The Big Challenge for Audit Readiness Property Plant

The Big Challenge for Audit Readiness: Property, Plant and Equipment at the United States Coast Guard Margo Sheridan, CDFM, Comptroller, U S Coast Guard Presented to: RDML American Society of Military Comptrollers K. Taylor. Washington, | DHS CFO Brief | 25 JAN DC Chapter July 2012 2010

Agenda • Why PP&E audit readiness is important • Life cycle of property • Business lines impacted by property • Types of property and associated challenges • Relationships with liabilities, costs, and budgets • Where we are, where we are going Assistant Commandant For Resources 1

WARNING: This is an Audience Participation Event Assistant Commandant For Resources 2

PERCV • Audit Assertions: management representations embodied in the financial statements: – Presence and disclosure – Existence – Rights and Obligations – Completeness – Valuation • Most audit work is done to prove these assertions • Obtain and evaluate evidence Assistant Commandant For Resources Reference: FAM section 235. 02 3

Life Cycle of Property • • Identify need Conduct research & development Program and budget for acquisition Acquire/build Place in use Repair/maintain/upgrade Dispose Assistant Commandant For Resources 4

Baseline Business Processes • Budget formulation to execution • Request to procure Scope • Procure to pay • Reimbursable management • Bill to collect • Grants management • Acquire to dispose System • Record to report Assistant Commandant For Resources 5

Why is PP&E important to you? • You can’t know what you need if you don’t know what you have • Major equipment and construction projects are itemized in legislation and must be discretely tracked in execution • Both accountants and budgeteers must report expenditures for equipment and other property • Age, location, and condition of PP&E matter to operational units and commanders—mission effectiveness • It is not about the audit—it is about stewardship and public trust that we will preserve resources Assistant Commandant For Resources 6

Why is Capitalized PP&E a problem? • In the beginning … a purchase request was issued, a requisition launched, a MIPR created – Object class – 25**? 26**? 31**/32**? – LOA – who validates? Certifier? Fund manager? Procurement official? Accounting technician? Property manager? • Critical paperwork is misplaced: purchase order/ contract, evidence of ownership, receiving report, invoice • Direct and indirect costs incurred to place PP&E in use are difficult to identify and document Assistant Commandant For Resources 7

Internal Controls Why is Capitalized PP&E a problem? (cont. ) Other challenges: – easements, software, items installed on leased equipment, property transfers, surveys, deployments, upgrades – Environmental liabilities—while in use, during repair/upgrade, at disposal Assistant Commandant For Resources 8

What information is needed to book a property asset? Acquisition/construction cost Date acquired or placed in service/BOD Useful life Dimensions/configuration Location Composition Unique identifier code/VIN /HIN/bumper number • Disposal value (if any) • • Assistant Commandant For Resources 9

What if key data points are missing? • Refer to SFFAS 3, 6, 10, 35, and AAPC Technical Release 13 • Options: – Date in service (DIS): VIN/HIN, mid-month or midyear convention – Valuation: PRV indexed to DIS (deflation of current replacement), appraisal, expenditure information, budget/appropriation data • Don’t forget property in contractors’ possession Assistant Commandant For Resources 10

Environmental Liabilities • SFFAS 5 & 6, AAPC Technical Releases 2 & 10 • Most property has associated environmental liabilities that is probable and measurable – Buildings – lead paint, asbestos, stored materials – Vehicles, vessels, mission equipment – CARC paint, mercury, phosphorescent paints, zinc oxide, lead, fiberglass – Land ranges – lead, unspent munitions, petroleum products, chemicals, underground water contamination Assistant Commandant For Resources 11

Questions? ? Assistant Commandant For Resources 12