R 131336Z OCT 16
MARADMIN 542/16
MSGID/GENADMIN/CMC WASHINGTON DC PR//
SUBJ/FY17 MARINE CORPS FULL FINANCIAL STATEMENT AUDIT//
REF/A/NATIONAL DEFENSE AUTHORIZATION ACT (NDAA) OF 2010//
POC/DAVID GARZA/GS15/HQMC, PR, RFK/WASHINGTON DC/TEL: (703)604-4653/EMAIL: DAVID.R.GARZA(AT)USMC.MIL//
NARR/REF A/SECTION 1003 OF THE NATIONAL DEFENSE AUTHORIZATION ACT OF 2010 REQUIRES DOD AUDITABILITY BY 30 SEPTEMBER 2017//
REF B/GREEN LETTER No. 2-16 DATED 12 SEPTEMBER 2016//
GENTEXT/REMARKS/1.  Situation.  The information in this message announces the Fiscal Year (FY) 2017 full financial statement audit and delineates responsibilities to support audit efforts going forward as directed by reference A.  In August 2009 the Under Secretary of Defense (Comptroller)/Chief Financial Officer (CFO) announced the selection of the Marine Corps to serve as the pilot military service for an audit of the Statement of Budgetary Resources (SBR).  Since that announcement, the Marine Corps has undergone, two SBRs and three Schedule of Budgetary Activity (SBA) audits, each identifying successive improvements in the auditability and readiness of the Corps’ financial balance sheets.  As a result of the Corps experience and efforts, the Commandant accepted and asserted the challenge of preceding the other Services in undergoing a Full Financial Statement Audit to commence in FY2017.  On 23 September 2016, the DoDIG entered into a contract with Kearney and Company as the Independent Public Accountant (IPA) to perform the FY 2017 full financial statement audit for the Marine Corps.  This audit will focus on all financial statement balances, to include all balances carried forward for all fiscal years, Balance Sheet, Statement of Net Cost (SNC), Statement of Changes in Net Position, and SBR.  The period of performance is 23 September 2016 through 31 December 2017.
2.  Mission.  The Marine Corps will support the FY 2017 full financial statement audit in order to maintain compliance with reference A.
3.  Execution.
3.A.  Commander’s Intent.  The Marine Corps has a commitment to achieve and sustain favorable audit opinions, regarding the presentation of its annual financial statements.  The transparency afforded with auditable financial statements further demonstrates the commitment to responsible financial management and the prudent management of taxpayer provided resources.  Efficiencies gained through audit efforts will enhance the overall support to the Warfighter and ensure the effective use of funds received.
3.B.  Concept of Operations.  DC Programs and Resources (P and R) Risk and Compliance Branch (RFK) will continue to lead and carry responsibility for the financial statement audit efforts.  Commanders and stakeholders must be actively engaged to support an effort of this magnitude.  Commanders and stakeholders will assist DC P and R RFK personnel by providing subject matter expertise, developing and updating documentation (regarding processes/procedures), testing internal controls over business processes, developing/implementing Corrective Action Plans (CAPs), ensuring sustainment of past audit readiness/remediation efforts, and obtaining the documentation/evidence required by auditors to support audit samples.
3.B.1.  Audit Phases.  The FY 2017 full financial statement audit will consist of four major phases.
3.B.1.A.  Planning phase:  Audit standards require adequate planning and consideration, due to the size and complexity of the organization.  During the planning phase, the IPA and Marine Corps will conduct an entrance conference.  Following the entrance conference, the Marine Corps provides the IPA operational overviews, by business/process segment.  The universe of transactions and financial statement compilation process are also presented to the IPA.  The IPA documents internal controls and assesses the risk of misstatements within the organization’s financial statements.  The results of the planning phase determine the nature, timing and extent of audit testing.
3.B.1.B.  Internal Control phase:  During the internal control phase, the auditors review the Marine Corps’ Process Cycle Narratives (PCNs) for each business process.  After review is complete, walkthroughs ensure the IPA has an understanding of the control points, potential weaknesses, and recommended corrective actions.  This phase assists the auditors in creating their internal control testing plan and helps them determine the amount of substantive testing samples required for the audit.  Commands can expect site visits from the IPA during this phase.
3.B.1.C.  Testing phase: During the testing phase, the auditors ensure financial statement account balances are supported by underlying documentation and analysis.  Stakeholders and commands can expect on-site testing and requests for source documentation to support beginning balances, compliance with applicable laws and regulations, internal controls, and substantive testing of individual transactions.  In addition, the testing phase requires “book to floor” and “floor to book” testing of assets, at the request of the IPA.  Marine Corps activities must fully comply and allow access to requested facilities, equipment, supplies, etc.
3.B.1.D.  Reporting phase:  The final audit report is developed and issued by the IPA.  This report provides the auditor opinion, documents all weaknesses found in the Marine Corps internal control process, and includes all auditor Notification of Findings and Recommendations (NFRs).
3.C.  Tasks:
3.C.1.  DC P and R.  As the financial statement audit lead, DC P and R serves as the liaison between the Marine Corps and the IPA, to provide guidance and coordinate efforts for the FY 2017 full financial statement audit.  DC P and R also assumes the stakeholder responsibility and shall provide audit support, as outlined within the Coordinating Instructions, pertaining to budget-to-report and execution for the following financial processes:
3.C.1.A.  Internal controls over non-financial operations (ICONO).
3.C.1.B.  Internal controls over financial reporting (ICOFR).
3.C.1.C.  Internal controls over financial systems (ICOFS). 
3.C.1.D.  Command financial assessments.
3.C.1.E.  Monitor remediation of NFRs.
3.C.1.F.  Audit coordination and response.
3.C.1.G.  Fund Balance with Treasury (FBWT).
3.C.1.H.  Standard Accounting, Budgeting, and Reporting System (SABRS) Recording and Reporting Beginning Balances.
3.C.1.I.  Financial Statement Compilation and Reporting.
3.C.1.J.  Funds Authorizations.
3.C.1.K.  Funds Distribution.
3.C.1.L.  MILPAY Temp SDNs.
3.C.1.M.  Household Goods Bulk Obligations.
3.C.2.  DC, Installations and Logistics (I and L).  DC I and L is responsible to provide audit support, as outlined in the coordinating instructions , to DC P and R RFK and in the process areas that pertain to order-to-cash, procure-to-pay, acquire-to-retire, and plan-to-stock reporting categories.  Additionally, DC I and L shall provide audit support for the following business segments:
3.C.2.A.  Military Standard Requisitioning and Issue Procedures (MILSTRIP), which includes supply requests, fuel purchases, and subsistence-in-kind orders.
3.C.2.B.  Inter and intra-agency work orders.
3.C.2.C.  Contracts.
3.C.2.D.  Government-wide Commercial Purchase Card (GCPC).
3.C.2.E.  Transportation of Things (TOT).
3.C.2.F.  Printing and reproduction.
3.C.2.G.  General property.
3.C.2.H.  Operating Materials and Supplies (OM and S).
3.C.2.I.  Environmental liabilities.
3.C.2.J.  Real property.
3.C.2.K.  Military equipment.
3.C.2.L.  Miscellaneous payments.
3.C.2.M.  Internal Use Software.
3.C.2.N.  Locate equipment and support data/documentation for auditor sample requests.
3.C.2.O.  Suspense Accounts Programs – Recycling, Agricultural out lease, Forestry, Trademarks.
3.C.3.  DC, Manpower and Reserve Affairs (M and RA).  DC M and RA shall provide audit support, as outlined in the coordinating instructions to DC P and R RFK and in the execution of all things that pertain to hire-to-retire.  Additionally, DC M and RA shall provide audit support in the following business segments:
3.C.3.A.  Military pay and entitlements.
3.C.3.B.  Civilian pay and entitlements.
3.C.3.C.  Transportation of People (ToP), to include but not limited to civilian, active duty and reserve, Temporary Additional Duty (TAD), and Permanent Change of Station (PCS) travel.
3.C.4.  Director, C4.  The Director C4 shall provide audit support to DC P and R RFK and in the execution of the following business segments:
3.C.4.A.  Testing and evaluation of financial information systems.
3.C.5.  Commanders.  Commanders shall provide audit support, as outlined within the Coordinating Instructions, to DC P and R RFK and all other stakeholders in the tasks section of this message during the performance of the audit.  Commanders shall:
3.C.5.A.  Provide supporting documentation for all sampled transactions assigned to the command through the SharePoint Audit Response Tracking Application (SPARTA), which is a workflow management tool that provides a centralized location for all audit response efforts and requests for documentation.
3.C.5.B.  Provide on-site support for purposes of delivering timely clarification of information regarding outstanding samples that have been previously delivered to the auditors.
3.C.5.C.  Provide responses to auditor’s follow-up questions, residing within SPARTA.
3.D.  Coordinating Instructions:  All Commanders and Stakeholders, as outlined within the ‘Tasks’ section, in support of the FY17 full financial statement audit shall provide an audit response point of contact (POC), provide an operational overview brief for each business segment, update respective PCNs, evaluate effectiveness of internal controls, provide Provided by Client (PBC) responses, participate in process walkthroughs/understanding meetings, provide sample/follow-up responses, and develop and provide NFR concurrence/non-concurrence statements, if applicable.  The below assignments are intended to provide clarification and unity of effort.
3.D.1.  DC P and R RFK is responsible for the coordination of all administrative tasks related to the audit effort.  The list of administrative responsibilities includes the following:
3.D.1.A.  Coordinate the development of strategic guidance for financial statement audit requirements.
3.D.1.B.  Coordinate the review and catalog delivery of all PBC items required by the DoD IG and IPA.
3.D.1.C.  Coordinate discussions to explain various business processes with the DoD IG and IPA.
3.D.1.D.  Receipt and dissemination of all audit samples from the IPA via the DoD IG.
3.D.1.E.  Collection, review, and delivery of all audit samples supporting documentation to the DoD IG and IPA.
3.D.2.  DC P and R RFK will coordinate all communication with the IPA and DoD IG.  Stakeholders and field commands shall not directly communicate with the IPA or DoD IG without the presence of a POC from RFK.
3.D.3.  SPARTA is the sole method with which all documentation pertaining to the audit is collected, reviewed, and delivered.
3.D.4.  Additional assignments may be necessary due to emerging requirements of the Financial Improvement and Audit Readiness (FIAR) and audit execution efforts.  Any discrepancy or conflict will be addressed via the chain of command to ADC, P and R.
4.  Administration and Logistics.
4.A.  MARFOR/MRI level coordination meeting to be announced via SEPCOR.
4.B.  All audit related tasks to be issued via Department of Navy (DoN) Tracker.
4.C.  Specific onsite Subject Matter Expert (SME) support to be requested via DoN tracker.
4.D.  IPA site visits to be announced via SEPCOR.
4.E.  Identification of stakeholder and command audit POCs to be issued via DoN Tracker.
4.F.  SPARTA access instruction to be delivered via SEPCOR upon identification of stakeholder and command audit POCs.
4.G.  Audit Playbook to be issued by DC P and R RFK via SEPCOR.
4.H.  All incremental costs incurred from audit readiness or engagement efforts are to use special interest code (SIC) AD0 (ALPHA – DELTA – ZERO) when obligations enter the accounting system.  This includes, but is not limited to travel, materials, support contracts, and dedicated CIVPERS.
5.  Command and Signal.  Questions regarding this guidance should be directed to the HQMC points of contact listed above.
6.  Closing Remarks.  The road ahead, in terms of remediation, sustainability, and expanded scope will be challenging.  A key aspect to achieving these outcomes is sound financial management that informs commanders and stakeholders on decisions about where and when to apply resources to national defense requirements.  The Marine Corps remains committed to working with the DoN, DoD and other services and agencies to improve our financial management practices and audit readiness.  The resulting efficiencies will allow the Marine Corps to capitalize on the precious resources entrusted to us, while enhancing the institutional credibility necessary to maintain public trust.
7.  Release authorized by LtGen G. L. Thomas, Deputy Commandant for Programs and Resources.//