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Fiscal Overview Professional Development Institute (PDI) Seattle, WA. Mr. Davis S. Welch Deputy Director, Army Budget 28-30 May 2014. Agenda. “Today’s Financial Climate and Budget Realities: Managing Change in Uncertain Times”. Drivers – Law and Strategy

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Fiscal Overview Professional Development Institute (PDI) Seattle, WA. Mr. Davis S. Welch Deputy Director, Army Budget 2


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    1. Fiscal Overview Professional Development Institute (PDI) Seattle, WA. Mr. Davis S. Welch Deputy Director, Army Budget 28-30 May 2014

    2. Agenda “Today’s Financial Climate and Budget Realities: Managing Change in Uncertain Times” Drivers – Law and Strategy Fiscal Environment (External Pressures) Priorities (Internal Pressures) Process – Thinking in Time Momentum Toward Financial Goals 2

    3. The Constitution and Title 10 USC US political traditions dictate the verb “raise” to avoid standing Armies. Protection of the commons mandates the verb “maintain” for Services protecting the air and sea. Maintain: Navy of 11 operational carriers Marines of 3 Divisions/Air Wings Air Force of 24K serviceable aircraft or 225K A/C Tons Raise and support Armies, but no Appropriation of Money to that Use shall be for a longer Term than two Years;* *Article. I, Section. 8. 3

    4. Primary Missions – What Do We Do? Defense Strategy Strategy as a Resource Driver Sequestration • Three Pillars • Protect the homeland, to deter and defeat attacks on the United States and to support civil authorities in mitigating the effects of potential attacks and natural disasters. • Build security globally, in order to preserve regional stability, deter adversaries, support allies and partners, and cooperate with others to address common security challenges. • Project power and win decisively, to defeat aggression, disrupt and destroy terrorist networks, and provide humanitarian assistance and disaster relief. • Primary Missions of the U.S. Armed Forces… • Counter Terrorism and Irregular Warfare • Deter and Defeat Aggression • Project Power Despite Anti-Access/Area Denial Challenges • Counter Weapons of Mass Destruction • Operate Effectively in Cyberspace and Space • Maintain a Safe, Secure, and Effective Nuclear Deterrent • Defend the Homeland and Provide Support to Civil Authorities • Provide a Stabilizing Presence • Conduct Stability and Counterinsurgency Operations • Conduct Humanitarian, Disaster Relief, and Other Operations • …shaping the Joint Force of 2020 4

    5. Understanding the Army’s Transition from Current Operations to Army 2020 ISO the New Defense Strategy Win Current Fights Larger, Modernized and Rotational MFO/Kosovo/OEF/OEP-P/OIF/OND 569K/358K/205K Maintained Capability to Regenerate 2003-14 Baseline TSC Phase 0: Shape Phase I: Deter Phase II: Seize the Initiative Phase III: Dominate Phase IV: Stabilize Phase V: Enable Civil Authorities Defend the Homeland: DSCA/Title 32 Prevent Shape Win Smaller, Modernized and Ready Decisive Action (Win) 490K/350K/205K Maintain Capability to Regenerate Globally Engaged (Shape) and Regionally Aligned (Prevent) New Strategy Vision: The Army as an integral member of the Joint Force providing the agility, versatility and depth to Prevent , Shape and Win. Endstate: Globally Engaged, Regionally Responsive and an Indispensible Partner that can Shape, Prevent and Win • Counter Terrorism and Irregular Warfare • Deter and Defeat Aggression • Project Power Despite Anti-Access/Area Denial Challenges • Counter Weapons of Mass Destruction • Operate Effectively in Cyberspace • Operate Effectively in Space • Maintain a Safe, Secure, and Effective Nuclear Deterrent • Defend the Homeland and Provide Support to Civil Authorities • Provide a Stabilizing Presence • Conduct Stability and Counterinsurgency Operations • Conduct Humanitarian, Disaster Relief, and Other Operations Capability (Minimum required for current demand or Regeneration) Capacity (Force Structure)

    6. America’s Army: Globally Responsive, Regionally Engaged All Volunteer Army Expeditionary, decisive landpower Broad range of military operations Defense of the Nation and Its Interests – at home and abroad Prevent Defending the Homeland Shape Building Global Security and deterring aggression Win Remaining prepared to win decisively should deterrence fail The Army consists of the Regular Army, the Army National Guard and the Army Reserve 6

    7. Federal Spending Trends FY 19: National Defense ~13%of Federal Budget(estimate in PB 14 Request) FY 62: National Defense ~49%of Federal Budget FY 15 Request FY 19 est FY 62 FY 15 Federal Budget Request Outlays -3,783B Mandatory -2,323B • Options to Reduce Federal Deficit • Decrease spending • Sequestration • Balanced Budget approach • Increase revenues Discretionary -1,192B Net Interest -268B Income Tax +1,542B Payroll Tax +1,070B Receipts +3,305B Corp Tax +402B Other +290B Deficit -504B Source: Fiscal Year 2014 Historical Tables, Budget of the U.S. Government 7

    8. Defense Spending TrendsDoD Budget (FY 14 Constant $) 9/11 (2001) Height of Cold War (1985) Korean War Armistice (1953) Height of Vietnam War (1968) Today Gulf War Ends (1991) Vietnam War Ends (1973) OCO? Base? End Strength Ramp? • Discretionary spending is ~30% total federal budget…of which, Defense is ~50% • Increasing emphasis to reduce spending/deficit…Congress and the Administration • Historically, funding levels have decreased as military demand decreases 8

    9. Army Budget Trends FY 2003 – FY 2019 ($B) OCO placeholder estimate; actual submission to be determined based on future decisions and events Our Guiding Principle Must Be Keeping Balance Among Readiness, End Strength, and Modernization FY 15-19 POM Request Enacted Execution Numbers may not add due to rounding Given realities of constrained budgets, the Army must adapt, innovate, and make difficult decisions impacting the Total Force 11

    10. Budget Control Act Impact on DoD Budget PB12 (extended to FY21) PB13 (extended to FY21) $487B over 10 years (FY12-21) Estimate for Sequestration Impact to DoD – Share of $1.2T BCA Deficit Reduction BUDGET CONTROL ACT SEQUESTRATION ~-$52B/yr • Sequestration Impacts to Army • End strength • Readiness • Modernization • Force Structure FY13 only: “American Taxpayer Relief Act of 2012” reduces to ~$42B • Strategy Support • Base Operations • Soldier/Family Prgms • Institutional Training • In FY14 the BBA adds back ~$22B (Army ~$5.4B) and in FY15 add backs ~$8B (Army ~$2.3B) to DoD’stopline. Black Line = Original Programmed Budget; FY 12-16 Yellow Line = Programmed Budget after Budget Control Act Reduction (-$487B); FY 13-17 Red Line = Sequestration – the reduction from Yellow line required to comply with deficit reduction requirement… another $1.2T, or $52B /year for DoD Green Line= Adjustments after Bipartisan Budget Act of 2013 10

    11. Internal Pressures: Army Priorities & Cost Drivers • Pay for our people • Readiness in our units & our Leaders • Training • Equipment sustainment • Installation Infrastructure • Modernization for future readiness • Ground Combat Vehicle • Science & Technology FY 2015 Request $120.5 B • “The Army's largest asset and greatest expense is, and has always been, its people.” • -HON John M McHugh, Secretary of the Army, 13 February 2014 11

    12. The Budget Process “Planning, Programming, Budgeting and Execution (PPBE)” Defense Executive Congress • Components prepare program & budget estimates • Planning Phase • Programming Phase • Budgeting Phase • Execute the Plan • OSD and OMB concurrently review Component Submissions • President Submits Budget to Congress • Congress authorizes and appropriates funding for the Department • Budget Legislation (Authorization and Appropriation) U. S. CAPITOL WASHINGTON Appropriations • PPBE Process Links Defense Policy & Strategy to Resources 12

    13. Budget Timeline Cycles FY 16 FY 15 FY 14 Budget Conference Committee (13 Dec 13 ) MYR 80/20 Debit Limit (7 Feb 14) CR Multi-year Execution (FY 14/15) FY 14 Appropriation (1 Year) H.R. 2775 CR FY 14 Multi-year Execution (FY 12 & 13) HAC-D Full Committee Marks 10-12 Jun 14 Continuing Resolution Expires (18 Jan 14 ) PB 15 4 Mar 14 (T) HAC-D Marks 30 May 14 SAC-D Marks Mid-Late Jul 14 OMB Pass-back (T) (15 Dec 13 ) FY 15 FY 15 Appropriation (1 Year) Congressional Review OSD PBR FY 15/16 (Multi-Year) Execution OMB Review Multi-year Execution (FY 13 & 14) Posture Hearings POM Offsite (22 Jan 13 ) SASC Auth Marks 20-23 May 14 Floor Vote TBD PB 16 HASC Auth Marks 29 Apr–19 May 14 QDR Congressional Review OSD PBR FY 16 Appropriation BES POM16-20 Build TAA16-20 FY 16 * OMB Review FY 14/15 (Multi-Year) Execution Focus Area Decision Brief (11 Dec 13) Posture Hearings OSD PBR BES POM17-21 Build TAA17-21 FY17 OMB Review Today 13

    14. Moving Towards Auditability:Managing Change • 6 GAO Auditability Recommendations: • Committed & sustained leadership • Effective plan to correct internal control weaknesses • Competent FM workforce • Accountability & effective oversight • Well-defined enterprise architecture • Successful implementation of the ERP 14

    15. Financial Climate and Budget Priorities:Managing Change in Uncertain Times DRIVERS Law Strategy EXTERNAL PRESSURES Shrinking Budgets INTERNAL PRESSURES Priorities, Costs, Emergent Demands • FINANCIAL GOALS • Enable the mission • Auditable financial statements • Cost culture • Efficiencies • Execution–informed planning PROCESS Thinking in Time MISSION Ready Army to meet the Nation’s Demands • Any business today that embraces the status quo as an operating principle is going to be on a death march • Howard Schultz, CEO, Starbucks 15

    16. Way Ahead • Continue to plan • Synchronize actions to curb spending and to mitigate of budgetary uncertainty • Identify and prioritize funding shortfalls • Plan to execute anticipated funding • Continue to communicate combined effects of Budgetary uncertainty • Continue to monitor and assess impacts of Administration and Congress decisions on FY 14 / FY 15 budget • Continue to coordinate ongoing budget and programming efforts for PB 15 and POM 16-20 • Achieve Audit Readiness by the end of FY 2017 16

    17. Auditability Office of the Deputy Assistant Secretary of the Army (Financial Operations) (DASA-FO)

    18. Change Management Treasury GWA TAS/BETC USG Budget Turmoil Sequestration BCA Audit Readiness Enemies of the United States DOD FM Certification FIAR SFIS Army HR Issues: Furloughs. Pay Freeze, staff cuts Limited Travel ERP Implementations FM Optimization Rebalancing

    19. A Priority at All Levels Congress, DoD, and Army leadership are focused on improving business processes and achieving auditable financial statements. A Major Department of Defense Initiative Affirms commitment to achieving audit readiness during his confirmation hearing in January 2013. He will continue “to ensure we make that deadline of 2017 on the audits.” — Defense Secretary Chuck Hagel Link to the SECDEF DoD Financial Accountability Message: http://comptroller.defense.gov/FIAR/ Implemented within the Army “Leaders at all levels are responsible for instilling proper levels of discipline and oversight into all business processes within their command.” “We will continue to review monthly testing results as we prepare for audit next year… Your leadership and attention to this work is required to ensure we are prepared and successful.” • Chief of Staff General Raymond Odierno • Vice Chief of Staff General John Campbell

    20. Executing the Financial Improvement Plan (FIP) Priorities Actions Goals  Statement of Budgetary Resources (SBR)  Information is timely, accurate, relevant • Funds Receipt, Dist., and Monitoring • Payroll (Civ. & Mil.) • Acquisition of Assets • Reimbursable Inbound • Grants, Cooperative Agreements, Subsidies, Contributions, and Advances • FBWT / Disb. & Collect. • Financial Reporting • Contractual Services/ Acquisition of Assets: • Reimbursable Out (MIPRs) • Purchase Cards • Supply Requisition • Contracts • Other • Assess documentation, processes, and internal controls • Implement corrective actions • Establish effective internal controls • Assess financial statement data for accuracy • Standard processes • Effective internal controls • Proper documentation • Accurate, timely, reliable and supportable financial data • Existence and Completeness (E&C) • General Equipment (GE) • Operating Materials and Supplies (OM&S) • Real Property (RP) • Inventory  Army is auditable • Enterprise Resource Planning (ERP) Systems • General Fund Enterprise Business System (GFEBS) • Global Combat Support System–Army (GCSS-A) • Logistics Modernization Program (LMP) • Integrated Personnel and Pay System–Army (IPPS-A) • Assess system controls • Correct control deficiencies Compliant Systems (FFMIA, FISCAM*) *The Federal Financial Management Improvement Act and Federal Information System Controls Audit Manual

    21. Army Progress, Challenges, and Way Ahead Progress by Assessable Unit Challenges Way Ahead • Statement of Budgetary Resources (SBR) • Appropriations Received: Received an unqualified opinion on $232B Appropriations Received. • SBR Processes Exams 1 & 2: Received a qualified opinion in late 2011 on the first audit exam (“mock audit” of financial activity conducted in GFEBS at select installations. • SBR Process Exam 3: covering all current year activity and appropriations, non-legacy GF activity in GFEBS, CEFMS, GCSS-Army, LMP and feeder systems. Results validated by audit report in April 2014. • SBR • SBA assertion, June 2014 • Monthly manual internal control and substantive testing • Review of SSAE 16 systems end user controls with DFAS • Control implementation and sustainment • FY 2015 SBA Audit • Service support and involvement • Detailed reconciliations to general ledger • Universe of transactions and completeness of populations • Audit Etiquette • (SBR and E&C) • Responsiveness and flexibility to audit requests • Knowledge sharing with Audit Readiness Directorate • Review of testing results and development of corrective actions • ERP Systems • Change management: Ability to follow audit-compliant processes and standards • Improved training • E&C • GE E&C Audit Report, October 2014 • Full assertion of Real Property and OM&S in September 2014 • Regular tracking of RP metrics with ACSIM detailing command execution of corrective actions • Existence and Completeness (E&C) • OM&S E&C Quick Wins: Achieved positive audit opinion from DoD IG in 2012 on 17% of Army’s missile assets, including the Javelin, Hellfire, and TOW assets. • Real Property E&C Quick Wins: Received clean audit opinion from IPA on first external Real Property audit at 23 installations. The exams covers approximately 50% of the value of Army’s RP assets • Enterprise Resource Planning (ERP) Systems • Developing reconciliation solutions to ensure feeder system data reconciles to the general ledger • ERP • Implementing corrective actions related to Exam II and Exam III findings

    22. Army Audit Readiness Timeline Dec 2012 Mar 2015 Oct 2014 Dec 2013 Jun 2014 Jun 2013 • Now:Corrective Actions identified in Exam 3 and Internal Testing • Implementing corrective actions to address audit findings in preparation for the audit • Preparing For: 1 October 2014 audit • Scope includes all Fiscal Year 2015 Army business processes • Auditors will test balances quarterly throughout the Fiscal Year Timeline Apr 2013 Nov 2013 Mar 2014 Apr 2014 Exam #2 Report FY15 Audit Begins Full Audit Readiness 2017 Exam #3 Report Exam #3 Assertion Exam 3 & Internal testing Corrective Actions - Complete - Underway

    23. Army Audit Readiness Timeline Apr 2013 Nov 2013 Dec 2013 Mar 2015 Jun 2013 Sept 2014 Dec 2012 Jun 2014 Oct 2014 Apr 2014 Mar 2014 GF SBR Exam #2 Audit Report FY 2015 SBA Audit Begins GF SBR Exam #3 Audit Report Full Audit Readiness 2017 GF SBA GF SBR Exam #3 Assertion SBA Assertion RP E&C Assertion RP E&C Quick Wins Assertion RP E&C Audit Report RP E&C Quick Wins Audit Report GE E&C Audit Report Asset E&C OM&S E&C Quick Wins Audit Report GE E&C Assertion OM&S E&C Audit Report OM&S E&C Assertion - Complete - Underway GF SBR Exam #2 Audit Report:GFEBS GF SBR Exam #3 Audit Report: GFEBS, GCSS-Army, LMP* ERP Assessments GF SBR: General Fund Statement of Budgetary Resources SBA: Schedule of Budgetary Activity E&C: Existence & Completeness ERP: Enterprise Resource Planning OM&S: Operating Materials & Supplies RP: Real Property GE: General Equipment “Assertion” means Army is ready to be audited *Limited to LMP-PADDS-GFEBS interface controls only

    24. Testing: The Basics • Internal controls are designed to provide reasonable assurance that Army objectives will be achieved; substantive procedures validate amounts • Testing is performed for Audit Readiness, Audits and Annual Statement of Assurance Internal Controls Testing Substantive Testing Supporting documentation is required for both internal controls and substantive testing.

    25. Common Command Challenges

    26. Army Challenges and Corrective Actions 31

    27. BCA Impact on DoD Budget PB12 (extended to FY21) PB13 (extended to FY21) $487B over 10 years (FY12-21) Estimate for Sequestration Impact to DoD – Share of $1.2T BCA Deficit Reduction BUDGET CONTROL ACT SEQUESTRATION ~-$52B/yr • Sequestration Impacts to Army • End strength • Readiness • Modernization • Force Structure FY13 only: “American Taxpayer Relief Act of 2012” reduces to ~$42B • Strategy Support • Base Operations • Soldier/Family Prgms • Institutional Training • In FY14 the BBA adds back ~$22B (Army ~$5.4B) and in FY15 add backs ~$8B (Army ~$2.3B) to DoD’s topline Black Line = Original Programmed Budget; FY 12-16 Yellow Line = Programmed Budget after Budget Control Act Reduction (-$487B); FY 13-17 Red Line = Sequestration – the reduction from Yellow line required to comply with deficit reduction requirement… another $1.2T, or $52B /year for DoD Green Line= Adjustments after Bipartisan Budget Act of 2013

    28. Army Budget Trends FY 1999 – FY 2019 ($B) OCO placeholder estimate; actual submission to be determined based on future decisions and events Our Guiding Principle Must Be Keeping Balance Among Readiness, End Strength, and Modernization FY 15-19 POM Request Enacted Execution Numbers may not add due to rounding Given realities of constrained budgets, the Army must adapt, innovate, and make difficult decisions impacting the Total Force

    29. Army Budget Trends The Army’s base budget trend has declined since 2010, both driving, and deriving from, a reduction in end strength and force structure, while prioritizing near term training over long term investment. The overall total budget reduction -- base and OCO -- from a peak in 2008 reflects declines in OCO commensurate to reduced war operations. The bars through 2013 reflect actual execution; the FY 14 bar reflects the base budget enacted at $122B, with $3.1B shifted from base to OCO. The FY2015 Budget Request is $120.5B. The FY15 OCO budget is not submitted at this time but is clearly needed to support operations in Afghanistan and Reset of equipment returning from the Theater.

    30. Fiscal Year 2014 DASA-FO Goals • Assert General Fund SBA audit ready in September 2014 • Partner with DFAS to ensure all end-to-end processes have adequate controls and supporting documentation • Implement fund balance with treasury reconciliation tool • Correct Exam 3 Notice of Findings and Recommendations • Continue implementation of GFEBS • Harvest the power and capabilities of the Enterprise Resource Planning system, GFEBS • Expand the current use of GFEBS (Treasury disbursing, contract entitlement, reporting) • Complete the migration of military pay to GFEBS • Facilitate the deployment of other ERPs • Prepare AWCF for audit assertion (all four financial statements) • Continue work to ensure Logistics Modernization Program is a compliant financial system • Continue to implement corrective actions to ensure auditable processes • Close legacy systems • Continue the closure of STANFINS instances using the existing plan • Develop and implement a plan to close out SOMARDS • Update Policies and Procedures to support ERPs • Implement Financial Management Optimization Pilot study • Develop a professional, credentialed staff • Effectively and efficiently respond to requirements

    31. Army Financial Management Optimization (AFMO) • Ms. Kristyn E. Jones • Deputy Assistant Secretary of the Army • (Financial Information Management) • 28 May 2014

    32. Sec Army Directive: Optimization of Army Financial Management On 11 Sep 12, Sec Army directed ASA(FM&C) to: • Develop & submit a fully staffed & coordinated implementation plan – Auditable by 2017 • Conduct a review of Army Financial Management: Processes, Policies, Organization, Workforce, Training •  Recommend: Best Practices, Improved Operations, Greater Efficiencies Develop an implementation plan, under the direction of the Chief Management Officer (CMO) Goals and Objectives • Organize for auditability and accountability • Leverage the Army’s new ERP material solution • Optimize workforce - Military and Civilian • Sustain readiness in Army Financial Management units • Minimize redundant capabilities – achieve efficiencies • Right-size the workforce (include grade plating & job series) • Develop training and certification strategy based on Optimal Solution • Reduce cost of FM operations

    33. Army Financial Management Optimization Analysis • Analytical Rigor: • Mapped and Refined Key Business Processes • Focused both Horizontally and Vertically • Processes • People • External Support • 3. Documented 490 Key FM Tasks; identified transactional tasks • Redistributed Roles and Functions to align responsibility/accountability • Developed COAs; collaboration with key partners Key Study Recommendations: Realign activities into existing U.S. Army Financial Management Command (USAFMCOM) Conduct a Hub/OA Pilot Test Standardize business processes/systems architecture Align workforce and training Improve analytical capabilities/skills Key Partners: DFAS, PEO, PMs, ASA (FM&C), and Installation Commands COA Analysis Criteria Auditability Responsiveness to commanders Flexibility Feasible, acceptable, suitable Cost savings FM military readiness Ease of implementation

    34. Realign Activities to USAFMCOM Future Transition Exists In USAFMCOM Near-term Transition New capabilities include: • Systems oversight/management • Functional financial analysis support • Cost Management support • Standardize processes • Improve performance • Reduce errors/reduce re-work • Eliminate redundancy • Audit compliance • Training • Monitoring

    35. As-Is FM Structure As-Is Structure As-Is Example – Fort Bragg CE FO DFAS DFAS ABO USAFMCOM FIM DASA-CE PEO/PM O&S DASA-FIM PEO-EIS ABO DASA-FO HQDA FORSCOM IMCOM USAR USASOC OA Legend FORSCOM IMCOM USASOC USARC Command Activities Transactional Activities Policy Establishment Army-Wide Policy Execution • Current Challenges • HQDA organizations responsible for both the development and execution of policy. • PEO-EIS performing some operational FM tasks. • Decentralized, non-standardized accounting activities performed within the commands and below the Operating Agency (OA) level. • Limited ability to focus on analytical tasks at OA level. • Limited operational control to impact Army-wide audit readiness initiatives. • Inefficient structure that can not absorb reductions without risking mission failure. XVIII MSE Below OA 82nd ABN Garrison

    36. Hub/OA Pilot Test To-Be Structure To-Be Example – Fort Bragg ABO ABO USAFMCOM DASA-CE PEO-EIS DASA-CE DASA-FIM HQDA FOA DFAS DFAS ABO DASA-FIM FOA X DASA-FO DASA-FO PEO-EIS FORSCOM IMCOM USAR USASOC OA Ft Bragg Hub Hubs XVII Garrison USARC • Why? • Enhance and reinforce auditable business practices • Consolidate Army command transactional activities • Redistribute roles and functions to align responsibility/accountability • Improve decision support 82nd • What are we testing? • Improvement in operational processes • Virtual vs. Physical locations • Enhancement of auditability, standardization • Effectiveness/efficiency of hub processes in supporting client-commands • Improvement in analytical capabilities/decision support Legend Army-Wide Policy Execution Command Activities Transactional Activities Policy Establishment

    37. FM Optimization Approach Current position Phase I Phase II Phase III Phase IV Mission Analysis Course of ActionAnalysis Pilot & Measure Fully Deploy Sec. Army DeploymentDecision Resource Alignment Changing Environment Bus. Process Analysis Benefits Realization Lessons Learned COA Process Redesign Wave Transition Process Piloting Position work for optimal outcomes! Strategic review DOTMPF-P Assessment & Impacts Benchmarking & Success Metrics Performance management • Purposeof Pilot Test: • To baseline and measure the most effective way to operate using the Army’s new financial management practices and organizational structure. • Measures of Success: • ‘Balanced Scorecard’ approach to provide overall view of pilot performance. Cost of Operations Workforce Measures of Success Strategic & Operational Governance Stakeholder Communication Operational Performance Strategic Performance Q2, 2016 Q3, 2012 Q2, 2014 42

    38. Standardize Business Processes and Systems Architecture As-Is Process Tiger Team Systems Architecture • Fully understand impact of all ERPs on FM community • Reduce legacy systems • Implement new capabilities • Integrated Resource Management • Labor Tracking • Supplier Self Service Lean Six Sigma Decomposed To-Be Process Goal: Standardized, auditable business processes and integrated IT solutions that support mission needs and requirements

    39. Align Workforce and Training GOAL Trained, ready, certified workforce Building blocks to workforce success… Development of FM leadership competencies Leadership Multi-discipline training, OJT, customer focused Training Right mix of civilian and military, grades, series, and job assignment utilization Workforce Standardized DoD FM competencies to guide training and development Certification

    40. Improve Analytical Capabilities/Skills “Budget mindset” “Cost and Performance mindset” What is the cost of readiness? How much have I obligated? What should it cost? Is spending consistent with my priorities? What did I spend last year? What can I really save? What outcomes for resources? Enablers Desired Outcomes • Effective organizational structure (OA) • Trained analytical skills • Leader development • Understanding of data and tools • Cost management competencies • Integrated knowledge management • Cost culture • Cost informed decision making • Better allocation of funds • Integrated planning, programming, budgeting, and execution • Optimized use of resources in support of Army strategy!

    41. Way Ahead • Approve USAFMCOM concept plan and de-conflict spaces/structure resources • Initiate USAFMCOM Transformation, 1 October 2014 • Conduct Hub/OA Pilot Test; beginning 1 October 2014 - 30 September 2015 • - Fort Bragg, NC and Wiesbaden, GE • Identify continuous improvements; mature systems; realign workforce and training, improve analytic capabilities • Continue collaboration with key partners & keep stakeholders informed • Provide Army Business Case and recommended course of action for SecArmy in January 2016 Full spectrum FM capabilities for exceptional stewardship and auditable outcomes

    42. Cost Management “Seizing the Opportunity” Army Day 28 May 2014 Stephen Barth DASA-CE PDI 2014

    43. Army Cost Culture Culture: Common Beliefs and Behavior in an Organization A Cost Culture entails developing – through leadership, education, discipline, and experience an understanding of the importance of: • making cost-informed decisions • making effective trade-off decisions to achieve the best possible use of limited resources • holding people accountable for understanding and being able to explain the costs of their organizations, products, services, and customers • focusing on continuously improving the efficiency and effectiveness of operations

    44. Cost Culture Strategy Vision: Army leaders consider, acknowledge, and control the cost of all operations and support to provide best value People Cost Management Community Cost Warriors Cost Culture Recognition CM Course Development & Training CM Certification CM Community of Practice CM101 ALMS CM Career CM Internship program AKO CM Community CM Organization Certification Establish Army Exec FM HQ CM Human Resources USAFMCOM Concept Plan Cost Management Knowledge Center PCAM Training PCAM Dev Cost Effectiveness Performance Evaluations AFMO Knowledge Management ALERTORDEXORD & Pilot GFEBS Financial Data Board AFMO CM Support Technology ERPs ICAM Training ICAM Dev CM Handbook FM Workforce Certification LSS Study completed AESIP GFEBS-SA ACWS LMP GCSS-A, IPPS-A CM Strategic Communications CMCC Training CMCC Dev Cost Controlling Cost Planning Cost Analysis Army-wide CM Policy & Documentation GFEBS Online Training Leadership Commitment Fielded GFEBS GFEBS DASA-CE Cost Model CM Master Data Management Processes Tools Governance CM Maturity Model Army Organizational Cost Models ACP 9.4.5 CM Metrics CBA Training FM School GCSS-Army FDS CBA 4 Hour training Cost Accounting Governance Risk Compliance CBA 4 Day training Investment Accounts Costing Tool Cost Capturing, Modeling & Documentation ERP Cost Structure & Functional Systems Design CBA Training Certified Field Trainers GFEBS Labor/ Payroll OSD DCMO - Enterprise CM Process How CM gets Done Labor Time Tracking Army Readiness Costing GFMDI and dynamic force structure Weapon System cost structure requirements CBA Online Training Cost Benefit Analysis (CBA) Cost Analysis Resource Informed Decisions Cost Benefit Analysis Workflow Tool Army Financial Benefit Reporting & Tracking (AFBRT) Cost Control Lean Six Sigma (LSS) Cost Control and AFBRT Mission: Enhance and further the institutionalization of cost management principles, practices and processes across all Army organizations; continually improve the efficiency and effectiveness of Army operations (organizations, products, services) in support of the overall Army mission. Cost Managed Organization

    45. Cost Planning • Set Cost Targets and Efficiency Goals • Compute Standard Rates • Cost Analysis • Variances • Depreciation • Trends and forecasting • Product, service or activity cost by element (labor, contract etc) • Understanding full costs of organizations, operations, products and services • Cost Management Process • Resource-Informed Decision Making Managing Business Operations Efficiently & Effectively Through the Accurate Measurement & Thorough Understanding of the"Full Cost" of an Organization's Business Processes, Products & Services in Order to Provide the Best Value. • Capture and Valuate Data • Accurate, timely and relevant data • Connecting operational output/performance data to financial data • Allocate Overhead • Cost Controlling • Move to action based on analysis • Change targets • Change resources • Change quality

    46. Army Cost Management End-to-End Business Process Develop & Maintain Cost Model Perform Cost Planning Perform Cost Accounting Perform Cost Analysis Perform Cost Controlling Determine Cost Objectives MaintainCost Model Level II Develop Metrics Develop Cost and Performance Targets Establish Planned Costs (inputs) Establish Planned Output Level II Perform Cost Assignment Capture Actual Outputs Perform Period End Close Capture Actual Costs Level II Perform Cost Assignment Capture Actual Outputs Perform Period End Close Capture Actual Costs Level II Select Method of Control Process Improvement Adjust Targets Manage Tradeoffs Compare Results to Plan Implement (changes to) Policies & Procedures Level II

    47. Army Cost Management/PPBE Matrix Planning (6-10 Years) Programming (6 Years) Budgeting (1-2 Years) Execution (Current Year) HQDA Command/DRU Operational Activity

    48. Cost Management Activities Supporting PPBE

    49. Army ERP’S Enable Cost Mgmt Army Cost Management Framework Provides Multiple Cost Views for Decision Making

    50. Strategic and Operational Costs (Cost of Readiness) Cost Methodology Force Structure COA Testing Personnel R2C2 1 2 3 Supply R2C2 Equipment R2C2 Training R2C2