Best Practices for Federal Audit Remediation
Posted on: November 3, 2014

Image source: Bigstockphoto.comUnless you are a consistently straight-A student, most people do not enjoy pop quizzes and final exams that gauge performance and preparedness.  When it comes to financial audits, federal agencies can feel the same test-related stress and anxiety about the rigorous evaluation of their financial reporting processes from external auditors.  Furthermore, the results of an audit, like a high school report card delivered to one’s parents, are publicized and can require months of remediation activities.

Depending on the maturity of an organization’s financial management system, a federal agency receives Notices of Findings and Recommendations (NFRs) that span several functional areas and offices, are targeted toward the gaps of a few specific processes, or both.  Finalized NFRs are distributed to federal government entities during the first quarter of the new fiscal year and require speedy resolution before the next round of external audits commence in the spring.

There are several leading practices to help agencies best prepare for the receipt of annual NFRs. The suggestions below facilitate improved execution of plans, communication across stakeholders, and buy-in for new processes.

  • Create a remediation plan. The most prepared organizations have already started drafting remediation guidance and project plans well in advance of the receipt of NFRs. Since exact findings are hard to predict, financial management personnel can establish common project management procedures – such as status reporting timelines and project plan formats.  When the NFRs are eventually finalized and received, remediation teams will be freed up to focus on how to precisely address these highly visible audit findings.
  • Involve leadership and affected branches. As with most process improvement efforts, it is important to receive early buy-in and feedback from the stakeholders of the new processes. This requires leadership involvement and inter-office coordination during the planning phases, which can improve the sense of ownership and acceptance across an organization when the new processes are officially in place.
  • Adjust processes to reflect workloads, skill sets and priorities. Every problem will have a different type of solution, and sometimes a single solution can have a mixed impact across branches or offices. It is important to understand the workload and knowledge requirements for new processes, prioritize solutions with the greatest impact, and distribute workloads appropriately to increase sustainability.
  • Develop adequate controls and regular reviews. Successful remediation teams implement new processes with established performance metrics in order to monitor improvements periodically throughout the fiscal year.  Benefits from effective preventative and detective internal controls include an increased reliability of financial reporting, improved organization compliance with policy, and enhanced integration with the goals of external financial audits.
  • Identify and communicate process risks. No matter how thorough a plan is, remediation teams will undoubtedly come across problems that threaten the timely execution of a project. It is imperative that remediation teams identify, communicate, and mitigate new risks before they threaten the successful implementation of newly improved financial management processes.

Each year federal agencies anticipate dedicating a high level of effort and leadership attention to remediate audit findings, but the proper advanced planning, continued communication, and strategic integration within an organization will help ease the burden and improve the success and sustainability of these efforts for the next set of evaluations.

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