Review of Fiscal Law December 6, 2002 Judith S. Boyd

1. Review of Fiscal Law December 6, 2002 Judith S. Boyd

2. Overview • Purpose & Objective • Challenges • Management Directives • Partnership Approach • Project Approach • Project Activities & Timeframe • What We Need From You

3. Purpose & Objective Purpose • Comprehensive review of the laws and associated rules, directives and processes governing DoD Financial Management to support the President’s Management Agenda. Objective • Recommend the legal changes, modifications and repeals necessary to transform DoD financial management into a coordinated network of laws that will result in a flexible and integrated foundation for the 21st Century.

4. Challenges • Overlapping / Conflicting Congressional/Administrative financial rules • Limited DoD “Freedom to Manage” • Disconnect between fiscal policy and business processes • No “wall-to-wall” review of Fiscal Law • GAO: DoD financial modernization requires complimentary policy/process modernization

5. Management Directives • President’s Management Agenda supports change: • “The Financial Management Initiative improves how the Government manages its money – reducing, for instance, the billions in erroneous payments the Government makes every year” • The e-Gov Initiative harnesses the power of the Internet to make the Government more productive • Congress seems receptive to DoD financial streamlining recommendations • SECDEF: Improving Financial Management in “Top Ten”

6. Partnership Approach • Management – Executive Sponsor & DoD Components • Fiscal Law Advisory Panel • Identify, justify, and recommend legal, regulatory and process changes • Contractor Support • SAIC • Keane • Financial ManagementServices, Inc. (FMSI) • Complementary to FMEA/FMMP Fiscal Law Advisory Panel (“Section 800”) Congress DoD Executive Sponsor Steering Group Fiscal Law Contractor Support Government Expert Advisors & Working Group

7. Project Approach • “Modular” Approach • Final Deliverable: Strategic Plan for Fiscal Law • Develop and Implement Comprehensive Legislative Recommendations • Interim: “Quick Hits” Tactical Opportunities • Process Transformation • Regulatory Changes • Coordinated Project Approach to avoid redundancies and maximize success Review of Fiscal Law in context with FMEA/FMMP and Contract Law/FASA

8. Project Activities & Timeframe Phase I – Scope Identification (01/01/03 – 6/30/03*) • Identify issues for review • Review and validate project scope • Identify issues • Propose recommendations for change & performance results expected • Legislative • Non-legislative • Interview Public and Private Stakeholders • DoD managers • Congressional staff, CBO, GAO, OMB, FASAB, & JFMIP • Private sector experts • Analyze and prioritize critical improvement opportunities in statute, regulation and process • Provide Executive Sponsor Initial Findings – “Quick Hits” (60 days following FMEA report release) • Define scope of analysis & Key Performance Indicators *Assumes FMEA report release on 4/30/03 Phase 1: 01/01/03 – 6/30/03

9. Project Activities & Timeframe Phase II – Recommendation Development (05/01/03 – 9/30/03) • Establish Advisory Panel • Identify Role and Engage OSD Legislative Affairs • Spin off “Quick Hit” opportunities for implementation (ongoing) • Provide IPRs to Steering Group • Provide recommendations for initial Advisory Panel review • Finalize legislative recommendations Phase 1: 01/01/03 – 6/30/03 Phase II: 05/01/03 – 9/30/03

10. Project Activities & Timeframe Phase III – Final Report & Action Model Implementation Plan (10/1/03 – 02/28/04) • Prepare final report • Background • Analysis and justification • Recommendations • Outreach and Communications Plan • Draft Legislative/Regulatory Language • Legislative Strategy • Conduct final Advisory Panel review • Submit recommendations for President’s Budget • Begin Phase IV planning for ongoing Fiscal Law review Phase 1: 01/01/03 – 6/30/03 Phase II: 05/01/03 – 9/30/03 Phase III: 10/1/03 – 02/28/04

11. What We Need From You • Continue Advocacy for MID 909 • Determine Executive Sponsor • Further Guidance/Your Insights

12. Back-Up Slides

13. Alternative Timetables • Option 1 • FY05 President’s Budget = 70% solution (Feb 04 PB) • Option 2 • FY05 out-of-cycle = 100% solution possible (May 04) • Option 3 • FY06 President’s Budget = 100% solution (Feb 05 PB) • Option 4 • SECDEF mandated “800 Panel” = 100% solution (May 03/May04) • Congress affirms the SECDEF actions (???) • Option 5 • Congressionally mandated “800 Panel” (FY91 NDAA Review of Acquisition Law) = 100% solution (???)

14. Cost $2.6M $1.7M $0.5M $0.2M $5.0M Total Estimated Cost $5.0M (15 months) • Contractor Support • Subject Matter Experts • Internet Web Services Costs • Travel • Total Estimated Cost

15. Expected Changes Legislative Change Examples • Anti-Deficiency Act • Problem - Fund managers can not pay vendors for purchases to required to perform work for working capital fund customers. • Possible Solution - Modify over-expenditure requirement to allow “Working Capital Funds” to either 1) over-expend “fund balance with treasury” or authorize borrowing authority from treasury equal to agency accounts receivable balance. • Result – Vendors are: 1`) paid timely, 2) provided increased working capital liquidity, 3) reduced borrowing cost, and 4) either reduced product or service cost or profits to be reinvested or returned to stockholders to be reinvested or used. • Disbursing Officer Act, Executive Order 6166, Prompt Payment Act • Problem – Vendors invoices can not be paid except by authorized government disbursing officers & interest penalties are assessed for late payment (Prompt Payment Act) • Possible Solution – Change Disbursing Officers Act, Executive Order 6166 & Prompt Payment Act to allow vendors to “Electronically PULL” payments from treasury general account equal to one months invoice for products or services and “post audit” paid invoice and adjust next month invoice for discrepancies, • Result - Vendors are: 1) paid timely, 2) provided increased working capital liquidity, 3) either reduced product or service cost or profits to be reinvested or returned to stockholders to be reinvested or used, and 4) Government payment processing cost, invoice examination and disbursing costs are reduced.

16. Federal Advisory Committee Act (FACA) • FACA Trigger • Private Sector Individuals alone or in conjunction with government employees providing consensus advice at the request of a government agency • Pro • Transparent, High Visibility • Use of Private Sector Recommendations • Led review of acquisition law (FY91 NDAA) • Con • Cumbersome and Time Consuming • Limits use of Private Sector • Limits flexibility of participants • FACA Requirements include (Department of Defense Directive 5105.4) • Establish a written charter that explains the mission of the committee; • Give timely notice of committee meetings in the Federal Register; • Have fair and balanced membership on the committee; • Open committee meetings to the public, whenever possible; • Have the sponsoring agency prepare minutes of committee meetings; • Provide public access to the information used by the committee; • Grant to the federal government the authority to convene and adjourn meetings; and • Terminate within two years unless the committee charter is renewed or otherwise