U.S. Coast GuardLocally based

Nationally deployedGlobally connected

March 2011

Assistant CommandantFor Resources/CFO

What we do …• We Protect Those on the Sea: leading responses

to maritime disasters and threats, ensuring a safe and secure maritime transportation system, preventing incidents and rescuing those in distress.

• We Protect America From Threats Delivered by the Sea: enforcing laws and treaties, securing our ocean resources, and ensuring the integrity of our maritime domain from illegal activity.

• We Protect the Sea Itself: regulating hazardous cargo transportation, holding responsible parties accountable for environmental damage and cleanup, and protecting living marine and natural resources.

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The U.S. Maritime Environment

• 95,000 miles of shoreline • 3.5 million square miles of

Exclusive Economic Zone – 200 miles out from the

coast• More than one-third of

gross national product originates in coastal areas

DHS/Coast Guard helping to implement new National Ocean Policy which will protect and sustain the economic resiliency of

our oceans, coasts, and Great Lakes.

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Maritime Transportation

• More than 90% of world’s trade carried on water

• Carries 78% of all U.S. international trade

• Transports 66% of all U.S. crude oil

• Produces thousands of U.S. jobs

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Seas provide opportunities/threats

• Avenue for commerce and world trade• Ability to have military power beyond

our shores to protect U.S. interests• Highways for criminal and terrorist

threats that honor no national borders

drug-smuggling submarine

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Where we fit

Dept. of the Army Dept. of the Air Force

U.S. Navy U.S . M arine Corps

Dept. of the Navy

Dept. of Defense

U.S. Coast Guard

Dept. of Homeland Security

U.S. President

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Military & Law Enforcement Authority

• The Coast Guard is one of the five branches of the U.S. Armed Forces under Title 10 of the U.S. Code and conducts military operations under DHS & DoD.

• Simultaneously, the Coast Guard exercises unique Title 14 authority as a domestic law enforcement entity.

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Unique Law Enforcement Authority Federal Laws & DOD Policy‒ Federal laws (10 USC 375 and Posse Comitatus Act) and DoD policy prohibit military usage in domestic law enforcement under normal circumstances.‒ Coast Guard exempt; Federal law (14 USC) authorizes the USCG to conduct regular domestic law enforcement operations during peacetime and war. ‒Navy and OGA assets become law enforcement platforms with USCG personnel aboard, including during time of war when Coast Guard is operating as part of DoD.

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Personnel Strength of Armed Forces

ServiceMilitarypersonn

el

Percentof

total

Army 758,400 41%

Air Force 401,400 22%

Navy 395,800 21%

Marine Corps

241,200 13%

Coast Guard

49,300 3%

Total 1,846,100 100%

Active duty and ReserveSource - FY11 DMA Requirements

Report

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Our People

• Full-time– Military: 41,400– Civilian: 7,900

• Part-time– Reservists: 7,900

• Volunteers– Auxiliarists: 33,000

Every member of the Coast Guard:Contributes to readiness

Owns the missionIs Semper Paratus

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U.S. Coast Guard is Semper Paratus - Always Ready - to provide

• Maritime Security Operations

• Maritime Law Enforcement

• Maritime Prevention

• Maritime Response

• Defense Operations

• Marine Transportation System Management

… through its 11 statutory missions

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1. Ports, Waterways, and Coastal Security

In an average day, the Coast Guard conducts:

•139 security patrols around critical infrastructure and key resources•6 security boardings on high interest vessels•4 safety and security escorts for military supply or Naval vessels

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2. Drug InterdictionIn an average day, the Coast Guard seizes:

•842 lbs of cocaine•148 lbs of marijuana

In June, 2010, crewmembersfrom USCG Cutter SITKINAK intercepted smugglers with nearly 1,000 pounds of marijuana 35 miles east of Hallandale Beach, Fla.

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3. Aids to Navigation (ATON)In an average day, the Coast Guard:

•Conducts maintenance on 117 aids, and •Resets the positioning or repairs of 24 aids

In 2010, the Aids to Navigation mission enabled safe movement of nearly 1.4 million commercial

vessel transits in 12 of the nation’s highest traffic ports

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4. Search and Rescue

In an average day, the Coast Guard:

•Saves 12 lives

•Responds to 64 search and rescue cases

•Saves $309K in property

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5. Living Marine Resources In an average day, the Coast Guard:

•Boards 13 commercial fishing vessels to ensure compliance with fisheries laws

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6. Marine SafetyIn an average day, the Coast Guard:

•Screens 720 commercial vessels and 182,000 crew and passengers•Investigates 12 marine accidents•Responds to 10 pollution incidents •Issues 173 credentials to merchant mariners

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7. Defense ReadinessThe Coast Guard contributes:

•Deployment of 6 patrol boats and 400 personnel to U.S. Central Command•Support to U.S. Africa Command’s African Maritime Law Enforcement Partnership program – Cutter Mohawk in 2010•Delivery of maritime capacity-building assistance for 51 nations, training 2,503 host country participants in 2010

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8. Migrant Interdiction

In an average day, the Coast Guard:

•Interdicts 10 undocumented migrants trying to enter the United States

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9. Marine Environmental Protection

In an average day, the Coast Guard inspects:

•29 vessels for compliance with air emissions standards•68 containers to enforce regulator standards•45 facilities ensure regulator standards are followed In an average day, the

Coast Guard:•Responds to and

investigates 10 pollution incidents

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10. Ice OperationsIn 2010, the Coast Guard:• Provided an ice-capable platform

(Cutter Healy) to support federal science and research projects in the Arctic

• Assisted over 200 vessel transits and facilitating shipment of $2 billion worth of raw materials during joint operations with Canadian Coast Guard on the Great Lakes

• Enabled safe winter shipping of over 12 million barrels of petroleum products worth over $1.5 billion in New England and New York

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11. Other Law Enforcement(foreign fishing vessel law enforcement)

In 2010, the Coast Guard:

• Detected 82 foreign fishing vessels illegally encroaching U.S. Exclusive Economic Zone

• Conducted 3 patrols and 17 boardings in support of Western and Central Pacific Fisheries Commission

• Provided law enforcement support to assist Canadian Department of Fisheries and Oceans with unarmed Northwest Atlantic Fisheries Organization (NAFO) inspections of vessels fishing under NAFO Convention

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International Presence

In November 2002, Patrol Forces Southwest Asia (PATFORSWA) stood up as a contingency operation, following a U.S. NAVY request for patrol boats in support of Operation Iraqi Freedom.  PATFORSWA was later commissioned as a permanent duty station in June 2004. Standard tour length is one year, dependent restricted, non-isolated PCS assignment.

Cutter underway OPTEMPO is very high, often in excess of 4000 hours annually.  While underway, cutters conduct maritime interception operations, maritime security operations, river patrols, off-shore oil infrastructure security, and training engagements with regional partners.

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Fiscal Year 2012 • President’s Enacted Budget for FY 2012:

- $8.956 billion (discretionary) - $1.654 billion (mandatory)

Total - $10.61 billion

• Budget priorities:– Sustain Front-line Operations– Rebuild Coast Guard– Enhance Maritime Incident Prevention and Response– Support Military Families

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Coast Guard Audit Introduction

• Nov 15, 2011 - Independent auditor issued “Qualified Opinion” on Coast Guard’s (CG) Consolidated Balance Sheet and Statement of Custodial Activity (SCA)

• Success of Fiscal Year (FY) 2011 Audit - First time since 2003 (after joining DHS) that the CG has successfully obtained an audit opinion of any kind

• FY11 Audit Opinion - Makes the CG the first of the five military services to have an auditable Balance Sheet and SCA

• Shifting Focus – CG planning for “Full Scope” audit of all financial statements (in addition to the Balance Sheet and SCA) for FY12

• Aiming High - Successful full scope audit in FY12 will result in “Unqualified Opinion” of all CG financial statements, highest financial accounting certification available by an auditing firm

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Size (Materiality) Matters

CG in DOT CG in DHS in 2010CG is 18% of DHS AssetsCG is 41% of DHS Liabilities

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Overcoming Cultural Inertia• “Operator Mentality”• Mission First!• “Tone at the Top”

• What’s important to the boss?

• Flag officers & senior enlisted aid change in vision

• Audit Remediation Campaign Plan is Key

• Turning the Corner• Building Momentum

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The Coast Guard “Audit Mantra”

• It’s not about Passing the Audit, it’s about doing our jobs IAW Federal Standards

• The audit is merely a trigger• It’s not extra work, it’s work we’ve been

required to do, but failed to do• You can’t know what you need if you don’t

know what you have• From the OMB Reviewer: the CG is not a

candidate for budget growth until they can pass the audit (paraphrasing)

• Just because you’ve said it once, doesn’t mean it doesn’t require repeating (rotations, etc.)

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Coast Guard Audit Readiness Strategy

Size

Scope

System

Sustainability

Focus on those items most material to the DHS Balance Sheet

Attack the items that can be remediated outside of current financial system limitations

‘Fix it once’ Remediate the root causes of the issue, not just a ‘quick fix’ to get through a current year audit

Divide the world of work into “Assessable Units”

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Audit Focus Areas

2003-2011: Consolidated (DHS) Balance Sheet

Audit

• Get the ‘balance’

• Work toward internal controls

• Include Statement of Custodial Activity

(SCA)

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FY2011 Mission Action Plan (MAP) Focus

• Military HR Internal Controls• Civilian HR Internal Controls• Actuarial Medical Liabilities• Environmental Liabilities• Accounts Payable• Accounts Receivable• Fund Balance with Treasury

– (Non Payroll)• IT General Controls• Capitalized Property

• CIP• Real Property• Major Electronic Systems• Operating Materials &

Supplies

FY11 Focus Areas

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06 JanF

INC

EN

HQ

Q3 Substantive Testing

Update NPFC’s Unbilled AFDA

Procedures

Update the Aviation Logistics Center’s procedures to include key control documentation

Update SFLC’s procedures to include key control documentation

Perform Analysis of Direct Expenditures

Move USCGA’s financials to FINCEN

Update WINS Procedures

Perform non-governmental suppliers clean-up

Implement Centralized

Invoicing process35

24.1

Implement Cadet Fund Strategy

Develop BRPs

Sustainment plan

Implement suspense monitoring procedures at each ALC

Update IPAC,Suspense and Cross Disbursement procedures

12-07 Accounts Payable & Accounts Receivable MAP Milestones for 27 DEC 2011 – 06 JAN 2012

3/31/2

012

9/30/2

012

6/30/2

012

12/31

/2011

9/30/2

011

Current Milestone Risks and Related MitigationRisks (Yellow) Mitigating Strategy

29.13 USCGA efforts may be delayed due to resource constraints and prioritization against existing system efforts at FINCEN and PPC.

Future state planning meeting indicates that January may be the earliest implementation period. Scheduling final date will be discussed once final technical requirements are developed and approved.

Issues (Red) Action2.5 USCGA efforts need to be refined before MAP and Quad are finalized. Future state planning meeting was conducted with USCGA this week. MAP and Quad

will be final once CG-852 develops timeline for software code changes and discusses implementation with PPC.

7.2 and 7.4 Due to resource constraints, the Aviation Logistics Center was not able to update procedure documentation by the end of Q1 FY 2012 as scheduled.

CG-852 is working with the Aviation Logistics Center to establish timelines for outstanding process documentation updates. Aviation Logistic Center updates should be complete by 1/31/12.

Key StatisticsPlanned Actual

Total AP AR Tasks 192 192

AP AR Tasks Completed to Date 51 46

Overall Percentage Complete 27% 24%

AP AR Tasks Due Next Period 4 9

AP AR Tasks Overdue (Red) 5

Tasks in Danger of Missing Due Date (Yellow) 0

Key Accomplishments this Reporting Period

1Conducted future state planning meeting with USCGA and discussed Cadet Fund and USCGA ALC future state technical requirements build out.

2 Continued Grant Accrual analysis and began Issue Paper draft related to current and future state process.

3 Continued review of subsistence fund (SX6) to identify potential gaps and remediation activities.

Key Tasks Planned for Next Period

1 Perform test of design at USCG Headquarters.

2 Continue Grant Accrual analysis.

3 Continue review of travel processes and procedures (TDY, with FBwT MAP team, and PSC).

Build process to record grant

accrual

Review travel advances procedures

Develop auditor walk-through

packages Review travel process procedures

Pol

icie

s an

d

Pro

ced

ure

s

196.521.213

18.5

Review AR FEMA requirements

Q2 Substantive Testing

Perform interim TOE and report

results

Report Q3 TOE Results

Report Q2 TOE Results

Q1 Substantive Testing

3.3

4.1 4.2

3.4,3.5

4.3

3.6 3.7

Determine requirementsto move NPFC’s financials to FINCEN

Update SFLC’s month-end suspense

reporting

Implement revised processing rates

Develop future state procedures

ICP

s an

d N

PF

C

Implement process improvementsto AP accrual

procedures

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Aca

dem

y

Resolve FY 11 AP Accrual/ Subsequent Disbursement NFR

Develop AP & AR FY 2012 Strategy

Rem

edia

tion

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2.2

29.13

17.1 17.2

Complete MVI clean up

34.1

Update TPIN Process

10.4

25

27.129.3,29.4

33.4 22

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7.2,7.4

23Resolve NPFC’s FY 2011 NFR

Resolve FY 2011 Inter-governmental NFR

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20

11.5

27.5

28.3

15

18.3 10.8

2.5

Move all cadets to direct deposit

9.2,9.4

Man

agem

ent

Con

trol

s

3.2

Review AP Accrual process

Perform TOD and

report results

Map USCGA financial process

Finalize AP & AR MAP and

Quad

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Coast Guard Financial Management

Principal Issues Moving Forward• CG accounting operations policies, procedures and

processes not in accordance with Generally Accepted Accounting Principals (GAAP) standards

• Multiple General Ledgers • General Ledgers non-US Standard General Ledger (USSGL)

Compliant• Lack of standard line of accounting

• Unable to address major functional gaps in cost-effective manner in current environment:• Centralized funds control• Three-way matching of good receipt• Payment management• Automated processing of Intergovernmental Payments and

Collections (IPACs)

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Aging, Ailing, and Failing35

• Non-compliant, with many government regulations producing:o Numerous audit findingso Inability to balance the books without unsupported On Top AdjustmentsoInability to effectively manage funds (lack of transparency makes FBwT balances uncertain)

• 16,000+ Customizations, Enhancements, & Workarounds (CEMLI report)o Much code remains undocumented due to contract dispute with support vendoroRecent add-ons causing performance issues due to conflicts with undocumented codeoNew code applied now “fixes one thing and breaks 10 things” – (CO FINCEN)o Enhancements/repairs extremely complex due to code conflictso Cannot upgrade due to customization complexitieso Not compatible with Standard Workstation Image 6.0 (Vista)o Greater maintenance overhead costs

• FPD hard-linked to CAS such that neither can be easily modified/updated• Dependence on old environments; some components run only in CITRIX• Cannot integrate with ALMIS, NESS, or Academy (4 CG General Ledgers)• Over 1,500 documented system problems• NFR’s: 20 of 52 2009 NFR’s related to CAS – 42%

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U.S. Coast Guard Entity-level Information

(Significant Systems Financial Process Flow)

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2012 Forward: Full Scope

Audit• Statement of Budgetary

Resources (SBR)

• Statement of Net Costs (SNC)

• Statement of Change in Net Position (SCNP)

• Internal Controls Over Financial Reporting (ICOFR)

Audit Focus Areas37

United States Coast GuardUnited States Coast Guard

On sceneOn scene

In demandIn demand

Semper ParatusSemper Paratus

Questions?

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