United States Coast Guard Real Property Completeness & Existence

1. United States Coast GuardReal Property Completeness & Existence ASMC DC Chapter Luncheon 16 March 2011

2. Agenda General CG Audit Strategy Balance Sheet Accountability vs. Accounting (Why You Need Both) Quick Overview of Management Assertions How does CG get there for Real Property? Cumulative Cost-based Asset Enrollment Trips based on co-located units Use best practices learned from Personal Property Remediation: Let the Inventory cleans the account, behavior, and make program healthy. Mythbusters 10/8/2014 2

3. Size (Materiality) Matters CG in DOT CG in DHS CG is 18% of DHS Assets CG is 41% of DHS Liabilities 3

4. Coast Guard Audit Readiness Strategy Divide the world of work into “Assessable Units” Scope Size Focus on those items most material to the DHS Balance Sheet ‘Fix it once’ Remediate the root causes of the issue, not just a ‘quick fix’. To get through a current year audit Sustainability Attack the items that can be remediated outside of current financial system limitations System 4

5. USCG Balance Sheet

6. Segregated Mission Action Plan (MAP) focus areas into two tracks Track One – those with largest impact on DHS balance sheet, can be fully remediated in current system state & sustained into the future Track Two – less material, but needed for full remediation of balance sheet line items Consolidated (DHS) Balance Sheet Audit for now Stand-alone audit in the future? Performance audits? Internal Controls audits? MAP Focus Areas

7. FY11 Efforts New Efforts Continuation of FY10 Efforts • Environmental Liabilities • Budgetary Resource Management • Accounts Payable • Accounts Receivable • Fund Balance with Treasury • (Non Payroll) • Military HR Internal Controls • Civilian HR Internal Controls • Actuarial Medical Liabilities • Capitalized Property • CIP • Real Property • Major Electronic Systems • Operating Materials & Supplies

8. % of Total GPP&E by NBV

9. % of Total GPP&E NBV Comparison By Asset Type Over Time Total NBV Comparison By Asset Type Over Time

10. Accountability vs. Accounting • Accountants are at CGHQ & FINCEN • Keep them there! • Accounting is the Byproduct of Operations • We want to leverage what units already do • Units know more than any of the accountants about their “stuff”

11. Financial Statements & Management Assertions Completeness Existence and Occurrence Valuation and Allocation Rights and Obligations Presentation and Disclosure

12. Financial Statements & Management Assertions What does this really mean? Completeness Existence and Occurrence Valuation and Allocation Rights and Obligations Presentation and Disclosure

13. Financial Statements & Management Assertions Completeness – floor-to-record Existence and Occurrence – record-to-floor Valuation and Allocation – approximates historical cost Rights and Obligations – do we own it or effectively own it, or does someone else own it? (e.g. Is it leases or on loan, etc.?) Presentation and Disclosure – Has something been delivered that is still accounted for in CIP

14. How do we get there for Real Property? Step 1: Target higher cost geographic areas first, and enroll assets methodically Step 2: Use the best practices of Personal Property remediation: Leverage units through a CG-wide capitalized property inventory, and use inventory to cleanse account, behavior, and make program healthy.

16.  BSU Seattle  SECTOR Columbia River  AIRSTA Cape Cod BSU Boston  USCGA SECTOR Long Island Sound  SECTOR New York  TRACEN Cape May  CG Yard  TRACEN Petaluma  BSU Alameda CEU Oakland  TRACEN Yorktown  BSU Portsmouth  BSU Elizabeth City  BSU San Pedro  SECTOR San Diego  ATC Mobile  AIRSTA Clearwater  AIRSTA Miami  CEU Honolulu  BSU Kodiak  CEU Juneau  AIRSTA Sitka BSU Ketchikan  SECTOR San Juan

17. How are we going to do it? 0 Reconcile + +

21. Inventory High-level Strategy Let inventory expose other problematic life cycle procedures Acquisitions Disposals Transfers Improvements Impairments Use Unit Personnel and CO/OIC/Unit level Supervisor to reconcile financial and subsidiary systems to get accurate count at each rung of hierarchy Use each unit’s inventory as a building block for the entire CG’s inventory Use asset UID’s to track across several systems Process flows drive decisions to arrive at standardized/repeatable result 10/8/2014 21

22. Grass Roots Effort - Clear & Detailed Procedures

23. Grass Roots Effort - “Sailor-Proof” Procedure Flowchart

24. Procedure - Physical Inventory Report / Count Sheet Once asset has been verified, initial & date each asset on report as shown: Each capitalized personal property asset that is inventoried needs to be initialed & dated by the CT. CT needs to initial & date bottom of each page of report.

25. Procedure - Physical Inventory Report / Count Sheet If edits are necessary, strike through the report, as shown below: Line-out & write-in individual data fields for corrections of characteristics listed on the report.

26. Procedure - Physical Inventory Report / Count Sheet Signatures and dates are required on last page of Physical Inventory Report, as shown: As a reminder, the actual sign off is performed once the subsidiary system reconciliation has been completed. The last page of the Physical Inventory Report needs to include signatures and date of each CT member, APO, and PA .

27. Procedure - Subsidiary System Reconciliation System Reconciliation: Currently, there is no interface and/or reconciliation between Oracle Fixed Asset (OFA) databases and Subsidiary Systems (e.g. AOPs, ALMIS, SAM, etc). This provides a very high probability that the CG has two different sets of property assets, and potentially unaware of disposal of assets. In turn, this could result in potential under/overstatement of PP&E account balance. Reconciliation Subsidiary System #2 Subsidiary System #1 Financial System

28. Procedure - Subsidiary System Reconciliation Some Subsidiary System Reports to be used during the Physical Inventory Count: Aviation Logistics Management Information System (ALMIS) - used to record operations & logistics of aircraft (also used for small boats). Abstract of Operation System (AOPS) - used to record the operations & logistics of small boats & vessels. Auxiliary Management Information System (AUXMIS/AUXDATA) - used to record auxiliary activities, including operations & logistics of small boats & vessels. Fleet Logistics System (FLS) - used to record the operational aspects of general purpose property, electronics, & occasionally real property. Shore Asset Management System (SAMS) - used to record the operational aspects of real property.

29. Once assets have been identified & matched, initial & date each asset on subsidiary system report, as shown: Procedure – Subsidiary System Reconciliation Report Example: AOPS for boats Each asset is reconciled to Physical Inventory Report needs to be highlighted, initialed, & dated by CT. Any discrepancies found during the reconciliation between the subsidiary system report & OFA report needs to be noted on subsidiary system report.

30. Follow-Through – The Property “War Room”

31. Chain of Command Involvement & Metrics

32. High Level Capitalized Property Inventory Timeline (Aug 09 - Sep 12) Update FRMM Updated PMM Pilot Inventory District 14 and Draft Procedures First RP Asset enter into Capitalized Physical Inventory Dec 10 inventory - CANX March Inventory March Inventory JAN 10 MAR 10 MAR 12 AUG 10 AUG 09 MAR 11 SEP 12 SEP 09 SEP 10 SEP 11 Spt '10 Sept '09 March '10 Jan '10 Aug '10 Aug ‘0 September Inventory March Inventory September Inventory September Inventory September Inventory Assert to Completeness, Existence, and Valuation for Vessels, Aircraft, and Small Boats Assert to Completeness, Existence, and Valuation for Real Property

33. How are we going to do it? 0 Reconcile + +

34. CFO Commitment Include Real Property into CG-wide Managed Capitalized Property Physical Inventory Nine (9) New Positions at CEUs/SILC/CG-4 in FY10 Environmental Specialists Realty Specialists Real Property Specialists USCG Facilities Classification Guide Publication Environmental Specialists Realty Specialists Real Property Specialists Real Property Manual, Vehicle Manual & PMM Rewrites 10/8/2014 34

35. Myth Busters – Things to Overcome “I found everything on my record” “This is Extra Work” “This is only to pass the CFO Audit” “We know where everything is” “That’s not my property” 10/8/2014 35

36. LCDR Robert E. Hart GPP&E Team Lead, Office of Financial Management Transformation & Compliance (CG-852) 202-372-3449 Robert.e.hart@uscg.mil 10/8/2014 36

37. Extra Slides

38. % of Total GPP&E by Cost

39. % of Total GPP&E Cost Comparison By Asset Type Over Time Total Cost Comparison By Asset Type Over Time

40. % of Total GPP&E Cost Comparison By Asset Type Over Time Total Cost Comparison By Asset Type Over Time

41. Completeness– Assertions about completeness address whether all transactions and accounts that should be presented in the financial statements are so included. Management Assertions Source: Auditing: 2004 Edition, Becker Conviser CPA Review, p. A2-34

42. Existence and Occurrence – Assertions about existence concern the actual existence of the assets and liabilities reported on the balance sheet as of a particular date. Assertions about occurrence address whether recorded transactions have in fact taken place. This assertion addresses the validity of the recorded amounts on the financial statements, specifically with respect to overstatement of the account balances. Management Assertions Source: Auditing: 2004 Edition, Becker Conviser CPA Review, p. A2-34

43. Valuation and Allocation – Assertions about valuation and allocation address whether asset, liability, equity, revenue, and expense components have been included in the financial statements at appropriate amounts. This assertion addresses concepts such as historical cost, consistency, accrual accounting, accounting estimates, impairment of assets, and allocation of costs. Management Assertions Source: Auditing: 2004 Edition, Becker Conviser CPA Review, p. A2-34

44. Rights and Obligations – Assertions about rights and obligations address whether assets are the rights of the entity (actually owned by the company) and liabilities are the obligations of the entity at a given date. Management Assertions Source: Auditing: 2004 Edition, Becker Conviser CPA Review, p. A2-34

45. Presentation and Disclosure – Assertions about presentation and disclosure address whether particular components of the financial statements are properly classified, described, and disclosed. Management Assertions Source: Auditing: 2004 Edition, Becker Conviser CPA Review, p. A2-34