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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
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•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
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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
