Financial Operations Panel

Presentation to the ASMC National Virtual PDI

June 3, 2021

Office of the Under Secretary of Defense (Comptroller)

Current Issues in

DoD Financial Operations:

Paving the Path for Both

Efficiency and Compliance

DoD Long-Term Audit Strategy

= Completed

✓Initiate annual,

full-scope

financial

statement audits

✓Develop

infrastructure to

collect findings,

prioritize

remediation and

monitor progress

✓Establish

baseline using

first-year audit

findings

Complete

remediation for

operational

priorities and

material

weaknesses

FY 2021 Operational Priorities

• Real Property – Existence & Completeness

• Inventory and Operating Materials and Supplies

• Government Property in the Possession of Contractors

• IT – Access Controls

• Fund Balance with Treasury

• Financial reporting Internal Controls

• Joint Strike Fighter

✓Align findings to

operational

priorities* and

material

weaknesses

Monitor and

refine internal

controls going

forward

✓

Align

remediation to

achieve

unmodified

opinions for DoD

Components

1. Collect

Feedback

from Audit

4. Monitor

Implementation

2. Align

Findings

to

Priorities

3. Complete

Remediation

Annual Audit

Cycle

2

Ongoing Evolution of the CFO

Balancing Compliance (aka Audit) with Improved Business Efficiency (Performance)33

The DoD Financial Operations Team

4

• Department of the Army

Natasha Anderson

Acting Director, Financial Operations and Accounting

• Department of the Navy

Mobola Kadiri

Deputy Assistant Secretary of the Navy (Financial Operations)

• Department of the Air Force

Fredrick Carr

Deputy Assistant Secretary of the Air Force (Financial Operations)

• Defense Finance and Accounting Service

Aaron Gillison

Deputy Director for Operations

AUDIT ROADMAP

Financial Operations and Information: Building a Culture of Performance

FY21 FY22 FY23 FY24 FY25 FY26 FY27

Army General Fund

CivPay FBwT

Budget

E&DL

PP&E

OM&S

AP/Procurement

AR/Revenue

ELCs

Contingent Liabilities

Other Liabilities

IT General Controls

MilPay

Leases

Internal-Use Software

(IUS)

Financial Reporting

GL Adjustments

Beginning Balance

Completeness

Evidential Matter

Army Working Capital Fund

CivPay FBwT

Systems Recons

Inventory

PP&E

E&DL

AP/

Procurement/Accruals

AR/Revenue

Budget

IT General Controls

GL Adjustments

Financial Reporting

ELCs

Beginning Balance

Completeness

Evidential Matter

Leases

IUS

Planned timelines are undergoing review.

Audit Opinion

Material Weaknesses / Accounts in Focus

Audit Opinion

5

NAVIGATING LEADERSHIP TRANSITION

We focus on 3 main areas to ensure new leaders are up to speed

Conduct Prep SessionsConfirm Audit Strategy

and Roadmap

Monitor Progress with

Accountable Officials

“Why” the audit is

important

“What” we are doing “How” we are getting

things done

6

FINANCIAL MANAGEMENT TRANSFORMATION IN ACTION

Financial Operations and Accounting: Building a Culture of Performance

How do we drive future success?

Use the Transformation Realized approach to address other longstanding issues. Examples:

► Government Furnished Property (GFP) where the Army cannot fully account for property issued to contractors

► Ammunition Accountability where records across the DoD are inaccurate and inconsistently reported, leading to excess supply orders or out-of-stock situations

Acceleration needed

Accountability and collaboration are key areas to improve to advance the audit

Transformation Realized

Army has already achieved great operational improvements in the audit process

What are we doing differently to drive success?

► Focus on priority control and process gaps

► Employ innovative technology and tools

► Accelerate and resource fixes over months not years

► Educate and train the workforce to modernize operations

► Hold IMCOM Divisions accountable for results with metrics

IMCOM-Real Property Automated Management Solution

Success

IMCOM in a better position to close NFRs and improve data accuracy and efficiency

7

FOCUS ON WHAT IS CRITICAL FOR SUCCESS

Financial Operations and Accounting: Building a Culture of Performance

Milestone Path Focus Areas

Wave 0*

Critical

Through All

Waves and

Beyond

Wave 1

Critical to Opinion

• GE – Existence/Completeness

• Real Property – Existence/Completeness

• OM&S – Existence/Completeness

• FBwT – Existence/Completeness, Valuation

• Environmental Liabilities – Valuation

• Procurement & Disbursing (Budgetary) – E/C, Valuation

Wave 2

High Risk to Opinion

• PP&E – Other Assertions

• OM&S – Other Assertions

• FBwT – Other Assertions

• Environmental Liabilities – Other Assertions

• Unfilled Customer Orders (incl. Revenue) – E/C, Valuation

• Payroll – E/C, Valuation

• Gross Costs and Earned Revenues – E/C

Wave 3

Moderate Risk to Opinion

• Payroll – Other Assertions

• Unfilled Customer Orders (incl. Revenue) – Other Assertions

• Procurement & Disbursing (Budgetary) – Other Assertions

• Appropriations Realized – All Assertions

• Other Budgetary Accounts – Remaining Assertions

• Other Assets (Advances) / Liabilities – All Assertions

Wave 4

Moderate Risk (Pending Others) to

Opinion

• Financial Reporting (Footnotes & Compilation)+

• Proprietary Accounting (AP, AR)** - All Assertions

• Net Position/CRO – All Assertions

* Wave 0 includes reliance on: Entity Level Controls, ITGC’s, CUECs, System Outputs, Posting Logic, JV controls, etc. Implemented through use of high-level recommendations

+ Financial reporting is the P&D assertion for all significant accounts** Proprietary accounting should be an easier lift after focusing on procurement processes and budgetary tie points

8

9

DON FM TRANSFORMATIONNAVY & USMC

• ABCs – drives Roadmap alignment to SECNAV priorities

• Audit - Execute to the targeted auditability timeline

• Budgetary Reform - Rigorously execute the budget

• Consolidation of Systems -Consolidate and reduce feeder and general ledger systems

• Execute to the Audit Roadmap: Accountability of Assets & Liabilities

• Complete Working Capital Fund migration to ERP

• Achieve a USMC Audit Opinion in FY21

• Transition to Defense Agency Initiative (DAI) system

USMC Milestones

DON Audit Roadmap

10

ACCOMPLISHMENTS & VISION

• Realized DOD’s lowest improper payment rate (less than 1%)

• Identified $2.78 billion in materials for redeployment through inventory clean-up initiatives

• Downgraded 5 Material Weakness

• Migrated Navy ERP to a high-performance analytics cloud-based platform supporting over 72,000 users managing nearly $70 billion in funding. Decommissioned 3 aging systems.

• Streamlined receipt of funds and eliminating ~27 thousand JVs (~$4.1T)

• Established a data strategy team and a process robotics community of excellence.

Accomplishments to Date

• Financial operations are executed in modern ERP systems.

• Standard business processes with internal controls tested annually based on risk.

• Budget is transparent and executed with fiscal discipline.

• Senior leaders have access to accurate & timely financial and logistics data, enabling informed decisions.

Working towards DON Vision for the future

Achieve a single, visible source of truth for all financial and operational data

President’s Budget Application CFO Dashboard Application

11

ADAPTING & EVOLVING

Workforce aligned with necessary knowledge, skills, and technology to support analytics,

insight, and auditability

Investment in Navy FM Workforce Readiness initiative is one componentof a larger realignment in the way that Navy FM does business

Working differently• Technology makes remote

operations and auditing a reality

• Opens doors to where and how we work to retain talent and expand access to new talent

Insight driven• Improve data and information

governance for decision-making

• Need for real-time analysis and predictive forecasting

FM talent• Drive talent development for

the future finance organization

• Increased focus on employee well-being

• Greater access through virtual conferences and training

I n t e g r i t y - S e r v i c e - E x c e l l e n c e

Anticipated Corrective action

Completion and Validation

Anticipated Conclusion Provided by

Auditor over Material Weakness

12

Air Force Audit Roadmap

General FundFY21

AIR FORCE GENERAL FUNDAUDIT

OPINION

FY22 FY23 FY24 FY25 FY26

Contingent Legal

Liabilities (AF/JA)Military Equipment

(SAF/AQ)

Earned Revenue/

RBA&E Acceptor

(SAF/FM)

Financial Reporting

Policy and

Guidance (SAF/FM)

Obligations (SAF/FM)

Internal Controls A-

123 (SAF/FM)

Payroll & Benefits

(AF/A1)

FBwT (SAF/FM)

E&DL – BRAC,

Restoration, and

Military Equipment

(AFCEC)

Contract Financing

Payments and

Accounts Payable

(SAF/FM)

Other Liabilities –

Contract Holdbacks

(SAF/FM)

Appropriations

(SAF/FM)

Financial Statement

Compilation and

Reporting (SAF/FM)

GPP&E: General

Equipment (AF/A4)UoT Phase 1:

Completeness (SAF/FM)

Internal Use

Software (SAF/CN)

Real Property (AF/A4) Information

Technology (SAF/FM)

Operating Materials &

Supplies (AF/A4)

E&DL – Other

(AFCEC)

UoT Phase 2: Quality

(SAF/FM)

Accountable organizations assigned to FY21 Priority Areas consistent with the SecAF Tone at the Top Memo.

*Includes Government Furnished

Equipment and Contractor

Inventory Control Point

Government

Furnished Property*

(AF/A4)

I n t e g r i t y - S e r v i c e - E x c e l l e n c e

Air Force Audit Roadmap

Working Capital Fund (WCF)

FY21

AIR FORCE WORKING CAPITAL FUNDAUDIT

OPINION

FY22 FY23 FY24 FY25 FY26 FY27 FY28

GPP&E, Net

(AF/A4)*

UoT (SAF/FM)**

Inventory Held

by AF (AF/A4)*

Internal Controls

(A-123)

(SAF/FM)**

Advances &

Prepayment

Liability (SAF/FM)

FBwT

(Leverage GF)

(SAF/FM)

Accumulating &

Preparing

Financial

Statements

(SAF/FM)**

Inventory Held

by Others

(AF/A4)*

Contract Authority

(SAF/FM)**

Payroll & Benefits

(AF/A1)

Expenses

(SAF/FM)**

Earned Revenue,

Spending

Authority, &

Accounts

Receivable

(SAF/FM)**

Other Federal

Employee

Benefits (AF/A1)

Contract

Financing

Payments &

Accounts Payable

(SAF/FM)

Information

Technology

(SAF/FM)

Other Assets

(SAF/FM)

Other Liabilities

(SAF/FM)

SBR Beginning

Balances

(SAF/FM)**

Integration and

Reconciliation of

Systems

(MROi/SCi)

(SAF/FM)**

Inventory Held

by AF [E&C]

(AF/A4)*

Inventory Held

by Others

[E&C] (AF/A4)*

* Delegated to AFMC/A4/10

** Delegated to AFMC/FM

Anticipated Corrective action

Completion and Validation

Anticipated Conclusion Provided by

Auditor over Material Weakness

13

I n t e g r i t y - S e r v i c e - E x c e l l e n c e

DAF Data Management Transformation

Air Force Enterprise/

Systems Environment

Current Strategy: Transform AF’s data environment using CDO Vault as primary data lake

Data Environment

CDO Vault

Cloud 1

ADVANA

Data

Exchange

SMART-

FM

BLADE A1

Use Cases

UoT reconciliations

FBwT historical trend

analysis and CCAS

reperformance

WCF cash modeling

Financial

dashboards

DFAS systems data

interface

QA data analytics

Roll forward

reconciliations

Status of Funds and

Open Document

Listing

Data validation for

AF financial data

prior to exchange /

use by others

CLL modeling

FBwT reconciliation

(possible future use

case / CCAS

replacement)

Financial statement

drill-down (UTB –

ATB reconciliation)

(pilot)

Obtain UoT data for

non-AF systems

• CDO Vault has existing/developing functionality for items noted in green text

• Advana has existing functionality for Items noted in blue text (no federal endorsement intendedNotes:

DAF is consolidating 6 General Ledgers into 2 by 2028

14

I n t e g r i t y - S e r v i c e - E x c e l l e n c e

The Future of Customer Service

Comptroller Services Portal (CSP)

Fully deployed to 79 AD Air Force bases

Worked directly with each Comptroller

Squadron

Integrated requested features

Over 218K incidents to date

MILPERS to DEAMS Transition

Transitioning MILPERS accounting - Not Pay -

from DFAS legacy systems to DEAMS in

preparation for AFIPPS implementation

Successfully transitioned ~$25B in MILPERS in

FY21 and complete ~$35B Appropriation in FY

22

Integrated Personnel and Pay System

(AFIPPS)

Objective is to integrate pay processes into Air

Force’s existing personnel platform for Total

Force to enable accurate and timely pay

delivery.

Currently AFIPPS is near Completion. IOC

starting June 2022.

PCS Automations

Improve the PCS experience for travelers

and technicians

Establish accurate PCS budget and

accounting

Ensure PCS transactions are fully auditable

Streamline PCS end-to-end process to

improve efficiency

15

DFAS: Audit Support

5/19/2021 Integrity - Service - Innovation

Fund Balance w/Treasury

Advana

Reduce Legacy Systems

IT and Access Controls

16

DFAS: The Mission Continued

5/19/2021 Integrity - Service - Innovation

Legislative

Proposals

Technological

Enhancements

17

STRENGTHEN

CUSTOMER

PARTNERSHIPS

INVEST IN

PEOPLE

ENHANCE

PERFORMANCE

MODERNIZE THE

BUSINESS

ENVIRONMENT

DFAS: Path of the Future

18

19

Questions and

Open Discussion