Drew Morgan

Director, Business Integration

Office of the Secretary of Defense - Comptroller

MAY 2015

How the Future Business Systems Environment

Will Help Us Sustain Financial Auditability

v4

OUSD(C) Strategic

Management Plan

FY 2011-2017

Strategic

Management Goals

Championa strong and capable

financial management

workforce

Acquireresources necessary

to meet national

defense objectives

Ensurethe 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 in2

DoD FM Environment

Dramatically Lower FM Business Mission Support

Costs

Improve and Standardize Information

Ensure Auditability

Outcomes

Goals

Maximize Operational

ERPs

DoD Policy Based on

Successful Pilots

Enablers

Strategic Investment Decisions Aligned with FM

Target

Information Driven Standards-Based Reduce Cost

Simplified Affordable Secure Sustainable Auditable

Simplify the Department's FM Environment

Achieve and Sustain an Auditable Environment

Strengthen Interoperability

Achieve Compliance

Improve Decision Making

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

Significant Budget Cuts/Mission

GrowthOperational Effectiveness

Visibility, Transparency

Audit Deadlines

Installation/

Command

4

Reduce Total Cost of FM Operations and

Enable Sustained Audit by Reducing FM Systems

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

5

Changing Landscape: Convergence of

Standardization Efforts

Standard Data &

Processes

E2E BPR

Treasury GWA and

IPAC

Transparency /

DATA Act

DoD & Federal IGT

Audit Readiness

FM Strategic Management Plan Goal

SMP Goal

SMP Key Initiatives* Intent of FM Functional Strategy Initiatives’ Goal Challenge Areas

Stre

ngt

he

n D

oD

Fin

anci

al M

anag

em

en

t • Execute the Financial Improvement Audit Readiness strategy and plans to achieve audit readiness by FY 2017

• Implement standards to ensure accurate and timely posting of accounting events and to improve interoperability across core financial management and feeder systems

Improve audit ability to support producing auditable financial statementsAudit Readiness

Eliminate Material weaknesses

Improve Internal Controls over processes that are relied upon for financial reporting Lack of Internal Controls

Data StandardsImprove accurate posting of accounting events to the general ledger utilizingthe standard USSGL and DoD Chart of Accounts

Establish and Enforce Data StandardsAchieve Compliance w/ Treasury RequirementsLink Budget and Execution information through standard reference dataImprove Interoperability among Core/Target FM and Feeder systems Simplify the FM environment by minimizing the number of interface failures Utilizing common standard data elements

Non-Compliance w/ Data Standards

Too Many Interfaces

• Improve, standardize, and reengineer financial management processes to gain efficiency in financial management operations in order to produce better financial information to support decision making.

• Maximize financial management operational capabilities through technology to achieve a positive return on investment and lower cost of financial management operations

Simplify the FM environment by standardizing processes eliminating manual processes

Manual or Non-Standard Processes

Simplify the FM environment by eliminating duplicative processes Duplicative Processes, TooMany Systems

Simplify the FM environment by minimizing the number of systems necessary to conduct business events

Too Many Systems

Lack of quality or timely access to data/information

Simplify the FM environment by eliminating # of legacy systems

Improve quality and integrity of financial information in systems of record

Improve data, processes, technology in order to support timely, accurate and reliable financial information for business decisions

7

Audit Deal-breakers

• Universe of Transactions (UoT)

• Funds Balance with Treasury (FBWT) balanced

• Unsupported Journal Vouchers

• Reconciliations (Feeders/GLs/Financial Statements

• Systems Readiness

• Supporting Documentation

FM Enterprise Initiatives focus on fixing root causes that

prevent us from reaching and sustaining audit

8

Integrated Financial Improvement Grand Strategy

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

SSAE16

FISCAM

USSGL

SFIS/SLOA

* Aligns with the DoD Strategic Management Plan (SMP)

Reducing the Number of Systems and Interfaces Through Standards &

ERPs Offers the Most Potential for &

Achieving Auditability

Annual Campaign

Plans• Applying FM Initiative

& Enablers

• Resulting in Annual

System Retirements

System

System

System

System

System

System

System

System

System

System

System

FM ERP

System

System

System

System

Point-to-Point Interface

Point-to-Point InterfacePoint-to-Point Interface

Point-to-Point Interface

Point-to-Point Interface

System

System

System

System

System

System

System

FM ERP

System

System

Point-to-Point Interface

Point-to-Point Interface

Point-to-Point Interface

Point-to-Point Interface

System

System

FM ERP

SystemSystem

System

System

System

System

System

Point-to-Point Interface

Point-to-Point Interface

Point-to-Point Interface

Point-to-Point Interface

Point-to-Point Interface

System

Point-to-Point Interface

System

FY15

FY19

FY16

FY17

FY18

FM ERPFM ERP

FM ERP

Cross Functional ERP

Cross Functional ERPCross Functional ERP

Cross Functional ERP

Cross Functional ERP

Cross Functional ERPFM ERP

FM ERP

System

STANDARD DoD

FM TARGET

ENVIRONMENT

~ 327 Roadmap

Systems ,

Annual Budget =

$719M*

~ 120Target Systems,

Annual Budget = ~$220M

10

Auditability

TARGET- Reduce Interfaces via Standard

Transaction Broker

- Minimize Reconciliations

- Supported Balances

327 Systems

2,000+ Point-to-Point Interfaces

Numerous Manual Reconciliations

Unsupportable Balances

FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22

# 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

11

~ 327 FM

Systems,

SNaP-IT Budget =

$719M*

Reducing the Number of Systems and Interfaces Through Standards & ERPs

Offers the Most Potential for Simplifying the Environment and

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

FMBudget

InventoryAcquisition

Payroll/PersonnelTravel

Logistics

Vendors

Portal

Enterprise-wide Standard

Data, Processes and

Systems

Disbursing(ADS,DDS, ERPs(Direct

Treas. Disbursing))

NGRMS, DTS, IPPS’, DCPS, EFD

12

DCD/DCWCentral data

repository

Cash

Traceability*Enterprise Daily

Cash Reporting and

Traceability (DCAS)

Initiatives Affecting FBWT

Sub-Allotments*,

**Execution and

internal controls

OversightImplement

enterprise

standards

Change

ManagementPromote

organizational

change

CARS

ImplementationReporting

IGT/IPP*Standard buy/sell

processes

Direct Treasury

Disbursing*,**Centralized post-pay

Auditability

Delinquent

DebtManagement of

delinquent debt

Results Outcomes

• 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

Data

Management*,*

*Standard financial

data/central data

broker

CollectionsReceivables

management

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

Legacy

Systems

DrawdownTransitions and

sunsetting

DSSN

Drawdown

Reporting1219/1220

Funds Distribution*,

**Electronic funds

distribution

Contingency

OperationsSupport

GTASSingle reporting

requirement

Sensitive

ActivitiesClassified data

CATWG

DoD G/L

As-Is Cash TraceabilityEntitlement Disbursement

Treasury (FACTS)1219/1220/224

Funds Balance with Treasury

(FACTS)

EOM Treasury Reporting by Dept End of Month

Reconciliation

and Rework

A

C

B

D

DDRS

E

F

Entitlement=

Disbursement(B)(A)

Disbursement=

EOM Treasury Report (by Dept)

(B) (C)

EOM Treasury Report (by Dept) =

G/L(D)

(C)G/L

=Treasury (Detail)

(E)(D)Treasury (Detail)

=Treasury (GL)

(E) (F)

! !

5 levels of manual recons

x 4 disparate processes (IN, CL, CO, + ODOs)

= 20 points of failure for FBWT traceability

As Is “Tie Points”

Note: Need data from Component, ODO & DFAS to calculate the systems &

manpower costs to manage/sustain these 20 Tie Points

15

Initiative: Enterprise Cash Accountability

Entitlement

Treasury(CARS)

DCAS

G/L

Route/Validat

e

Reconciliatio

n

A

C

B

DCAS=

Treasury(B) (D)

DCAS=

G/L (DDRS)

(B) (C)

G/L=

Treasury(C) (D)

Real-time Validation

FBwT / GLAC

DDRS

D

3 levels of automated recon

X 1 enterprise process =

FBWT auditability

To Be “Tie Points”

Initiative: Intra-governmental Transactions

System Improvement

• Establish enterprise data warehouse of intra-governmental transactions for audit, research and analysis

• Automate handshake and agreement between buyer and seller before settlement (reduces chargebacks)

• Leverage DoD Global Exchange (GEX) solution and Standard Line of Accounting (SLOA)

Standardization

• Establish common identifier to synchronize buyer

and seller accounting transactions

• Establish proper general ledger treatment for all

events

• Build common Intragov Data standard

Process Improvement

• Documented terms and conditions

• Documented performance and receipt

• Eliminate the pay and chase mentality

Enterprise IGT Process

GFEBSSTAN-FINS

SOM-ARDS

*PBAS: TI-21 Non-General

Funds

DEAMS GAFS-R

FUN

DS

DIS

TRIB

UTI

ON

AC

CO

UN

TIN

G S

YSTE

MS

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 all 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/SLOA elements BS/POA, BA, BSA, BLI, (or B1-B4) 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 functional area code (BP), sub-allocation Code (Limit), CA1 (Org Code), O3 (FSN)

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

STARS-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

Why do we need a standard

transaction broker?

TODAY TARGET

Point-to-Point “Spaghetti” – Expensive!!! Extremely difficult to Manage or Standardize

Hub and Spoke – Lower Cost, Standardization, Audit interface controls,

Scalable

* GEX is the De Facto Standard for Integration among 4th Estate

Business Systems, and is being evolved to serve as the Target

Standard Transaction Broker.

20

Disbursing Systems

Accounting Systems

GEX and Contract Pay – An Example-

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

DCMA MOCAS (Feb-17)

DCMA MOCAS (Feb-17)Treas PAM/SPS

NOT GEX

Connected

LegendSLOA Ready Dates Not

Provided

SFIS Configured

SLOA Long-term Plan

SLOA Plan Not Provided

SLOA Ready by GWA

Not SLOA Applicable

DLA WAWF

Support Systems

DFAS SCRT

DFAS EUD

DFAS BAM

DFAS DCAS (Sep-14)

DLA DDRS (N/A)

Treas Reporting (PIR, CARS)

DLA EFD

DLA EDA (May-15)

DLA SPS (May-15) DLA eProc (Feb-14)Army PADDSAF ConWrite

Standard Enterprise Lines of Accounting

Partner

System

Partner

System

Partner

System

Partner

System

Partner

System

Partner

System

Partner

System

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 (N-ERP & DAI use T&L)

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

ERPs and Silos

24

Core Accounting:

General Funds

Core Accounting:

WCFs

Budget Formulation

& Exhibit GenerationTimekeeping &

Cost Management AcquisitionInventory &

Logistics

ODO-DAI

ODO-EBAS

Army GFEBS

Army LMP

Army GCSS

Navy ERP

MC-GCSS

AF-DEAMS

Core FM

Other

Functional

Areas…

planned

FOR OFFICIAL USE ONLY25

Initiative: Cost Management

SLOA Cost Elements Aligned Cost Framework

Work Order

Number

Functional

Area

Cost

Element

ActivityProject

Cost

Center Cost

Center

• 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.)

• Enables standardized reporting

26

26

Initiative: JITC SFIS & USSGL Compliance Reviews

27

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

Chart of Accounts Posting Logic SFIS Business Rules

Validation

DDRS Trial Balance SLOA Interfaces SFIS 10.0 Interfaces

1.43% 0.65%16.47%

42.11%

100.00% 90.91%

Compliant

Not Compliant

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

*

DATA Act RequirementsFFATA Sec. 3 “Full disclosure of federal funds”

28

To be posted on USASpending. Gov“:

1. Reporting of Appropriation level data by Program Activity and Object Class in FY2016.

2. Linking of Award Information with Obligation and Outlays from Financial Systems

and posted beginning May 9, 2017.

How the Future Business Systems Environment Will Help Us Sustain Financial Auditability?

1. Simplify the Target Environment

2. Simplify key E2E processes

3. Minimize point-to-point interfaces

4. Retire legacy systems & use functionality in ERPs

5. Comply with data, exchange, and process standards

6. Leverage technology to gain efficiencies

29

Why will this enable DoD to Sustain Financial Auditability?

1. Easier to provide a Universe of Transactions (UoT)

2. Reduce the need for unsupported JVs

3. Better enable reconciliation of FBWT

4. Lowers audit-related costs• Systems sustainment

• Interfaces

• FISCAM reviews

• Extra substantive testing/sampling … lowers audit costs

• Fewer recons & re-work … lower labor costs

5. Can rely on Shared Services & related SSAE-16s

30

Questions/Discussion

6/14/2015 3:45 PM Presentation Title 31

Back-up

6/14/2015 3:45 PM Presentation Title 32

How Does SLOA Support the FM Strategic Initiatives?FM Strategic Initiative Outcomes How SLOA Enables Each Outcome

Financial Improvement and Audit Readiness (FIAR)

SBR Assertion FY 2014Financial 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. 14Standard 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 ManagementDelinquent 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 ToolsNear 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 ManagementConsistent 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 33