Bureau of medicine and surgery 2012 navy medicine audit readiness training symposium
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Bureau of Medicine and Surgery 2012 Navy Medicine Audit Readiness Training Symposium. Consumables: Path to Audit Readiness June 5 th – 6 th , 2012. Audit Readiness. Context

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Bureau of Medicine and Surgery 2012 Navy Medicine Audit Readiness Training Symposium

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Bureau of medicine and surgery 2012 navy medicine audit readiness training symposium

Bureau of Medicine and Surgery2012 Navy Medicine Audit Readiness Training Symposium

Consumables: Path to Audit Readiness

June 5th – 6th, 2012


Audit readiness

Audit Readiness

  • Context

  • DoD is required to assert audit readiness for the Statement of Budgetary Resources (SBR) by the end of Fiscal Year 2014. As part of Navy Medicine’s audit readiness effort, the Consumablesbusiness process has been identified as an assessable unit for which assertion must take place.

  • Purpose

  • To discuss the Key Control Objectives (KCOs), Key Supporting Documents (KSDs), identified gaps and potential corrective actions for Consumables.

  • Outcome

  • An understanding of the status of the Consumables assessable unit, including major deficiencies and what can be done now at the field level to facilitate a successful financial statement audit.

    • Some assessable units may not require field action at this time.

FOR OFFICIAL USE ONLY


Consumables scope definition

Consumables Scope/Definition

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Audit readiness timeline

Audit Readiness Timeline

Control Testing Time Period

Assessable Unit Assertion

Interim Progress Milestones (90 Days, 50 %, 75 %)

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Audit readiness process

Audit Readiness Process

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Key control objectives kcos

Key Control Objectives (KCOs)

KCOs – Represent outcomes needed to achieve proper financial reporting and are a basis by which the effectiveness of control activities can be evaluated.

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Key control objectives kcos1

Key Control Objectives (KCOs)

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Key control objectives kcos2

Key Control Objectives (KCOs)

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Key supporting documentation dmlss

Key Supporting Documentation - DMLSS

KSDs – Documentation retained to support individual financial transactions and accounting events.

FOR OFFICIAL USE ONLY


Key supporting documentation purchase card

Key Supporting Documentation – Purchase Card

FOR OFFICIAL USE ONLY


Deficiency types

Deficiency Types

  • Material Weakness: A deficiency, or combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected timely.

  • Significant Deficiency: A deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.

  • Control Deficiency: A deficiency that exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements in a timely manner.

FOR OFFICIAL USE ONLY


Considerations for deficiency type

Considerations For Deficiency Type

  • Quantitative Materiality - Dollar impact or potential impact to the financial statements

  • Qualitative Materiality - Non-quantitative factors such as complexity of transactions, legal or regulatory concern or system deficiencies

  • Pervasiveness - Number of activities or transactions affected by the deficiency

  • Audit Dealbreaker- Issues that prevent an audit from occurring

  • Existing Guidance - Determining whether current policy or SOP is in place that meet financial reporting requirement

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Consumables material weaknesses

Consumables Material Weaknesses

  • Material Weakness 1: Inconsistent use of the Disbursement Reconciliation Tool (DRT) in DMLSS

  • General Causes:

  • Uniform Compliance

  • Reliance on Systems Controls

  • Material Weakness 2: Inadequate proof of receipt

  • General Causes:

  • Lack of standardized documentation & process

  • Multiple control points

FOR OFFICIAL USE ONLY


Inconsistent use of the drt in dmlss

Inconsistent Use of the DRT in DMLSS

  • Issue Detail

  • The Audit Readiness team identified transactions where the Disbursement Reconciliation Tool (DRT) was not used. The DRT is an enhanced business process within the Defense Medical Logistics Standard Support (DMLSS) that compares the dollar amount of goods received in DMLSS to the dollar amount disbursed in STARS-FL (EC610). The DRT is considered a critical control activity as it provides management with a systematic monitoring tool to identify and resolve errors between the logistics system and the system of record.

  • Impact on Audit Readiness

  • If the DRT is not used, then items, wherein the amount disbursed in STARS-FL differs from the receipt amount recorded in DMLSS will not be reviewed/reconciled. This may cause misstatements in Gross Outlays on the Statement of Budgetary Resources that go undetected.

FOR OFFICIAL USE ONLY


Inconsistent use of the drt in dmlss1

Inconsistent Use of the DRT in DMLSS

  • Path Forward

  • A Corrective Action Plan will be Developed for implementation by the Activities. It must include:

    • A three way reconciliation of disbursements between DMLSS, STARS-FL and Treasury disbursement information (CHOOSE)

    • A review of any documents that do not pass the ‘DRT Check’

    • Documentation that supports the review that occurred, including:

    • Standardized process for reconciling items that do not pass ‘DRT Check’.

  • Potential Activity Actions

    • Require users to complete DRT eLearning course at https://jml149.dmlss.detrick.army.mil/resourcecenter/

    • Implement review and approval process for DRT reconciliations once developed.

FOR OFFICIAL USE ONLY


Inadequate proof of receipt

Inadequate Proof of Receipt

  • Issue Detail

  • The Assessable Unit team noted several Activities that do not keep packing slips or other similar shipping documentation on file. Packing slips/shipping documentation should be maintained in order to validate that items received are correctly entered into DMLSS.

  • Impact on Audit Readiness

  • If packing slips/shipping documents are not retained on file, there is no proof of receipt of consumable goods. Without such supporting documents, the accuracy of the transactions in the general ledger can not be validated. This could result in incorrect amounts being recorded to accounts payable or disbursed to vendors, which could potentially lead to over- or understatement of either amount on the Statement of Budgetary resources.

FOR OFFICIAL USE ONLY


Inadequate proof of receipt1

Inadequate Proof of Receipt

  • Path Forward

  • A Corrective Action Plan will be Developed for implementation by the Activities. It must include:

    • A method for standardizing the collection and filing of packing slips

    • Electronic data retention is optimal, but not ultimately required

    • A reconciliation/review of amounts listed on packing slips, or other receiving documents, to ensure that they agree to amounts entered in DMLSS and documented on the DD250.

    • Optimally, Mechanism built into payment process that doesn’t allow for payment unless reconciliation/review has been performed.

  • Potential Activity Actions

    • Work to maintain packing slips in a standard way for purchased consumables.

    • Participate in development of retention strategy in relevant SOPs via actively submitting change requests and feedback when possible.

FOR OFFICIAL USE ONLY


Other consumables deficiencies

Other Consumables Deficiencies

  • Significant Deficiency 1: Inadequate Segregation of Duties for the Purchasing and Receipt functions

  • Control Deficiency 1: Inconsistent execution of the purchase card reconciliation process

FOR OFFICIAL USE ONLY


Inadequate segregation of duties

Inadequate Segregation of Duties

  • Issue Detail

  • The Assessment Team identified instances among Activities where it appears that the person who ordered goods was the same as the person who acknowledged receipt of the items in DMLSS

  • Impact on Audit Readiness

  • If the person ordering goods is the same as the person acknowledging receipt of the goods ordered, there is potential risk of fraud, waste and abuse violations which may impact the accuracy of financial statements

  • Path Forward / Potential Activity Actions

  • Review DMLSS user access roles and responsibilities

FOR OFFICIAL USE ONLY


Inconsistent execution of the purchase card reconciliation process

Inconsistent execution of the purchase card reconciliation process

  • Issue Detail

  • The Assessment Team identified inconsistencies in the execution of the purchase card reconciliation process where Activities did not properly reconcile and/or properly record adjustments in STARS-FL

  • Impact on Audit Readiness

  • If purchase card reconciliations are not performed routinely in accordance with Navy Medicine policy, required adjustments may not be recorded in STARS-FL, which may impact the accuracy and reliability of financial statements

  • Path Forward / Potential Activity Actions

  • Execute reconciliations in accordance with the Purchase Card SOP

FOR OFFICIAL USE ONLY


Bureau of medicine and surgery 2012 navy medicine audit readiness training symposium

  • Questions?

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