Transcript Slide 1

Office of the Under Secretary of Defense (Comptroller)
DoD Financial Management
Priorities and Emerging Issues:
a DCFO Perspective
Mark Easton
Deputy Chief Financial Officer
Office of the Under Secretary of Defense (Comptroller)
June 2010
7/18/2015 4:25 AM
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Agenda
• DoD Comptroller Management Framework
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Alignment to Strategic Management Plan (SMP)
• The DoD Business Environment
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Self-Assessment – internal and external stakeholders
Business “Control Continuum”
The Vision for Change
• The DCFO Team: Leading Change while Sustaining
Traditional Strengths
• DoD Emerging Financial Issues
– DoD
High-Priority
Performance
Goals
DoD
High-Priority
Performance
Goals
Improper
Payments
– Improper
Payments
“Do
NotNot
PayPay
List”
– “Do
List”
IRS
3%3%
Withhold
– IRS
Withhold
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Reporting Model Workgroups
Financial Reporting Workgroups
Intragovernmental Business
ERP Relationship to FIAR
• What it Means to You… May depend on where you are!
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DoD Financial Management Priorities and Emerging Issues
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DoD Financial Management
Framework
• Acquire needed resources
and make best use of them
• Pay people and vendors on
time and accurately
• Good stewardship of
public funds
• Strong Financial
Management (FM)
workforce
• Personnel
• Logistics
• Acquisition
• Installations
Acquire Needed Resources / Best Use
Strong FM Workforce
Successful Financial Management Depends on a
Strong Enterprise Business Environment
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DoD Strategic Management Plan
Business Priorities (BP)
BP1
Support the
All-Volunteer
Force
BP2
Support
Contingency
Business
Operations
BP3
Reform the DoD
Acquisition and
Support Processes
BP4
Enhance the
Civilian
Workforce
BP5
Strengthen
DoD Financial
Management
USD(C) SMP Metrics in the DoD SMP
Health Care
Cost Trends
Internal
Controls in
Afghanistan
(None)
Wounded
Warrior
Pay Support
FM Workforce
Trends
ARRA
Obligation Rates
ADAs
FIA
R
Mil Pay Timeliness
Cancelling
Appropriations
Civ Pay Timeliness
External Reporting
 Performance Budget
 OMB High-Priority
Performance Goals
 Annual Performance Report
 Agency Financial Report
Citizens’ Report
 Other
DJMS Sustainment
Improper Payments
Implement Effective
Financial Systems
Vendor/Contractor
Pay Timeliness
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The Department of Defense:
Size, Complexity, and Challenges
Fortune Top 10 Largest Companies
#
Company
In the private sector, achieving a “clean”
opinion is considered normal business –
but with some exceptions (e.g., Enron).
•
If the DoD were a Fortune 500 Company,
we would be #1 – larger than Exxon Mobil
and Ford combined).
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DoD is one of few Cabinet-level
Departments still without an acceptable
audit opinion.
2009
Revenue
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Department of Defense*
$589.9B
1
Exxon Mobil
$442.9B
2
Wal-Mart Stores
$405.6B
3
Chevron
$263.2B
4
ConocoPhillips
$230.8B
5
General Electric
$183.2B
6
General Motors
$149.0B
7
Ford Motor
$146.3B
8
AT&T
$124.0B
9
Hewlett-Packard
$118.4B
Valero Energy
$118.3B
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We apply rigor and discipline to
operational missions (e.g., nuclear
power, flight safety, etc.). Our goal
is to apply similar discipline to
business operations but size and
complexity is a challenge.
*Based on FY 2009 DoD Total Obligation Authority (TOA); does not include recently appropriated Supplemental Funding of $79.9B
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GAO Perspective on
DoD Enterprise Business
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Lack of sustained leadership (frequent turnover)
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Cultural resistance to change
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Lack of meaningful metrics (with added difficulty monitoring progress)
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Inadequate incentives/accountability mechanisms
Possible Solution: An enterprise framework and
improved horizontal integration
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An Internal Perspective:
A Business Environment Profile
Mission
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Variety of Services Provided
Urgency of need to support the Warfighter
Processes
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Lack of embedded internal controls
Lack of process standardization
Manual processes are often the norm
Systems
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Lack of integration between financial and operational systems
Antiquated technology and systems
Lack of visibility into detailed data
People
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Workforce spread across the globe / “decentralized” culture
Retention / attrition of the workforce
Occasionally resistant to change
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DoD Business
“Control Continuum”
No Assurance
“Playground Rules”
Qualified
Assurance
Current
State
Reasonable
Assurance
Absolute
Assurance
Financial
Auditability
Nuclear
Reactor
Safety
FFMIA
Compliant
GAP
No Control
(Anything Goes!)
“Closing the Gap”
Will Mean:
• More standard processes
• Implementing more capable systems
• Controls that are in place and tested
Complete Control
“Closing the Gap”
Represents Opportunities for:
• Improved operational efficiency
• Reduced vulnerability to fraud/waste
• Sustained public trust/confidence
Goal is to Improve the Quality of Information Used for Decision Making
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The Vision for Change
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Context:
– DoD Financial Management health and capabilities are
a reflection of the business environment and the
key supporting elements
• People
Need to Strengthen Each
• Processes
Area – Working Together
Towards Specific Outcomes
• Systems
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Vision:
– The Comptroller must serve as a catalyst in
strengthening key elements of our business…
both inside and outside of the Financial Management
“Stovepipe.” We need to recapitalize our “Business
Infrastructure.”
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Leading Change…
Future Directions
Accounting/Finance Policy
• Leading in-theater business
improvement initiative
• Implementing provisions of
Executive Order on improper
payments
Financial Reporting & Analysis
• Spearheading IC audit readiness
execution
• Evaluating revised federal
reporting model
Business Integration Office
• Implementing an improved
Investment Review Board process
• Strengthening partnership with
BTA
Financial Improvement & Audit
Readiness
• Partnering with Military
Departments and Defense
Agencies on FIPs
• Evaluating ERP implementation
using financial audit lens
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…While Sustaining Traditional Strengths
Recent Accomplishments
Accounting/Finance Policy
• Completed 91% of the FMR updates
• Reduced Cash Held Outside Treasury by
$800 million (25%) and Related Treasury
Interest Expense
• Supported an Enterprise Approach in Solving
Automated System and Personnel Issues
within Theater
Business Integration Office
• Developed a cost collection and reporting
system for ARRA reporting
• Implemented seven OMB high priority
metrics reported through the Deputy Chief
Management Officer
• Developed a DAI implementation schedule
for FY10 and FY11 deployments; supported
DTIC FY10 implementation
Financial Reporting & Analysis
• Developed Financial Statement Formal
Reporting Streamlining Proposals
• Implemented AFR streamlining
• Reduced Intragovernmental Elimination
Differences
• Developed Strategy for Military Equipment
Reporting (CAMS-ME Alternatives)
Financial Improvement & Audit
Readiness
• Commenced Audit of USMC SBR
• Qualified audit opinion on TMA CRM
financial statements
• Defined priorities for audit readiness efforts –
information important to decision makers
• Drafted FIAR Guidance and Next FIAR Plan
• Supported development of a theater
business system architecture
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DoD Emerging
Financial Issues
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DoD’s Top 10 High-Priority
Performance Goals
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Increase Energy Efficiencies
Reform the DoD Personnel Security Clearance Process
Execute Virtual Lifetime Electronic Record (VLER) Milestones
Streamline the Hiring Process
Implement Department-wide In-sourcing Initiative
Spend American Reinvestment and Recovery Act (ARRA)
Funds Quickly and Effectively *
• Provide Effective Business Operations and Ensure Logistics
Support to Overseas Contingency Operations *
• Increase the Audit Readiness of Individual DoD Components *
• Reform the DoD Acquisition Process
• Enhance the Security Cooperation Workforce
* USD(C) Lead
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Improper Payments
• Executive Order, “Reducing Improper Payments and Eliminating
Waste in Federal Programs,” issued November 2009
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Adds additional reporting requirements:
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Quarterly reporting to OIGs on High Priority programs and High Dollar
improper payments to individuals and contractors
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None of DoD’s reporting programs have been designated high priority
by OMB for FY 2010 reporting, but high dollar improper payments do
apply
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Data to be posted publicly
– DoD’s data will be posted to the OUSDC Public website
– Link to Treasury’s Payment Accuracy site may also be posted
once site is finalized
• OMB Memo issued March 2010 – Payment Recapture Audits
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OMB guidance pending
Encourages post pay recovery audits
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Pending Legislation
• The House version of the Improper Payments Elimination
and Recovery Auditing Act (IPERA) has moved on to the
Senate for review
• Biggest effect on DoD would be the threshold reduction
from $500 million to $1 million for instituting the recovery
auditing requirement, if cost-effective
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New Presidential Memo
“DO NOT PAY LIST”
• Prevention of improper payments is key
• All agencies directed to:
– Review current prepayment procedures
– Investigate and utilize additional existing databases to verify
eligibility for payment
• SSA Death Master File List
• GSA’s Excluded Parties List
• Treasury’s debt check system
• HUD’s Credit Alert System
• IRS’ Tax Delinquency List
• These lists collectively will be known as the Do Not Pay List
• OMB to issue guidance within 90 days to address
Governmentwide coordination and utilization
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IRS 3% Withhold
Requirements
• Section 511 of the Tax Increase Prevention and Reconciliation
Act (TIPRA) of 2005 (P. L. 109-222) required a 3% withholding
on any government payment for property or services
– Will operate similar to income tax withholding from wages – the
company will claim a credit for the 3% withheld when filing
income tax returns
• American Recovery and Reinvestment Act 2009 extended
implementation 1 year to payments after Dec. 31, 2011
• IRS has not yet provided final implementing regulations
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Proposed Regulations
Payments Subject to Withhold
• Payments $10,000 or greater in value (de minimis threshold)
• Government purchase card payments & fuel cards
– Payment occurs at point of sale when credit card is tendered
• All contract and vendor payments (incl. transportation)
• Utility payments
• Payments under govt. programs to provide health care or other
services that are not based on the needs or income of recipient
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IRS 3% Withhold
Requirements
• DFAS is also working across the Department identifying systems
impacted and programming changes necessary.
• IRS has not committed to a specific date for final regulations but
the latest word is the end of summer 2010.
• IRS final implementing regulations will govern the number and
types of changes required to our policies, operations, and
accounting and entitlement systems.
• We expect further guidance to come out from OMB as their
working groups get underway and begin addressing how all
federal agencies should be implementing these withholding
requirements.
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Reporting Model
Workgroups
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Statement of Spending and Statement of Net Cost
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Presents Expenditures by OMB Object Class
Summarizes “USASpending.gov” information
Proposed Revised Statement of Net Cost
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Present managerial cost information most beneficial to decision-makers
Identified obstacles and resolutions to implementing reporting model
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Audit all financial statements at government wide or remain with agency
Source data for SOS should reside in accounting systems
Revise FASAB standards to Incorporate SOS
Internal Control
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Obstacles and Resolutions
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Established proposed Statement of Spending (SOS)
Identify high risk areas (i.e. Improper Payments)
Update audit criteria for audits of internal controls
Proposals to be presented to CFO Council
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Financial Reporting
Workgroups
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Statement of Net Cost (SNC)
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Effective FY 2010 – Separately report actuarial gains/losses
Effective FY 2012 and Beyond – Segregate program and administrative
costs by major program
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Developing guidance and processes to include:
– Defining administrative costs and major programs
– Developing new USSGL account(s)
– Evaluating reporting cost by OMB object classes
Statement of Budgetary Resources
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Effective FY 2011 - Format aligned with the revised SF-133
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Resource and status sections are condensed
Added: New Budget Authority, Net Section
Adjustment lines added to reflect material changes to beginning obligated and
unobligated balances
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Intragovernmental Business
• Level 1 Activity – Business between DoD and Other Federal Agencies
• Level 2 Activity – Business between DoD entities
• DoD unable to reconcile intragovernmental activity
– Result in $27B unsupported Governmentwide adjustments
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DoD responsible for over $5B
– GAO cited intragovernmental activity reconciliation as one of three areas
that prevented GAO from expressing an opinion on the consolidated
financial statements of the U.S. Government
• OUSD(C) is working with top trading partners
– Establish framework for data exchange as an interim solution
• DoD Entities must work closely with trading partners
– Trading Partner interaction and data exchange necessary to reconcile
• DoD’s current system solution is IVAN and deployment plans are in
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process
Treasury and OMB considering a Federal Governmentwide solution
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ERP Relationship to FIAR
Background
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Success in audit depends on end-to-end (E2E) process with:
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All business events recorded in general ledger and
General ledger postings traceable back to supporting
evidence/documents
ERPs are essential but not sufficient to improving E2Es –
integration with feeder and mixed systems is also required
Legacy Systems
Environment
AREA
Checkpoint
AREA
Checkpoint
Target Systems
Environment
ERP Programs and
Enterprise/Component
Transition Plans
ERP Wave 1
ERP Wave 2
OUSD(C) FIAR will lead efforts to confirm auditability and
design detailed, auditable solutions for any impediments.
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ERP Relationship to FIAR –
What Needs to Be Done
• Assess E2Es where ERP has been implemented to:
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Confirm auditability of solution
Identify any remaining audit impediments
• Define and implement auditable solutions
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FIAR, DCMO, Component, and BTA collaborate on solutions and
implementation
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Component can’t solve these remaining issues alone
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They likely cut across the Enterprise
They will require deep accounting and audit experience
• Include improvement plans in FIPs and track progress
through FIAR Plan
Any remaining audit impediments should be
resolved before Departmentwide rollout
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FIAR Goals and Priorities
• FIAR Goals
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Achieve and sustain audit readiness
Achieve and sustain effective internal controls
Attain business and financial system FFMIA compliance
• FIAR Priorities – Information important to decision making
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Budgetary Information
• Status of Funds Received, Obligated and Expended
• Results in auditable Statement of Budgetary Resources (SBR)
Mission Critical Asset Information (Military Equipment,
Real Property, Inventory, Operating Materiel & Supplies, and General
Equipment)
• Audits based on Existence and Completeness assertion
• Audits will also test important management information
(e.g., location, condition, utilization rate)
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FIAR Overview
• We now have a coordinated, focused approach to FIAR
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Focus on data we use to manage
• Audit readiness demands enterprise commitment
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Business environment must change
Need Service/Agency help
• Why will we be more successful this time?
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Focused approach and demonstrated value yield management buy-in
Most resources programmed
Long-term and interim goals established
Governance structure in place
Target ERP systems implementations are underway
We Are Committed to Demonstrating Progress
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Open Government
• This administration is committed to creating an
unprecedented level of openness in government
– Government should be transparent, participatory and collaborative
– Memo stating this signed on President’s first full day in office
• Open Government Directive (OMB M-10-06)
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Establishes steps and deadlines for creating a more open culture within each
agency
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Data will be made more accessible to the public and include improved
communication between government and public
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DoD Open Government page: http://www.defense.gov/open/
• Improve the quality of Federal spending information
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Establishes a framework for placing internal controls over preparation and
dissemination of financial data
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DoD governance structure under Senior Assessment Team and to incorporate
risk assessment and control activities as outlined in OMB A-123
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To work on improving dialog with public
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Business Environment:
Operational Theater Focus
GOAL: Provide effective business operations and ensure
logistics support for Overseas Contingency Operations
Precept:
Strengthening the business environment within the operational theater will
improve effectiveness (responsive mission support) and ensure better
control over resources (internal controls)
Approach:
Ensure Systems, People, and Policy/Processes are in place at appropriate
levels to provide management visibility and assurance over controls
Value
Proposition:
End State
Vision:
Improve mission effectiveness, enhance personnel safety/security,
reduce likelihood of loss of funds or erroneous payments, less rework,
better cost visibility/control
Lessons learned from early theater experience applied;
Capability transportable to future contingencies/theaters
Multi-level Engagement with an Enterprise-Integration Strategy
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Summary
• The DoD Financial Management community is performing
well
• Enterprise-wide changes in our business will be required
to meet stakeholder expectations
– More standard/better controlled processes
– Better integrated/more capable systems
• We are applying these changes in current plans and
initiatives… as we deal with emerging issues
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DoD Financial Management Priorities and Emerging Issues
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What Does All This Mean to
You as a Financial Manager?
…Depends on Where You Are
If you are at a:
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Headquarters Command
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Echelon II (e.g., Major Command)
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Field Activities (Post / Camp / Station)
– Promulgate clear guidance
– Emphasize change management themes
– Develop a plan for change
– Emphasize communication with field activities
– Implement plans / focus on internal controls
– Remember “source documents”
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