As one of 22 component agencies within DHS, the Coast Guard was not alone in its financial management problems; the new department was struggling as a whole to get its consolidated books in order. To address these wide-spread financial management concerns, Congress passed the DHS Financial Accountability Act (FAA) of 2004. A key element of the DHS FAA required the department and its components to adhere to more rigorous financial management processes, accounting standards, and independent audits. This put the Coast Guard in a challenging position. The service had to comply with new and far more stringent financial management standards with a financial management team that had been allowed to atrophy. To make matters worse, as one of the largest components within DHS, the Coast Guard’s ability to meet these new standards was core to the ability of the department as a whole to achieve success.

The Coast Guard met this challenge in the same way it faces operational challenges: head on. In 2006, the agency formed a Financial Management Transformation Task Force (FMTTF) that identified the root causes of the service’s financial management shortcomings and developed a strategic plan of action. Included in the plan was a requirement for a stronger chief financial officer (CFO) organization and a more rigorous service-wide financial management program. With this plan in hand, the Coast Guard established its Financial Strategy for Transformation and Audit Readiness (FSTAR) plan in 2007 that included 15 specific action items. As a result, in 2008, the service was able to fully support several key elements of its balance sheet and make significant improvements in several others. These successes allowed DHS to move closer to an auditable position.

With these 2008 successes and associated lessons learned, the Coast Guard chartered an Audit Readiness Planning Team (ARPT). The ARPT worked closely with the DHS CFO and built upon and refined the work of the FMTTF, producing version 2.0 of the FSTAR. Version 2.0 provided the service’s focus areas for FY 2009 and FY 2010. In support of version 2.0, the Coast Guard launched an all-out blitz. The service created the Internal Controls and Audit Readiness Board (ICARB), chaired by the vice commandant and comprised of the two deputy commandants (vice admirals) and the assistant commandants (rear admirals) who lead the service’s major directorates. The Coast Guard CFO and deputy CFO started meeting weekly with each audit progress team. And the commandant and master chief petty officer of the Coast Guard filmed videos communicated to all hands service-wide the importance of the audit and the requirement for everyone to do their part.

Despite these tremendous efforts, the service remained unable to sufficiently support its 2010 balance sheet and DHS was unable to obtain an audit opinion. The significance of the Coast Guard’s impact on DHS’s ability to pass its audit was captured in congressional testimony by DHS CFO Peggy Sherry. In her testimony on May 13, 2011, Sherry stated, “In order to receive an opinion on our consolidated balance sheet in FY 2011, specific improvements and corrections must be made at the U.S. Coast Guard. …” Sherry went on to compliment the commitment of the Coast Guard commandant, Adm. Bob Papp, the service’s collaboration with the department through the FSTAR plan, and characterized the progress made by the Coast Guard as “impressive.” Most important, she concluded her comments on the department’s ability to pass its audit stating that “the U.S. Coast Guard is putting the department on a path to attaining a balance sheet opinion in FY 2011.” Strong words of affirmation for the service.

Sherry’s words were also prophetic. In November 2011, the Coast Guard received a “qualified” opinion from the independent auditor for its balance sheet and statement of custodial activity. For the service, it had improved the accuracy of its balance sheet from a mere 6 percent in FY 2008 to more than 90 percent – an unprecedented achievement. For Coast Guard financial managers, eight years of long hard work had come to fruition.

Through the Coast Guard’s ability to produce an auditable balance sheet, DHS finally received a “qualified” opinion from the independent auditor. In a recent press release, Sen. Tom Carper, D-Del., stated, “An agency’s ability to keep track of its finances is a key ingredient to curbing waste and fraud. With a lot of hard work and the attention of its leadership, the Department of Homeland Security now has accounting and financial statements in good enough order to conduct a full financial audit, a first for the department. I am encouraged by the remarkable progress that the agency has made – accomplishing its goal to be audit-ready two years early … As we work to trim budgets and reduce deficits, agencies across the federal government must improve their financial management practices to avoid squandering precious taxpayer resources. …”

While achieving a qualified opinion is a huge accomplishment, it is only a waypoint toward achieving an unqualified full-scope audit opinion for DHS. The Coast Guard must now focus on bringing up to standards its remaining financial statements that were not part of the 2011 audit opinion. The service set out on this course in October 2011, but the undertaking is enormous. Never one to shy away from a challenge, the service has set the goal of being fully auditable by the end of FY 2012. Coast Guard director of financial operations and the service’s comptroller, Margo Sheridan, stated, “The Coast Guard is the first military service to receive a qualified audit opinion. This is no small accomplishment, and I expect us to measurably improve on last year’s audit results in fiscal year 2012 through continuous improvements in accountability and financial management.”

For the defense planners who read this article, the success realized by the Coast Guard’s financial management team is a perfect example of what can be achieved through effective strategic and campaign planning. The financial management responders completed a threat assessment, identified strategic goals, and then devised an eight-year campaign plan to achieve those goals. In a society that lives on 10-second sound bites and quarterly returns, this level of deliberate planning and sustained execution is rare, making the achievement all the more noteworthy.

There is no doubt that the Coast Guard financial management team has restored faith in the service’s ability to responsibly manage the taxpayers’ dollars. More important, in doing so, they have positioned the Coast Guard to continue to receive the funds it needs to serve the nation. The significance of this achievement and its impact on the service’s future cannot be overstated. Confirming this importance, Papp stated, “Our successful achievement of a qualified opinion on our fiscal year 2011 consolidated balance sheet audit assures our financial practices have withstood scrutiny from an independent auditing firm. It enables us to withstand heightened oversight and evaluation of everything we do that affects the expenditure of Coast Guard resources.”

Heroic action takes many forms. There are the more commonly recognized heroics of risking physical harm to save or protect others. There are also the heroics of stoic perseverance to achieve a critical outcome. The former receives the limelight, the accolades, and the silver screen. The latter comes simply with the acknowledgement from a grateful leadership of a job well done.

This article first appeared in the Coast Guard Outlook 2012 Summer Edition.