Financial Management Modernization Program Gerald Thomas, Director, Financial Management Modernization Task Force Office of the Under Secretary of Defense (Comptroller)

Vision “The Department of Defense will be managed in an efficient, business-like manner in which relevant, reliable and timely financial information, affirmed by clean audit opinions, is available on a routine basis to support informed decision-making at all levels throughout the Department.” Point of Slide: We understand what you want and what is needed. Words paraphrased from “Friedman Study” Except, added “…efficient, business-like manner…”

Scope People Processes Policies Systems Enterprise Architecture

More Funds for the Warfighter Approach Execute Management Plan to Attack Problems Reengineer Business Processes to Model Private Sector Establish Defense-wide Standards Consolidate & Modernize Systems Enhance and/or Augment Financial Management Workforce Simplify Accounting & Reporting Rules Near-term Improvements Efficiency = Long-term Solutions Improved Public Confidence Accountability = Manage Using Performance Metrics More Funds for the Warfighter Stabilize Systems & Initiatives Point of Slide: How we’re going to attack the problem? The path to full transformation is a long one. (Friedman Study) The complete solution is key to ensuring that the transformation has a permanent impact on DoD. (Friedman Study) Performing an industry benchmark -- lessons learned, benchmarking for both success and failures with similar efforts Twin-track approach (Friedman Study) provides Near-term improvements (Management Plan) -- increased management attention-- Accounting Adjustments Late Payments Overpayments Long-term solution (Enterprise Architecture)--business processes and systems-- Business Process Reengineering, modeling highly-successful private sector enterprises. Establish Defense-wide data and process standards. Consolidate and modernize systems Enhance “core competencies” Engage Congress and the Office of Management and Budget to simplify accounting and reporting rules.

Enterprise Architecture Community Core Project Team Senior Steering Committee DoD Components Office of Management & Budget Project Direction Extended Project Team Treasury Industry Financial Management Working Group Extended Project Assistance

Typical Procurement Process 8. Clerk inputs receipt into order system 10. Comptroller Certifies Invoice Invoice Certification 2. Supervisor approves request 3. Clerk inputs order into order system Requisition Purchase Order Non-financial Feeder System 4. Comptroller authorizes funds Establish Commitment Accounting and Finance Systems Establish Obligation Record Accounts Payable Process Payment Request Payment 1. Maintenance worker requests a part Purchase Order Requisition 5. Contracting Officer Awards Contract Contract Point of Slide: Demonstrate complexity of a single process: Ordering a Part Depicts an ideal process: steps -- 10 minimum people - 6 government employees as a minimum documents (Task Force effort has identified to date 431 unique documents) (i.e. 46 different documents to represent a purchase order), DoD 112 SF 62 Air Force 67 Army 65 Navy 76 Others 38 Electronic 11 non-financial feeder systems -- three identified (ordering systems, acquisition systems, and inventory) Unfortunately many of the steps are manual, systems are not integrated or even interfaced. Annual DFAS Statistics 100M accounting transactions (commitments, obligations, payables, disbursements, adjustments, etc.) 14M invoices 5M travel payments Business Process Reengineering example: Electronic Invoices (Step 10); DFAS rate manual vs. electronic ($18.77 vs. $8.45) Computerized Accounts Payable Systems (CAPS) DFAS cost $12.00 to perform match and batch and prevalidation DFAS overall cost $16.37 to perform match and batch and prevalidation Non-financial Feeder System 7. Dock worker receives and deliveries part Receiving Report 9. Vendor Sends Invoice 6. Vendor ships part Packing List Invoice Non-financial Feeder System

Inefficient and Costly Jeopardizes Reliability and Timeliness Systems Environment Point of Slide: To illustrate complexity of the current systems environment. 77 Core Systems - Systems which primarily provide accounting and finance functions (General Ledger, Accounts Payable, Accounts Receivables, Disbursing, Payroll, etc.) DFAS has reduced the number of core systems from 324 to 77 since 1991 (DFAS strategic plan) Tier 1 - Directly feeds financial information to a Core system Non-financial feeder - supports mission functions and provides financial data to a core systems (I.e. inventory, property, acquisition, etc.) To date we have identified more than 560 plus systems that support greater than 1000 different interface requirements Data call underway expect completion end of September. Tier 2 & 3 - Tier 2 directly feeds information to a Tier 1 systems, etc. -- Data call underway expect completion end of January. The C3I System registry identifies 273 systems classified as financial systems and over 1100 systems that would be consider support systems (validation of the data call against the C3I registry is on-going). Actions to stabilize existing inventory: First step is to Identify inventory through data call(s) Capture both operational and development budget through the budget process -- modifications to the budget submission for financial and non-financial systems Issue letters to insert Comptroller approval in the process for any new system initiatives and systems moving from prototype to deployment or production Tier 3 ??? Systems Tier 2 ?? Systems Tier 1 500+ Systems Core 77 Systems Inefficient and Costly Point of Entry Jeopardizes Reliability and Timeliness Statements & Reports

Schedule FY 2002 FY 2003