The Big Challenge for Audit
Readiness:
Property, Plant and Equipment at
the United States Coast Guard
Margo Sheridan, CDFM,
Comptroller, U S Coast Guard
Presented to:
RDML
American Society of Military Comptrollers
K. TaylorWashington,
| DHS CFO
Brief | 25 JAN
DC Chapter
July 2012
2010
Agenda
•Why PP&E audit readiness is important
•Life cycle of property
•Business lines impacted by property
•Types of property and associated challenges
•Relationships with liabilities, costs, and
budgets
•Where we are, where we are going
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PERCV
• Audit Assertions: management representations
embodied in the financial statements:
– Presence and disclosure
– Existence
– Rights and Obligations
– Completeness
– Valuation
• Most audit work is done to prove these assertions
• Obtain and evaluate evidence
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Reference: FAM section 235.02
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Life Cycle of Property
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Identify need
Conduct research & development
Program and budget for acquisition
Acquire/build
Place in use
Repair/maintain/upgrade
Dispose
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Baseline Business Processes
• Budget formulation to execution
• Request to procure
Scope
• Procure to pay
• Reimbursable management
• Bill to collect
• Grants management
• Acquire to dispose
System
• Record to report
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Why is PP&E important to you?
• You can’t know what you need if you don’t know what
you have
• Major equipment and construction projects are itemized
in legislation and must be discretely tracked in execution
• Both accountants and budgeteers must report
expenditures for equipment and other property
• Age, location, and condition of PP&E matter to
operational units and commanders—mission
effectiveness
• It is not about the audit—it is about stewardship and
public trust that we will preserve resources
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Why is Capitalized PP&E a problem?
• In the beginning … a purchase request was issued, a
requisition launched, a MIPR created
– Object class – 25**? 26**? 31**/32**?
– LOA – who validates? Certifier? Fund manager?
Procurement official? Accounting technician? Property
manager?
• Critical paperwork is misplaced: purchase order/
contract, evidence of ownership, receiving report,
invoice
• Direct and indirect costs incurred to place PP&E
in use are difficult to identify and document
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Internal Controls
Why is Capitalized PP&E a problem?
(cont.)
Other challenges:
– easements, software, items installed on leased
equipment, property transfers, surveys, deployments,
upgrades
– Environmental liabilities—while in use, during
repair/upgrade, at disposal
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What information is needed to book a
property asset?
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Acquisition/construction cost
Date acquired or placed in service/BOD
Useful life
Dimensions/configuration
Location
Composition
Unique identifier code/VIN
/HIN/bumper number
• Disposal value (if any)
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What if key data points are
missing?
• Refer to SFFAS 3, 6, 10, 35, and AAPC Technical
Release 13
• Options:
– Date in service (DIS): VIN/HIN, mid-month or midyear convention
– Valuation: PRV indexed to DIS (deflation of current
replacement), appraisal, expenditure information,
budget/appropriation data
• Don’t forget property in contractors’ possession
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Environmental Liabilities
• SFFAS 5 & 6, AAPC Technical Releases 2 & 10
• Most property has associated environmental
liabilities that is probable and measurable
– Buildings – lead paint, asbestos, stored materials
– Vehicles, vessels, mission equipment – CARC paint,
mercury, phosphorescent paints, zinc oxide, lead,
fiberglass
– Land and ranges – lead, unspent munitions,
petroleum products, chemicals, underground
water contamination
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Questions??
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