How the FM Target Environment Will Help Us Sustain Financial Auditability Presentation to the ASMC National PDI June 3, 2016
Agenda Financial Improvement and Audit Readiness Strategy (Mark Easton) An Agency s Plan towards FM Target Environment and Financial Auditability (Aaron Gillison) 2
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FM Strategy Commitment to FI+AR We in the Department of Defense are prepared to make difficult strategic and budgetary choices. We are also committed more than ever before to finding new ways to improve the way we do business and be more efficient and accountable in our defense spending. - Ash Carter Secretary of Defense 4
Vision for DoD FM Target Environment To achieve a DoD FM environment that is standard, simplified, affordable, auditable, and secure Strategic Imperatives Simplify and Standardize the FM Environment Achieve Audit Readiness by end of FY 2017 Enhance Operational Effectiveness and Efficiency Reduce FM Operating Costs Strategic Outcomes Stewardship and Public Trust Audit Sustainability Strengthened Mission Capabilities Improved Data Quality for Decision Making Informed and Productive Workforce Affordable FM Environment SIMPLIFY and STANDARDIZE 5
Transition to the FM Target Environment Persistent FM Challenges Target Environment Financial Improvement/Audit After 5 Years - Potential 20-30% Reduction 6
Every Dollar Counts How $1 Million Makes an Impact 3,800 SETS OF GORE TEX (TOPS AND BOTTOMS) M16 AMMO TO FULLY QUALIFY 30,600 SOLDIERS ANNUALLY 1 SET OF HOT WEATHER BDUs FOR A DIVISION (17,000 SOLDIERS) 6,000 PAIR OF DANNER COLD WEATHER BOOTS 12,500 COLLEGE SEMESTER HOURS FOR SOLDIERS 67 STATE OF THE ART TRACK MOUNTED SINCGARS RADIOS 900 27 INCH TVs W/1 YEAR OF CABLE FOR UNIT DAYROOMS 18 HMMWVs WEIGHT TRAINING EQUIP FOR 22 BDE SIZED GYMS 435 TRACK MOUNTED GLOBAL POSITIONING SYSTEMS (GPS) 7
Simplify and Standardize An auditable and affordable environment is the result of good business practices 8
The What Strategy Approach Implementation of the FM Strategy with a 2-Year Audit Ready focus that is in line with the Target Environment Progress towards strengthening the foundation, strengthening the surroundings and building to the future is underway 9
The How of the FM Strategy Improve mission effectiveness for the warfighter and achieve audit readiness Stag e Critical Initiat i ves Technology Enablers Management Enablers/ Lever s Business Outcomes Strengthen the Foundation Strengthen the Surroundings Build for the Future SFIS/SLOA/USSGL Audit Ready IT Environment FBWT Cash Accountability Intergovernmental Transactions Universe of Transactions Sensitive Activities Guidance Property Journal Vouchers Open Obligations Optimized and Leveraged ERPs Standard Transaction Broker Business Analytics Shared Services Governance Risk Management Policy Budget and Investment Outreach Stewardship and Public Trust through Transparency Audit Sustainment Strengthened Mission Capabilities Improved Financial Data Quality for Decision Making Informed and Productive Workforce Affordable FM Environment DATA Act 10
The Why Initiative Business Impact We all need to continue making great change through the priority Initiatives to see great value 11
How does this impact you? People Change management Training of new process Enterprise standard view point vs. local agency view Process General Terms and Condition required prior to order execution Standard Line of Accounting on both the order and order acceptance Documentation of receipt and acceptance prior to payment Requirement of SFIS trading partner data for financial reporting Technology System changes to comply with end-to-end IGT standards Connect with the GEX G-Invoicing is the Federal system for reimbursable intragovernmental business Intragovernmental Transactions DoD is Implementing Treasury s G-Invoicing Solution What is the value? Business Value Ability to track and have visibility of execution of funds Ability to record intragovernmental transactions accurately, timely and completely Less re-work Automate manual process Audit Value Ability to trace funding from initial agreement to payment Ability to provide documentation to the auditors Ability to support the elimination entries for intragovernmental transactions Remediation of a significant material weakness 12
How does this impact you? People Change management Training on new process Enterprise standard view point vs. local agency view Realigns skill sets and responsibilities Process More rigor in requisition process Enter standard line of accounting on requisitions Requisition number and line number on contract documents Procure to Pay Improving the Handshake Between Acquisition and Finance What is the value? Business Value Contracts are posted accurately and timely in the accounting system for obligation and the entitlement system for payment Reduce manual work End-to-end traceability of funds Audit Value Strengthens internal controls Technology Accounting and Entitlement systems connect with the GEX Accounting and Entitlement systems comply with the Purchase Request Data Standard (PRDS) and Procurement Data Standard (PDS) Ability to trace funds from requisition to payment 13
Cash Accountability - FBWT Improving the Validity and Visibility of Cash How does this impact you? People Change management Training on new process Enterprise standard view point vs. local agency view Realigns skill sets and responsibilities Process SLOA validation at multiple points Moves disbursing to Department of Treasury Centralized reconciliation process of disbursements and collections Full FBwT reconciliation (funding and expenditures) Technology System changes to comply with end-to-end FBwT standards Connect with the GEX Utilize existing Treasury standards Develop new DoD standards for FBwT What is the value? Business Value Ability to track and have visibility of execution of FBwT Ability to record funding, disbursements and collections accurately, timely and completely Less re-work Automate manual process Audit Value Ability to trace expenditures from entitlement to payment to posting Ability to support the undistributed JV entries for FBwT Remediation of a significant material weakness 14
Strategy Evidence Based - Example The OUSD(C) as the Fourth Estate FMO has implemented the Strategy using DAI Business Outcomes Standard Processes Standard Data Reduced cost Auditable Reduced Complexity Better decision making Produce a Reconcilable UoT Recent Agency projected $3 million annual savings Standard processes at 15 Defense Agencies Unmodified SSAE-16 Opinion < 3% Manual Journal Vouchers Implemented the GEX for 25 interfaces Decisions made using cost management Reduced over 10 homegrown legacy systems 92% invoices processed electronically 15
Everyone is Critical in Achieving the Strategy! Simplify and Standardize the FM Environment Everyone is critical in achieving the DoD FM Strategy Challenge the status quo Change the game by playing smarter We know we can be successful by working together! Strategic Imperatives Simplify and Standardize the FM Environment Achieve Audit Readiness by FY18 Enhance Operational Effectiveness and Efficiency Reduce FM Operating Costs OUTCOME = Affordable, auditable, and accountable business environment for the Warfighter and American taxpayer 16
An Agency s Plan towards FM Target Environment and Financial Auditability Simplifying and Standardizing the FM Environment to Improve Our Customer Service 17
DFAS Alignment with the DoD FM Strategy DoD FM Strategic Imperatives DFAS Strategy Achieve Audit Readiness by FY18 Audit Readiness Simplify and Standardize the FM Environment Target Business Systems Environment Enhance Operational Effectiveness and Efficiency Operational Excellence Reduce FM Operating Costs Efficiencies Integrity - Service - Innovation 18 18
One Team One Mission It is more important than ever to work together to achieve the FM target environment as we approach the audit readiness deadline and live in a budget constrained environment Customer OUSD(C) DFAS People Process Technology Integrity - Service - Innovation 19 Maximum Organizational Performance 19
How DFAS Is Operationalizing the Strategy Simplifying and Standardizing for a Better Customer Experience 20
Simplifying and Standardizing FM Systems Why Reducing Legacy Systems Is So Important RLS Directly Supports the Objectives of the DoD FM Strategy by Implementing Standard Business Processes to Reduce Legacy Systems Simplifies the Business Environment Improves Data Reliability Reduces Costs Strengthens Internal Controls Improves Timeliness, Accuracy, and Reliability of Financial Data 21
The Value to the Customer of Reducing Legacy Systems Complex Non-Standard Antiquated System Environment Cumulative Savings Define Evaluate Align Business Outcomes Reduction of Systems Simplified Standard Modern System Environment Mitigated Technology Risk Standard Secure Strong Internal Controls 22
Achieving Audit Readiness and Sustaining Auditability as an IT Shared Service Provider As a service provider, with multiple customers, systems, and processes, this is how DFAS efficiently and effectively supports the Department s audit readiness goals SSAE16s Self- Reviews Systems Reviews DFAS Audit Ready Integrity - Service - Innovation 23
DFAS Audit Readiness as an IT Shared Service Provider = SSAE 16s + Self-Reviews + System Reviews SSAE 16s- Conducted and received 14 favorable SSAE 16 exam opinions to date on 5 DFAS services (Civilian, Military, and Contract Pay; Disbursing; Financial Reporting) Self-Reviews- Supported Army, Navy, and Air Force in 8 favorable opinions on FIAR assessable unit assertions and 6 Defense Agency customers in 22 favorable standalone audit opinions since the onset of the DoD Audit Readiness strategy in FY11 Systems Reviews- Achieved and sustained system audit readiness for 23 material DFAS-owned systems against critical system controls = Initiatives + Innovation + Remediation Partnering with OSD FIAR office and Defense Agency customers in support of the audit strategy for the 4 th estate Capturing lessons learned and best practices in order to benchmark throughout audits activities Utilizing the Audit Management Tool to support DFAS internal audit initiatives and customer audit requests Implementing capability to monitor and support DFAS response to customers' audit findings and tracking of corrective action plans = Effective Business Management + Effective Internal Controls + Sufficient, Accessible, and Current Documentation Document, test, correct, report through a mature DFAS Managers Internal Control Program Expand structured system reviews to micro-applications and other material DFAS-owned systems Improve tools and management reporting that enhances oversight and data integrity Enhance accessibility of key supporting documentation in order to provide to auditors more timely and efficiently DFAS has achieved 16 consecutive unmodified opinions on DFAS Working Capital Fund Financial Statements, 21 consecutive favorable opinions for the Military Retirement Fund, and 13 consecutive favorable opinions for the Medicare-Eligible Retiree Health Care Fund 24
We Need Help from Our Customers! Different Missions but One Simplified and Standardized FM Environment People Shared responsibility and accountability (leadership and workforce) Process Integrated practices and controls into day to day activities Clearly defined roles and responsibilities Repeatable, auditable and sustainable business processes Technology Compliant systems (SFIS, SLOA, USSGL) Strong internal controls Standard data exchanges Reduce systems Use GEX 25