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The Single Auditor Approach. USACE's Journey Toward Complete Auditability.

In April 2017, the Department of Defense (DoD) Deputy Chief Financial Officer (DCFO) approved the U.S. Army Corps of Engineers (USACE) to undertake a unique approach to auditing the Military Construction (MILCON) funds entrusted to USACE by the Army, Air Force, and other DoD agencies (hereafter referred to as "USACE DoD stakeholders," or just "stakeholders"). With this approval, the single auditor approach (SAA) was born.

This article will take you on a fascinating journey starting with USACE receiving its first MILCON sub-allotted funds unmodified (clean) opinion, for the Defense Logistics Agency (DLA), and the plan for Fiscal Year (FY) 2018 to start the auditing of each USACE DoD stakeholder. By the end of this article, you will understand USACE's unique approach to auditing and how it is a win for all DoD audit efforts.

USACE Military Programs MILCON Construction Process

USACE is one of the DoD construction agents designated by 10 U.S.C. [section]2851(a) and DoD Directive 4270.5. As a construction agent, USACE has been given the programmatic responsibility and financial accountability over all construction projects for our many stakeholders. With this responsibility USACE has determined the most effective way to manage this large program is by requiring all funding to be provided via sub-allotment. The sub-allotment process is a financial process where our stakeholders send a Funding Authorization Document (FAD), which is loaded into our Corps of Engineers Financial Management System (CEFMS), and is treated the same as our Congressional provided Civil Works appropriations. Because the funds are recorded as direct funds, USACE becomes not only the fund holder, but also assumes responsibility for the audit of these funds. Each USACE DoD stakeholder is assigned a national program manager. This top level management ensures all construction projects are completed on-time, within budget, and in accordance with USACE policy.

USACE Civil Works Audit History

USACE is a unique organization with two vastly different major mission areas. One is the Military Programs Directorate, while the other is the Civil Works Directorate. The Civil Works Directorate consists of three mission areas: commercial navigation, flood and storm damage reduction, and aquatic ecosystem restoration. The Civil Works Directorate is funded by the Energy and Water Development Committee, and is directed by the Office of Management and Budget (OMB) to prepare standalone audited annual financial statements. The Civil Works Directorate has received ten consecutive unmodified audit opinions from two independent public auditors (IPAs). Our time-tested approach to audit success is the basis for the SAA and one of the key components that led to approval from the DoD DCFO.

The Single Auditor Approach

As each USACE DoD stakeholder was going through the audit readiness phase we realized we would be subject to multiple audits by multiple IPAs. So we came up with the idea of a single auditor. The basis for SAA is one auditor will audit both the USACE Civil Works financial statements and also the newly created financial statements for each stakeholder. In our minds, this was a no-brainer. We get to ensure our Military Programs Directorate sub-allotment process would be preserved, and we would need to interact with only a single auditor. The SAA begins at the typical audit start point of producing and delivering a reconciled universe of transactions to the IPA. During the first nine audits, USACE has focused on providing only a single universe of transactions population for all Civil Works appropriations. Now, however, under the SAA, we must provide a population for each stakeholder. Once the universes of transactions are provided, the process accelerates into full swing with all three phases of the audit process--planning, testing, and reporting. After all three phases of the audit are completed successfully and USACE receives an unmodified opinion, the IPA will prepare multiple opinion reports. After the DoD Inspector General has completed its review of the IPA audit work and opinion reports, they will provide an endorsement, which is added as part of the opinion report package. Finally, the opinion report package is transmitted to each USACE DoD stakeholder to be included in their overall opinion report.

The Advantages

The two major advantages of the SAA are the ability to use our proven auditing approach, and the need for only a single Government Accountability Office (GAO) Federal Information System Controls Audit Manual (FISCAM) audit.

The ability to use our proven auditing approach to all three phases of a financial audit (planning, testing and reporting) is a must for consistency in providing supporting documentation and talking to the IPA. During the planning phase, if the SAA were not approved, USACE would have to host multiple planning visits and conduct process reviews for each IPA to include individual trips to our USACE Finance Center (UFC), located in Millington, TN. The rationale behind the multiple visits is that IPAs work independently from one another to formulate their own audit plans, and therefore, attempting to schedule a single planning visit at either a USACE Field Operating Activity (FOA) or the UFC would simply not work. But, under the SAA, USACE would have the ability to schedule one planning visit related to business processes and internal controls at a FOA and another one at the UFC. After the planning phase we turn our attention to the testing phase. Since FY 2006, USACE has developed time-tested sample checklists to provide our FOAs with a list of exactly what documentation is required to support each possible transaction within CEFMS. These checklists are one of the reasons USACE has been able to sustain audit success over the past ten years. Therefore, having to develop numerous checklists for each auditor based on their unique auditing plan would have been a tremendous challenge for USACE and could have led to audit failure due to our potential inability to provide timely supporting documentation. The last phase is the reporting phase. Under the SAA, USACE will work with DFAS to load our reconciled and audited trial balances directly into the Defense Department Reporting System (DDRS) to be used during compilation of our USACE DoD stakeholders' financial statements, eliminating the reconciliation issues with the USACE trial balances and DDRS.

The second advantage of the SAA is related to the GAO FISCAM audit. This annual test is required as part of the financial audit, and with a single auditor, USACE would require only one test. If the SAA were not approved, USACE would have either had to contract (at an additional cost to USACE) for a Statement on Standards Attestation Engagement Number 18 (SSAE18) report, or be subject to redundant FISCAM tests by multiple IPAs to satisfy the audit requirement.

The FY 2017 Defense Logistics Agency Audit

DLA was our initial stakeholder to use the SAA. During the planning phase, USACE was able to schedule one visit at an FOA that was working on multiple DLA projects and had a robust Civil Works program. Moving to the testing phase, USACE started with beginning balances. Based on the USACE IPA's analysis of the material balances within the DLA trial balance, the IPA decided to test four material areas. These areas were the Construction in Progress (CIP) balance (largest balance on the DLA Financial Statements), undelivered orders (UDOs), transfers out based on DD1354's provided to the land holding commands within DoD, and Funds Balance with Treasury (FBwT). Beginning balance samples are very large and in the case of CIP and UDO testing, this meant most sample packages, to include follow-up documentation, were well over 1,000 pages, with some reaching 10,000 pages. This testing approach was time consuming and more difficult than our normal process under the Civil Works audit, but the FOA's and the UFC came through, doing it within an extremely short timeframe, and during the fiscal year end crunch time.

After beginning balance testing was successfully completed we transitioned to current year testing. Using our checklists (with some modifications for the SAA) we cruised through this phase. However, we did have some first-year audit issues related to transfers out and UDO's, which will always be a challenge during a first-year audit.

As current year transaction testing was completed with excellent results, the UFC loaded our CEFMS trial balances into DDRS and prepared the DLA financial statements and notes. Before they were able to prepare the DLA financial statement and notes, the UFC and DFAS worked tirelessly to create a separate responsible work area (RWA) for the CEFMS trial balances within DDRS. Although this task proved to be difficult, both DFAS and the UFC, working as a team, accomplished the goal, and the DLA financial statements and notes were created. The final phase in any audit is, of course, the audit results and report. For the FY 2017 DLA audit, USACE was delighted to report an unmodified opinion to the senior leaderships at USACE and DLA.

The FY 2018/2019 CFO Audit Plan

With all of the lessons learned during the FY 2017 DLA audit, USACE is now ready to tackle the rest of our stakeholders. Our goal is to get the rest of USACE an unmodified opinion over a two-year time span. In FY 2018, USACE will work to validate all of the material balances for our remaining stakeholders, and obtain an unmodified audit opinion for Army MILCON. After completing the Army MILCON audit, USACE will end the year working with our IPA to validate the ending balances for all other stakeholders. This testing will put USACE in an excellent position moving into FY 2019.

Beginning in FY 2019, we will work with DFAS to set up additional RWA's within DDRS to input more audited CEFMS trial balances directly into DDRS. If this plan goes well, and we can produce auditable financial statement and notes for all USACE DoD stakeholders, we will have achieved our goal of complete auditability within USACE. This will bring the rest of USACE into audit sustainability mode for the foreseeable future.


All of the success over the past 10 years and our anticipated future success with the SAA is the result of the dedicated and hardworking individuals in our FOAs. They provide thousands of pages of supporting documentation, answer follow-up questions, host site visits, and ensure USACE internal controls are sound. Also responsible for our success is the UFC, which processes millions of transactions, prepares financial statements and notes, and maintains CEFMS, the best financial management system within the federal government. Finally, this success does not happen without the total support from the great senior leadership team within USACE. From the Commanding General on down, the USACE senior leadership team provides us with its unwavering support and tools to not only achieve our audit goals, but to exceed them.

William L. Holtzman

William L Holtzman is a senior accountant at Headquarters, U.S. Army Corps of Engineers (USACE) within the Directorate of Resource Management. He is currently the Program Manager for the USACE Civil Works Financial Statement Audit presiding over ten consecutive "clean" opinions to include the "clean" opinion for the Defense Logistics Agency Military Constructions funds sub-allotted to USACE. William resides in Columbia, Maryland with his wife Therese and has two kids Rachel and William.
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Author:Holtzman, William L.
Publication:Armed Forces Comptroller
Date:Mar 22, 2018
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