1. Drew Morgan Director, Business Integration Office of the Secretary of Defense - Comptroller March 2015 DoD Financial Management Strategy Why Accelerate the FM Target Environment? v4

2. OUSD(C) Strategic Management Plan FY 2011-2017 Strategic Management Goals Champion a strong and capable financial management workforce Acquire resources necessary to meet national defense objectives Ensure the legal, effective, and efficient use of DoD resources DoD Financial Management is Aligned with Higher-Level Strategic Goals Changes Affecting Everyone The Right Skill Sets and Career Framework Getting More out of the Program to Support Mission Confidence in Public Stewardship and Improved Efficiency Desired Outcomes Emerging FM Certification Program Downward Pressure on DoD Top Line Demands for Financial Auditability Strategy to Budget to Execution – Knowing DoD Strategic Cascade is the Start of Knowing How You Fit in Strategy to Budget to Execution – Knowing DoD Strategic Cascade is the Start of Knowing How You Fit in 2

3. “ Burning Platform” Compelling Need for Rapid Business Integration Challenges Laws, Regulations, Policies Culture Scarce Expertise ODO/Component Department Federal-wide Optimum “Enterprise” Balance Inherently Government Federal Shared Services Commercial Outsourcing Drastic Budget Cuts/Mission Growth Operational Effectiveness Visibility, Transparency Audit Deadlines Installation/ Command 2015 - We are Here 3 KEY Foundational Pieces Now In Place: OSD-C/DCMO Governance DITPR DoD IT Shared Services Strategy Standards [BEA, SFIS, SLOA, PDS] Audit Deadlines

4. Convergence of Government Standardization Efforts Global Data Standard DoD Procure-to-Pay Treasury GWA and IGT Acquisition Standards Federal Transparency Areas FM Data Standards 4

5. FI 5 Financial Improvementand Audit Readiness How Do We Sustain Audit? AR

6. Eliminate Legacy Systems Improve Inter- operability Establish Data Standards Accurate Posting to G/L Eliminate Material Weaknesses Improve Auditability Too Many Systems Too Many Interfaces Duplicative Processes Non-Standard Processes Lack of Internal Controls Audit Readiness 6 FM Functional Strategy Goals and Outcomes GoalsChallenges Initiatives Execute FIAR strategy Implement Standards Improve Interoperability Improve, Standardize, and Re- engineer FM processes Support Decision Making Maximize FM Capabilities Achieve Positive ROI Lower Cost of FM Operations

7. Reduce Total Cost of FM Operations and Enable Sustained Audit by Reducing FM Systems and Simplifying the Environment IT Budget Reconciliations, Rework, Redundant and Manual Processes, Unsupportable Balances Auditability, Complexity and Issues, Point to Point, Data Calls, Information Uncertainty Internal Controls, Material Weaknesses, Non-Standards 7

8. Integrated Financial Improvement Grand Strategy 8 FM Standards & Compliance Standard Processes & Systems Leverage Technology Business Outcomes * Direct Treasury Disbursing Cost Management Funds Distribution Daily Cash Reporting Standard PPBE Delinquent Debt Management Treasury System Roll - Out Sub - Allotment Execution Intra / Inter - Govt. Trans - Invoice Payment Platform ( IGT / IPP ) Business Results Maximize and Leverage ERPs Shared Services Standard Transaction Broker & Business Analytics Better financial information for business decisions Auditable financial statements Transparency of financial data Interoperability among business systems End - to - end funds traceability and linkage between budget and expenditures Stronger Internal Controls impacting financial reporting and auditability Compliance with Govt - wide Accounting ( GWA ) Initiatives Enterprise Planning, Program Budget & Exec. ( PPBE ) OSD FIAR Plan Guidance SSAE 16 FISCAM USSGL SFIS / SLOA * Aligns with the DoD Strategic Management Plan (SMP)

9. Reporting/Cash (BEIS(DDRS,DCAS) 1099-TRP, CORAS,SORS) Business Warehouse/Analytics (BEIS- DCD/DCW, EBI, BI tool) Target FM Business Systems Environment Core Acct/ ERPs: (DAI, EBAS, Navy ERP, GFEBS, DEAMS,EBS, GCSS-A, LMP, MSC- FMS, GCSS-MC, SABRS,FAMIS) Treasury (GTAS, CARS, USA Spending) We Can Achieve This by Executing the FM Functional Strategy Standard Transaction Broker (STB) (GEX) Component Capabilities Functional Areas FM Budget Inventory Acquisition Payroll/Personnel Travel Logistics Vendors Portal Enterprise-wide Standard Data, Processes and Systems Disbursing (ADS,DDS, ERPs(Direct Treas. Disbursing)) NGRMS, DTS, IPPS’, DCPS, EFD 9

10. Auditability TARGET -~120 systems -~ $220 million -Reduce Interfaces via Standard Transaction Broker -Minimize Reconciliations -Supported Balances 327 Systems 2,000+ Point-to-Point Interfaces Numerous Manual Reconciliations Unsupportable Balances FY14FY15FY16FY17FY18FY19FY20FY21FY22 # Systems, Interfaces, Manual Processes Simplified Environment and Improved efficiencies Potential Savings to: Repurpose to the Mission Not sustainable at current budget levels Auditability sustainable at current & future budget levels 10 327 FM Systems, Budget = $719M* 327 FM Systems, Budget = $719M* To Date: 285 Systems 42 retired = ~$7M budget savings

11. Simplified Cash Accountability 11 Entitlement Treasury (CARS) Treasury (CARS) DCAS G/L Route/Validate Reconciliation A C B DCAS = Treasury (B)(D) DCAS = G/L (DDRS) (B)(C) G/L = Treasury (C)(D) Monthly Real-time Validation FBwT / GLAC DDRS Daily D 3 levels of automated recon X 1 enterprise process = FBWT auditability To Be “Tie Points” What’s Next: DCAS functionality tested Automated feed from Treasury CARS Re-engineer Reconciliations TJS, WHS, Army GFEBS, DLA

12. Direct Treasury Disbursing 12 NTDO Variation Examples External Entitlement CAPS, STARS1 Pay, DCPS Disbursing System ADS, DDS (to FRB for EFT) Treasury PIR DoD CAnT External Entitlement & FRB DJMS, MOCAS, GFEBS, DAI Treasury PIR DoD CAnT FRB (EFT pay) TDO Variation Examples ERP Self Entitled GFEBS, CMA, DHS Treasury PAM DoD Cash Notional Target What’s Next: GFEBS TDO for Self- Entitled o Include TFOs TJS and WHS Pilot TDO for TFOs in Apr-15 DLA TDO Oct-15 Additional Implementations

13. Intergovernmental Transactions (IGT) in Treasury’s Invoice Processing Platform (IPP) 13

14. Governmentwide Treasury Account Symbol Adjusted Trial Balance System (GTAS) 14 FMSOMB President’s Budget DDRS GTAS FMS 2108 / Combined Statement SF 133 Program and Financing Schedule DFAS/DoD Treasury Annual Reporting Central Accounting System Edits Agency’s Financial Statements GFRS DoD Compliancy with GTAS Reporting Requirements and Attributes

15. Electronic Funds Distribution (EFD) 15 GFEBS STAN -FINS SOM- ARDS *PBAS: TI-21 Non-General Funds DEAMS GAFS-R FUNDS DISTRIBUTION ACCOUNTING SYSTEMS OSD Level – EFD Phase 1 (Budget structure down to President’s Budget BLI) Handles the initial OUSD(C) FAD distribution to the original allotment holder; delivers funding via interface EFD includes DoD Appropriated Funds (General (less BRAC) and Non-General) down to BLI (Includes TI-57, TI-21, TI-17, and TI-97 funds) Includes SFIS elements BS, POA, BA, BSA, BLI at this level Component Field Level – EFD Phase 2 (Below Pres Bud BLI) EFD now handles the sub-allotment of TI-97 funds within the original allotment holder’s organization and the sub-allocation of funds to other Defense Organizations EFD carries forward SFIS/SLOA elements identified above and includes the B13 Budget Allotment Line Item (BALI), B12 Suballocation Code (Limit), CA1 (Org Code), O3 (FSN) Will add USSGL to Funds Distribution Component Accounting Systems Receives TI-97 FAD interface file from EFD at each level of distribution and begins executing funds when they are distributed to the final allotment holder TI-21, TI-57, and TI-17 field level FADs will be arriving from GFEBS, AFM, and PBIS respectively; (TI-21 Non-General Funds will be distributed via PBAS-FD until Army determines future plan) NAVY -ERP STAR S-FL TI-97 funds below BLI PBIS: TI-17 funds below BLI AFM: TI-57 Funds below BLI EBIZEBS WAAS DAIEBAS Manual Automatic GFEBS: TI-21 General Funds below BLI EFD CEFMS SABRS - Post EFD Phase 3 (EFD contains all appropriated funds; General and Non-General)

16. Standard Line of Accounting (SLOA) Contract Pay 16 Disbursing Systems Accounting Systems AF DEAMS DFAS GAFS-R Army LMP Army GFEBS Army CEFMS DLA EBS DLA DAI JS EBAS Navy ERP DFAS SABRS DFAS STARS MOCAS Support Systems Contracting Systems DFAS EAS DFAS MOCAS (Aug-17) Treas PAM/SPS NOT GEX Connected Legend SLOA Ready Dates Not Provided SFIS Configured SLOA Long-term Plan SLOA Ready by GWA Not SLOA Applicable Most Accounting Systems are already GEX connected DLA WAWF Support Systems DFAS SCRT (Aug-17) DFAS EUD DFAS BAM DFAS DCAS (Jan-15) DLA DDRS (N/A) Treas Reporting (PIR, CARS) DLA EFD DLA EDA (May-15) DLA SPS (May-15) DLA eProc (Feb-14) Army PADDS AF ConWrite

17. Global Exchange (GEX) 17 Partner System

18. How Does SLOA Support the FM Strategic Initiatives? FM Strategic InitiativeOutcomesHow SLOA Enables Each Outcome Financial Improvement and Audit Readiness (FIAR) SBR Assertion FY 2014 Financial Statement Assertion FY 2017 Software tracks and records audit trail at each exchange of data, business rule modification, format transformation, etc. Enables matching transactions between multiple accounting/feeder systems in 1-to-1 format which can be easily reconciled Enables cleaner end-to-end transactional flow and processing Standard Line of Accounting (SLOA) Improved E2E FM Information Exchange Enables clean interoperability across the enterprise E2Es SFIS/USSGL Compliance and Validation Proper Posting of Transactions in DoD Financial Systems SFIS Compliance Plans as part of Component OEPs Workbooks define and reformat subset of SFIS data (SLOA) into standard definitions Data compliance with Treasury and OMB standards Enterprise Funds Distribution/Next Generation Resource Management System (EFD/NGRMS) Integrated capability to formulate, distribute, track and execute the DoD budget Links transactions to the Budget/Funds Distribution data Transformed, standard data for allocation and distribution of funds identically across the enterprise Direct Treasury Disbursing Standard FBWT Daily Recon Process Enables automatic matching of disbursement to accounting system (near real-time recon) Enables routing ERP data directly to Treasury Provides necessary data to prepare a Direct Treasury Pay Ready File Government-wide Accounting (GWA) Daily Treasury Reporting - GWA compliance by Oct. 14 Standard FBWT Daily Recon Process Enables translation of TAS/BETC standard data elements to ADS Consolidates DSSNs into standard repository for daily reporting Intragovernmental Transactions (IGT) Standardize IGT Process DoD-Wide Eliminate manual processes and multiple forms Single Repository for IGT Orders for audit readiness Reduce IGT Eliminations material weakness Enables standardized MIPRs necessary data to perform eliminations Intakes data formats into single central repository from multiple buyer systems and transforms it into a standard format, and vice versa Standard buyer and seller data provides data matching and reconciliation Delinquent Debt Management Delinquent debt collections to treasury after 90 days, using re-engineered processes Enables matching and analysis of invoice data to obligation data in real- time and analyzes discrepancies between the two Provides flags against delinquency business rules and provides error report when rules are violated (document LOAs overpaid, etc.) Maximize ERP Capabilities E2E Process Improvement Eliminate redundant capabilities in the E2Es Take advantage of imbedded controls within ERPs Eliminates inefficiencies and reliance on feeder systems Reduces need to point-to-point interfaces & downstream errors Standard Transaction Broker Reduce/Minimize Point-to-Point Interfaces Already connected to the GEX Minimizes need to reconfigure legacy systems Enables translation, validation, and routing between key E2E systems Business Intelligence Tools Near real-time, standards-based information and analytics from authoritative sources Software provides detailed reports at each exchange of data, business rule modification, format transformation, etc. Cost Management Consistent cost data and management across the Department Enables use of cost management codes and OCC for cost reporting Provides the cost management information on every purchasing transaction which will facilitate Full Cost Accounting 18

19. Sample Component Oracle System JITC USSGL/SFIS/SLOA Verification Results 19 2 February 2015 Areas for USSGL/SFIS/SLOA Compliance: 1)System Posting Chart of Accounts to the DoD Chart of Accounts 2) Posting Logic 3)SFIS Attribute Base Configuration 4)DDRS SFIS Trial Balance 5)SLOA Interfaces/Data Exchanges 6)SFIS 10.0 Interfaces/Data Exchanges *

20. Joint Interoperability Test Command (JITC) USSGL/SFIS/SLOA Verification Phased Schedule by System 20 2 February 2015

21. Enterprise Cost Management Framework 21

22. Enterprise Cost Management Framework Aligned to SLOA Cost Elements 22 SLOA Component defined data elements roll up into the Enterprise Framework Ties Component managerial accounting to enterprise managerial accounting Allows Components to determine lower level line item breakout of funding documents (e.g. Payroll, Contracts, etc. EBAS-D has all of these SFIS Cost Elements Illustrative Mapping Cost Center Activity Functional Area Project Cost Center Work Order Number Cost Element

23. Further Leveraging Integrated ERP Capabilities Offers the Most Potential for Reducing the Number of Systems and Interfaces US Standard General Ledger (Budgetary and Proprietary) Budgetary Resource Management Payment Management Financial Reporting General Ledger Management Funds Balance with Treasury Management Receivables Management Cost Management FM Functional Strategy Core Financial System Functions/Capabilities Execution-Level Planning Programming Budget Planning and Formulation Exhibit Generation Funds Distribution & Control Prior-Year Actuals Feed Translation to Capabilities Available Today in the Core FM ERPs Matching & Payment Warehousing Disbursing Billings & Collections IPACS Budget Execution/ Funds Mgmt/ Funds Control (General & Working Capital Funds) Commitments, Obligations, Expenditures, Reimbursables Treasury and OMB Reporting (Standard Feeds) Cost Accounting (GFEBS,DAI Navy ERP) Cost Accumulation and Allocation Timekeeping (Navy ERP uses T&A) Acquisition Core FM Inventory Payroll/ Personnel Travel Logistics ERPs Offer Additional Capabilities for Other Functional Areas Standard Interfacing / Business Integration Standard Business Intelligence and Analytics  ERP capabilities maximized today  Initiatives underway to further leverage  Further leveraging needed – Enterprise PPBE ConOps and Cost Management Framework / Proof of Concept underway FM Initiatives are now underway leveraging all of these ERP capabilities 23

24. FI 24 Financial Improvementand Audit Readiness How Do We Sustain Audit? Why accelerate DoD’s FM Target Environment? AR

25. Urgency to Implement FM Initiatives Key Takeaways: Mandate for 2017 Audit Limited and declining resources require streamlined and simplified processes as well as simpler footprint (systems and infrastructure) Long-term sustainability Investments and divestments must be meaningful and coordinated Standards (data, process and controls) are imperative to unify enterprise systems and processes Strategic perspective overcomes stovepipes 25

26. Questions/Discussion 26

27. Back-up 27

28. Simplified Cash Accountability 28 DCAS Source Record ID TAS BETC Amount SDN Limit Posting Results Cd Transaction Post Date Data Repository PIR/SPS Payment Information Repository/Standard Payment System PIR/SPS Payment Information Repository/Standard Payment System TRS/CIR (Transaction Reporting System / Collection Information Repository) TRS/CIR (Transaction Reporting System / Collection Information Repository) CARS (Central Accounting Reporting System) CARS (Central Accounting Reporting System) NTDO/TDO/Self- Disbursed/Non-DoD A1) Expenditure / Collection Data (Daily) A7) Re-class A2) Account Statement (Daily) SF215 DDRS D9) Account Statement (Monthly) B8) Month-end Cash Balances Denotes new interface/process Denotes possible data conversion to/from SLOA via SLOA Centralized Service (SCS) D10) FBWT Reconciliation D10= C9 & B8 D10= D9 & B8 Recon of Disbursing/ CAR Balances A3) A3) Recon of Disbursing /CAR Balances (Department ; 1329/1400 Level) ADS Treasury By: For: Recon of Disbursing/ CAR Balances A3) A6 ) Recon of transaction Sent / Posted (Detail Level) A4&A5 DCAS Accounting Systems A4) Expenditure Accounting Data A5) Accept/Reject Data SF1080 / SF1081 C9) Month-end Trial Balance GTAS (Government-wide Treasury Account Symbol Adjusted Trial Balance System) GTAS (Government-wide Treasury Account Symbol Adjusted Trial Balance System) New Recon: B8 & D9 ST/GSA GFEBS CO IN CL ST/GSA CL By: CO IN CO IN CL For: * Civilian Payroll *Suspense Accounts *Military Payroll *Accounts Receivable *Unliquidated Balances E11) DCD/DCW 1)Cash Accountability Repository 2)Business Intelligence Layer for Reconciliations DCD/DCW 1)Cash Accountability Repository 2)Business Intelligence Layer for Reconciliations ---On SBRs--- ST/GSA CL By: CO IN CO IN CL For: Target: GEX. DCAS, or Direct IN – Army & ODO CL – Navy CO – Air Force Entitlement / Disbursing Systems (IN/CO/CL Networks) Entitlement / Disbursing Systems (IN/CO/CL Networks) MAP-5 (Pay/Coll) MAP-X (Trial Balance) MAP-X (Trial Balance) MAP-6 (Reclass) MAP-X (Daily Acct Stmt) MAP-X (Cash Recon) MAP-X (Mtly Acct Stmt) MAP-5 (Pay/Coll) MAP-5 (Payment) MAP-X (Cash Recon) MAP-5 (Collection) MAP-6 (Cash Reporting) MAP-6 (Cash Reporting)

29. Why do we need a standard transaction broker? TODAYTARGET Point-to-Point “Spaghetti” – Expensive!!! Extremely difficult to Manage or Standardize Hub and Spoke – Cheaper, Easy to Standardize and Manage, More Scalable * GEX is the De Facto Standard for Integration among 4 th Estate Business Systems, and is being evolved to serve as the Target Standard Transaction Broker. 29