	Background

In May 2010, the DOD Comptroller issued the FIAR Guidance to provide  a standard methodology for DOD components to follow in developing an  audit strategy and implementing FIPs. The Army Did Not Fully Follow FIAR Guidance in Determining the Scope of Its General Fund Budget Execution Audit Readiness Efforts

To help prioritize and guide its efforts, the Army developed its FIP for  budget execution emphasizing the implementation of effective GFEBS  processes for achieving SBR audit readiness. For example, the Army’s analysis identifying Army  and service provider business processes and systems supporting its  General Fund SBR FIP for budget execution was incomplete. Risks associated with these scope limitations, if not properly  addressed, could adversely affect the Army’s ability to achieve audit  readiness goals as highlighted below. Legacy systems. However, we found that it did not always follow the FIAR  Guidance in performing tasks required for these phases. For example, we  found that the Army’s documentation and assessment of internal controls  were not always complete or accurate and that extensive deficiencies had  not been remediated prior to an IPA firm’s examination of its audit  readiness efforts. Overall,  the gaps and deficiencies we identified throughout the various phases of  the Army’s efforts to develop and implement its FIP for budget execution  were largely due to its focus on (1) an approach that emphasizes  establishing audit-ready GFEBS-based processes and (2) meeting  scheduled dates and asserting audit readiness before correcting  extensive control deficiencies. However, this approach raises serious  concerns regarding the reliability of the Army’s readiness assertions, the  likelihood that SBA and full SBR audit readiness will occur as planned,  and the Army’s ability to ensure the accuracy of financial information used  to monitor budgetary resources to achieve its mission. Recommendations for Executive Action

To improve the Army’s implementation of the FIAR Guidance for its  General Fund SBR FIP for budget execution and facilitate remaining  efforts to achieve SBR auditability, we recommend that the Assistant  Secretary of the Army, Financial Management and Comptroller, take the  following 10 actions:  identify activity attributable to assessable units associated with service  provider systems and business processes having a significant impact  on the Army’s SBR;  coordinate efforts with service providers to obtain and document  within MOUs a shared understanding of roles and responsibilities for  processing Army data;  identify and document qualitative risks and other factors, including  those associated with the Army’s reliance on service provider  readiness efforts as well as other processes and systems supporting  significant portions of its SBR that the Army excluded from the scope  of its readiness efforts and assess their potential impact on SBA and  full SBR auditability and established timelines required to effectively  achieve audit readiness; update the Army’s determination for achieving SBR audit readiness  included in DOD’s FIAR Plan Status Report to address NDAA  requirements; completely and accurately document the linkage of financial reporting  objectives to control activities; document criteria and processes for identifying key information  technology systems that have a significant impact on the Army’s SBR  audit readiness; obtain and assess the results of service provider SSAE No. Appendix I: Objectives, Scope, and Methodology

The objectives of our review were to determine the extent to which the  Army developed and implemented its General Fund Statement of Budget  Resources (SBR) financial improvement plan (FIP) for budget execution  in accordance with the Financial Improvement and Audit Readiness  (FIAR) Guidance with regard to (1) determining the scope of activities  included in the FIP and (2) completing those activities included in the  scope of the FIP. To address our objectives, we reviewed the Department  of Defense (DOD) FIAR Guidance and selected provisions of the National  Defense Authorization Acts (NDAA) for fiscal years 2013 and 2010 to  understand the methodology the Army is required to use, and related  responsibilities, for achieving audit readiness. We conducted this performance audit from June 2012 to May 2014 in  accordance with generally accepted government auditing standards.
Why GAO Did This Study

The National Defense Authorization Act for Fiscal Year 2013 requires the Department of Defense (DOD) to describe how its SBR will be validated as ready for audit by September 30, 2014. The DOD Comptroller issued the FIAR Guidance to provide a standard methodology for DOD components to use to develop and implement FIPs, improve financial management, and achieve audit readiness. The Army's FIP for budget execution provides a framework for planning, executing, and tracking essential steps with supporting documentation to achieve audit readiness of its General Fund SBR.
GAO is mandated to audit the U.S. government's consolidated financial statements, including activities of executive branch agencies such as DOD. This report identifies the extent to which the Army developed and implemented its General Fund SBR FIP for budget execution in accordance with the FIAR Guidance with regard to (1) determining the scope of activities included in the FIP and (2) completing those activities included in the scope of the FIP. GAO reviewed the Army's FIP to determine whether it contained the elements required by the FIAR Guidance and reviewed test results, status reports, and other deliverables.

What GAO Found

The Army has made important progress in developing its financial improvement plan (FIP) for budget execution to help guide its General Fund Statement of Budgetary Resources (SBR) audit readiness efforts. This FIP covers current year activity associated with the recently deployed General Fund Enterprise Business System (GFEBS) emphasizing the implementation of effective business processes. However, the Army did not fully complete certain tasks in accordance with the Financial Improvement and Audit Readiness (FIAR) Guidance to ensure that its FIP adequately considered the scope of efforts required for audit readiness. For example, the Army did not consider the risks associated with excluding current year activity associated with legacy systems and did not adequately identify significant SBR activity attributable to service provider business processes and systems. These activities may continue to represent material portions of future SBRs and, if not auditable, will likely affect the Army's ability to achieve audit readiness goals as planned.
For GFEBS-related audit readiness activities within the scope of its FIP for budget execution, the Army documented controls in narratives and flowcharts and performed monthly tests to assess their effectiveness. Based on test results from June 2012 through May 2013, the Army identified extensive deficiencies, such as lack of appropriate reviews or approvals, and had an average failure rate of 56 percent.
The Army did not fully follow the FIAR Guidance in performing the tasks required. For example, the Army's documentation and assessment of controls were not always complete or accurate. Further, extensive deficiencies identified by Army had not been remediated prior to an independent public accountant's (IPA) examination of its audit readiness efforts.
Overall, the gaps and deficiencies identified above are largely due to the Army's focus on (1) the audit readiness of new GFEBS processes despite continued reliance on legacy systems and service providers and (2) asserting audit readiness before correcting extensive control deficiencies. Army officials cited adherence to assertion and IPA examination milestones as essential. However, this approach raises serious concerns regarding the likelihood that SBR audit readiness will occur as planned and the Army's ability to ensure the accuracy of financial information used to monitor budgetary resources to achieve its mission.

What GAO Recommends

GAO recommends that among other things, the Army take steps to improve implementation of the FIAR Guidance for its General Fund SBR FIP for budget execution and ensure that all significant SBR processes, systems, and risks are adequately considered and identified deficiencies are resolved. The Army concurred with GAO's recommendations.