Field of Dreams Shaping Internal Controls & Process Remediation to Achieve Sustainable Financial Audit Success CDR COLIN CAMPBELL LCDR MIKE DANISH Touchstone.

Field of DreamsShaping Internal Controls & Process Remediation to Achieve Sustainable

Financial Audit Success

CDR COLIN CAMPBELL LCDR MIKE DANISH

Touchstone Pictures

2Touchstone Pictures

Previously On…

• Aligning Remediation & Internal Controls

• Internal Control Cycle

• Tools & Best Practices

• Roadmap to Success

www.uscg.mil/hq/cg8/cg845/treats

Agenda

• Context and messaging

• Remediation strategies

• Internal controls

• Customer focus

• Transition to sustainment

US Coast Guard

6US Coast Guard

“We have a clean opinion,

why do we have to change this?”

Audit is Proxy: Get House in Order

Independent confirmation that

• Financial statements are reliable

• Business processes are effective

• Organization complies with laws and regulations

“The audit means nothing to me.”

Financial Statements

Financial statements simply reflect how your organization is managed and run.

• Provide data needed to assess efficiency and effectiveness of operations

• Accounting standards reinforce accountability for assets and programs

“I can guarantee you my team is

doing it right.”

Processes

Activities that ensure that processes are working as desired, reduce errors, and identify problems as they occur.Management establishes; employees execute.

• Operations: pre-flight/under-way checklists, quality control checks on product lines

• Financial: funds check, approval signatures

• Systems: access controls

Unless you want the audit to be

an annual exercise in

compliance, you need effective

internal controls.

14US Coast Guard

Compliance

Auditors ensure compliance with applicable laws and regulations.

16US Coast GuardUS Coast Guard

Executive Focus

17

• Oversees coordination of annual financial statement audit activities• Validates, verifies, and reports to the Commandant

EMC-ICARB: Executive Management Council – Internal Controls/Audit Readiness Board

• Assists in overseeing and coordinating the annual financial statement audit• Reports remediation effort progress to the EMC-ICARB

SAT: Senior Assessment Team

• Develops corrective actions to address material weaknesses and significant deficiencies

• Coordinates and executes the planned remediation efforts

MAP: Mission Action Plan

• Promotes importance and value of internal control and accountability• Facilitates effective communication, coordination, monitoring, and execution

of internal control initiatives, including risk assessments

ICWG: Internal Control Working Group

US Coast Guard

US Marine Corps

Strategy

20

•Assessable Units

Scope

•Materiality

Size•R

oot cause, GAAP

Sustainable

•Asset focus, accounting mechanics

Balance

•Policies, procedures, controls

Controls

•Modernize financial/logistics systems

System

Lucasfilm

US Coast Guard

23

Organize your parts

1) Determine Scope

2) Perform Materiality

Assessment

3) Perform Risk

Assessment

4) Document Process and Procedures

5) Develop Testing Plan

6) Perform Test of Design

7) Perform Test of

Effectiveness

8) Evaluate Test Results

9) Report Results to

Management

10) Create Corrective Action Plan

11) Roll Forward and Monitoring

12) Statement of

Assurance

24

Internal Control Cycle

1) Determine Scope

2) Perform Materiality

Assessment

3) Perform Risk

Assessment

4) Document Process and Procedures

5) Develop Testing Plan

6) Perform Test of Design

7) Perform Test of

Effectiveness

8) Evaluate Test Results

9) Report Results to

Management

10) Create Corrective Action Plan

11) Roll Forward and Monitoring

12) Statement of

Assurance

25

Fails TOE

Fails TOD

High Risk

Internal Control Cycle

1) Determine Scope

2) Perform Materiality

Assessment

3) Perform Risk

Assessment

4) Document Process and Procedures

5) Develop Testing Plan

6) Perform Test of Design

7) Perform Test of

Effectiveness

8) Evaluate Test Results

9) Report Results to

Management

10) Create Corrective Action Plan

11) Roll Forward and Monitoring

12) Statement of

Assurance

26

Remediated

Internal Control Cycle

27

28

29

30

Risky Business

Internal Control Reporting

Coast Guard Commandant’s Assurance Statement

Assessable Organizational Elements (AOE) Assurance Statements

Compliance with Laws and Regulations Reliable ReportsEffective and Efficient

Operations

Internal Controls Over Operations (AOE)

CG-85

Information Technology General Controls (CG-6)

CG-6

Internal Controls Over Financial Reporting (CG-85)

Government Performance and Results Act Reporting (DCO)

32

One goal, many steps

Take-Aways

• Audit remediation = getting house in order

• Controls benefit everyone

• Senior leaders need to drive message

• Focus on the material issues

• Don’t go overboard

Take-Aways

• Set up an annual cycle

• Get the right information to process owners and to leadership

• Don’t speed through risk assessment and remember risk is a matter of perspective

• Champion successes but stick to high standard

Questions?

CDR Colin CampbellCG-845

[email protected]

LCDR Mike DanishCG-85

[email protected]

35