1. Update on OUSD(C) Initiatives Overview and Path Forward
OUSD (Comptroller) Business Integration Office (BIO)
4/20/2017
Update on OUSD(C) Initiatives Overview and Path Forward
Mary Kemp, OUSD(C) BIO
June 10, 2015

2. FM Functional Strategy
Initiatives Overview
4/20/2017
Compliance
Vendor Pay
Contract Pay
Travel
IPAC/IGT
Interfund
Transportation Pay
Military Pay
Civilian Pay
Reimbursables
Compliance
Direct to Treasury Disbursing
DCAS Reconciliation
Govt. Wide Accountability
IGT/IPP
FIAR
FIAR
Assessable Units
Mission and Vision
FM Functional Strategy
Governance
Enterprise Business Model
Customer Driven Focus
Define Process
Identify Systems
Define Data Require-ments
Develop Implemen-tation Plan
Federal Initiatives
DoD Initiatives
Improved Auditability
Federal Government Accountability

3. Problem Statement
DoD FBWT auditability cannot be sustained with today’s cumbersome monthly cash reporting & recon processes and disparate systems

4. DoD Challenges and Requirements
Source Document Errors
Utilize data validation earlier in end-to-end business processes
Inconsistent edits (ERP, entitlement, DCAS, DDRS, Treasury)
Leverage a standard validation service
Non-Standard Recon Processes and Tools
Transition to a DoD Centric Model
Point to point interfaces
Utilize a data broker in lieu of point-to-point interfacing
Large unsupported JVs and use of suspense accounts to balance cash
Business Process that eliminates out of balances on a daily basis
Compliance with US Treasury GWA/CARS daily reporter mandate
Design DoD-wide process and align systems to ensure compliance
Direct Cite/Cross-Disbursing Business Process
Drive business process change to IPP or funding realignment, minimizing Cross-Disbursing transaction volume

5. What is the Magnitude - Analyzing the Problem?
FBWT
Treasury Reports
Statement of Accountability (SOA)/ Statement of Transactions (SOT)
Year Closing Statement
Problem
Impact
Initiatives
Cash Traceability &Reconciliation
Data Management
Drawdown Plan
Implementation of DSSN Payment & Collections
GTAS Project
IPP Project
Treasury Disbursing
Project
In-Transits
$26 Billion 
Undistributed
$3.9 Billion
Unsupported Accounting Entries
$ Billion
Intra/Inter governmental
Eliminations
$93 Billion
Budgetary / Proprietary Differences
$7 Billion

6. Many Initiatives Affect FBWT:
CATWG
GTAS
Single reporting requirement
Oversight
Implement enterprise standards
Change Management
Promote organizational change
Data Management*,**
Standard financial data/central data broker
IGT/IPP*
Standard buy/sell processes
Sub-Allotments*, **
Execution and internal controls
Sensitive Activities
Classified data
DCD/DCW
Central data repository
Cash Traceability*
Enterprise Daily Cash Reporting and Traceability (DCAS)
Direct Treasury Disbursing*,**
Centralized post-pay
DSSN Drawdown Reporting
1219/1220
Funds Distribution*, **
Electronic funds distribution
Delinquent Debt
Management of delinquent debt
Collections
Receivables management
CARS Implementation
Interfund Reporting
Legacy Systems Drawdown
Transitions and sunsetting
Contingency Operations
Support
Daily traceability of all outlays/collections via DCAS/GEX
Daily validation of accuracy of disbursements and collections via GEX
Daily reconciliation of Treasury accounts with Component accounts
Daily reconciliation of Treasury CARS to GL via DCAS/GEX
Reduction in reclassification entries
Reduction in statement of differences, use of clearing accounts, or unsupported JVs
Auditability
Results
Outcomes
Existing Working Group
* Initiative directly relates to Audit Readiness, Daily Funds Balance w/Treasury (FBWT)/Cash Balancing Goals
** Initiative heavily enables Auditability & Strengthens Financial Controls or Maximize ERPs as Key Enabler

7. Initiative: Cash Accountability Model
System Improvement
Single system – Defense Cash Accountability System – to perform expenditure reconciliations
Adapt legacy disbursing systems to perform daily disbursing using Treasury standards
Reduce the number of systems reporting to Treasury
Standardization
Formation of DoD Cash Accountability Working Group
Expand development of data standards around a FBWT Business Enterprise Architecture
Leverage Treasury Shared Services processes and procedures
Process Improvement
Single DoD solution for Cash Reconciliation and Reporting
Leverage ERP capabilities to perform Treasury Direct Disbursing functions
Partner with Treasury and DoD Disbursing Offices to implement CARS and GTAS reporting
Cash Notional Target

8. Initiative: Treasury Disbursing
Systems Improvement
Reduction in expenditure “touch points”
Native ERP functionality leveraged
Standardization
Aligns with Gov’t wide business process, facilitates big data analytics for improper payments, debt ceiling management etc.
Process Improvement
Supports Treasury/GWA modernization
Standardization of reconciliation processes
Improve data quality and consistency across entire E2E processes by reducing errors

9. Initiative: SLOA Validation Service
Systems Improvement
Provide a mechanism that source systems can use to validate transactions prior to their dispatch on the E2E process
Improve enterprise analytics through exposure of SFIS/SLOA financial data
Standardization
Improve data quality by enforcing standard data structures for DOD financial information
Exploit GEX to transport SLOA-compliant financial transactional data between core E2E financial, feeder, disbursing and reporting systems.
Process Improvement
Supports Treasury/GWA modernization
Standardization of reconciliation processes
Improve data quality and consistency across entire E2E processes by reducing errors
SCS Integration

10. IGT – Introduction
4/20/2017
One of DoD’s key material weaknesses is an inability to reconcile inter/intra-governmental (IGT) activity and balances
Based on fourth quarter FY 2013 statistics provided by the Treasury Department, DoD’s IGT imbalances with civilian agencies alone were over $10 billion.
IPP-IGT Program encompasses all of DoD, the related TI-97 Reimbursable Work Orders workstream is a subset that is specific to the 4th Estate audit readiness effort.
DoD is 56% percent of the Federal-wide eliminations problem
$20.2 billion net difference in FY12
$26B (78%) buy/sell in FY13
Unbalanced intra/inter governmental (IGT) buy/sell activities accounted for $33.6 billion net difference in FY13

11. The IGT Problem – at the Federal & DoD Levels:
4/20/2017
“A major reason for the disclaimer is the government’s inability to adequately account for and reconcile intra-governmental transactions between departments and agencies. This reform activity supports effective financial management through the achievement of a clean audit opinion; the elimination of material weaknesses; and the production of timely, accurate financial information to help guide decision-making.”
Office of Management and Budget, Executive Office of the President
Source: Federal Financial Management 2009
“DoD financial management systems cannot produce the transaction-level details and supporting documentation necessary to reconcile buyer and seller data and support IGT eliminations on the applicable DoD financial statements.”
Source: DoD IG Report No. DODIG
Why is it important to solve this issue?
Despite efforts and progress toward auditable financial statements, the U.S. Government – and DoD specifically – still struggles with material weaknesses that make the financial data unreliable.
According to the Federal Financial Management Report 2009, published by the Office of Federal Financial Management within the Office of Management and Budget (OMB), “A major reason for the disclaimer is the government’s inability to adequately account for and reconcile intra-governmental transactions between departments and agencies. This reform activity supports effective financial management through the achievement of a clean audit opinion; the elimination of material weaknesses; and the production of timely, accurate financial information to help guide decision-making”.
This is a problem for all of our organizations, even if your organization has an auditable statement today. Once aggregated with other agencies, all agencies are contributing to the federal governments out of balance affect. Hence, the combined federal statement of the U.S. is currently not auditable.

12. INTERFUND – Out of Scope
4/20/2017
IGT is also known as…
Military Interdepartmental Purchase Requests (MIPRs)
Reimbursables
Buy/Sell Transactions
Interagency Agreements
Within DoD, these transactions are referred to as Military Interdepartmental Purchase Requests (MIPRs) or reimbursables.
Within the broader U.S. Government, they commonly are known as buy/sell transactions, reimbursables, interagency agreements and IPAC.
Does not include the sensitive activities, Interfund, MilStrip, etc…..currently only true reimbursable buy/sell activity.
IPAC
INTERFUND – Out of Scope

13. Why is IGT a material weakness?
4/20/2017
Why is IGT a material weakness?
Goods and/or
services
Requesting
Agency
Servicing
Agency
Out of balance
Why is IGT a material weakness?
Imbalances occur when federal entities, or “trading/business partners,” jointly are unable to account for and reconcile differences when buying and selling goods and services from one another.

14. Why is IGT a material weakness?
4/20/2017
Incompatible Systems
Decentralized
Thousands of reimbursable IGT transactions take place every day, all over the world.
The fact that IGTs are executed in a decentralized fashion, requires that these transactions must all be tracked, accounted for and reconciled.
Currently, there are many differences in acquisition and financial management procedures, systems, data standards and reporting, which result in a broad spectrum of challenges.
This is not only a weakness within DoD but the entirety of the federal government to include the civilian agencies.
Worldwide
Lack of Standards
High Volumes

15. Supported & Unsupported Entries – IGT JVs
4/20/2017
Supported & Unsupported Entries – IGT JVs
FY15 Q2
FY15 Q1
Unsupported number driven by moving expenses from non-fed to federal (matching buyer to seller) transfers in/out (i.e. WCF free issues moved to O&M
FY15-Q1
FY15-Q2
Supported Adjustments
$204.6m
$202.3m
Unsupported Adjustments
$39.36b
$54.10b

16. DoD Challenges and Requirements
4/20/2017
Challenge
Requirement
IPP
Lacking documentation for audit
Provide for a data warehouse of IGT transactions for audit, research and analysis 
Buyer and seller transactions and accounting are out of balance, unable to reconcile (in part due to lack of common identifier)
Need common identifier to synchronize buyer and seller accounting transactions (including proper general ledger treatment) using clearinghouse methodology
Proof of receipt and acceptance
Require appropriate users to record receipt and acceptance, preserve for audit
Buyer and seller not in full agreement on terms and details transactions
Automate handshake and agreement between buyer and seller before settlement (reduces chargebacks)
Prompt response to audit findings
Need affordable and rapidly delivered solution to meet DoD audit readiness campaign plan
Lack of visibility of current status of IAA including remaining period of performance, available funding, unfilled orders, filled orders and paid orders
Must preserve association and provide a common identifier for all transaction components throughout life cycle of agreement, and provide a consolidated view of the information
DoD transaction volumes and diverse systems
Must handle DoD volume and interface with DoD systems using DoD Global Exchange solution and SLOA

17. Backup

18. Review of Audit Findings
4/20/2017
Finding
FY15 Requirement
IPP Requirement
IPP
Existing RWO Audit Findings:
“(Reporting Entity) has not been able to isolate…RWO transactions from the rest of the (Reporting Entity) financial transactions”
Transactions were recorded in the improper period (NFR 2014-RWO General-001)
Improper recording of (Reporting Entity’s) Intra-appropriation (APPN) reimbursable activity (NFR 2014-RWO-002)
Lack of sufficient audit evidence to substantiate transactions (NFR 2013-RWO-003)
Improper recording of collections (NFR 2014-RWO-004)
Lack of routine tie out of feeder systems to the GL accounts. (NFR 2013-RWO-005)
1. Develop a MOU with each trading partner and agree to terms including receipt and acceptance, reconciliations, adjudication of required adjustments, and KSD retention
2. Identify a universe of transaction level detail for each trading partner.
3. With DFAS assistance, perform monthly reconciliations of transaction level detail with the trading partner to identify variances at the MIPR level.
4. Adjudicate the variances and identify adjustments required to align the transaction level detail for each trading partner.
5. Perform and record appropriate receipt and acceptance procedures
6. Maintain KSDs, per the MOU, which support the transaction level detail as well as receipt and acceptance
Provide for a data warehouse of intra-governmental transactions for audit, research and analysis 
Need common identifier to synchronize buyer and seller accounting transactions (including proper general ledger treatment) using clearinghouse methodology
Require appropriate users to record receipt and acceptance, preserve for audit
Automate handshake and agreement between buyer and seller before settlement (reduces chargebacks)
Must preserve association and provide a common identifier for all transaction components throughout life cycle of agreement, and provide a consolidated view of the information
DOD IG Findings:
“Inaccurate and unsupported intra-governmental account balances continues to be one of the long-standing material control weaknesses preventing DoD from achieving audit readiness on the DoD Agency-wide basic financial statements.” – Report No. DODIG
“DFAS personnel should use supportable transaction-level details (that is, the actual elimination amount) to reconcile and eliminate IGTs.” – Report No. DODIG
Must handle DoD volume and interface with DoD systems using DoD Global Exchange solution and Standard Data Sets

19. Invoice Processing Platform
4/20/2017
Invoice Processing Platform
Enabling “controlled” E2E IGT transactions
Reengineering the IGT business process
Leveraging Treasury’s shared service
Systems & Business Controls = Auditability
IPP is traditionally known in the context of commercial e-invoicing (DoD utilizes WAWF and there are no plans to utilize commercial IPP within DoD)
The IPP platform was enhanced to included IGT capabilities and business processes
Over the last few years Treasury/FRBB has piloted IPP for IGT with select civilian agencies…..and most recently since 2012 within DoD. Current focus is on implementations within DoD as you represent 58% of the IGT buy/sell activity within the federal government.
IPP is compliant with the Statement on Standards for Attestation Engagements No. 16 (SSAE 16), Reporting on Controls at a Service Organization (formerly, SAS 70)

20. It’s all Important! Data Requirements Data Requirements
4/20/2017
Governance Structure
Data Requirements
Intergovernmental Data Standard
IPP for IGT Business Rules
GEX Data Mapping
IPP for IGT Reporting Capability
System Change Requests
Future State IPP/IPAC
Data Requirements
Standards & Policy
Standards & Policy
Approval of Buy/Sell IGT Views in DoD Business Enterprise Architecture
Guide revisions to applicable Laws, Regulations, and Policies, and Provide Implementing Instructions from FIAR Guidance
Development and Oversight of Management Internal Controls Programs (OMB A-123)
Metrics
Improve Quality of Information
Principles of TQM and Lean
Create Integrated Project Plan and Schedule
Monitor & Report on Project Status
Establish SMP & Project Metrics & Produce Reports
Metrics
Change Management
Develop Implementation Outreach
IPP-IGT Implementation Guides
Unified Communications Strategy
Online Presence for the IGT Module of IPP
Speaking Engagements and User Symposiums
Distance Learning and Train-the-Trainer Strategy
FM Career Workforce Training Modules
Change Management
Data element standardization necessary to process transactions effectively was an important first step.
A second initiative introduced by the Treasury Department was the implementation of Intra-governmental Transaction Scorecards to measure each agency’s progress towards resolving IGT differences with their trading partners.
Both initiatives were important, however, the volume of reimbursable IGTs for larger agencies, such as DoD, prompted senior leaders to consider the necessity of an end-to-end solution.
DoD, in particular, concluded that improving interoperability between trading partners, streamlining end-to-end processes, reducing transaction processing costs, and achieving and sustaining auditable reimbursable processing cannot be achieved solely by introducing standardized data elements and scorecards.
In light of this need, DoD decided to evaluate IPP as a potential solution for reimbursable IGT end-to-end processing.
It’s all Important!

21. Key Enablers to Success
4/20/2017
Key Enablers to Success
Creative Abrasion
IAA
GEX
SLOA & PRDS
Creative Resolution
Creative Agility
The Treasury Department, via a tiger team, has introduced a data standard for Reimbursables via the standard IAA.
DoD also implemented a Standard Line of Accounting (SLOA) and procurement data standards, to be utilized across DoD, which encompass Treasury’s required data elements.
Finally, and perhaps the most important enabler to success, DoD has invested in a centralized data hub, called the Global Exchange or GEX, to facilitate the exchange of reimbursable transactions between the Army, Navy, Air Force, USMC and other DoD Component financial management and acquisition systems.
Creative Abrasion – Generating collaborative ideas & thought through discourse and debate...get it out on the table…not a bad thing.
Creative Resolution – Make integrative decisions that combine disparate or even opposing ideas.
Creative Agility – Ability to test, experiment, and pilot through quick pursuit, reflection, & adjustment

22. 4/20/2017
Pre-GEX
Spaghetti systems are largely the creation of time. A system starts out with a few links between disparate systems. Gradually, the links increase one at a time until the links number the factorial of the separate systems.
Source:

23. 4/20/2017
Post-GEX
GEX
Spaghetti can be found in code or in systems. The solution to the problem is creating a broker. This is similar to using a broker to buy and sell stocks and shares. You sell to the broker, the broker sells to anyone else in the world who wants to buy. Similarly when you buy from a broker, you don't care where it comes from. The broker is responsible for getting the shares.
The broker pattern is useful for maintaining a centralised set of data. Many services and systems provide data and demand data, and creating a broker to maintain the central repository (using the publish and subscribe pattern), means there is no spaghetti.
Source:

24. 4/20/2017
IGT Target
Figure 2 depicts the end-to-end business process for reimbursables as designed to operate in the GEX environment.
The GEX is used in this environment to facilitate consistent data quality and standards, data error handing, and a full audit trail.
It receives transactional data from multiple source systems across DoD, and maps the disparate data feeds and elements into a standard data element structure.
These standard data elements can then be readily routed to IPP and different systems throughout DoD.
This will standardize the data flow between IPP and DoD systems and reduce the need for point-to-point interfaces.
Some of the unique features of GEX are its ability to handle different file formats (such as flat files, XML, or Excel®) and different message formats (such as ANSI X12, UN/EDIFACT, or HL7).
While routing data between systems, GEX validates data with crosswalk tables, business rules and other authoritative sources.
The GEX also routes transactions to any or multiple partner systems.
The IPP solution is expected to be used by different departments and components, involving multiple systems with different data elements/standards.
By using GEX, all required systems will be able to communicate more seamlessly while maintaining consistent data standards.

25. Support Agreement Role in IGT Documented Performance & Receipt
4/20/2017
Key Process Changes
Support Agreement Role in IGT
Documented Performance & Receipt
IPAC Pay & Chase
During the spring of 2013, DoD developed a project charter outlining proposed project governance, project management, strategies and controls that team members could use during the IPP IGT implementation.
The project charter was approved and published on July 15, 2013.
On August 5, 2013, DoD issued a memorandum announcing its partnership with the Treasury Department to implement IPP as DoD’s core system to manage all inter- and intra-governmental reimbursable transactions and documentation.
According to Mr. Easton, “This partnership will strengthen management and accountability for nearly $273 billion in intra-governmental business.”
The DoD memorandum established a DoD-wide chartered IPP implementation governance board and announced that the Office of the Under Secretary of Defense (Comptroller) Business Integration Office (BIO) would lead implementation efforts in coordination with the Department of the Navy.
As DoD’s executive agent, the Navy is responsible for planning and overseeing service component execution plans.

26. Six Month Outlook Highest Kickoff and Conduct Pilots
April
MAY
JUNE
July
August
September
Kickoff and Conduct Pilots
25% Reimb. Auth. On IPP GT&Cs
Development of Enterprise System ECPs
50% Reimb. Auth. On GT&Cs
Release GT&C Memo
Draft Intra-governmental Data Standard (IGDS)
Release IGDS for Review
IPP-IGT Implementation Memo
Receive and Analyze IGDS Feedback
Development of Enterprise GEX Maps
MILESTONES
Milestone Occurrence
LEVEL OF EFFORT
Less
More
PRIORITY
Lowest
Highest
PHASE
Planning
Develop-ment
Policy

27. Adoption: IPP Becomes More Valuable with Increased Use
4/20/2017
Adoption: IPP Becomes More Valuable with Increased Use
Wave 1 – Early Adopters
FY15
Wave 2 – FY16
DoD Policy Directive
2-Party Buy/Sell Transactions
DoD Reimbursable Authority
25% (of DoD reimb auth) in IPP
~$12B
FY 15 Target: 50 % of Reimb Authority reflected in IPP as GT&C
Early adopters critical to informing requirement gaps, defining change management activity
IPP “value” increases with each new connection/adopter
Outcomes from early adopters :
Develop implementation guide to direct the process for future “connections”
Document unique trading partner requirements
Aid OJT desktop guide development
50% (of DoD reimb auth) in IPP ~$24B
500 transactions per month

28. Mary Kemp, OUSD(C) BIO mary.l.kemp12.civ@mail.mil
Questions?
Mary Kemp, OUSD(C) BIO

29. Mary L. Kemp – OSD(C) Business Integration Office
4/20/2017
Mary L. Kemp is lead accountant in the Business Integration Office, Office of the Under Secretary of Defense (Comptroller). She has 30+ years of service as an auditor, budget analyst, accountant, and systems analyst with Department of the Army, Defense Finance and Accounting Service and OUSD(C). She is a past president of ASMC’s CNY Leatherstocking Chapter, a Lean 6 Sigma Green Belt, Certified Defense Financial Manager, and DoD Financial Management Level 3 certified. She just completed her Master's Degree coursework and will graduate in June from the National Defense University.