Dramatic action movies and television shows chronicle the heroic efforts of U.S. Coast Guard men and women saving lives, interdicting drug smugglers, securing America’s ports, and cleaning up oil spills. However, behind these front-line operators are teams of unsung heroes performing support functions essential to sustaining the service’s ability to execute its many missions. One such team is made up of financial managers, yeomen, property custodians, and storekeepers embedded in every level of the organization.

Over the past eight years, their determined efforts made the Coast Guard the first military service to receive a favorable financial audit opinion from an independent auditor, a huge accomplishment that improves the service’s competitive position for future funding and a story that deserves to be told.

Receiving a favorable audit opinion may sound dry and boring to many, but it is essential to sustaining the trust of the American people and the future of the Coast Guard. Taxpayers and their elected officials must believe that the service is making sound use of every dollar it is given. Americans are not known for throwing good money after bad. The ability to pass an independent audit is foundational to creating public confidence in the Coast Guard’s fiscal responsibility and greatly strengthens its ability to compete in the annual budget process, particularly in these constrained economic times.

The ability to compete well for taxpayer dollars has never been more critical for the Coast Guard. The service desperately needs to continue the recapitalization of its major assets by continuing the acquisition of national security cutters, offshore patrol cutters, fast response cutters, and polar-capable icebreakers. Without these new platforms to replace its fleet of aged and worn-out cutters, the Coast Guard will be hard pressed to meet its missions. This would put the lives of those on the sea at greater risk, and open the nation’s extensive maritime borders to smugglers and those who would do Americans harm. Yes, it takes operators to execute the missions, but it takes funds to acquire, train, and equip operators and to provide platforms from which to operate. For any agency, a critical path for obtaining and sustaining the funding needed is passing its financial and performance audits.

In addition to its Internal Controls Over Financial Reporting (ICOFR), the Coast Guard produces five financial statements that are core to the financial audit. These statements are the balance sheet, statement of custodial activity, statement of budgetary resources, statement of net costs, and statement of change in net position. Of these five, the largest is the balance sheet, which, for the Coast Guard, balances assets and liabilities of just under $67 billion. As recently as fiscal year (FY) 2008, the service could only provide assurances over the accuracy of just 6 percent of the balance sheet. Clearly the situation was unsatisfactory to the Coast Guard. As a major component of the Department of Homeland Security (DHS), the Coast Guard’s financial management status significantly impacts the department’s audit position and became a focus for improvement.

How the Coast Guard got into this unenviable position requires an understanding of where the service started. Prior to the creation of DHS, the service had resided within the Department of Transportation (DoT). DoT was a large department in which the Coast Guard was one of the smaller components. In 2003, when DHS was created and the Coast Guard was shifted over, the service found that it was now a large component of a small department. Simultaneously, the Coast Guard realized several years of unprecedented budget increases and mission growth. During this period the service rightfully focused on its mission, building its operational capacity and capability, mostly for maritime security. In doing so, little attention was given to increasing the capacity or processes to manage the increased funding, causing the Coast Guard’s financial management to suffer accordingly.