department of defense agency financial report fiscal year 2012

Department of Defense Agency Financial Report for FY 2012
SYSTEMS, CONTROLS, AND LEGAL COMPLIANCE
MANAGERS’ INTERNAL CONTROL PROGRAM
The Department has a fundamental responsibility to be an effective steward of government
money. Effective internal controls are the foundation of an organizational framework
predicated on accuracy and accountability. Internal controls represent an organization’s
plans, methods, and procedures used to meet its mission, goals, and objectives, and serve
as the first line of defense in safeguarding assets and preventing and detecting errors,
fraud, waste, abuse, and mismanagement. The purpose of internal control is to provide
reasonable assurance that an organization’s objectives are achieved through (1) effective
and efficient operations, (2) reliable financial reporting, and (3) compliance with laws and
regulations.
The Department is responsible for establishing, maintaining, and assessing internal controls
in order to provide reasonable assurance that it meets the objectives of the Federal
Managers’ Financial Integrity Act, Public Law (PL) 97-255, sections 2 and 4; the Federal
Financial Management Improvement Act, PL 104-208; and the Office of Management and
Budget’s Circular (OMB) No. A-127, entitled “Financial Management Systems.”
OMB Circular No. A-123, entitled “Management’s Responsibility for Internal Control in the
Federal Government,” requires agencies and individual Federal managers to take systematic
and proactive measures to:
• Develop and implement appropriate,
cost-effective internal controls.
• Assess the adequacy of internal controls
in Federal programs and operations.
• Assess and document internal controls
over financial reporting and financial
management systems.
• Identify deficiencies and necessary
improvements.
• Take corresponding corrective actions.
• Report annually on internal controls
through management assurance
statements.
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A U.S. Army Sgt. shares a high five with an
Afghan boy during a presence patrol in
Kabul, Afghanistan.
U.S. Army photo by Sgt. Catherine Threat
Based on the Department’s assessment of
internal controls, the Deputy Secretary of Defense has signed the following Statement of
Assurance.
Management’s Discussion and Analysis