the financial compilation process demystified - pdi...

The Financial Compilation Process—

Demystified

ASMC PDI 2017-Workshop #66

Learning objectives

Fredrick Carr, CPA, CDFM-A, DFMCP3,

Associate Deputy Assistant Secretary for Financial Operations,

Office of the Assistant Secretary of the Air Force (Financial

Management and Comptroller)

Michele Gaw, CPA, CGFM, DFMCP3,

Director, Accounting Standards and Reporting, Defense

Finance and Accounting Service

Dianne Guensberg, CPA, CGMA,

Managing Director, Grant Thornton, Public Sector Audit

Introductions

Learning objectives

To understand:

• How to plan and implement an

effective and efficient compilation

process

• The role of Component and

DFAS, how and what they

review, and key issues they find

• The role of OMB and Treasury

Workshop Objectives

Agenda

• What is a compilation?

• Beginning the process—Initial recording of

transactions, the role at the base/operations level,

importance of FIAR

• The process at DFAS/Generation of Trial Balance– DoD Financial Reporting Overview

Agenda (Continued)

• Building the AFR from the Trial Balance—

developing the presentation and disclosures and

Management’s Discussion and Analysis (MD&A)

• DoD-wide review; addressing OMB and Treasury

questions

• Questions?

Learning objectives

• Compilation:

"The action or process of producing

something, especially a list, book, or report, by

assembling information collected from other

sources."Source: Oxford English Dictionary

When producing financial statements,

management asserts that the statements are

accurate and fall within the guidelines of

general accepted accounting principles

(GAAP).

Background—

What is a compliation?

Background—

Management's Assertions and Internal Control over

Financial Reporting

-

– Management establishes a system of internal

controls to prevent or detect and correct, in a

timely manner, material misstatements at the

financial statement and relevant assertion

levels.

Beginning the process—

Financial Statement Assertions

– Existence or Occurrence

– Completeness

– Rights and obligations

– Accuracy/valuation or allocation

– Presentation and disclosure

Background—

What is Internal Control?

• Internal Control is a process that helps an entity

achieve its objectives—meeting the financial

statement assertions. It is the first line of defense

in safeguarding public resources.

• Internal control consists of five components:

– Control Environment

– Risk Assessment

– Control Activities

– Information and Communication

– Monitoringhttp://GAO.GOV/Greenbook

http://gao.gov/Greenbook

Beginning the Process—

• Initial recording of transactions:

– The role at the base/operations level

– Importance of FIAR

The process at DFAS

• From Transactions to Trial Balance to Financial

Statements

DDRS Budgetary Overview

3/22/2012 Integrity - Service - Innovation 12

Future

Trial Balances (TB) (Daily & Monthly)

BudgetaryReporting (B)

Trial Balances

AFS StatementsStatement of Budgetary Resources (SBR)Balance Sheet Statement of Net CostStatement of Changes in Net PositionSchedule of Budget Activity (SBA)Footnotes

External DoD Reporting• FECA• Imputed Financing• Judgment Fund• Employee Benefits Expense

Internal DoD Reporting

• Capitalized Assets

• Contingencies

• Deferred Maintenance

• Environmental Liabilities

• Military Equipment

• Etc….

DCAS

Cash

PBAS & PBIS

Funding

Audited Financial Statements (AFS)

DataCollection

Module (DCM)

GFRS

Budgetary Reports SF 133 FMS 2108 Schedule of Transfers and

Reappropriations AR(M) 1002 AR(M) 1307 AR(M) 725

Management Reports•Balance Sheet•Statement of Budgetary

Resources•Service Specific Reports

ColumbusGF & DWCF

Various

DefenseAgencies

SABRSGF&DWCF

MarineCorps

ClevelandVarious

Navy DWCF

Current

GAFS-RGF&DWCF

Air Force

NavyERP

Navy

DAI

DefenseAgencies

CABS

JCS

STANFINS,SOMARDS,

CEFMS

Army GF

STARS -HCM,STARS -FL

Navy GF

DISA WAAS, DFAS WAAS,DoDEA WAAS

DefenseAgencies

Budget Execution

OSD(C)

Executive Dashboard

OSD(C)

CORASDDRS DDRS

DDRS

LMP

Army DWCF

CCSS,SIFS,

STANFINS

Army DWCF

MSGP

Trust Fund

Current

EFD

EBS

DLA

(DoD COA/SFIS)(DoD COA/SFIS)

OBIEE

GTAS

TREASURY

SCES

FMS

CEFMS

COE

DEAMS

Air Force GF

FAMIS

DISADWCF

DIFS

FMS

ER

PLegacy

Dire

ct imports

GFEBS

GCSS

Army GF

Adjustment (GTAS)

ICe

DDRS

DDRS

STATE DEPTTransportation

Other Departments

Classified(Masked)

DefenseAgencies

EBAS

WHS

Step 1: DDRS Pre-Processing


DDRS AFS Service AFS AFRDoD AFSDDRS BEPre-processing

Required Actions*

• Identify any Feeder Trial Balances or Feeder GLACs that need to be built

• Correct or exclude all necessary conditions before user submits

* Not all submitters use Pre-Processing

Required/Critical Attributes

• Feeder file trial balances

• Feeder file GLACs

• Required feeder LOA elements identified on next slide (58 of 70 SFIS elements)

• For elements not received, DDRS derives value based on business rules.

Overview

• DDRS is SFIS complaint and requires General Ledger Trial Balance Submission

• Pre-processing reads in field accounting input files and converts to SFIS form

3-6th WDPre-Processing

NFR

6th WDCARS Final

Integrity - Service - Innovation 14

SFIS 10.0 Maintenance – DDRS Requirements

Appropriation Account

Information (19)

Department Regular Code (A1)

Department Transfer Code (A2)

Main Account Code (A3)

Sub-Account Code (A4)

Apportionment Category Code

(A5)

Receipt Indicator

Sub Classification Code

Reimbursable Flag Indicator (A9)

Fund Type Code (A10)

Authority Type Code (A12)

Availability Time Indicator

(A13)

Borrowing Source Code (A14)

Program Report Code (A17)

Year of Budget Authority Indicator

(A19)

Beginning Period of Avail. (A27)

Ending Period of Avail. (A28)

Availability Type Code (A29)

Program Year (A30)

Apportionment Category B

Program Code (A26)

Transactional

Information (23)

USSGL/DoD Account Code (T2)

Debit/Credit Indicator (T3)

Begin/End Indicator (T4)

Transaction Effective Date

Transaction Post Date

Transaction Amount (T7)

Exchange/Non-Exchange Indicator

(T9)

Custodial/Non-Custodial Indicator

(T10)

Currency Code

Country Code

Entity/Non-Entity Indicator (T13)

Covered/Uncovered Indicator (T14)

Current/Non-Current Indicator

(T15)

Business Event Type Code (BETC)

Security Cooperation Customer

Code (T21)

Security Cooperation Case

Designator (T22)

Security Cooperation Case Line

Item Identifier (T23

Prior Year Adjustment Code

(T24)

Organizational

Information (3)

Organization Unique

Identifier

Agency Disbursing

Identifier Code

Agency Accounting

Identifier Code

Trading Partner

Information (5)

Federal / Non-Federal Indicator

(TP1)

Trading Partner Indicator Code

(TP2)

Business Partner Number (TP3)

Trading Partner Main Account

(TP4)

Trading Partner Sub-Allocation

Holder Identifier (TP5)

Budget Program

Information (9)

Budget Activity Identifier (B2)

Budget Sub-Activity Identifier (B3)

Budget Line Item Identifier (B4)

Object Class Code (B6)

Contingency Code

BEA Category Indicator Code (B9)

Program Code

Sub-Allocation Holder Identifier (B12)

Budget Allotment Line Item Identifier( B13)

Transactional

Information (23) (Cont’d.)

Credit Cohort Year (T25)

Budgetary Impact Indicator (T26)

Security Cooperation

Implementing Agency Code

(T27)

Product Service Code

Reduction Type Code (T29)

Cost Accounting

Information (11)

Funding Center Identifier

Cost Center Identifier

Project Identifier

Activity Identifier

Cost Element Code

Work Order Number

Transaction Quantity

Unit of Measure Code

Asset Unique ID

MEPR Code

Functional Area Identifier


Step 2: DDRS Budgetary Execution



Required Validations

Pass required DDRS-B reconciliations

GTAS

Pass GTAS edits in DDRS-B

Generate GTAS submission to Treasury

Certify GTAS submission

Required Actions

Reconcile funding

Reconcile Collections and Outlays to Treasury

Generate GTAS and Treasury Tie-Points

Process Corrective JV’s if needed

Generate BEX submission to OSD

Generate upload file to DDRS-AFS (quarterly)

Overview

• DDRS Budgetary Execution process produces : GTAS submission to Treasury and BEX file for OSD

• Critical to this process is TFM reconciliations

18th

GTAS Closes

6th WDCARS Final

6/12/2017 Integrity - Service - Innovation 166/12/2017 Integrity - Service - Innovation 16

Step 3: DDRS Audit Financial Statements



Required Actions

Manual Data Calls

FECA and Unemployment Compensations (DOL)

Employee Benefits and Imputed Financing (OPM)

Judgment Fund and Imputed Financing (Treasury)

Fiduciary (Treasury)

MOCAS Contingent Liability (DFAS)

Eliminations

Inter Agency trading partners relationships

Journal Voucher to agree with trading partner may be required


Data Calls Validations

Trading Partner Differences

All Standard and Section V Reconciliations

Treasury Report of Receivable to entity Public AR

Current/Prior year Statement and Footnote recons

Perform necessary work to clear variances as a result of the above reconciliations

Overview

• Final Consolidation point for DoD entities prior to DoD-wide Consolidation

• OMB reportable entities prepare full statements and footnotes for 3rd and 4th Qtrs

20th WDDoD Components Final

18th GTAS Close

6/12/2017 Integrity - Service - Innovation 176/12/2017 Integrity - Service - Innovation 176/12/2017 Integrity - Service - Innovation 17

Step 4: DoD Agency-Wide Financial Statements




Tie-Point Reconciliation

OMB Warrants

Treasury Trial Balance

Treasury Report of Receivable to DoD wide Public AR

AFR to GRFS Reclassified Statements

Overview

• Final Consolidation point in DoD prior to submission to Treasury and OMB for Federal Gov’t Consolidation

• Statements Prepared Quarterly but only submitted to Treasury and OMB for 3rd and 4th Qtrs

20th WDDoD Components Final

45th WDAFR Published

Required Actions

Government-Wide Elimination

Prepare Agency-Wide Footnotes

Prepare Agency-Wide Variance Analysis

To Prior Year Statements

Prepare DoD Material Difference Report

Reconcile Agency-Wide SBR to OMB SF133

Populate AFR Template for OSD review (4Q only)

Validate DoD balance is Government Wide Financial Reporting System (GFRS) (4Q only)

6/12/2017 Integrity - Service - Innovation 186/12/2017 Integrity - Service - Innovation 186/12/2017 Integrity - Service - Innovation 18

Step 5: Post-Final DDRS Reporting Activities



Required Actions

• DFAS provides DODIG disaggregated and consolidating DoD-wide Statements

• DODIG reviews the GFRS Closing package and required locked Statements

DFAS prepares following sections of the DoD AFR

Notes

Improper Payments

Required Validation

• AFR to GFRS reclassified statement reconciliation

Overview

• Annual Financial Report (AFR) is prepared

• Report includes DODIG opinion

37th WDIG Opinion on AFR’s

45th WDAFR Published


Overview of Consolidated Audit Strategy

19

Use the Work of Component AuditorsGroup Auditor to assume responsibility for or make reference to audit opinions of

each Component Auditor

Perform Independent Testing Group Auditor to perform internal controls and substantive

testing over activities & balances

Consolidated Financial

Statements

23% Budget15% Assets

(e.g. DLA, SOCOM, DISA)

DoD Designated Audits

Tier 2

ArmyGF & WCF

OMB Designated Entity Audits

Navy*GF & WCF

(*includes USMC)


Air ForceGF & WCF


Other Tier 1 Entities

(e.g. USACE, Military Ret. Trust Fund)


Tier 1 (72% Budget, 82% Assets)

AUD-IT UoT

Rec

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n

Tiers 3 and 4

Rec

on

cilia

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n

Eliminations

ArmyGF & WCF

Navy*GF & WCF

Air ForceGF & WCF

Other Tier 1 Entities

Tier 2 Entities Tiers 3 and 4 Entities EliminationsConsolidated

Footnote Schedule

Foo

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te S

ched

ule

s

DFAS will continue to prepare footnote narratives for Tier 1, Tier 2 and the DoD-Wide statements

Note: Elimination entries inside individual Tiers 1 and 2 Reporting Entities will be covered by their respective Component Auditors UTB to ATB

Reconciliation

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Intr

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Inte

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Elim

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ion

Uo

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Intr

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El

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oT

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/4

Elim

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Tier 34% Budget2% Assets

(e.g. WHS, DARPA, DTRA)

Mid-Tier Defense Agencies

Tier 41% Budget1% Assets

(e.g. DHRA, DSS, DFAS GF)

Smaller Reporting Entities

DoD-Wide Consolidated Audit Performed by DoD OIG


DoD Agency-Wide Audit Structure

Use the Work of Component AuditorsConsolidated auditor to assume responsibility for or make reference to audit opinions of

each component auditor

Perform Independent Testing Consolidated auditor to perform internal controls and substantive testing over activities &

balances

Tier 2 Tier 3 Tier 4Tier 1 (74% Budget, 82% Assets)

Army GF(TI-21)

Army WCF(TI-97)

Navy GF (incl. USMC GF)

(TI-17)

Navy WCF(TI-97)

Air Force GF(TI-57)

Air Force WCF(TI-97)

USMC WCF(TI-97)

USACE-CW**(TI-96)

Military Retirement Trust Fund**

Military Retirement Trust Fund Payment

Defense Health Agency (DHA)

• DHA-Contract Resource Management**

• DHA-Comptroller• DHA-Uniformed

Services University of Health Sciences

• SMA-Army• SMA-Navy• SMA-Air Force• SMA-National Capital

Region DoD Component Level Accounts**

U.S. Transportation Command

(USTRANSCOM)• Air Mobility

Command• Military Surface

Deployment and Distribution Command

• Military Sealift Command

• Cmd Staff• Defense Courier

Division• USTRANSCOM

Component Level

Medicare-Eligible Retiree Health Care

Fund (MERHCF)• MERHCF**• Payment to

MERHCF

Defense Information Systems Agency

• General Fund• Working Capital Fund

Defense Logistics Agency

• General Fund• Working Capital Fund• Strategic Materials

Defense Commissary Agency**

• General Fund• Working Capital Fund

U.S Special Operations Command

Defense Contract Audit Agency**

Defense Finance and Accounting Service,

Working Capital Fund**

Washington Headquarters Services

(WHS)• Office of the

Secretary of Defense (OSD)

• WHS• Pentagon

Reservation Maintenance Revolving Fund (including Pentagon Force Protection Agency)

• Building Maintenance Fund

• Department of Defense Test Resource Management Center

• Civilian Military Program

• U.S. Court of Appeals, Armed Forces

• Defense Legal Services Agency

Missile Defense Agency

Defense Security Cooperation Agency

Department of Defense Education

Activity

Defense Advanced Research Projects

Agency

Other TI-97 Funds Provided to the Army

by OSD

Chemical Biological Defense Program

Defense Contract Management Agency

Defense Threat Reduction Agency

Office of the Chairman, Joint Chiefs

of Staff (JCS)• JCS• National Defense

University

• Defense Acquisition University• Burden Sharing Account by Foreign Allies,

Defense• Other TI-97 Funds Provided to the Air Force

by OSD• Support for U.S. Relocation to Guam

Activities, Defense• Defense Human Resources Activity• Office of Economic Adjustment• Other TI-97 Funds Provided to the Navy by

OSD• Defense Security Service• Defense Technical Information Center• Department of Defense Office of Inspector

General• Department of Defense Education Benefits

Fund• Director, Operational Test and Evaluation• Defense Media Activity• Emergency Response Fund, Defense• Homeowners Assistance Fund, Defense• Military Housing Privatization Initiative• Host Nation Support for U.S. Relocation

Activities, Defense• Defense POW/MIA Accounting Agency• Voluntary Separation Incentive Trust Fund• Defense Technology Security

Administration• Business Transformation Agency• Defense Gift Fund• National Security Education Trust Fund• Defense Finance and Accounting Service,

General Fund• Component Level Adjustments• Agency-Wide Component• Defense Cooperation Account

Critical Audit Take Aways

Journal Vouchers

1. Define purpose

2. Support with transactions

3. Coordinated with component

Eliminations

1. Attributes reporting critical

Federal/non-Federal Attribute

Trading Partner

Prior Period Adjustments

1. Packages required and provided to OMB

2. Critical distinction between “correction of error” and “change of

accounting principles”


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