Proper Execution Alignment Audit Readiness Training Symposium June 2012

Agenda Overview Background Areas of Concern Execution Monitoring Guidelines Discussion FOR OFFICIAL USE ONLY 2

Overview Context: Reporting Requirements and Audit Readiness necessitate accuracy and precision Purpose: Understanding the connection between proper execution alignment and defending our resources Outcome: Participants will understand their role in improving Navy Medicine’s financial reporting FOR OFFICIAL USE ONLY 3

Background FOR OFFICIAL USE ONLY 4 MTFSMARTOP32Congress APPN/ AUTH Navy Budget  MTF awards Provider Contract  Enters data into STARS  Flows to SMART  M83 pulls execution data from SMART to populate OP32  OP32 submitted to OSD(C) via TMA  Congress reviews OP32 data  Uses data to determine policy and write legislation  Appropriation and Authorization bills establish funding and program controls based on OP32  Reductions directly impact our ability to provide quality care

Background FOR OFFICIAL USE ONLY 5 Execution Baseline Reviews (FY09 - FY11) Congressional & OSD (C) Requirements and Guidance Audit Readiness Unfinanced Requirements & POM Issues Key Drivers Improved Execution Tracking & Financial Reporting Quarterly Execution Reviews

Background Issues Impacting Navy Medicine’s Budget Execution Baseline Position (EBP) Review TMA continues to review Navy Medicine’s budget at the PE level Variance to PE controls creates “trade-space” – opportunity for TMA to reduce Navy’s budget President’s order to reduce travel, printing and conferences SECDEF Memo to reduce travel, printing expenses by 20% from FY10 level Conferences continue to draw additional scrutiny OSD monitors compliance via semi-annual data calls Service Support Contractor reductions SECDEF Memo in Summer FY10 mandated targeted cuts to Contractor Support Services (CSS) Cuts would accumulate at 10% per year for FY11-13 and carry forward OSD monitors compliance via semi-annual data calls FOR OFFICIAL USE ONLY 6

Areas of Concern Object Class 25 – Contracts Codes and Definition from OMB’s A – Advisory and Assistance Services 25.2 – Other services from non-Federal sources 25.3 – Other services from Federal sources 25.4 – Operation and Maintenance of Facilities 25.5 – Research and development contracts 25.6 – Medical Care 25.7 – Operation and Maintenance of equipment FOR OFFICIAL USE ONLY 7

Areas of Concern SMART Execution Data for Object Class 25 FOR OFFICIAL USE ONLY 8 Object Class FY 2007 Certified FY 2008 Certified FY 2009 Certified FY 2010 Certified FY 2011 Certified FY 2012 (as of 5/15/12) 250-Consult & Other Services [Q]447,243,000419,883,086498,412,508258,924,528(20,443,083)(113,338) 250-Other Costs [X] (133,508) 250-Service Transfer Funded [Z](71,042,107)(77,760,859)(86,941,017)(60,492,957)(57,362,453)(27,985,323) 251-Advisory & Assist Srvcs [Q]231,9481,587,1769,823,8592,190,33713,572,3721,609, Other Services [Q]639,822,426649,460,165683,630,124709,944,171590,943,844117,286, Purch Goods/SVCS From Gov [Q]111,287,011113,407,485124,607,849180,393,701298,382,610117,776, Oper& Maint-Facilities [Q]28,143,14551,261,514825,7211,906,71335,436,03834,488, R&D Contracts [Q]482,211284,391133,064757,772598,0552,126, Medical Care [Q]526,953494,704523,926617,420377,930,074426,343, Purch Maint of Equip (DOD) [D]128,094159,23581,143117,97182,37275, Purch Maint of Equip (COM) [P]21,542,97222,215,77921,959,68547,408,56444,205,24150,538,489

Areas of Concern FOR OFFICIAL USE ONLY 9 Object Class Code (OCC) 25 Discussion 25.0 – Not a valid object class per OMB A-11. Do not use this object class when reporting obligations 25.1 – Data reported here should be consistent with that in the Service Support Contractor reporting to TMA. ***OSD requires that these Contract Services decrease by 10% each year*** 25.2 – Activities should continue to scrub their books and move contracts to other codes as applicable. Do not assume this OCC is correct because it was always used -- review the contract to determine the appropriate OCC to use. ***OSD requires that these Contract Services decrease by 10% each year*** 25.5 – Activities should review contracts coded as R&D and move to the correct OCC 25.6 – Contracts for medical providers should be reported in this OCC

Areas of Concern SMART Execution Data for Invalid Object Class FOR OFFICIAL USE ONLY 10 BAGObject ClassExpense ElementFY 2011FY 2012 Total BAG Invalid Total EE96,693,59870,357,505 Invalid M-Utilities/Rent97,206,80170,357,505 Invalid Z-Service Transfer Funded (513,203) 1-In House Care Invalid Total EE5,541,7213,355,605 Invalid M-Utilities/Rent6,009,5823,358,319 Invalid Z-Service Transfer Funded (467,861)(2,714) 3-Consolidated Health Support Invalid Total EE132,02998,227 Invalid M-Utilities/Rent132,02995,513 Invalid Z-Service Transfer Funded 2,714 4-Information Management Invalid Total EE79,446 Invalid M-Utilities/Rent79,446 6-Education and Training Invalid Total EE3,7351,728 Invalid M-Utilities/Rent3,7351,728 7-Base Ops/ Communications Invalid Total EE90,936,66766,901,945 Invalid M-Utilities/Rent90,982,00966,901,945 Invalid Z-Service Transfer Funded (45,341) The law requires the President’s Budget to present obligations by object class. Therefore, Invalid Object Class is not a correct option Object Class 23 is for Rent, Communications, and Utilities. These costs should be transferred from Invalid to OCC 23  Rental payments to GSA  Rental payments to others  23.3 – Communications, utilities, and miscellaneous charges

Areas of Concern SMART Execution Data for Pharmaceuticals FOR OFFICIAL USE ONLY 11 Obligations for pharmaceuticals should not be reported outside of PE / and Expense Element 4. Pharmaceuticals PEs should not include costs for supplies, salaries, travel, equipment or contracts. Navy’s pharmacy budget has been cut in each of the last EBP rounds due to incorrect coding of pharmacy obligations. Expense Element Pharmaceuticals - CONUS Pharmaceuticals - OCONUS Total 4-Pharmaceutical Supplies233,375,25815,206,337248,581,595 P-Equip Maint (Commercial)(276) Q-Other2,1660 T-Supplies18,5253,83022,355 U-Civilian Personnel(150)14,59614,446 W-Equipment97 Y-Printing/Reproduction0120 Z-Service Transfer Funded(749) Total-EE233,394,87215,224,883248,619,755 Program Element Expense Element FY12 (as of May 21, 2012) Pharmaceuticals – OCONUS4-Pharmaceutical Supplies15,206, Pharmaceuticals – CONUS4-Pharmaceutical Supplies233,375, Mil Public Hlth/Occ Health4-Pharmaceutical Supplies Dental Care Activities – CONUS4-Pharmaceutical Supplies Mil Unique Rqmts - Other Med - Hlth Care4-Pharmaceutical Supplies Environmental Compliance4-Pharmaceutical Supplies(355) Def Md Ctrs, Stn Hsps & Md Clns – OCONUS 4-Pharmaceutical Supplies13, Def Med Ctrs, Stn Hsps & Clns – CONUS4-Pharmaceutical Supplies385, Dental Care Activities - OCONUS4-Pharmaceutical Supplies362

Execution Monitoring M83 relies on SMART data for external reporting to higher level agencies, so accuracy is key Drill down to a lower level (go beyond the AGSAG/PE review) –  Track execution across all available measures in the CAD/LOA  Understand ALL of the execution measures being reported for your activity  Validate your execution by the following data elements (at a minimum): o Function/Subfunction (FSF) o Expense Element (EE) o Object Class Code (OCC) o Cost Account Code (CAC) Track execution against plan and authority with variance explanations/corrective action plans prepared FOR OFFICIAL USE ONLY 12

Execution Monitoring Establish a recurring execution review schedule  Activities should pull STARS and SMART report and review execution across all data elements to ensure accuracy and compliance with guidance Reach out to M83 and let us know if you require further guidance  We rely on the activities to be the first line of review and they should report problems/areas of concerns to the regions and on to HQ for guidance/clarification FOR OFFICIAL USE ONLY 13

Discussion What are your concerns? How can we work together to surmount these challenges? How can HQ do a better job of communicating with you? FOR OFFICIAL USE ONLY 14