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Translating Between The Auditor and the Field Perspective.

In Fiscal Year (FY) 2018, the Air Force completed its first full financial statement audit. A full financial statement audit includes all financial transactions (e.g., military equipment purchases, real property renovations, civilian and military payments, contractor invoices, etc.), and underlying processes and systems supporting those transactions.

This was a significant step forward and it could not have been accomplished without the participation of many communities beyond financial management (FM) to include logistic and acquisition, and the operational units across the Air Force major commands and bases. Following the FY 2018 audit, the Office of the Assistant Secretary of the Air Force for Financial Management and Comptroller (SAF/FM) gathered feedback from those Involved in the audit. One clear lesson learned is that FM and audit language most commonly used to explain the Financial Improvement and Audit Remediation (FIAR) program does not easily translate to everyone. Moving into FY 2019, one area of focus is to more clearly define common audit terms as they relate to mission-oriented personnel, so those individuals are better positioned to help achieve success for the FIAR program.

Even something as straight-forward as what constitutes overall success for the FIAR program cannot be taken for granted. Those In the FM community know the purpose of FIAR is to support America's Service men and women in carrying out their missions, while ensuring we are appropriately managing the resources entrusted to us by the taxpayers to accomplish that goal. Success will ultimately be demonstrated by our ability to progressively remediate audit findings, sustain the fixes, and obtain an independent unmodified audit opinion on the Department's financial statements. However, this audit language does not resonate with Airmen in the field. When speaking with them, we should say the auditors need to see documented evidence of the actions we take to account for transactions and assets, so they are confident our financial statements are accurate. This will allow the Airmen to recognize and embrace the important role they play in the audit.

The following examples help illustrate how we can do this. One is a simple variation of the language used to explain existence and completeness (E&C) testing. The second is a more detailed example focused on Air Force munitions.

(1) Auditors review individual financial statement line items by testing the underlying processes and transactions behind those balances. For example, the Air Force reported $98.5 billion of military equipment assets on its financial statements. We know the auditor will perform E&C tests to confirm that amount. Although someone from a non-FM background could likely determine the meaning of E&C testing, if we clarify up-front that E&C testing simply means the auditor needs to conduct a floor-to-book and book-to-floor inventory, it shows our understanding of the field's perspective and terminology. This small nuance can establish more open communication, and help them prepare to lead the auditor through a successful site visit.

(2) Despite the differing levels of understanding of the auditor's focus, the Air Force demonstrated exceptional accountability of Air Force-held munitions during the 2018 financial statement audit. The Air Force reported approximately $24 billion of conventional munitions assets; $7 billion of which were held by the Army. The stockpile includes high-quantity, low-dollar value items, such as pistol and rifle cartridges, to very expensive air-to-air and air-to-ground ordnance. These assets are purchased in two separate appropriations--Procurement of Ammunition, Air Force, and Missile Procurement, Air Force.

To test these financial statement line items, the auditor visited nine Air Force sites focusing primarily on high-dollar value assets. At some bases, the materiality threshold--translated as minimum dollar value--was set at $10,000; at others, it was set at $25,000. Our auditor tested 9, 345 line items containing over 5.1 million individual assets valued at $3.25 billion. Their samples were drawn from the Air Force munitions system of record, Combat Ammunition System. The auditor then conducted floor-to-book and book-to-floor testing. They noted only one exception, an ammunition box had an incorrect serial number written on the asset tag.

These excellent outcomes were the result of the culture of accountability and dedication to the mission demonstrated every day by the Air Force munitions personnel, without necessarily knowing and understanding common audit terms. Air Force munitions squadrons conduct an annual 300 percent Inventory. A100 percent count is taken twice a year, usually in March and September, and a 10 percent count is taken in each of the remaining 10 months. The few discrepancies noted during an inventory are quickly investigated and remediated by a munitions team member who did not perform the original count, and asset movements are validated by supporting documentation. FM would refer to this as the execution of a strong internal control program, but the munitions team members apply this level of precision because they are focused on delivering munitions to the warfighter both safely and timely. Regardless of how either community refers to these efforts, they are helping the Air Force drive toward a successful audit.

Munitions serves as one of many positive highlights of our FY 2018 audit efforts and we anticipate further success during the FY 2019 audit. To realize this improvement, we need to focus on intentionally breaking down communications barriers between the different communities within the Air Force. There is no question our men and women in the field are focused on executing their daily responsibilities to achieve mission success. As we begin the second year of the audit, we intend to continue to help them understand how their daily responsibilities also impact the financial statements and the success of the audit.

Dr. Lola Fawole

Dr. Lola Fawole is the Director of Financial Statements Audit and Remediation with the office of the Assistant Secretary of the Air Force for Financial Management and Comptroller (SAF/FMF). She is responsible for managing the financial statements audit and working closely with Air Force key Stakeholders, Service Providers and Independent Public Accountants to remediate audit findings and improve the integrity of financial reporting. She previously worked at the Office of the Undersecretary of Defense Comptroller overseeing the production of the DoD Agency Financial Report. Dr. Fawole is a member of the ASMC Washington Chapter.

John Smart

John Smart, CPA is a Branch Chief for the Financial Statements Audit and Remediation Directorate with the office of the Assistant Secretary of the Air Force for Financial Management and Comptroller (SAF/FMF). He works to ensure that the Air Force's $191 billion portfolio of Mission Critical Assets are properly reported on the Balance Sheet. He has been with the Air Force compiling financial statements and implementing the audit readiness plan for eight years. He previously worked at the Department of Veterans Affairs. John is a member of the ASMC Washington Chapter.
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Author:Fawole, Lola; Smart, John
Publication:Armed Forces Comptroller
Date:Mar 22, 2019
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