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Managing Your Budget In a Declining Economy June 2010. Army Day. COL C. A. Cruse, Chief Mr. Todd Nethery, Chief OMA Budget Formulation OMA Current Operations Army Budget Office, ASA (FM&C). Pentagon Math. Imbed Video of Abbot and Costello 7 X 13 = 28. Agenda. Setting the Stage

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managing your budget in a declining economy june 2010

Managing Your BudgetIn a Declining EconomyJune 2010

Army Day

COL C. A. Cruse, Chief Mr. Todd Nethery, Chief

OMA Budget FormulationOMA Current Operations

Army Budget Office, ASA (FM&C)

pentagon math
Pentagon Math

Imbed Video of Abbot and Costello 7 X 13 = 28

agenda
Agenda
  • Setting the Stage
    • DoD Budget Growth
    • Army Budget
  • Challenges Ahead
  • Managing Your Budget
  • Conclusion
  • Building the Next Army Budget
setting the stage
Setting the Stage
  • “Therefore, as the Defense Department begins the process of preparing next year’s Fiscal Year 2012 budget request, I am directing the military services, the Joint Staff, the major functional and regional commands, and the civilian side of the Pentagon to take a hard, unsparing look at how they operate – in substance and style alike.”

Secretary of Defense Robert M. Gates

Eisenhower Library, Abilene, Kansas

8 May 2010

army funding trends
Army Funding Trends

$1.7 Trillion in 10 years

Business practices changed.

DepSecDef 9 Apr Memo:

“POM 12-16 “

OEF OIF GTA Surge Responsible Drawdown

* OCO appropriations include war and non-war funding

army budget growth oma
Army Budget Growth OMA

FY 2000 $18.9B

FY 2011 $33.9B

*Contract growth includes CLS

challenges ahead
Challenges Ahead
  • OCO Shrinking
    • OCO to base movement
    • Increased limitations/rules
  • U.S. Economy
    • Health care
    • Banking reform
    • Housing foreclosures
    • Oil spill
    • Unemployment
  • Peace Dividend
    • Following Korea, Vietnam, and Gulf War I
      • A 17 – 22% reduction to the DoD budget
    • What will the reduction be after OIF/OEF?
managing your budget
Managing Your Budget
  • “…to convert sufficient ‘tail’ to ‘tooth’ to provide the equivalent of the roughly two to three percent real growth…” Secretary of Defense Robert M. Gates
  • Set the Stage
    • Requirements ≠ Funding
      • Schedule 8s
      • Concept plans
  • Business School Answer
    • Divesture
      • Streamlining
        • Reduction in overhead
          • Eliminate redundant processes

Over 300 Schedule 8s and Concept Plans approved for FY 2011 to compete for funding… but there is no funding!

managing your budget setting the stage
Managing Your BudgetSetting the Stage
  • Business School Answer
    • Divesture
      • Wants vs. Needs
      • Change in Mission
    • Streamlining
      • Supposed to be cleaner
      • Careful that we do not streamline into a mission failure
    • Reduction in Overhead
      • Fastest growing component of budget
      • Relationship to centralization of systems – finance, accounting, human resources, IT networks/communications
    • Elimination of Redundant Processes
      • Do I have to do this? Why?
  • Recommendations to Find the Savings
    • Budgeting
      • Execution
        • Follow through!
managing your budget find the savings in the budget
Managing Your Budget Find the Savings in the Budget
  • Budgeting
    • Currently – Last years’ plus 2-3%
    • Set the baseline
    • Are the models still accurate?
  • Create a Cost Culture
        • Physical upgrades to access control points will equal a 26% reduction in guard requirements
        • 1SG Barracks Initiative – recoup excess BAH; $130M savings in ten years
  • Defending the Budget
    • Idea formed
    • G8/PAE POMs for the idea with the PEG
    • ABO documents the idea in a “stub”
    • Army defends the idea to OSD
    • Army briefs and defends the idea to Congress
    • Congress appropriates budget

If my grandmother can not understand the new idea, it will probably not get funded!

managing your budget find the savings in execution
Managing Your Budget Find the Savings in Execution
  • Get/Keep your commander involved
  • Live within your means—the base is the base
  • Get everyone invested
  • Reviews
    • Joint Reviews
    • Periodic Reviews—tradition vs. actual requirements
    • 5th Quarter analysis
  • Program Budget Advisory Committee
  • Develop a requirements consideration process
  • Accurate accounting--$$ in the details
  • Truth in lending
  • Cost/Benefit analysis; cost estimation
  • Train your subordinate unit resource managers
  • Moral courage . . . .

Why Do We Reward 100% Obligation?

managing your budget find the savings in the follow through
Managing Your Budget Find the Savings in the Follow Through
  • After Action Reviews
  • Do the Models Give You What You Need?
  • Rate Adjustments for Estimation
  • What about Overhires?
    • Temporary
    • Permanent
  • Publish Successes – Reward Successes!

Do You Conduct AARs? Do You Follow Thru?

slide15

Conclusion

  • “I say the patriot today is the fellow who can do the job with less money.” President Dwight D. Eisenhower
  • Take Aways:
    • OCO limitations/rules
    • Status quo will not do
    • Involve your leaders and get everyone invested
    • Create a “cost culture”
    • Live within your means
    • Aim for success
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