Transcript FY15 President’s Budget Request

Headquarters
U.S.
AirAir
Force
Headquarters
U.S.
Force
Integrity - Service - Excellence
Air Force Financial
Management &
Comptroller Update
Steve Herrera
SAF/FMP
1
Overview

Audit Readiness

Budget Update

Cost Challenges
Integrity - Service - Excellence
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FIAR Update
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Congress’ Desire – Fix it
1990
CFOA
1994
1996
GMRA FFMIA

Landmark Legislation:




FY05
NDAA
FY10
NDAA
FY13 FY14
NDAA NDAA
The Chief Financial Officers Act of 1990: Created CFO position within cabinet level
agencies, directed OMB to prepare a 5-year Federal Financial Management Improvement
Plan and established pilots for agency financial statement audits
The Government Management Reform Act of 1994: Expanded CFO Act of 1990 by requiring
annual auditable financial statements
The Federal Financial Management Improvement Act of 1996: Required agencies to
implement compliant financial systems
Refined Guidance:






FY02
NDAA
NDAA FY02: Directs DoDIG to stop auditing financial statements until management
asserts they are ready for audit
NDAA FY05: Directs 1st Financial Improvement and Audit Readiness (FIAR) Plan
NDAA FY10: Legislates DoD’s established audit readiness dates
NDAA FY13: Legislates SBR by SECDEF goal of September 30, 2014
NDAA FY14: Legislates audit of FY18 financial statements NLT March 31, 2019
Continued Congressional interest
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Financial Improvement Audit
Readiness (FIAR)
Why is FIAR Important?
FY 2013 NDAA, P.L. 112-239
Codifies requirement for Statement of
Budgetary Resources to be audit ready
by September 2014

Comply with Laws – Law requires financial
statement audits

Verify Correct Allocation of Funds – Verify
that all resources are allocated to approved
mission priorities in a legal manner

Make Better Use of Resources – Provide
better information for timely, informed
decision-making and identify funds for
other purposes

Increase Public Trust – Reassure the public
and Congress that the Air Force is a good
steward

Understanding the value proposition
extends beyond auditable financials –
accountability, cost control, operational
improvement
Air Force Identified as Highest Risk Agency Due to Reliance on
Legacy Processes & Systems
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Audit Strategy
• Air Force Strategy
• Achieve audit readiness for the Statement of Budgetary
Resources (SBR) by the end of 2014
• Increase emphasis on accountability for assets
• Execute a full review of the Department’s financial controls
over the next two years and establish interim goals to assess
progress
• Appropriately resource efforts to meet these goals
• Achieve audit readiness for all financial statements by the end of 2017
• Approach includes investments in:
•
•
•
Processes
Systems
People
"To assist in accomplishing the DoD mission, we need to continue to improve the
Department's financial processes, controls and information. The Financial Improvement
and Audit Readiness (FIAR) Plan outlines the strategy, priorities and methodology for
achieving these objectives.”
- Robert F. Hale, Under Secretary of Defense (Comptroller)
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Investment in Processes


Schedule of Budgetary Activity (SBA)
Assertion – June 30, 2014
Existence & Completeness of Mission
Critical Assets Assertion – June 30, 2016
Schedule of Budgetary Activity:
 Discovery complete. Planning for corrective
actions


Engaged functional owners in
implementation of the corrective actions
and sustainment activities
Significant progress made in correcting IT
control deficiencies
Existence & Completeness:
 Munitions (Held by the AF) – Completed
walkthroughs and Internal Control Testing.
Executing Dual Purpose Testing. Preparing
for assertion by July 31st

Real Property – Substantially completed
walkthroughs for Real Property

Focus efforts on addressing audit readiness
“deal breakers” through September 30, 2014:
 Ensure completeness of financial
transactions through reconciliation of
feeders systems to the general ledger

Ensure journal vouchers are adequately
validated and supported. Address root cause in
order to eliminate as many JVs as possible

Establish audit infrastructure to support the SBA
audit

Continue with implementation and monitoring of
the internal controls, supporting documentation
and complimentary user entity control
considerations

Legacy environment and lack of data
standardization requiring manual data calls,
cross-walks and reconciliations

Reliance on Service Providers to have an audit
ready system and process environment

Depth of audit readiness expertise
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Air Force FIAR Timeline
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Air Force FIAR Timeline
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What Have We Learned
Through Examinations

Common deficiencies across business processes have been
identified through examinations & self-assessments:

Lack of documentation supporting existence and validity of financial
transactions, such as:

Management review of business events resulting in financial transactions
are documented (e.g., orders and vouchers are signed and dated)

Delegated authorities for certifying officials (DD Form 577)

Business events impacting payroll – Hiring actions, promotions,
separations, entitlements

Timely certification of employee timesheets and travel vouchers

Journal vouchers not supported

Inability to validate all transactions resulting in obligations posted to the
accounting systems (e.g., contract actions are not completely and timely
recorded)

Weak Segregation of Duties & Weak Access Controls
TWO KEY TAKE AWAYS: 1) Comply with Policies & Procedures; 2) Retain
Supporting Documentation
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SBA Priorities Going Forward


Aggressively work corrective action plans through Sep 30, 2014

SAF/FM will engage with the process owners to validate and prioritize
corrective actions

Process owners are responsible for execution of the corrective actions

SAF/FM will validate and monitor that corrective actions are implemented
correctly

Process owners are responsible for sustainment of the corrective actions
Prepare for the SBA audit

Develop an audit support infrastructure – People, process & technology

Define roles & responsibilities

Establish communication protocol

Train
As we prepare for the SBA FY2015 audit, we continue to learn from executing
AND preparing for the audit.
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Investment in Systems
-- Multiple financial feeder systems and current 1960s
core accounting system does not meet federal requirement to use the USSGL at
the detailed transaction level.
– Defense Enterprise Accounting and Management System
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Defense Enterprise Accounting and
Management System (DEAMS)

Timely, accurate and reliable
information for decision makers

Fully auditable system to meet
statutory requirements

Oracle -based solution with
standardized business rules,
processes and language

Captures data once and uses
it across the enterprise
®

As DEAMS is deployed,
legacy data remained in legacy
systems; new data/transactions are conducted in DEAMS

Operational Assessment 2 noted DEAMS is on track towards suitability,
effectiveness, mission capability, and making progress towards
readiness for IOT&E
DEAMS provides us Accurate, Reliable and Auditable Financial Information
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DEAMS Materiality at
Deployment
$180
$163.5
Budget Authority in Billions
$160
$140
$121.2
$120
AFGF Direct
Budget Authority
$100
$80
$60
$41.7
$45.1
$35.1
$40
$12.1
$20
$0
$43.5
$3.9
$4.0
May-09
Oct-12
$4.2
$4.4
$5.5
Oct-13
Apr-14
Jun-14
Oct-14
Scott
McConnell Dover JB McChord MacDill
ACC
Travis
DFAS – LI
(+.1K Grand Forks Fairchild
AFGSC
(+ .3K Charleston (+ 2.9K
(.8K
Users) Little Rock
Users) JB McGuire Users)
Pope
Users)
DFAS-Rome
(+ .4K
(+ .8K
Users)
Users)
AMC deployed bases reflect actuals and
others are projected based on FY12 final
distribution
Jan-15
Apr-15
AETC
AFDW
AFRC
(+ 2.5K
Users)
ANG
GSUs
(+ 3K
Users)
Oct-15
Jan-16
Apr-16
Oct-16
Complex AFSPC
USAFA
PACAF,
(ACC
USAFE DFAS-JA
AFMC
AETC
SDDC
DFAS-CO
(+ 2K
AFDW
DFAS-EU Users)
(+ 10.2K
AFSOC)
(+ 2.4K
Users)
(+ 4.2K
Users)
Users)
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Deployments - FY15
Oct FY15
15/Est 2.9K
No change
ACC
• Beale
• Davis-Monthan
• Dyess
• Ellsworth
• Holloman
• Mountain Home
• Moody
• Seymour-Johnson
• Shaw
• Tyndall
AFGSC
• Barksdale
• Malmstrom
• Minot
• FE Warren
• Whiteman
7/16/2015
Feb FY15
Was 20/Est 2.5K
Now 13/Est 4.1K
AETC
• Altus
• Columbus
• Goodfellow
• Keesler
• Laughlin
• Luke
• Sheppard
• Vance
Add:
• Maxwell
• JB Lackland (LSHR)
• JB Randolph (LSHR)
• JB Langley (LE)
• Offutt
• Nellis
Financing the Fight
May to Jun FY15
Was ANG/Est 3K
Now ANG and 10
AFRC/Est 3.6K
(~17 trng teams)
AFRC
• Carswell
• Dobbins
• Grissom
• Homestead
• March
• Minn - St Paul
• Niagara Falls
• Pittsburgh
• Westover
• Youngstown
ANG ~ 67 GSU sites
15
Deployment Summary - FY15
• Feb Deployment
• Moves up 3 additional AETC bases – Maxwell, JB Lackland
and JB Randolph
• Moves up 2 additional ACC bases – JB Langley and Offutt
• Further incorporates new Training/SME personnel
• Jun Deployment:
• Moving to Jun will incorporate Release 4 in May which
addresses significant workarounds for AFRC/ANG travel
• Deploys to AFRC (10 bases) and ANG GSUs (~ 67 units)
• Realigns Andrews with Bolling (AFDW) in FY16
• Realigns Cannon with Hurlburt (AFSOC) in FY16
• AF will have 5 addt’l MAJCOMs on DEAMS by EOY FY15
7/16/2015
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Investment in People
“Working a single system is definitely ideal. We only need to log in to one system; another time
efficiency. It is very easy to forget a step in any process when you are using three or four
systems to process a single document.” – Ms. Joy Clifford, 436th CPTS
“I can see how DEAMS, serving both as the document management system and accounting
system, gives FM a congruency that it has lacked in prior years.” – SrA Jeffrey Lowder, 319 CPTS
DEAMS

Changes the entire way
we do our jobs through
improved business
process re-engineering

Training plan is
standardized and
focuses on user roles
and responsibilities

Time saving and fully
supports audit readiness
Audit Readiness

Airman engagement in
monthly testing

Investing in building
the right skills and
knowledge to operate
in a complex modern
fiscal environment
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DoD FM Certification

The Air Force is leading OSD in the implementation of the FM
Certification program.

By improving our functional competency training, and solidifying
common training plans and courses, we increase the intentional
training on the fundamentals of our business and advance our
efforts to obtain auditable financial statements.
Areas of Focus:

Course Gaps

Systems Interface

Policy Clarification

Tools/Communications
SharePoint Site: https://cs3.eis.af.mil/sites/26786/DODFMcertification/default.aspx
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Budget Update
7/16/2015
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National Fiscal Environment
Federal Budget Surplus/Deficits
Federal
Outlays
2015
2015
% of GDP
% of Federal Outlays
Net Interest
Revenues and Outlays
National deficit and debt are risks to national security Budget Control
I n Act
t e gofr2011
i t y mandated
- S e r v i DoD
c e -toEdo
x its
c epart
l l e in
n debt
c e reduction
2015
% of GDP
2015
% of GDP
Federal Debt
20
Historical Budget Trends
(Includes supplemental & OCO funding
Iraq/Afghan
$800
AF
DoD
$700
Buildup/Cold War
(FY 86-98)
DoD: -32%
AF: -44%
Vietnam
$600
Vietnam
(FY68-76)
DoD: -30%
AF: -38%
$500
Iraq/Afghan
(FY08-13)
DoD: -23%
AF: -17%
Reagan Buildup
$400
$300
$200
$100
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2018
2016
2014
2012
2010
2006
2002
1998
1994
1990
1986
1982
1978
1974
1970
1966
1962
$0
21
FY15 PB: Request
Billion
$140
$120
$100
$80
$60
$40
$20
$138.3
$137.8
NonBlue
$29.5
NonBlue
$28.5
MILPERS
MILPERS
$29.2
$29.1
MILCON $1.8
MILCON $1.4
RDT&E
$16.0
RDT&E
$16.0
Procurement
Procurement
$16.8
$18.5
OCO Transfer $2.8
O&M
$42.2
O&M
$44.3
FY14 Enacted
FY15 PB
$
FY15 PB Guiding Principles
■
■
■
■
We must remain ready for the full-spectrum of military
operations by providing Airmen with the right training & equip
When forced to cut capabilities (tooth), we must also cut the
associated support structure and overhead (tail)
We sought to maximize the contribution of the Total Force
Our approach will focus on the unique capabilities the Air
Force provides the joint force, specifically against a fullspectrum, high-end threat
Tough Choices…Striking the Balance

First: Seek efficiencies and cut overhead
 Reduce major HQ operating budgets to achieve savings
 Support military compensation recommendations
 Re-invest savings into readiness and quality of work/life
 Take risk in MILCON, FSR&M & installation support
 Limits on TDYs and contract services continue
 Second: Balance capability, capacity and readiness
 Divest fleets (A-10 & U-2) to achieve maximum savings
 Reduce some tactical fighters, Command and Control,
electronic attack & intra-theater airlift
 Favored new capabilities over upgrading legacy equip
 BL: Keep no more force structure than we can afford to keep
ready…requires tough choices to absorb $B’s in reductions
“We're going to build the most capable AF against a high-end threat that is affordable in 2023. To
do that we'll have to balance capability, capacity, and readiness.”
I n t e g r i tGen
y - Welsh,
S e r vDecember
ice - E
xcellence
2013
22
Cost Challenges
7/16/2015
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Rising Costs, Shrinking Force
AF TOA

The Military Personnel
Appropriation has been a relatively
consistent percentage of overall Air
Force Budget Authority

but …
$200
$150
$100
$50
MILPERS

Housing

Base Pay

Retirement
$100
360
$90
340
$
$80
$70
320
$60
300
$50
Integrity - Service - Excellence
Thousands
2013
2011
2009
2007
2005
2003
2001
Major drivers are…
End Strength
Thousands

The cost per Airman has
increased while End Strength
has decreased
380
Cost Per Airman

1999
$0
TY $B
25%
24%
CY14 $
24
Aircraft Operations and
Support (O&S) Growth
Millions
Aircraft O&S Growth CPTAI TY
9.0
•
8.0
7.0
•
•
6.0
5.0
4.0
6.6% CPTAI
Total O&S
Air Force experiencing significant Operations and Support (O&S)
cost growth
Fuel has largest growth; price varies
Weapon system sustainment (WSS) and flying hour (FH) program
are largest cost areas; sources of growth complex
• Air Force managed repair costs continue to rise
• Contractor managed repair insight limited by data
• Contractor logistics support and organic costs growing at
similar rates on a normalized cost per total aircraft inventory
(CPTAI) basis
Other4.7%
CPTAI
4.7%
FH+WSS
7.6%
CPTAI 7.6%
3.0
Fuel CPTAI
10.2%
10.2%
2.0
MIL CPTAI
5.1
5.1%
%
1.0
0.0
1996
1997
1998
1999
2000
TY Total CPTAI
2001
2002
MIL CPTAI
2003
2004
Fuel CPTAI
2005
2006
FH+WSS CPTAI
2007
2008
2009
2010
2011
2012
Other CPTAI
Sustainment growth will slow as budgets decrease, drivers of
I n t e g r i t ygrowth
- S e r v will
i c e not
- Excellence
25
Investment Cost Assessments
Trends/Goals
120
$ Billions
■ High confidence, realistic estimates
$1.3B
100
$4.7B
$1.0B
$8.1B
80
$99
$11.9B
60
Cost
Risk
$60
$93
$90
position/buying power
$77
61%
40
■ Improve cost/schedule performance
■ Better posture top-line pressures
■ Strengthen contract negotiation
64%
60%
42%
20
33% of
RDTE/
Proc
0
PB 11 PB 12 PB 13 PB 14 PB 15
# of pgms 20
47
42
51
* “Cost risk” is the difference
between valid cost estimate and the
available funding
65
Continue
In
t e g r i t y to
- Sdrive
e r v i cdown
e - E xcost
c e l lrisk!
ence
26
Shaping Budgets with Analysis

Groundwork for the AF’s
FY15 and FY16 POM

~50 cost assessments,
increased O&S focus

Earlier delivery to shape
MAJCOM resource plans
SAF/FMC continues
portfolios
I n t e g r ito
t yreduce
- S e r vcost
i c e risk
- E xinc acquisition
ellence
27
Final Thoughts

The Air Force remains steadfastly committed to
achieving a clean audit

Our audit readiness efforts are designed to achieve
lasting financial improvements, not just a one-time
clean opinion based on unsustainable efforts

Our biggest challenge will be that our current 1960s
accounting system does not comply with the federal
requirement to use the standard general ledger structure of accounts at the
detailed, transaction level

The AF is fully committed to audit readiness and will not treat any single set back
or achievement as a defining moment--we are on a marathon to achieving full
audit readiness by 2017 and we will not relent

Tough Fiscal Climate…The challenge is to balance capability, readiness and
capacity to support the fight tonight and a high-end fight in 2023
 Reinvest in Airmen readiness: train, equip…core people programs
 Begin the gradual road to recovering full-spectrum readiness
 Shield highest-priority capabilities
 Forced to make difficult capacity trade-offs
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Back Up
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FIAR - a Matter of Trust,
Not Money
$18,000
$16,000
$14,000
$10,000
$8,000
$6,000
$4,000
$2,000
Mil Spending
Other Govt
2013
2011
2009
2007
2005
2003
2001
1999
1997
1995
1993
1991
1989
1987
1985
1983
1981
1979
$0
1977
$Billion
$12,000
GDP
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DEAMS Today
As of April 2014
 DEAMS Software  Complies with FFMIA 1996, is widely-used
across the federal government and enables end-to-end auditability
 ~ 1,400 users at 8 AMC bases, 2 ANG units, tenant organizations, and
DFAS-LI
 Operational Assessment 2 Findings Positive
 Dual Processing  using legacy and DEAMS
 Old transactions in legacy; new transactions in DEAMS
 Mix of training options to maximize learning opportunities
 Classroom, OJT, WBT, webinar
 Conducting pre-deployment activities for 1 Jun “go-live”
Integrity - Service - Excellence
Mission & Vision
Mission
“Serve with integrity as the commander's
trusted financial advisor by providing
high-quality support to decision makers
on budgetary, financial, cost and
economic issues while continuously
improving the quality, efficiency and
customer-focus of Air Force financial
services and operations.”
Vision
“Maximize the combat effectiveness achieved with each
dollar of taxpayer resources through continuous
improvement in resource allocation, analysis, financial
services, and execution.”
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Our Goals
 Properly resource the nuclear enterprise
 Support combatant commanders through
effective budget formulation, execution &
analysis
 Provide responsive financial operations to
support commanders, Airmen and their
families
 Drive transparency and reduce costs through
standardization and continuous process
improvement
 Support cost estimation, program control
and other acquisition processes
 Provide AF leadership effective decision
support
Integrity - Service - Excellence
SAF/FM Role

SAF/FM is the financial advisor to SecAF/CSAF– not just the banker


How can we efficiently and effectively accomplish our goals?
SAF/FM is a Designated ASAF

Direct/manage financial
management activities and
operations

Supervise/direct the
preparation of Service Cost
Positions and Non-Advocate
Cost Assessments

Approve/supervise any
project to design or enhance
a financial management
system

Approve the establishment
and supervise the operation
of any asset management
system
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Our Customers









Top 4
Air Force 2-letters
AF Corporate Structure (AFCS)
Office of the Secretary of Defense (FM,
CAPE, AT&L)
Congress
Service FM Executives
AF & Joint Requirements Oversight
Councils
MAJCOMs & Installations
DoD/Industry FM Community
Integrity - Service - Excellence
SAF/FM – Who we are…
SAF/FMB
SAF/FMC-AFCAA

Co-chairs AF Board w/ AF/A8P on programmatic,
basing and budget issues to provide
recommendations for AF Council approval

Provide cost, economic, financial and business case
analysis support to the Secretariat and Air Staff.


Provide guidance and direction to the Secretariat, Air
Staff, and Major Commands for the development of
funding requirements
Directing special studies for SECAF, CSAF and Air
Force senior leaders in response to internal, OSD,
OMB and Congressional inquiries.


AF lead on budget issues with OSD/OMB/Congress

Responsible for budget and funds control of
procurement, RDT&E, MILCON, MFH, and BRAC

Provide full service accounting support to classified
programs and designated national customers
Review and comment on technical propriety and
sufficiency of cost, economic, financial or business
case analysis for the SECAF, the Under Secretary of
the Air Force (USecAF), CSAF or the Vice Chief of
Staff of the Air Force (VCSAF), OSD, OMB or
Congress.

Responsible for O&M and MILPERS budgets
Maintain liaison with appropriations committee
members, professional staff, and personal staff

Prepare or delegate Non-Advocate Cost
Assessments (NACA) of all AF pre-MDAP, MDAP and
MAIS to support the Planning, Programming,
Budgeting and Execution (PPBE) process, source
selections, analyses of alternatives, program cost
and schedule breaches.

Developing and administering cost, economic and
business case analysis policy, guidance, standards
and templates, training, education and professional
certification programs and analyst qualification
criteria.



Integrate, formulate and present supplemental
budget submission, unfunded lists, Program Budget
Review, Overseas Contingency Operations budget
and President’s Budget; interface into AF Corporate
process for submission to OSD
Manages the Air Force’s Force and Financial Plan
(F&FP) data base and submitting finalized Air Force
positions to the OSD automated systems.
Integrity - Service - Excellence
36
SAF/FM – Who we are…
SAF/FME
SAF/FMP


Serves as the designated Air Force internal control
administrator.

Directs and manages the Air Force Management
Internal Control Program (MICP) to ensure
compliance with the Federal Manager’s Financial
Integrity Act (FMFIA), OMB Circular A-123,
Management’s Responsibility for Internal Control,
Comptroller General standards, and DoD guidance.
manpower Allocation, serves a the HR liaison

FM Officer development management and FM War
Planning oversight/Unit training management
Financial Improvement Plan/Financial Improvement
Audit Readiness (FIP/FIAR

Is the Air Force cash management official and
designated Audit follow-up official.

Is the Air Force’s Anti-deficiency Act (ADA) program
manager for identifying, investigating, reporting, and
processing ADA violations.

Is the SAF/FM CIO responsible for FM Information
Assurance, Portfolio Management, Financial
Improvement Plan and Business Enterprise
Architecture (BEA) assertion, including the
development, implementation and standardization of
data.

Oversight/mgmt of AF accounting & finance
activities/Liaison between AF and DFAS
Is responsible for all matters pertaining to operations
and administrative support functions for the Office of
the Assistant Secretary of the Air Force for Financial
Management and Comptroller and it’s staff.

Managing the SAF/FM operating budget and
providing Resource Advisor support to SAF/FM.

Manages the FM Awards Program

Responsible FM Manpower & Human Resource Mgt




Responsible for the implementation of AF FM
Certification and FM Certification Learning
Management System (LMS)
Responsible for Course Development & FMDLC Mgt,
DT Support, SAF/FM Primer, SAF/FM Comptroller
Magazine & Newsletter and FM Social Media
Campaigns.
Manages the NCR Palace Acquire (PAQ) Program.
Integrity - Service - Excellence
37
SAF/FM - Where we are…
605 positions across US; 535
positions encumbered
FMP
Ellsworth AFB, SD
(122)
FMP & FMC
Dayton, OH
(58)
FMC
Hanscom, MA
(7)
Pentagon, DC
& Andrews AFB
(302)
FMC
Los Angeles, CA
(7)
FMP
Denver, CO
(76)
FMC
Eglin, FL
(8)
FMP
Gunter Annex, AL
(20)
FMP
San Antonio, TX
(5)
Integrity - Service - Excellence
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