There is a lot of discussion around Sustainable Audit Readiness in the Defense Industry right now. And for good reason, Congress has passed the FIAR Initiative which is mandating accountability and currently requiring the DoD to conduct its first annual agency-wide audit.
FIAR stands for Financial Improvement and Audit Readiness and the US Department of Defense has been working on the FIAR directorate for almost ten years in a quest to become audit ready. The FIAR initiative values accountability, with two of its highest priorities being budgetary and mission critical asset information.
The US Congress is holding the Department of Defense accountable to achieve and sustain full audit readiness of DoD property, plant, equipment, operating materiel and supplies starting FY2018.
This audit readiness initiative is more than an investigation into accounting and record keeping. It’s a department-wide endeavor that requires accountability for all qualifying assets and inventory and to be able to verify the existence and completeness of that inventory.
Specific Asset and Inventory Reporting
The asset and inventory data that is required to be able to perform a clean audit has been clearly outlined in government policies. These requirements are expected on each qualifying unique asset and cannot just be applied across a group or a type of asset.
Each asset will need a number of very specific pieces of data and all of this detailed asset information will need to be reported to the IUID Registry. This reporting requirement is applicable to assets that are newly acquired items, legacy items, as well as Government Furnished Property (GFP).
The required asset and inventory information includes:
- Unique Item Identifier (UII) for qualifying assets
- Category/Type
- Location
- Status
- Description
- Custody
- Controlling/Financial Reporting Entity
It’s crucial that all DoD agencies and defense contracting businesses establish an automated approach to providing asset and inventory data to a centralized system, in this case the IUID Registry, in order to create a sustainable process that allows them to pass these audits.
Sustainable Audit Readiness
Successfully navigating an audit process is one thing — but developing systems in your organization to have a sustainable audit readiness program is another. At the end of the day being audit ready comes down to proper asset management procedures and systems that can accurately track your assets and capture lifecycle events in such a way that you can accurately and efficiently report that information to government systems.
Once this asset lifecycle data has been captured it needs to be properly managed and maintained in order to preserve the audit trail. This audit trail is a detailed record of events for a specific asset from the time of acquisition to its disposal. Organizations that can properly maintain an audit trail and be able to produce it when needed will have a much easier time with the DCMA auditors.
Conclusion
Sustained Audit-readiness means that organizations must integrate asset management into their day-to-day operations. The entire Defense industry needs to understand that audits are not going away. Modern defense contractors need to embrace full asset accountability and establish systems and procedures to improve asset visibility and inventory accuracy throughout the entire life of the asset.
For a more in-depth look into this topic download our 2018 Guide to Audit Readiness.
Learn why accurate property and asset data is so critical and how the reporting process of that specific information to the appropriate government systems is paramount to maintaining compliance. Click here to learn more about our UC! Web asset management system.
