Auditing: It’s Not Just About the Dollars

1. Auditing: It’s Not Just About the Dollars Theodore J. Williams Air Force Auditor General 3 June 2010

2. Overview • Audit Guidance • Internal Controls • Types of Audits • Financial • Performance (Operational) • Performance Audit Examples

3. Audit Guidance • Government Auditing Standards (The Yellow Book) • Generally Accepted Government Auditing Standards (GAGAS) • DoD Instruction 7600.02, Audit Policies

4. Internal Controls • Reasonable assurance objectives are being achieved: • Effectiveness and efficiency of operations • Reliability of financial reporting • Compliance with applicable laws and regulations • Internal Control Structure (5 Components) • Control Environment • Risk Assessment • Control Activities • Information and Communication • Monitoring

5. Types of Audits Objectives (Risk) Report Tests Audit • Financial vs Performance (Operational) Internal Controls Review Financial Numbers Properly Stated/Presented Completeness, Accuracy, etc. Opinion on Financial Presentation Performance Program Efficiency & Effectiveness Condition, Cause, & Effect Findings & Recommendations

6. Financial Audits • Objective (Risk): Assess whether financial information is: • Stated in accordance with Generally Accepted Accounting Principles (GAAP) • Reliable • Benefits: Primarily nonmonetary; mitigate risk • Data accuracy/completeness • Compliance with laws and regulations If not, Why? (Internal Control Process)

7. Performance Audits • Objective (Risk): Assess whether the entity: • Acquires/uses resources effectively/efficiently • Programs are achieving intended results • Complies with applicable laws and regulations • Benefits: Monetary and nonmonetary; mitigate risk • Streamline processes • Cost avoidances • Operational readiness • Personnel safety If not, Why? (Internal Control Process)

8. Performance AuditsRemotely Piloted Aircraft • Objective. Evaluate whether Air Force’s training program produced number of RPA pilots necessary to meet contingency requirements • Effect. Manned aircraft pilots temporarily assigned to meet RPA requirements…training plan not sustainable or efficient…disjointed career paths for both • Recommendation. Create specific RPA career path to improve Air Force’s ability to provide this critical weapon system • Air Force currently implementing RPA-specific career path 8

9. Performance AuditsHurricane Disaster Planning • Objective. Evaluate whether Air Force’s Emergency Management program included adequate protection and preparation measures to respond to disasters • Effect. Gaps and inconsistencies in processes to protect installation assets, ensure personnel security and allow necessary communication operability • Recommendation. Update hurricane planning checklists & develop standard operating procedures for communication frequency management • Audit provided installation commanders complete readiness picture 9

10. Performance AuditsAOR Aerial Port Operations • Objective. Evaluate whether U.S. Air Forces Central Area of Responsibility (AOR) personnel efficiently used airlift capacity to manage wartime contingency cargo and passenger movement • Effect. 40% of cargo missions flew at less than 50% capacity, 20% flew empty…inadequate metrics/processes for identifying and minimizing unused capacity • Recommendation. Implement aerial port process improvements for better coordination between airlift planners and management of contracted commercial airlift • Audit helped identify and develop controls to increase airlift efficiency 10