R 051305Z JUN 18
MARADMIN 311/18
FM CMC WASHINGTON DC
MSGID/GENADMIN/CMC WASHINGTON DC PR//
SUBJ/ FY18 MARINE CORPS FULL FINANCIAL STATEMENT AUDIT//
REF/A/NATIONAL DEFENSE AUTHORIZATION ACT (NDAA) OF 2010//
POC/MS. RENIE ELLIOTT/HQMC, PR, RFK/WASHINGTON DC/TEL: (703) 604-4678/EMAIL: RENIE.ELLIOTT@USMC.MIL, MR. GREG GOODRICH TEL: (703) 604-0139:  EMAIL: GREG.GOODRICH@USMC.MIL.
NARR/REF A//SECTION 1003 OF THE NATIONAL DEFENSE AUTHORIZATION ACT
2010 REQUIRED DOD AUDITABILITY BY 30 SEPTEMBER 2017//REF B//GREEN
LETTER NO. 2-16 DATED 12 SEPTEMBER 2016//REF C//SECDEF MEMO DATED
5 OCTOBER 2017//REF D//DEPSECDEF MEMO DATED 27 SEPTEMBER 2017//
REF E//SECNAV MEMO DATED 28 SEPTEMBER 2017//
GENTEXT/REMARKS/1.  Situation. The information in this message announces the Fiscal Year (FY) 2018 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, 2 SBRs, 3 Schedule of Budgetary Activity (SBA) audits, and a full financial statement audit in FY17.  The FY17 full financial statement audit was larger in scope than the previous audits and resulted in a “Disclaimer” of opinion and identification of 9 material weaknesses and 134 findings across multiple business processes and IT systems.  The Marine Corps is currently undergoing the FY18 full financial statement audit with efforts to show improvement in multiple areas and remediate some of the findings identified during the FY17 audit. On 1 January 2018, the DoDIG entered into a contract with Kearney & Company as the Independent Public Accountant (IPA) to perform the FY18 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 previous fiscal years for the Balance Sheet, Statement of Net Cost, Statement of Changes in Net Position, and SBR. The period of performance is 1 January 2018 to 31 December 2018.
2.  Mission. To support the FY18 full financial statement audit in order to maintain compliance with reference A.
3.  Execution.
3.A.  Commander’s Intent.  To achieve and sustain favorable audit opinions, regarding the presentation of Marine Corps’ 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&R) Risk, 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&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, 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 FY18 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 of PCNs are complete, the IPA conducts walkthroughs to gain 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, Programs & Resources. Lead the financial statement audit effort and serves as the liaison between the Marine Corps and the IPA.  Issue guidance and coordinate efforts for the FY18 full financial statement audit.  Coordinates all audit requests and shall provide audit support, as outlined within the Coordinating Instructions (paragraph 3.D), 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 Operations (ICOO).
3.C.1.C.  Internal Controls Over Financial Reporting (ICOFR).
3.C.1.D.  Internal Controls Over Financial Systems (ICOFS).
3.C.1.E.  Command financial assessments.
3.C.1.F.  Coordinate remediation of NFRs.
3.C.1.G.  Audit coordination and response.
3.C.1.H.  Fund Balance with Treasury (FBWT).
3.C.1.I.  Standard Accounting, Budgeting, and Reporting System (SABRS) Recording and Reporting Beginning Balances.
3.C.1.J.  Financial Statement Compilation and Reporting.
3.C.1.K.  Funds Authorizations.
3.C.1.L.  Funds Distribution.
3.C.1.M.  MILPAY Temp SDNs.
3.C.1.N.  Household Goods Bulk Obligations.
3.C.1.O.  Temporary Additional Duty (TAD) travel to include but not limited to civilian, active duty and reserve.
3.C.2.  DC, Installations and Logistics (I&L). DC I&L provide audit support, as outlined in the coordinating instructions and in the process areas that pertain to order-to-cash, procure-to-pay, acquire-to-retire, and plan-to-stock reporting categories.  DC I&L 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&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.2.P.  Transportation of People (ToP) - To include but not limited to civilian, active duty and reserve
3.C.3.  DC, Manpower and Reserve Affairs (M&RA). DC M&RA provide audit support, as outlined in the coordinating instructions in the execution of all things that pertain to hire-to-retire. DC, M&RA 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.  Permanent Change of Station (PCS) travel.
3.C.4.  Director, C4. Provide audit support in the execution of the following business segments:
3.C.4.A.  Testing, evaluation, and assessment of financial information systems.
3.C.4.B.  Assessment of USMC’s Risk Management Framework (RMF) implementation effort.
3.C.5.  Commanders. Provide audit support, as outlined within the Coordinating Instructions 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 within 48 business hours to auditor follow-up questions, residing within SPARTA.
3.D.  Coordinating Instructions:  All Commanders and Stakeholders, as outlined within the ‘Tasks’ section, in support of the FY18 full financial statement audit shall appoint a Senior Accountable Official (SAO) which will be responsible for concurring or non-concurring to Notification of Findings and Recommendations (NFRs) within three business days after receipt.  SAOs will also be required to appoint Accountable Officials (AOs) which in conjunction with the SAO will be responsible for concurring or non-concurring to observations within two business days after meeting/discussion with the IPA.  Stakeholder point of contacts (POC) shall provide an operational overview brief for each business segment, update respective PCNs, evaluate effectiveness of internal controls, submit timely Provided by Client (PBC) responses, participate in process walkthroughs/understanding meetings, and provide sample/follow-up responses.  The below assignments are intended to provide clarification and unity of effort.
3.D.1.  DC, P&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&R RFK will coordinate all communication with the IPA and DoD IG. Stakeholders and field command 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 to the IPA.
3.D.4.  Additional assignments may be necessary due to emerging requirements of the Financial Improvement & Audit Readiness (FIAR), audit, and audit sustainment efforts. Any discrepancy or conflict will be addressed via the chain of command to ADC, P&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&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 for the Marine Corps in terms of auditability will be challenging.  The actions needed to remediate and sustain financial, operational, and system improvement requires commitment from all Marines and civilians supporting the warfighter. A key aspect to achieving positive outcomes related to audit 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 sustain improvements made. 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 Lieutenant General Gary L. Thomas, Deputy Commandant for Programs and Resources.//