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The Alexander Hamilton Award Nominees

Nomination for FY 2003 PCIE Award

Nominating entity:       Treasury Department Office of Inspector General
Award: Alexander Hamilton Award
Category: Audit
Contact: William H. Pugh, Deputy Assistant Inspector General for Audit, (202) 927-5768
Nominees: Treasury OIG CFO Audit Team

Michael Fitzgerald, Director, Financial Audit Division
Louis King, Director, Information Technology Audit Division
Susan Barron, Audit Manager
Ade Bankole, Audit Manager
Sunday Okurume, Audit Manager (Divested)
Kimberly Fleming, Audit Manager, (Divested)
Mark Levitt, Team Leader
Alejandro Biggs, Team Leader
Ken Harness, Team Leader
Donna Joseph, Team Leader
Edward Thomas, Team Leader (Divested)
Mary Yarborough, Auditor (Retired)
Rafael Cumba, Auditor
Catherine Yi, Auditor
Shiela Michel, Auditor
Nakita Parker, Auditor
Citation: This award recognizes the CFO Audit Team, led by Michael Fitzgerald, for outstanding audit services rendered, in recognition of accelerating the audit of the Treasury Department's FY 2002 consolidated financial statements from 150 days to only 45 days after the fiscal year-end. The Department's FY 2002 Performance and Accountability Report, including the audited financial statements, was issued on November 15, 2002, two years ahead of the Office of Management and Budget's requirement that all Federal agencies submit these annual reports by November 15, 2004.

Nomination Statement FY 2003 PCIE Award
Treasury OIG CFO Audit Team

The Treasury OIG CFO Audit Team, under the leadership and direction of Michael Fitzgerald, completed the audit of the Treasury Department's FY 2002 consolidated financial statements only 45 days after the fiscal year-end. This represented a dramatic acceleration of our annual audit, as compared with the prior year. Our FY 2001 audit report was issued on February 27, 2002, or 5 months after the close of the fiscal year. Our FY 2002 audit report was included in the Department's FY 2002 Performance and Accountability Report (PAR) submitted to the Office of Management and Budget (OMB) on November 15, 2002.

Not only was this two full years ahead of OMB's requirement that all Federal agencies issue their annual performance and accountability reports, including audited financial statements, by November 15th, but Treasury was the only cabinet-level agency to meet this challenge in FY 2002 and only one of two executive agencies able to meet the challenge (Social Security Administration being the other). Treasury's accelerated submission of its FY 2002 PAR was cited by OMB as one of the most significant achievements of FY 2002 in furthering the President's Management Agenda for Improved Financial Performance.

The challenges faced by the CFO Audit Team in accelerating Treasury's annual audit were daunting and multi-faceted. This included working with management to improve the accuracy and timeliness of interim financial information, streamlining the year-end closing and consolidation process, restructuring OIG audit plans and approaches, modifying existing audit contracts, and providing oversight for other auditors engaged in the FY 2002 audit effort. The CFO Audit Team demonstrated extraordinary leadership, initiative, innovation and professionalism in managing this large-scale audit operation and bringing it to a successful conclusion.

Treasury operations encompass a broad range of economic, financial, law enforcement and regulatory activities. The FY 2002 consolidated financial statements consisted of 25 component entities, which included 14 components or activities subject to stand-alone audit requirements. Major audited components included the Internal Revenue Service, U.S. Customs Service, Exchange Stabilization Fund, Bureau of Public Debt, U.S. Mint, Financial Management Service, and the Office of D.C. Pensions. In FY 2001, only one audited component, a relatively small bureau, had been able to have its statements audited by November 15. Most of the major FY 2001 component audits were not completed until shortly before issuance of the FY 2001 PAR. This was due in large part to major financial systems deficiencies and control weaknesses at many of these entities. Our FY 2001 component entity audits identified 11 material weaknesses and 14 other reportable conditions in internal control. In short, the attempt to accelerate the FY 2002 audit to only 45 days after the fiscal year-end required a quantum leap rather than a marginal improvement over the prior year.

The ability to accelerate the audit at Treasury to such a great extent was predicated on many factors, the most important of which was management's reengineering of financial management processes to improve the quality and timeliness of interim financial reporting as well as year-end closing processes. More accurate financial information during the year was an absolutely essential condition for an accelerated annual audit, since auditors would need to perform certain work earlier and place at least some reliance on interim financial information to reduce the amount of audit work required on year-end balances. This in turn required that management develop estimation processes and analytical tools to improve the accuracy of interim financial information.

Treasury had initiated monthly closings in FY 2001, however the data was inaccurate, incomplete and not conducive for audit. In order to remedy this situation, in early FY 2002 the CFO Audit Team participated with Treasury management in reviews of monthly data at each of the significant bureaus to identify reporting deficiencies and how they could be addressed. Based on OIG recommendations, management developed and implemented better estimation and analytical techniques that gradually improved the quality and completeness of the monthly data. This progress enabled auditors to restructure their audit approaches to perform more work on FY 2002 interim balances, generally as of 6/30/02, and to reduce the amount of audit work necessary at year-end.

The CFO Audit Team faced major challenges in restructuring the audit plans and approaches to accommodate an accelerated issuance date for the FY 2002 PAR. The sheer volume of audit work at Treasury required a broad based audit effort consisting of the OIG, the General Accounting Office (GAO), and 6 contracted Independent Public Accounting (IPA) firms. The OIG audited the Treasury consolidated statements and several component entities, the GAO audited the IRS and BPD Debt, and the other component entities were audited by the IPAs.

As the principal auditor, the OIG needed to work with Department and bureau management, as well as the GAO and the IPAs to radically restructure the FY 2002 financial statement preparation and audit timelines to enable completion of the audit work by November 15. This task was further complicated by the requirement to consolidate performance reporting into the FY 2002 PAR for the first time. Aggressive timelines were developed for audit deliverables at the bureau and Department levels, based upon stringent requirements for management to submit sufficiently reliable data to the auditors on a timely basis. This required modifications to our audit contracts with the IPAs, as well as major restructuring of the OIG and GAO audit plans. It was also emphasized to management that, even with the exceptional amount of upfront planning and preparation, audit acceleration on such a significant scale was a very risky proposition. Virtually everything had to go right in the major bureau audits as well as the consolidated audit. Otherwise, there would likely be adverse effects on the audit results and the Department may not be able to maintain a clean audit opinion. This potential tradeoff between timeliness in submitting the FY 2002 PAR and audit results was stressed to management.

Inevitably, numerous accounting and auditing issues arose that could impact a successful acceleration. The CFO Audit Team worked diligently with management, the contracted IPAs, GAO and, where necessary, OMB to ensure that these issues were resolved expeditiously. The CFO Audit Team also worked with the Department of Labor OIG to accelerate the FECA audit results in time to support our report issuance by November 15.

The compression of such a large volume of audit work into such a short time frame created extraordinary time pressures for the CFO Audit Team, especially during the period following the fiscal year-end. In addition to completing its work on the consolidation and the components audited by the OIG, the team had to perform the necessary oversight work on the contractors and review GAO's work in order to incorporate the results into our consolidated audit report. The entire CFO Audit Team tirelessly worked long hours to ensure that all work requirements and professional standards were met.

The acceleration of the annual audit at Treasury is a milestone achievement in Federal financial management, and it has been hailed by OMB as a positive example for other agencies to follow. It proved that a big agency can get it done early and get it done right. It also highlighted the importance of strong and constructive working relationships between management and auditors. Based on the successful FY 2002 experience at Treasury, OMB has strongly encouraged other agencies to make every effort to accelerate their FY 2003 audits, rather than waiting for FY 2004 to meet the new reporting requirements. The CFO Audit Team, along with our financial management counterparts at Treasury, has actively assisted in these efforts by meeting with financial management and auditors at other agencies and speaking at various conferences and seminars to share insights on how agencies can successfully accelerate their annual audits.

The Alexander Hamilton Award is designed to recognize an individual or team that has demonstrated "outstanding achievements in improving the integrity, efficiency or effectiveness of Executive Branch agency operations." The CFO Audit Team has consistently been a driving force in improving financial management at Treasury. Most of the material weaknesses reported by the Department have been identified by our financial statement audits, and we have worked closely with management to recommend solutions. The successful acceleration of the FY 2002 audit marked a new high point for the impact of our audit work in improving financial management operations at Treasury.

The benefits of our work to the Department go well beyond early issuance of the FY 2002 PAR, or the clean opinion on the financial statements. The broader business benefits are the increased reliability and timeliness of interim financial information. This directly resulted from the early engagement by the CFO Audit Team with management to address material weaknesses and improve interim financial reporting processes to an extent that an accelerated audit would even be feasible. Improving the quality and usefulness of data throughout the year for informed decision-making is still a work in process at Treasury, particularly developing good cost accounting and linking resources to results, however major progress was made during FY 2002, much of which can be attributed to the dedication, determination, and professionalism of the CFO Audit Team.

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