In fiscal year 2015, DLA asserted audit readiness for its financial processes over its working capital fund, general fund, and transaction fund.
The Independent Public Accountant Ernst & Young arrived in August 2016 to begin conducting an audit of DLA’s financial records for FY17. The FY17 and FY18 audit has identified weaknesses and common themes which led to DLA receiving a disclaimer of opinion on its financial statement audit.
The disclaimer is a common result in the early stages of any audit, especially an organization as large and complex as DLA. The disclaimer confirmed that the agency was unable to provide the evidentiary matter, or records, required for a “clean” audit opinion.
In response to the number of audit findings, DLA Director Army Lt. Gen. Darrell Williams issued an Operation Order to create the Audit Task Force. The mission of the task force is to coordinate, integrate, and synchronize audit efforts across the agency.
Led by Navy Rear Adm. Deborah Haven, director of DLA Joint Reserve Force, and staffed with 40 employees from across the agency including DLA Energy, the task force is the principal audit advisor to the director. Additionally, the task force will manage the audit, prioritize efforts and stand up a comprehensive and integrated Enterprise Risk Management and a Management Internal Control Program.
“It is important that the American people have confidence in our management of every taxpayer dollar,” Williams said. “DLA is committed to achieving a clean audit opinion for all three of its activity funds, making measurable progress every year.”
“As an agency, we made strides last year in our audit journey, and there is still plenty to accomplish,” Haven said.
With the task force established, DLA is positioned to build on its past successes while leveraging lessons learned to reach its goal of achieving unmodified opinions for its financial statements.
To give more perspective on DLA’s efforts to achieve an unmodified audit opinion, the lead for the DLA Audit Task Force Navy Rear Adm. Deborah Haven answered a few questions.
What are the agency’s efforts toward achieving a modified audit opinion of its financial statements?
In order to achieve a modified opinion for the working capital fund, general fund and transaction fund, the agency is addressing several key Notice of Findings and Recommendations including improving our standard operating procedures, internal controls, and producing evidential matter in a timely matter.
What are some of the challenges facing the Audit Task Force?
The challenges lie in the complexity and size of DLA. Large, geographically diverse workforce tend to work in silos. Our goal with the task force is to help execute the coordination, integration, and synchronization of the audit effort across the agency. We have established a team to view issue areas with a cross-functional lens. We hope this will improve our ability to think “big picture” and recognize the various handoffs both upstream and downstream.
The biggest challenge the task force will tackle this year is identifying and mitigating risks to our processes. The fiscal year 2019 audit noted that DLA lacked sufficient internal controls, and more specifically a comprehensive and integrated Enterprise Risk Management and Management Internal Control Program. In response, the agency has developed a robust enterprise focused A-123 Program to assess risks and design/implement internal controls. A key component of the program is the development of internal training to establish skills required for the proper identification and reduction of risks. Once implemented, internal controls will help us drive positive audit results, enhance our decision making process, and mitigate risk.
What are some of the lessons learned so far from the audit?
One key lesson learned is the need to think in terms of the end-to-end processes to identify root causes and address those causes with comprehensive corrective action plans. This includes having an understanding of the information technology and financial systems that drive the processes, as well as the ability to reconcile data from feeder systems. Only when we can visualize and understand the entire process will we be able to provide accurate and complete evidentiary matter to the auditors.
We also increased our communication and collaboration with customers and partners. At DLA, everyone is involved in the audit. This is literally an ‘all hands on deck’ effort for DLA, our partners, and customers.
What advice do you have for the DLA workforce regarding audits and the Ernst & Young auditors?
In terms of the audit, the task force is encouraging all DLA employees to get involved and ask questions. The audit does not only impact the financial role; it impacts every role here at DLA. We are encouraging everyone to be knowledgeable about the processes they support and to be able to identify internal controls associated with those processes. Additionally, the task force is working to help employees be prepared to provide evidential matter for every transaction.
In addition, the best advice I can give for interacting directly with the auditors would be to always:
- Be professional
- Be consistent and confident
- Don’t get defensive
- Answer the question completely and accurately
- Respond to requests in a timely manner
What are the agency’s biggest strengths/ weaknesses in the audit process?
DLA Director Army Lt. Gen. Darrell Williams always says the agency’s “secret sauce” is the people, and I couldn’t agree with him more. Over the last few months, I have been meeting with the Major Subordinate Commands to discuss the task force. I was consistently surprised by how engaged and knowledgeable our workforce is and how willing they are to assist.
Our biggest weakness is probably the current state of the end-to-end process documentation. In many cases, the processes cross over workstreams, geographical locations, and MSCs. While this is a challenge, it is one that DLA is addressing as part of its commitment to the audit.
Anything else you would like to add?
I am proud to lead the Audit Task Force and excited for what’s ahead!