPPORTING THE UDO VALIDATION STATUS SHOULD BE RETAINED IN ACCORDANCE
WITH THE DOCUMENTATION SUPPORT MATRIX AND AVAILABLE FOR REVIEW UPON
REQUEST. A LISTING OF DOCUMENTATION REQUIRED TO SUPPORT EACH TYPE OF
TRANSACTION CAN BE FOUND AT HTTPS://CGPORTAL.USCG.MIL/CTL/RPDKSM.
	C. ALL UNITS SHOULD REVIEW OPEN OBLIGATIONS CONTINUOUSLY TO ENSURE
THAT UDOS ARE VALIDATED. ANY OBLIGATION THAT IS NOT NEEDED FOR
FURTHER (POSSIBLE) EXPENDITURES MUST BE REDUCED TO ZERO. THIS IS
CALLED A DEOBLIGATION. FAILURE TO MONITOR UDOS AND VALIDATE THEM CAN
RESULT IN A FIELD UNIT BEING UNABLE TO USE ALL OF THE FUNDS IT MIGHT
HAVE AVAILABLE. PARTICULAR EMPHASIS SHOULD BE PLACED ON AGED UDOS,
ESPECIALLY THOSE IN EXPIRED ACCOUNTS OR THOSE THAT HAVE HAD NO
ACTIVITY FOR SEVERAL PERIODS.
	D.  HAVING AS SMALL A UDO BALANCE AS POSSIBLE WILL HELP ANY UNIT BE
PREPARED FOR POTENTIAL AUDITOR SAMPLING AND FREE-UP VALUABLE
RESOURCES TO BE SPENT ON OTHER PRIORITIES.
4. AUDIT 101: HERE ARE THE FINANCIAL AUDIT PROFESSIONAL DEVELOPMENT
ITEMS FOR THIS MONTH:
	A. PROVIDED BY CLIENT (PBC) REQUEST:  A PBC IS A TERM USED BY THE
EXTERNAL AUDITOR TO REFER TO A PIECE OF INFORMATION/DATA (SUCH AS A
DOCUMENT OR FILE) THAT SHOULD BE PROVIDED BY THE COAST GUARD TO THE
AUDITOR. THE EXTERNAL AUDITOR WILL THEN USE THE PBC INFORMATION THE
COAST GUARD PROVIDES AS PART OF THEIR TESTING OF THE SERVICE'S
FINANCIAL MANAGEMENT FRAMEWORK. PBC REQUESTS FROM THE EXTERNAL
AUDITOR ARE PROCESSED BY THE COAST GUARD THROUGHOUT THE FISCAL YEAR
IN PREPARATION FOR THE AUDIT OPINION.
	B. NOTICE OF FINDINGS AND RECOMMENDATIONS (NFR): A NFR SUMMARIZES
THE EXTERNAL AUDITOR'S FINDINGS FOR A PARTICULAR AUDIT AREA.  IT
INCLUDES RULES GOVERNING THE FINDINGS AND RECOMMENDATIONS TO
REMEDIATE EACH CONDITION. NFR'S PROVIDE THE COAST GUARD WITH AN
OPPORTUNITY TO DOCUMENT A FORMAL RESPONSE REGARDING HOW WE WILL
CORRECT (REMEDIATE) THE STATED CONDITIONS IN THE NFR. THESE FINDINGS
AND RECOMMENDATIONS CAN BE RECEIVED THROUGHOUT THE FISCAL YEAR IN
PREPARATION FOR THE AUDIT OPINION, HOWEVER, MOST COME AT THE END OF
THE FISCAL YEAR.
	C. CONTROL TESTING: A CONTROL IS AN INTERNAL ACTION OR SAFEGUARD
MECHANISM IMPLEMENTED AND PERFORMED IN ORDER TO PREVENT AND/OR DETECT
FINANCIAL MISTAKES, ERRORS, AND FRAUD. CONTROL TESTING IS A COMMON
AUDITOR TEST THAT CONFIRMS THESE SAFEGUARDS ARE WORKING THE WAY THEY
ARE SUPPOSED TO. IF THE COAST GUARD'S INTERNAL CONTROLS ARE
EFFECTIVELY PREVENTING/DETECTING MISTAKES, ERRORS AND FRAUD, THE
AUDITOR WILL FEEL COMFORTABLE THAT THE DATA PRESENTED IN OUR
FINANCIAL STATEMENTS IS ACCURATE AND COMPLETE. CONTROL TESTING
SAMPLES ARE USUALLY SMALL (ANYWHERE BETWEEN 3 AND 105 DATA SAMPLES)
AND ARE CONTINUOUSLY COLLECTED OVER THE COURSE OF A FISCAL YEAR.
	D. SUBSTANTIVE TESTING: SUBSTANTIVE TESTING IS DESIGNED TO DETERMINE
ERRORS IN LINE ITEM DOLLAR AMOUNTS AND BALANCES. THESE TESTS
REPRESENT A HIGHER LEVEL OF SCRUTINY THAN CONTROL TESTING. IN THE
ABSENCE OF INTERNAL CONTROL MECHANISMS, THE AUDITOR WILL TEST TO
ENSURE THERE ARE NO ERRORS THAT WOULD CAUSE THE COAST GUARD'S
FINANCIAL STATEMENTS TO BE INACCURATE. SUBSTANTIVE TESTING IS USUALLY
BASED ON A STATISTICAL (OR REPRESENTATIVE) SAMPLE BASED ON THE NUMBER
OF TRANSACTIONS (SIZE OF THE POPULATION). BECAUSE OF THE LARGE VOLUME
OF TRANSACTIONS PROCESSED DAILY BY THE COAST GUARD, A SUBSTANTIVE
TESTING SAMPLE CAN GET VERY LARGE (INTO THE THOUSANDS). OTHER TYPES
OF SUBSTANTIVE PROCEDURES THAT THE AUDITOR CAN PERFORM INCLUDE RATIO
ANALYSIS, ANALYTICAL PROCEDURES, AND THIRD PARTY CONFIRMATIONS.
	E. IF YOU ARE LOOKING FOR ADDITIONAL INFORMATION ON FINANCIAL AUDIT
READINESS, PLEASE GO TO THE CG PORTAL PAGE FOR THE OFFICE OF
FINANCIAL MANAGEMENT TRANSFORMATION AND COMPLIANCE (CG-85) AT
HTTPS://COLLAB.USCG.MIL/LOTUS/MYQUICKR/CG-85-OFFICE-OF-FINANCIAL-TRAN
SFORMATION
(NOTE: THIS URL IS IN LOWER CASE).  THERE, YOU WILL FIND INFORMATION,
TRAINING MATERIALS AND LINKS TO OTHER AUDIT RELATED RESOURCES UNDER
THE "AUDIT BASICS" TAB.
5.  MS. MARGO SHERIDAN, DIRECTOR OF FINANCIAL OPERATIONS/COMPTROLLER
SENDS.
6.  INTERNET RELEASE AUTHORIZED.