R 261909Z OCT 12 ALCGFINANCE 049/12 SUBJ: MONTHLY FINANCIAL AUDIT STATUS UPDATE - OCTOBER 2012 A. COMDT COGARD WASHINGTON DC 151825Z NOV 11/ALCGFINANCE 043/11 B. COMDT COGARD WASHINGTON DC 201615Z DEC 11/ALCGFINANCE 046/11 C. COMDT COGARD WASHINGTON DC 211622Z AUG 12/ALCGFINANCE 026/12 1. This is the thirteenth in a monthly series of ALCGFINANCE messages intended to improve financial audit communications and information sharing throughout the Coast Guard. 2. Current Status: A. Fiscal Year (FY) 2012 audit readiness effort is currently in its final phase. For more information on audit phases, see reference A. Many of you have been impacted by the FY 2012 audit, more than ever before in previous audits. Allow me to express my gratitude to you for your hard work and dedication during the FY 2012 audit. The Department of Homeland Security is on track to receive a favorable audit opinion on four of its five financial statements, successfully passing this level of scrutiny on a full scope audit for the first time since independent auditing began under DHS. This is due in no small part to Coast Guard-wide efforts and your hard work to improve financial management and increase our accountability to DHS and the public. B. As we finish up the FY 2012 audit and prepare to transition into the FY 2013 audit, please keep in mind that our new goal is the sustainment of our previous audit success. This can only be achieved through your collective hard work, diligence and attention to detail with respect to the Coast Guard's financial management and health. 3. Audit 101: A. We first introduced you to the concept of internal controls in our December 2011 newsletter, reference B. To reiterate, internal controls are activities within financial processes that are designed to prevent undesirable outcomes. They identify problems, reduce errors, and ensure the Coast Guard's financial processes are working correctly. While internal controls are often used to prevent waste, fraud and abuse, they also increase the effectiveness and efficiency of resources that are used. B. This month we will continue our focus on the legal history of internal controls in the Coast Guard, following up on last month's introduction to the Federal Managers Financial Integrity Act of 1982 (FMFIA). After the FMFIA, the most important law affecting the implementation of the Coast Guard's internal controls is the Department of Homeland Security Financial Accountability Act of 2004. C. During the first year of its existence, the Department of Homeland Security was the only federal cabinet department that was not included under the Chief Financial Officers Act of 1990. The DHS Financial Accountability Act of 2004 was passed by the 108th Congress to remedy this gap and extend the requirements of the CFO Act consistently across all parts of the executive branch, including DHS. D. The enactment of the DHS Financial Accountability Act served many important roles, among them to: (1). Bring the DHS Chief Financial Officer (CFO) under the requirements of the CFO Act of 1990. (2). Create the Office of Program Analysis and Evaluation within DHS. (3). Require the joint study of the costs and benefits of having DHS (and all other CFO agencies) obtain audit opinions of their internal controls. E. Most importantly for the Coast Guard, Section 4 of the DHS Financial Accountability Act requires the Secretary of Homeland Security to report on the performance and status of DHS (and Coast Guard) internal controls over financial reporting. This section makes explicit the requirement for internal controls and the testing, reporting and oversight of internal controls throughout all DHS agencies, including the Coast Guard, and reaffirms the FMFIA's basic requirements. 4. Monthly Audit Tips: A. Proper stewardship of Federal resources is a requirement of all military and civilian members of the Coast Guard, from the purchasing of Maritime Law Enforcement equipment to the expenditure of government travel funds on TDY trips. This month's audit tips will focus on Antideficiency Act (ADA) for financial management personnel at Coast Guard units. B. A detailed introduction to the ADA was provided in the August newsletter, reference C. The ADA makes it illegal for Coast Guard employees to authorize or make expenditures from (or obligate under) any fund beyond the amount already available in the fund. It prohibits employees from incurring financial obligations on behalf of the government before funds have been appropriated, and prohibits excess obligations/expenditures of an apportionment or reapportionment. C. Coast Guard employees working in financial management, including procurement/purchasing, should closely track funds to ensure that ADA violations do not occur. Funds tracking pursuant to the ADA includes asking: (1). Were expenditures or obligations made that exceeded the amount available for expenditure or obligation in an appropriation or fund? If so, reference 31 U.S.C. 1341(a)(1)(A) and (C), and DHS ADA Policy, Section 2.6, page 1. (2). Has there been an occurrence where a contract or obligation for payment of money was made before an appropriation was authorized by law? If so, reference 31 U.S.C. 1341(a)(1)(B) and DHS ADA Policy, Section 2.6 page 1. (3). Were expenditures or obligations made that exceeded either the amount of an apportionment or a lesser amount, if established by agency regulations (such as the allotment level)? If so, reference 31 U.S.C. 1517(a) and DHS ADA Policy Section 2.6, page 1. D. If a Coast Guard employee can answer yes to any of the three above questions, they are potentially in violation of federal law and internal Coast Guard/DHS Policy. Compliance with the ADA is crucial to both the core values of the Coast Guard and our ongoing audit success. All funds should be tracked by financial managers in order to ensure that funding is used for the purpose for which it was appropriated and approved by Congress. E. For additional audit related materials, view the 'Audit Readiness Training' folder at the CG-85 portal site (https://collab.uscg.mil/lotus/myquickr/cg-85-office-of-financial-tra nsformation/documentation-support-matrix). 5. Ms. Margo Sheridan, Director of Financial Operations/Comptroller, sends. 6. 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