In fiscal 2017, the Army will undergo a system-wide financial audit, with all of its commands, activities and units being audited by independent auditors to ensure the Army's financial statements accurately report its current and long-term financial condition.
And the Aviation and Missile Command will be ready.
During fiscal year 2015 and throughout fiscal year 2016, AMCOM employees are working to ensure that AMCOM reaches and maintains at least a 95 percent audit readiness rate in both its general fund and Army working capital fund accounts.
"AMCOM is significant to the Army's and the Army Materiel Command's success in the audit," said Eric Lampkin, AMCOM's audit readiness team lead and chief of the Audit Readiness Division, Resource Management.
"AMCOM is material to AMC financial statements. While AMCOM only has 1 percent of the Army's general fund, it manages 52 percent of the Army's working capital fund's inventory assets, which includes all the AMCOM-owned aviation and missile assets. In the Army working capital funds, as AMCOM goes, so, too, goes AMC and the Army."
The AMCOM G-8 (Resource Management) has the lead on audit readiness. About 250 employees are involved in the overall AMCOM effort -- conducting substantive testes of internal controls. The G-4 (Logistics) has oversight responsibility for property, plant and equipment.
"The Army methodology and approach to audit readiness has been adopted by AMCOM," said Bill Fowler, AMCOM's audit readiness program director in Resource Management.
"Once we adopted that methodology and approach, AMCOM pushed local audit readiness testing and developed other methodologies that were later adopted by other commands throughout the Army. The AMCOM audit readiness effort is a coordinated and collaborative effort of the Accounting and Audit Readiness Division of the G-8 and the Internal Review and Audit Compliance Office."
When AMCOM commander Maj. Gen. Jim Richardson took command in the summer of 2014, he set AMCOM audit readiness as an essential among his top priorities.
"Audit readiness is crucial to the future of AMCOM's sustainment and maintenance programs," Richardson said.
"Because of the significant amount of aviation and missile hardware that AMCOM sustains, this command is a major element in the Army's commitment to be ready for the 2017 audit. I am confident that AMCOM employees leading the audit readiness program will meet their goal. AMCOM will not only be ready for the 2017 audit but we will pass it with flying colors."
It was Richardson's leadership that actually got AMCOM employees focused on preparing for success in the 2017 audit.
"Although initially started under the prior AMCOM commanding general, Maj. Gen. Richardson should be credited with the progress of audit readiness at AMCOM," Lampkin said. "In 2012, we began training everyone in regards to audit readiness. But from there it took some time to build the synergy and to get management engaged in the process. Once Maj. Gen. Richardson made it a top priority, the mission of audit readiness became part of our everyday mission."
During the next year, AMCOM and its employees will undergo a series of examinations and audits in preparation for the independent audit in fiscal 2017. Undergoing an audit and obtaining an Unqualified Audit Opinion is essential to the future of the Army, AMC and AMCOM, as without a "clean" audit report Congressional support of future funding is jeopardized, Fowler said.
"If we aren't audit compliant by fiscal year 2017, we will continue getting funding for sustainment of current weapon systems, but there will be little Congressional support for funding new acquisition programs," said Fowler, referencing the Audit the Pentagon Act of 2015, which has been referred to the Committee on Armed Services in the Senate.
The 2017 audit is a result of the Chief Financial Officers Act of 1990, which mandates that all government agencies will undergo an independent audit. The Department of Defense is the only government agency that has not been audited as required by the CFO Act.
"The other federal agencies began in 1990," Fowler said.
"But the Department of Defense did not comply; now DoD is the only federal agency that has not undergone a financial audit. Congress got involved and required that the DoD would undergo an audit so that Congress can rely on the financial statements and track where funding is going. Congress set the new deadline as fiscal year 2017."
The audit will involve financial statements for the general fund, which provides administrative supplies, and for the working capital fund, which operates commercial-like and industrial facilities that provide essential services and support for readiness and sustainability of the warfighting forces.
Since 2010, the Army has put into place a Financial Improvement Plan that better prepares it for audit compliance. The plan includes GFEBS (General Fund Enterprise Business System), which standardizes business processes and transactional input across the Army; LMP (Logistics Modernization Program); and other enterprise resource planning systems. The systems keep track of more than a million transactions a day.
Some have argued that the DoD is too large for an audit. Others that the DoD needs to manage funding reports and financial statements just like other government agencies, regardless of its size.
"The arguments have been that DoD has too many systems, too many complex issues, too big of an operation to audit," Lampkin said. "But Congress said DoD will have auditable financial statements so that leaders can make good financial decisions."
And, Congress made that so with the National Defense Act of 2010 that stated an audit will be completed in fiscal year 2017 and established yearly audits after that.
"DoD has never gone through a financial audit. It is much different from Inspector General inspections, a compliance or an operational audit," Fowler said. "Very few people have seen an Army financial statement."
At AMCOM, employees were trained on GFEBS and LMP in 2012 prior to the implementation of both programs. Since then, audit readiness employees have evaluated internal controls for each business process and then tested those controls.
"Our internal review activity gives us a better basis of assertion that we are audit ready," Fowler said. "We select a sample of transactions randomly every month. We test controls and look for supporting documentation so we can validate the transactions."
In the logistics arena, those internal audits have been in place since 2010 and have been directed by employees like Larry Spring, a logistics management specialist in AMCOM Logistics, which has oversight of AMCOM plant, property and equipment management systems.
"When we first started the effort, we would take one or two audit test samples every few months and do an audit on those," Spring said.
"Now, we are getting anywhere from 20 to 30 test samples every month. Those samples require documentation. We use test samples to ensure we can produce reliable reports, verify where the inventory information comes from, pull supporting documentation and confirm the documented processes."
In the logistics arena, Spring is on an AMCOM audit readiness team that includes team lead Anita Harrison; deputy team lead Richard Lewis; Diedre Foster, who represents the Budgetary Authority; Tim Milligan and Eva Mears, who are in charge of real property auditing; and Darrell Stroy and Marsha Gill, who work with Spring on general equipment auditing. The team also includes employees working in Operation Material and Supply, the AMCOM Logistics Center and Internal Review; at AMCOM subordinate commands Corpus Christi and Letterkenny Army depots, and Test, Measurement and Diagnostic Activity; and all of AMCOM's hand receipt holders and employees from Resource Management.
As part of audit preparation, the team has reviewed equipment paperwork, email communications and inventory systems to ensure that all AMCOM property is properly accounted
for from cradle to grave. The effort involves all AMCOM employees involved in maintaining Army-owned property and equipment inventories.
Since 2010, there has been a significant improvement in AMCOM's audit readiness. While the general fund is audit ready, the working capital fund is still not quite at the high level where it should be yet.
"We have gone from 17 percent audit ready in 2010 to 85 to 87 percent audit ready," Spring said. "We are still working to attain that 95 percent audit ready goal.
"When Maj. Gen. Richardson made audit readiness one of his top three priorities, it really stepped up the game. He is very adamant that we get to 95 percent before fiscal year 2017 because that's when the Army says we will be ready for an independent audit from an outside agency."
Toward that end, fiscal year 2016 will see the involvement of Department of the Army auditors in the AMCOM audit test sample process.
"They will look at the property book and pull from the latest transactions for the month," Spring said. "We will make sure to get the requests for samples out to hand receipt holders (those employees who manage inventory for AMCOM's various divisions and offices). The DA auditors will use the Army Audit Data Repository to look at the supporting documentation provided for the samples."
Hand receipt holders will be required to provide documentation for the test samples. Those test samples that don't have proper documentation will be corrected, getting AMCOM even closer to the 95 percent audit readiness goal.
"The more samples they pull, the better picture they get of our audit readiness. They will be looking to see if there are trends of compliance or noncompliance," Spring said.
"Until we started doing this, we were not following regulatory guidance at the AMCOM or the Army levels. That's what the audit is all about. We are getting back to basics, and making sure that government equipment is being properly accounted for, that AMCOM employees are good stewards of taxpayer funds and that AMCOM manages its finances properly."
The key to the success of the AMCOM audit, Spring said, is ensuring that hand receipt holders have the training needed to properly document their office inventory.
"We understand that property accountability is not the primary duty of the hand receipt holders. Often, it's an added duty to their main work responsibilities," Spring said. "That's why it's important that we make sure they know what right looks like.
"It just goes back to training the workforce. When hand receipt holders understand what is required for them to do then they will provide the correct documentation."
Once AMCOM and the Army passes the fiscal 2017 independent audit, ensuring audit readiness will be an ongoing mission.
"This represents a paradigm shift in Army resource management," auditor Fowler said. "Now, there is an emphasis on producing verifiable financial statements needed to make good financial decisions at the departmental and national levels. This is a shift in how DoD does business. This is a shift to accountability of financial assets and internal controls."
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