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Understanding the DOD's FAIR requirement

By Jennifer Stomber
Realty specialist
Office of the Director of Civil Engineering


   The Department of Defense-mandated Financial Improvement and Audit Readiness requirement is one of the Air Force's top priorities.

   Because few of us will be able to take time from our busy work schedules to study the 346-page guide published by the Office of the Under Secretary (Comptroller and Chief Financial Officer), we developed this FIAR primer to help you understand the DOD's expectations.

   The Chief Financial Officers Act of 1990 established the requirement for audits of financial statements. In 2010, the National Defense Authorization Act directed the DOD to ensure all financial statements are validated as audit-ready no later than Sept. 30, 2017.

   In support of the CFO Act, the Office of Management and Budget's Circular A- 123 -- Management's Responsibility for Internal Control -- defines management's responsibilities for internal financial controls in federal agencies. Internal control is a tool for management to achieve the objectives of effective and efficient operations, reliable financial reporting and compliance with applicable laws and regulations.

   In response, the secretary of Defense directed the DOD to meet legal requirements in order to achieve full audit readiness on all financial statements by the end of fiscal 2017. Real property is one of five FIAR major-mission critical assets. While the Air Force lead for FIAR is Secretary of the Air Force/Financial Management the Air Force Civil Engineer community plays an essential role as the functional entity responsible for real property accountability and for environmental liabilities.

The importance of FIAR

   FIAR provides instructions for implementing a consistent, DOD-wide plan for achieving financial improvement and audit readiness objectives. Air Force audit readiness efforts directly support the ability to meet DOD fiscal challenges and prove to both Congress and the American people, with reassurance, that the DOD is a good steward of public funds. Twenty-three of the 24 major federal agencies achieved auditability on their annual financial statements, with 21 of those 23 achieving unqualified (clean) opinions and the other two achieving qualified opinions. The DOD is the only remaining agency with a disclaimer from its auditors.

   Improving DOD's financial management operations helps provide America's military men and women the resources they need to carry out their mission, and improve stewardship of the resources entrusted to us by taxpayers. DOD priorities include providing budgetary information, proprietary accounting and information, mission-critical asset information and valuation of assets, liabilities, revenues and costs reported in the financial statements.

   FIAR ensures financial statements are created in compliance with audit requirements. It verifies all resources for approved mission priorities are allocated legally. Furthermore, complete and accurate data supports better decision-making in day-to-day operations.

   For our CE community, facility sustainment resource requirements are defined by the Office of the Secretary of Defense's Facility Sustainment Model, which relies heavily on a complete and accurate Total Force real property inventory at each installation and site. If we under-report our assets in the model, we under-program our real property requirements as well. Additionally, if the Air Force is unable to pass an audit, it will have a detrimental effect on its credibility with Congress, which could ultimately result in fewer resources for the Air Force.

   Success will be demonstrated through the audit of financial statements, performed by independent auditors resulting in an unqualified (clean) audit opinion on DOD's financial statements. Base CEs play an important role in accounting for real property and environmental liabilities. Meeting the timelines directed by the secretary will be no easy task, but focused corrective action plans spanning from the headquarters to installation real property officers will help reach these goals.

Action plans

   To prepare for the FIAR deadline of March 30, 2017, an Air Force Real Property FIAR Summit team developed 38 corrective action plans formally conveyed to all major commands in a memo earlier this year. The plans are based on self-identified deficiencies defined during the summit, to be tracked and reported on a monthly basis using a new SharePoint site. Additionally, a dedicated collaboration page has been created on MilSuite to push out best practices, additional policy and/or guidance and revised or new processes. While the plans are specific to the real property functional community, they also integrate the Air Force Inspection System's Management Internal Control Toolset Self-Assessment Communicators to assist in management oversight and provide installation commanders visibility to CAP achievements and allow for self-reporting of problem areas.

   One of the most important plans is CAP Zero - Internal Phase II Existence and Completeness efforts. Phase I efforts were performed by tiger teams comprised of representatives of headquarters Air Force, Air Force Civil Engineer Center, SAF/FM and the Air Force audit coach. Phase I planned a visit to an installation under each MAJCOM. The team assisted each installation in performing a real property review of buildings and structures. Linear assets were excluded from the validation and will be done at a later date. The Phase I teams used the installation's real property inventory listing to assist the installation team in accomplishing its existence and completeness review.

   Existence and completeness prepares the Air Force for an audit and improves awareness by stressing the importance of accurate real property inventories to support planning and programming future missions and requirements. Real property constitutes 32 percent of the Air Force plant, property and equipment value on the balance sheet, making real property accountability a critical component of Air Force audit readiness.

   With the 2017 deadline rapidly approaching, all Airmen play a key role in FIAR's success.

   Effectively accounting for real property inventory means we have a 100-percent complete physical inventory of assets on each installation. With the support of installation wing commanders and the base CE community, accomplishment of Corrective Action Plan Zero and all 38 CAPs will go a long way toward achieving compliance with FIAR in the Air Force, and drive DOD closer to an unqualified opinion. Real property FIAR efforts underpin CE asset management principles. If we get it right the first time, sustainment of FIAR efforts will be much easier and a more routine process.