Defense Contractors that manage government property to FAR 52.245-1 obligations or supply assets to the US Military are obligated to comply with the Defense Departments’ IUID Policy. The IUID Policy is a series of regulations set out to define the Marking Requirements for government property and assets. For this blogpost I would like to address how the IUID obligation relates to audit readiness.
At this point, everyone in the Defense Industry should be aware that the current administration, the US Congress and the Pentagon have all committed to a full financial audit of the entire Defense Department.
This full-scope annual audit is not just an investigation into financial record keeping. It will reach into every corner of the DoD. Currently, there are over 1,200 auditors inspecting the DoD from book to floor and floor to book. Which not only means that the items in the Accountable Property System of Record (APSR) need to be produced for inspection; but it also means, auditors will check to ensure that all accountable inventory has been properly recorded in that APSR.
Needless to say, the physical inventories of every branch of the Military along with the defense contractors that support them will be scrutinized in the coming months. The full report from the Comptrollers office is expected to be released in November.
How the IUID obligation relates to audit readiness
When you break this Audit Readiness obligation down it means that the DoD has to account for all serially managed items. Luckily, the DoD has adopted Item Unique Identification (IUID) as the standard for which to mark and track each serially managed asset owned by the government. This IUID Policy is the key to asset accountability and true audit readiness.
IUID Labels
The IUID Policy requires that all mission critical assets be marked, or labeled, with a 2-Dimensional Barcode called a Data Matrix. Military Standard 130 outlines the specifications that must be followed in order for an IUID label to pass inspection. This includes the fact that the IUID must be a globally unique number that usually consists of a part number, serial and cage code. It’s also important to note that the label needs to be applied in such a way that it remains attached for the entire life of that asset.
IUID Reporting
Furthermore, the IUID Policy is very clear as to the specific asset information, often referred to as asset pedigree, that needs to be reported to the IUID Registry. Applying the label is only half of the IUID obligation – the other half is reporting the asset details to the IUID Registry; which is the master repository for all DoD asset information. This reporting requirement applies to newly acquired items, legacy items, as well as Government Furnished Property (GFP).
The required asset details that need to be reported include:
- Unique Item Identifier (UII)
- Category/Type
- Location
- Status
- Description
- Custody
- Controlling / Financial Reporting Entity
The IUID obligation requires that you capture and record all of this asset pedigree. The good news is that using IUID is an Industry best practice for asset management and inventory control. Once you have the IUID label applied to your assets your organization can leverage this 2-D barcode to your advantage.
Modern barcode readers can scan these labels and populate the data into your database in order to capture information for your property management system. This kind of automatic data capture is the key to enable accurate and efficient inventory management.
Auto-ID Technology and IUID
It goes without saying that maintaining an accurate inventory is pivotal to audit readiness. When the DCMA auditors come for an inspection they will be expecting you to know exactly where your accountable assets are at all times. Organizations that are able to leverage auto-ID technology (IUID, barcodes and RFID) and maintain accurate inventory records are going to place themselves way ahead of those that do not.
When the Defense Department mandated the IUID Policy, they adopted the Industry accepted best practices for asset identification, tracking and management. In reality, Auto-ID technology is the only currently feasible way to manage a physical inventory that is as large as the Defense Department’s. Requiring all accountable assets to have a globally unique number (IUID) and then recording that specific asset information in a single master repository (IUID Registry) is a brilliant system. Obviously, the next step is auditing the assets and the IUID Registry to ensure and enforce compliance to the IUID Policy.
A Deeper Dive
To learn more about how the IUID obligation relates to audit readiness watch this short video. The video segment was taken from a recent A2B Tracking webinar that I presented on Achieving Sustainable Audit Readiness. I hope you enjoy.
Click here to watch the video.
