Using Data Analytics: UDO Monitoring, Expenses, Construction in Progress and Capital Asset Management. CAPT Carl Messalle CDR Khristopher Johns

Transcription

1 Using Data Analytics: UDO Monitoring, Expenses, Construction in Progress and Capital Asset Management CAPT Carl Messalle CDR Khristopher Johns 1

2 Agenda USCG Organization USCG Audit & Internal Control Overview Data Analysis & Management Reviews o Undelivered Orders o Expense o Construction in Progress (CIP) o Capital Asset Management 2

3 USCG Domestic Laydown 1,493 Operating Locations Worldwide 19,000+ Capitalized Property Assets & Improvements 3

4 Audit History PROGRESS USCG Balance Sheet, % Supported USCG related Material Weaknesses 100% 8 90% 7 80% 6 70% 60% 50% 40% 30% 20% Unmodified Clean Opinion on Financial Statements Financial Reporting 10% 1 0% Note: USCG is not primary contributor to DHS Material Weakness for ITGC

5 Using Data Analytics Use Data Analysis Tools to: o Pull source transactional data from financial system(s) o Categorize the data (large volumes) o Tie out the data (large volumes) o Present information and Allow managers to review data at various levels of detail o Use analysis for determination of risk, thresholds and materiality levels 5

6 Snapshot of US Coast Guard Obligations (as of 12/30/17) Approximately; 74,000 UDOs $4.4 B Current Year $2.7 B Prior Year $1.7 B 5 Resource Mgmt Offices 55 Sub-organizations Organizational Break-out LANT 27% PAC 9% CG8 2% DCMS 59% Sub-Organization Count (top 90%) DCO 3%

7 Historical Audit Issues Policies not consistently reinforced to ensure obligation and de-obligation activity was appropriately identified, recorded, and monitored (FY14/15 NFR). Results since FY14; FY14 BRM Material Weakness Finding (due to a misstatement of $84M) FY15 BRM Significant Deficiency FY16/17 No UDO audit findings 7

8 Why it matters. we strive to make the most of every dollar we spend and generate future opportunities for savings that will benefit the warfighter. - David L. Norquist Under Secretary of Defense (Comptroller)/CFO 8

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10 U.S. Treasury 10

11 U.S. Treasury U.S. Coast Guard!! 11

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13 Financial Statements 13

14 Rescissions Financial Statements 14

15 OOVA Home Page 15

16 What is OOVA? Open Obligation Validation Application (OOVA) OOVA is used to validate open obligations NOT a system of Financial Record All open obligations in the Coast Guard financial system must be periodically reviewed and validated to ensure that they are valid, properly documented, and accurately recorded according to current CG policy Supports monitoring and DHS reporting requirements; Obligations that are no longer valid must be identified and removed from the financial system A specified population of open obligations must be reported quarterly to DHS as defined by DHS Component Requirement Guide (via Obligations Analysis) 16

17 OOVA Statuses 1. Still Needed: Still Needed for it s original purpose 2. No Longer Needed: De-obligate immediately (i.e. no further payments required) 3. Problem Disbursement: Notify FINCEN and follow up until deobligated 4. Error: UDO required to be closed out by another department 5. None: No status has been assigned (i.e. the obligation has not yet been validated) 6. Complete: Forward to Contracting Officer (KO) to begin Closeout. No future outlays/expenditures/invoices expected. If future outlays are expected status should be still needed 7. In Closeout: KO actively closing out obligation ensuring that any residual obligation is de-obligated. No future outlays expected 18

18 Validation Requirements Validation of all current year obligations Quarterly Validation of the top 80% (based on dollar value) and a percentage of the bottom 20% for each quarter except Q1 Annually Q1 of any fiscal year has no required validations because UDOs are not required to be validated until 90 days old During Q2 to Q4, any obligation created during the current quarter is excluded from the quarterly validation requirements Quarterly percentages of the bottom 20% will culminate to ensure 100% obligation validation of UDOs older than 90 days 19

19 OOVA Scorecard FY17 Q4 20

20 OOVA Scorecard Validation Data Organization: DCMS ALC Sub organization: Document IDs are linked to the Validation Update page. 21

21 OOVA Validation History 22

22 UDO Business Process Improvements Engage RMOs to discuss results and ways to improve (via RMO Working Group) Monthly Non-Statistical testing to hone in on UDOs that threaten population (per Risk Assessment) Process documentation (Field-level and HQs) Updates to Policies and Procedures (as needed) Generate System Development Change Requests to improve the function capabilities 23

23 UDO Monitoring (Internal Control) -Monthly -Targeted -Risk Based -Statistical -Quarterly JV 24

24 Budgetary to Proprietary USSGL Dr 4700 Cr 4801 Procurement Action???? 25

25 Budgetary to Proprietary USSGL Dr 4700 Cr 4801 Procurement Action Obligation 26

26 Budgetary to Proprietary USSGL Dr 4700 Cr 4801 Dr 4801 Cr 4901 Dr???? Cr 2110 Procurement Action Obligation Receipt of goods 27

27 Budgetary to Proprietary USSGL Dr 4700 Cr 4801 Dr 4801 Cr 4901 Dr 6100 Cr 2110 Procurement Action Obligation Receipt of goods 28

28 Expense Population Analysis & USSGL 6100 Analysis Monitoring o 6100 is Largest Line item on Statement of Net Cost o Diverse set of Business Events / Transactions make up 6100 population o Dis-Aggregate 6100 population into major Buckets o Allows management to easily review population o Understand your Data 29

29 Expense Review 30

30 Expense Population Analysis & Monitoring Military Payroll & Benefits Expenses 6100 Dashboard $795M Debit activity o Macro Level Compare to Annual Approp, previous Qtrs & FY expenses o Internal Controls Positive TOD/TOE Test work & audit results o Military Pay Expenses ~40% of entire 6100 Population Questions: o 6100 Dashboard Net $795M Debit = $970M Debit & $175M Credit o Management asks $175M Credit activity in Military Payroll?..why? o Answer: Reversing of Payroll accrual & Reclassification of payroll expenses as withholdings.understand your data 31

31 Expense Population Analysis & Monitoring Construction in Progress Expenses 6100 Dashboard $103M Debit activity o Macro Level $103M compare w/ previous Quarters / flux analysis o Internal Controls Positive TOD/TOE Test work & audit results o CIP Expenses ~5% of entire 6100 Population Questions: o 6100 Dashboard Net $103M Debit = $152M Debit & $49M Credit o Management asks $49M Credit activity in CIP Expense?..Why? o Answer: $42M Reclassification of AC&I Labor Expense into CIP Labor + other minor adjustments & error corrections..understand your data 32

32 Expense Population Analysis & Allows USCG to: Monitoring o Demonstrate understanding of 6100 population & activity o Demonstrate relative risk areas for review & testing o Link Internal Controls to segments of 6100 population o Timely analysis and review of what is hitting expense..management should know that info, right? 33

33 Construction in Progress (CIP) USCG implemented sustainable CIP processes which: o o o o o Identify & Establish Capital Projects Identify Assets being constructed Accumulate capital costs for those assets in proper CIP account & expense non-cap costs Allocate CIP costs to assets Asset Placed in Service book to proper asset account 34

34 Construction in Progress (CIP) Once CIP business processes are established need to understand how transactions are created o Sounds simple. but it s not...splitting invoices across assets, processing errors, processing supplemental costs, manual entries from other GLs, system limitations, etc. Once you Understand & Classify transactions you now have the Decoder Ring Use Decoder Ring Write code Pull & Sort Transactions Build CIP Roll Forward Prove Balances 35

35 Construction in Progress (CIP) Ref CIP Balance Category Total & Total & Total & TIER Beg. Balance $ 1,935,907,505 $ 2,016,640,207 $ 2,572,665,446 2 Calculated Beg. Balance $ 1,935,907,505 $ 2,016,640,207 $ 2,572,665,446 3 (-) PY OTA (ZADL & ZADJ) $ (139,986,688) $ (190,350,133) $ 116,629,129 4 (+) NESSS GL Activity $ 85,772 $ 39,258 $ 6,370 5 (+) Inputs Into CIP from Invoices (Initial review of invoices) $ 312,157,570 $ 349,244,085 $ 289,731,379 6 (+) Interest, Insurance, Spare Parts, ICP $ 28,048,300 $ 21,204,176 $ 28,849,763 7 (+) Labor & Payroll Adjustments $ 19,930,206 $ 19,607,037 $ 16,583,396 8 (+) Removal of Expense from CIP (Based on review of invoices) $ (34,227,472) $ (42,640,443) $ (141,197,818) 9 (+) Remove Assets Placed in Service $ (194,894,656) $ (98,398,314) $ (97,697,265) 10 (+) Assets with Prior Period OFA Adj $ - $ - 11 (+) Manual JVs by FINCEN Variance $ (3,572) $ (9,822) $ 9,822 Simple CIP Roll forward: Beginning Balance of 1720 & Invoices Paid (Cap projects) Expenses from CIP Interface of accepted assets = Ending Balance of 1720 & (+) CY OTAs (ZADL & ZADJ) $ (190,350,133) $ 116,629,129 $ 123,450, (= ) Calculated End. Balance 14 Variance/System Timing Difference between TIER Ending Balance and the Calculated Ending Balance $ 2,016,640,207 $ 2,572,665,446 $ 2,675,772,746 $ - $ (0) $ (0) 15 TIER End Balance $ 2,016,640,207 $ 2,572,665,446 $ 2,675,772,746 36

36 Construction in Progress (CIP) Once you have data and roll forward, you can establish a workflow and automated monitoring of CIP Balances and associated activity: o o o o o CIP balance by Project Are CIP costs being allocated to assets? Are assets being capitalized in a timely manner? Drill down to identify problem areas? How much of Projects are being expensed vs. capitalized? 37

37 Construction in Progress Review 38

38 Capital Asset Monitoring Construction in Progress and Asset Disposals are the Gateways to the Property Balances being accurately maintained o USCG Manages / Maintains assets in multiple systems that don t communicate with accounting system of record o Parallel to establishing sustainable Property processes established Capital Asset Monitoring (CAM) activity to reconcile Property Records and workflow with various Logistics Systems 39

39 Capital Asset Monitoring Prioritize, communicate and fix discrepancies Actively monitor variances & tackle root causes Demonstrate accuracy o o Logistics Systems Aircraft, Cutters, Boats 98% of 1750 balance (existence) Logistics System Real Property 100% of 1730 & 1740 Balance (existence) Report findings to management & leadership Transparency breeds self correcting behavior 40

40 Capital Asset Monitoring 41

41 Questions? 42