Auditing the security assistance accounts

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1. Why these accounts are audited at all

The obligation is statutory and older than the program office arrangements built around it. "The Chief Financial Officer (CFO) Act of 1990 (P.L. 101-576) requires federal agencies prepare financial statements and have those financial statements audited by the agency’s Inspector General or by an independent external auditor, as determined by the agency’s Inspector General" (SAMM C14.6.2).

Defense came to it late. "The National Defense Authorization Act (NDAA) Fiscal Year (FY) 2010 (P.L. 111-84) required the DoD to undergo annual financial statement audits beginning in FY 2017" (SAMM C14.6.2). That produced two separate sets of statements for the agency, one consolidated into the department wide statement and one reported directly to the treasury department (SAMM C14.6.2).

The second set exists because of a decision taken outside defense. "The Department of Treasury identified the SAA as material to USG financial statements in 2017, requiring DSCA to submit audited financial statements on an annual basis" (SAMM C14.6.2). The first full audit came later: "The first of these annual full financial statement audits for the SAA began in FY 2022" (SAMM C14.6.2).

That date matters for reading anything about the state of these accounts. A regime that began in 2022 is young, and the findings it generates are the findings of an early audit rather than of a settled one.

2. Two audit worlds, kept apart

Not every audit of the agency is the same kind of audit. One directorate oversees responses to the accountability office, the defense inspector general and other audit organizations publishing reports on the agency or on security cooperation programs. A different one leads the financial statement work, and the manual states plainly that its chapter applies only to the second (SAMM C14.6.1).

Anyone receiving a request should therefore establish which of the two it belongs to before answering, because the route, the deadline and the office on the other end are different.

3. Three tiers, and who sits on each

The structure is described in one sentence. "DSCA and the Implementing Agencies (IAs) follow a three-tiered governance structure to facilitate communication and information flow between tiers on SAA audit readiness challenges and solutions" (SAMM C14.6.2.1), and the tiers are graded by seniority: "The three tiers include the SAA Governance (Senior Executive Service (SES) Level), the SA Audit Readiness Board (SA/ARB) (GS-14/15 Level), and IA-level working groups" (SAMM C14.6.2.1).

The top tier is chaired at the highest level available. "Tier 1 operates under the authority of the DSCA Director who serves as the Chair" (SAMM C14.6.2.1.1), with senior military department leadership representing sales operations and support from the finance service. A separate senior steering group was added in 2020 as an advisory body chaired by the chief financial officer.

The middle tier does the work. The board is chaired by the comptroller and carries two representatives from each implementing agency, one for audit support and one for operations, plus two from the finance service in Indianapolis (SAMM C14.6.2.1.2). The audit remediation office of the defense comptroller became a voting member in 2021.

The bottom tier is deliberately informal. "The IA-Level Working Groups meet on an ad hoc basis to support the requirements of the Tier 2 SA/ARB" (SAMM C14.6.2.1.3), convened by the same people who sit on the board above them.

4. Who produces the numbers, and who signs for them

Preparation and approval are separated. The finance service consolidates and provides the statements as the accounting service provider, and "DSCA is responsible for reviewing and approving the financial statements" (SAMM C14.6.2.2).

Underneath that sits a monthly obligation that reaches well beyond headquarters. Trial balances, meaning a summary of balances in all general ledger accounts, go to a departmental reporting system every month. The implementing agencies and geographic commands submit their own monthly, for all execution activity on the funds they received (SAMM C14.6.2.2).

Participation is not optional, and the manual ties it to money. "DSCA funds the community for SAA audit remediation activities through the annual SA Program and Budget Review (SAPBR) process, and as such, the entire SA community is required to fully participate in audit and audit remediation activities" (SAMM C14.6.2.2). The budget route behind that sentence is described in how the administrative budget is built.

5. What an audit looks like from the inside

Requests arrive centrally. An audit response team receives, reviews and assigns them, and the groups assigned are responsible for asking clarifying questions, providing documentation and meeting the stated due date (SAMM C14.6.2.3). A separate liaison officer appoints a primary or collateral action officer to prepare and coordinate the response (SAMM C14.6.2.3.1).

Two set piece meetings bracket the work. An entrance conference is held as soon as practical between the agency, the finance service, the implementing agencies executing the funds under audit, and the auditor, with the presentation drawing on both sides (SAMM C14.6.2.3.2). At the other end, "During Exit Conferences, auditors present proposed findings and draft reports to all groups involved in the engagement (e.g., DSCA, DFAS, and IAs)" (SAMM C14.6.2.3.3).

Findings then become a work plan. A notice of finding and recommendation triggers a schedule and named owners, who build corrective action plans with measurable milestone steps and dates (SAMM C14.6.2.3.4). Closing one out is a separate act by a separate team: "Once CAPs are created and implemented, the DSCA (OBO/CMP/FAS) Validation Teams reviews the CAP and applicable documents evidencing milestone completion to verify that the CAP remediates the NFR" (SAMM C14.6.2.3.4).

6. The quarterly check on stale money

Alongside the annual audit runs a quarterly discipline aimed at balances that have stopped moving. The review is required of components executing title 22 assistance funds, and its stated purpose is stewardship through timely reconciliation and closure of transactions on sales cases (SAMM C14.7.1).

Dormancy has a defined test rather than a judgment. "Balances are defined as dormant if they have not been liquidated and no obligations, adjustments, contract modifications, disbursements, or withdrawals occur within the 90-day dormancy period" (SAMM C14.7.1). The function is stated as plainly: "The DAR-Q serves as a quality control mechanism, holding each DoD component accountable to review dormant financial transactions and implement timely corrective action as needed" (SAMM C14.7.1).

The cadence is fixed to the quarters. "Funds holders, with assistance from supporting accounting offices, must review financial dormant transactions for timeliness, accuracy, and completeness during each DAR-Q review period ending March, June, September, and December" (SAMM C14.7.2). The review supports the reconciliation and closure duties described in how a case is reconciled and closed.

Key terms

Security assistance account	The account reported directly to the treasury department and audited annually since 2022.
Three tier governance	Director level, a board at GS-14 and 15 level, and ad hoc working groups. SAMM C14.6.2.1.
Trial balance	A summary of balances in all general ledger accounts, submitted monthly.
Notice of finding and recommendation	An audit finding, which starts a corrective action plan with dated milestones.
Dormant balance	A balance unliquidated and untouched for ninety days, caught by the quarterly review.

Every statement above links to the document behind it. The full source list for this piece is on the sources page.

This page describes public United States government programs for general information. It is not legal, regulatory or procurement advice, and it does not address the facts of any particular case.

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