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DISA identifies best practices from recent audit

The Defense Information Systems Agency (DISA) Working Capital Fund earned a clean audit result from an independent public accounting agency hired by the Department of Defense (DOD) Office of the Inspector General.

A clean audit provides Congress, the DOD, customers, stakeholders, and taxpayers the confidence to know that DISA is fiscally responsible and conducting business in a consistent manner.

According to Barbara Crawford, DISA's accounting and readiness division chief, the audit provides the agency's leadership and external stakeholders an assurance that the reported results reflect the actual execution of funds.

"Audits promote timely and reliable financial information for the benefit of making informed decisions about future acquisitions and resource allocations in order to efficiently and effectively [support the warfighters]," said Crawford.

DISA also received a modified audit opinion for its general fund, which comprises approximately 25 percent of the agency’s total budget. A modified opinion means certain levels of testing did not meet criteria, which, in the auditor’s judgement, would allow them to fully support the financial statement presentation. This audit opinion is still a significant accomplishment in the current environment, where audit readiness has been the focus. 

A successful audit requires documenting and understanding the end-to-end process of the business transaction life cycles. DISA was recognized for its best practices in:

  • Building a foundation through compliant processes.
  • Establishing a seasoned audit support team.
  • Standardizing reconciliations and analyses.
  • Building a staging library of key supporting documents.
  • Establishing an overall culture of readiness.

Crawford highlighted communication as a key component of a successful audit.

"It is very important to have direct interaction between the auditors and [the agency] to ensure the [agency] provides the audit agency with exactly what is needed and misunderstandings are resolved quickly," she said.

Preparation, effective internal controls, leadership involvement, lessons learned from past audits, learning from the experiences of other federal entities, and continuous improvement are essential for a successful audit outcome.

Sanna Sims, the DISA comptroller, who oversaw the audit, recently shared her thoughts on the audit with the agency’s senior leadership team.

"This has necessarily been a DISA-wide team effort, and is, therefore, a DISA-wide accomplishment." 

One example Sims pointed to is the focused DISA-wide team effort that reversed a material weakness identified in a previous audit related to property existence. 

"Every individual in every center in DISA played a role in this phenomenal achievement -- we located over 98 percent of property sampled around the world, and it was accurately valued on the financial statements."   

The 15-month long audit included a review of more than 70,000 artifacts, which revealed the condition of military assets and expenditures. DISA provided transaction details, monthly fund balance with Treasury reconciliations, funding authorization documents, capital property existence, aging schedules for accounts receivable and accounts payable, journal voucher coordination with the Defense Finance and Accounting Service (DFAS), elimination reconciliations with trading partners, policies, and evidence of internal controls testing.

"A clean audit result means that we - DISA - are auditable," said DISA Director Army Lt. Gen. Alan R. Lynn. "We understand where all the money is going. This is what right looks like in DOD."

DISA has two types of funding - general funds are appropriated by Congress and Defense Working Capital Fund (DWCF) is provided by customers to maintain operations. More than 75 percent of DISA's funding comes from DWCF and totaled $8.2 billion in the fiscal year 2017. The general funds totaled $2.76 billion for the same timeframe.

DISA is currently one of only seven DOD organizations to successfully accomplish a financial statement audit.

The DOD Inspector General contracts with independent public accountants in verifying that an agency's financial information is correct, as well as making sure the processes used to report and compile the financial data have sufficient internal control in place to reduce the chance of misreporting or fraud. The review of an agency's internal controls takes into account the paper trail of financial documents, the financial systems used to process the documents, and the separation of duties among the employees who handle the financial data.

The Chief Financial Officers Act of 1990 requires an annual audit of each of the 23 federal departments and agencies. DISA is in compliance with the congressionally-mandated September 2017 deadline, which states the Defense Department must declare itself "audit ready."

Posted Sept. 6, 2017