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Financial Professionals Contributing to Strategic Performance

Financial Professionals Contributing to Strategic Performance. AGA Spring Professional Development Conference Virginia Peninsula Chapter. Ken Winter Chief Financial Officer. March 14, 2012. Outline. Synopsis --------------- Environment Contributions To Strategic Performance

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Financial Professionals Contributing to Strategic Performance

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  1. Financial ProfessionalsContributing to Strategic Performance AGA Spring Professional Development Conference Virginia Peninsula Chapter Ken Winter Chief Financial Officer March 14, 2012

  2. Outline Synopsis --------------- Environment Contributions To Strategic Performance Future Challenges &Opportunities -------------- Summary

  3. Synopsis 1. Environment • Massive national economic/financial challenges (Weak economy & massive debt) • Government spending continues to outpace revenues • Continuing pressure to reign in “wasteful” government spending 2. Contributions to Strategic Performance • NASA Centers support strategic Agency mission performance • Agency/Center systems/controls & financial professionals provide strategic contributions • Two recent Center Contribution Examples • Center diversified its mission portfolio to avoid budget cuts & align with new missions • Center efficiently used financial resources to optimize mission/institutional health 3. Future Challenges & Opportunities • Anticipate severely constrained future budgets & challenges to achieve key efficiencies • Constraints/challenges provide opportunities for proactive strategic mission contributions • Strategic contributions require experts, systems/controls, information & proactive remedies • Future professionals require functional and mission knowledge, skills & abilities • Professionals must enhance (train/develop) & apply expertise to sustain optimal contributions

  4. Environment

  5. U.S. Economy • $15 Trillion/year Gross Domestic Product (GDP) (FY11) • $3.6 Trillion/year Annual Budget (FY11) • $15.3 Trillion Debt • $118 Trillion Social Security, Medicare, Prescription Drug Net Liability • $17.8 Billion FY12 NASA Budget • Massive national economic/financial challenges • Slow pace of economic recovery (severe slump) • Instability of U.S. and overseas financial markets threatens to prolong slump • Economic activity projected to pick up pace after 2013 • Economy expected to remain below economy’s potential until 2018 • Record deficits; Federal spending exceeding revenues ($1.3t deficit in FY11) • U.S. Unemployment rate will likely remain >8% until 2014 (currently 8.3%) • U.S. Inflation and interest rates will remain low for next few years Sources: Congressional Budget Office; www.usdebtclock.org • Anticipate severe external pressure on current and future budgets

  6. Federal Spending Exceeds Revenues Discretionary Spending $3.6 Trillion $2.3 Trillion NASA NASA ~0.5% of Federal Budget Other incl: Excise Taxes, Gift/Estate Taxes, Customs Duties and Miscellaneous Receipts Notes -- Other incl: Veteran’s benefits, Civil Service Retirement & Disability, and Other Public Health Service Programs Non-Defense Discretionary incl: Health & Human Services, Transportation, Education, Housing & Urban Development, NASA, etc. • Defense incl:DoD, overseas contingency, and Homeland Security • $1.3t deficit in FY11 – discretionary/non-defense continues to be squeezed

  7. 11 Years of Ongoing Deficits • If current policies extended, debt will grow to 94% of economy/GDP by 2022 • Highest level since just after World War II

  8. Contributions to Strategic Performance

  9. Agency Mission Assignment Environment Mars rover Curiosity scheduled to land on Mars Aug 6th • NASA field installations “Centers” support multiple Agency missions • 10 Aero-space, research & development Centers (inc. JPL) support 5 Agency mission areas • Five Basic Agency mission areas • Space Exploration/Operations • Space Science • Space Technology • Aeronautics & • Other (Education/inspiration, Reimbursable support to other agencies/industry) • Evolving Agency missions • Retirement of Shuttle system • Cancellation of New Shuttle system replacement program “Constellation” • Addition of new Space Technology mission • Additional cross Center competitions to assign/obtain mission work • NASA’s financial systems, controls & practices provide key information • Enterprise Resources Planning system/controls & practices provide key/standard information • Knowledgeable Financial professionals integrate mission implications/performance

  10. FY 2012 Agency Budget ($b) • Space Science$5.09 • Aeronautics $.57 • Space Tech $.58 • Space Exploration $3.77 • Space Operations $4.23 • Education $0.14 Cross-Agency Support $2.99 Construction/Environmental $.39 Inspector General $0.04 Total $17.8b FY2012 Appropriation ~$1.7b below NASA Authorization Act top level funding

  11. NASA Langley Research Center

  12. NASA Langley Research Center Missions Aeronautics Space Technology Space Science Other -- Education, Reimbursables, etc. Space Exploration NASA Langley Research Center

  13. Contributions to Strategic Performance Example 1 Diversify Center Mission Portfolio

  14. Grow/Diversify Center Mission Portfolio • NASA Langley highlighted “troubling” future Center budget trends • Potential “going out of business” trends • Center historically aligned with aeronautics missions (less space missions) • Center highlighted Center portfolio imbalance • Center evaluated/decided options to remedy/strengthen Center’s future • Pursue greater mission contributions & commensurate future larger budgets • Pursue a more diversified mission portfolio • Pursue continued alignment/matching to evolving Agency missions • Pursue new Agency mission area • Center helped Agency establish/expand space technology mission portfolio • Center captured /performing key new space technology missions • Center pursuing additional reimbursable work from other agencies/industry • Reimbursable work maintains technical currency & Center institutional capability • Currently, Center future budget profile healthy “flat” & more diversified • 2012 - 2017 profile relatively flat (not decreasing) top line budget trend • 2012 - 2017 profile aligned with Agency’s diversified mission portfolio

  15. Then -- 2006 Projected Budget Trend (Down) Projected Budgets Based on FY2006 President’s Budget Release *Budgets are projected budgets, not actual budgets $m FY05 FY06 FY07 FY08 FY09 FY10 • Anticipated significant budget reductions in 2006 President’s Budget profile • 3/14/12

  16. Now -- Current (2012) Center Budget Trend (Flat) Flat budget profile projected for out years $m ARRA FY13 President’s Budget Notes: Excludes External Business; FY 04-12 reflects actual budget authority received; FY09 included ~$82m of “Recovery” Act • Budgets relatively flat for past several years (excluding ARRA) • FY11 included $20m for New Town Phase II and FY12 $30m • FY13 President’s Budget - $33m Construction of Facility reduction from FY12 3/14/12

  17. Then – FY2005 NASA Mission Budgets (% of Total) • Aero only 6% of total NASA budget in FY05, but 55% of NASA LaRC budget • 3/14/12

  18. NASA Langley Research Center Mission Budget % Comparisons 2012 2005 • Transition to a more diversified/balanced mission portfolio • 3/14/12

  19. 2012 NASA Agency vs. NASA Langley Mission Budget Comparisons Agency NASA Langley *Agency Management Operations (AMO) includes NESC, IPAO, etc. (part of CASP) **Excludes CMO and Reimbursables • Maintain “Diversified” aligned portfolio • Center mix significantly relies on smaller segments of Agency budget • 3/14/12

  20. Contributions to Strategic Performance Example 2 Improve Financial Performance

  21. Improved Financial Performance • Agency provided 2-year funds by Congress to match varying mission needs • Congress nevertheless expects optimum/full use of provided funds each year • Expects full obligation & optimum costing • Agency/Center indicated a pattern of weak performance in mid-2000’s • CFO proactively alerted Agency/Center & noted potential remedies • Leadership awareness, engagement & follow-up • Agency/Center improved performance • Using improved financial systems and processes • Center improved obligation/cost performance • Center also implemented critical strategic investments • Monitoring & Metrics • Leadership follow-thru • Rewarded improvements • Penalized weak performance

  22. Financial Trends • By 2007, Center had large (~100% of annual procurement budget) growing under used fund trend • Great improvements (2007 $474m Uncosted, 2011 $253m, 2007 $141m Unobligated 2011 $22m) • Must keep/grow budget (capture business) & continue to use funds efficiently/effectively

  23. New Systems, Tools & Processes Link to LaRC System Architecture • In early 2000s NASA implemented new financial systems and processes • Implemented Enterprise Resource Planning System (SAP) in 2003 • Replaced 10 different “accounting” systems with one • Also implemented/replaced/standardized • Time and Attendance/Labor Distribution System • Travel Management System • Asset/Aircraft Management System • Human Capital Information System • Provided framework for standard information & increased financial analysis capability • New systems and processes complicated the audit process for several years • Nevertheless, recent (2011) “clean opinion” highlights success/system integrity • New systems/tools/processes provide standardized data • Also require professionals with analytical skills to use information effectively • Deliver timely, accurate, reliable useful information to “decision makers” • Provide trend analysis and remedial options

  24. Monitoring & Metrics • Used financial metrics to evaluate/monitor financial performance • Agency/Stakeholder focus on efficiently using appropriated funding • Significantly improved “uncosted obligations” & “unobligated” performance • Effectively using funds reduces future risks (rescission, etc.) • Implemented monthly Financial Performance Management Reviews • Tracked performance and addressed organizational issues • Reward improvements • Penalize weak performance • Expert financial professionals/advisors • Used “financial dashboard” to review status & identify issues • Analysts provide variance explanations and improvement plans • Analysis aided Center management in strategic reinvestment of ~$75m (see next chart)

  25. Center Redeployed Investment Trends ($m) • Efficient use of funds • ~$75m redeployed over the past four years • Infrastructure - ~$31m • (Includes maintenance, IT, equipment, facility upgrades) • Org shortfalls - ~$19m • (Includes various org requests/approvals for funds) • New Town outfitting - ~$10m • Bid &Proposals - ~$9m • Utility Energy Security Contract (UESC) - ~$9m • Safety/Security - ~$7m • Redeployed funds improved Center institutional capabilities & financial performance

  26. Future Challenges & Opportunities

  27. President’s FY 2013 Budget • Many Agency budgets are being significantly reduced • NASA 2013 proposed budget “basically” flat/slightly reduced from FY12 levels

  28. Evolving Federal Environment -- Cuts • Significant National momentum to cut spending • Budget Control Act of 2011 – brought conclusion to the 2011 debt-ceiling crisis • Initial $917b reduction to projected deficit over 10 years (begins in FY12) • Initial debt limit increase of $900b • Joint Select Committee on Deficit Reduction to recommend $1.5t more deficit reduction • If $1.2t - $1.5t in cuts enacted, the debt ceiling could be raised by an equal amount • If less than $1.2t enacted, automatic reductions (sequestration) would be triggered • Sequestration to bring deficit reduction to $1.2t & borrowing limit increased by that amount • No agreement reached – additional $1.2t in automatic reductions to begin in FY13 • Executive Orders promoting/directing efficient/effective spending • NASA $200m reduction in FY12 and FY13 targeting: • Consultants/Admin Expenses • Travel • Heightened scrutiny • NASA travel went from $72m (FY05) to $94m (FY11), now $76m • Travel data for government agencies posted on junketsleuth.com • Employee Information Technology Devices • Printing • Executive Fleet Efficiencies • Extraneous Promotional Items -- Stuff We All Get (SWAG)

  29. Opportunities *Out years are notional Additional reimbursable business opportunity $23M Unobligated Budget Projection End of Yr Projection of $153M Uncosted Obligations • Flat budget profile necessitates additional focus on “reimbursable” business

  30. Financial Professionals Future Role 30 • Professionals must enhance & apply capabilities • Nurture professional knowledge, skills & abilities • Enhance systems, controls, & information • Integrate professionals into mission performance • Participate commensurate with future challenges • NASA Langley Research Center’s professional financial workforce • Center financial/budget workforce (~100 employees & ~100 contractors) • Civil service workforce includes accountants, budget analysts & systems analysts • Formal education provides key capabilities • Center OCFO civil service workforce education summary • 35% masters degrees • 61% bachelor degrees • 3% associate degrees • 2% no degree • Ongoing training & development provides additional needed capabilities

  31. Center Professional Development Framework 31 • Framework designed for/by employees & managers • Framework aligns training/development with employee’s competencies & experience • Framework identifies training & development opportunities • Training/development opportunities include: • Agency, Center college courses, webinars, books/publications, seminars etc. • Requires 24 hours of minimum annual course work/training • Training noted in individual development plan (IDP) & supervisor discussions • Framework supports broad professional development • Encourages cross function/organization (in/outside) details & rotations • Framework integrates Agency NASA CFO University opportunities • University established in 2008 • Curriculum (core/elective) designed by/for)CFO, business & other professionals • Maximizes/incorporates existing training/programs • Includes various delivery methods (in-house, vendor, online) • Ex. CFO 101, Budget Formulation/Execution, Finance for Non-Financial Mgrs. • Center supports CFO University with course developers, trainers, & students

  32. Tackling Current & Future Challenges • Continue to enhance systems/controls & information • Nurture financial professionals • Continuing professional training & development • Integrate mission & functional knowledge/capability • Proactively highlight key financial/mission information • Enhance/integrate financial analytics (inc. projections) • Highlight mission/institutional challenges & opportunities • Proactively highlight options & remedies • Nurture proactive strategic, decision-making • Implement follow-up, reinforcing practices • Example -- Monitoring & Metrics

  33. Summary 1. Environment • Massive national economic/financial challenges (Weak economy & massive debt) • Government spending continues to outpace revenues • Continuing pressure to reign in “wasteful” government spending 2. Contributions to Strategic Performance • NASA Centers support strategic Agency mission performance • Agency/Center systems/controls & financial professionals provide strategic contributions • Two recent Center Contribution Examples • Center diversified its mission portfolio to avoid budget cuts & align with new missions • Center efficiently used financial resources to optimize mission/institutional health 3. Future Challenges & Opportunities • Anticipate severely constrained future budgets & challenges to achieve key efficiencies • Constraints/challenges provide opportunities for proactive strategic mission contributions • Strategic contributions require experts, systems/controls, information & proactive remedies • Future professionals require functional and mission knowledge, skills & abilities • Professionals must enhance (train/develop) & apply expertise to sustain optimal contributions

  34. Supplemental

  35. Federal Financial Indicators ($t) * Gross Federal Debt dollars in Trillions (t) ** FY 2013 Budget of the United States • Massive, growing debt erodes ability to increase non-defense discretionary funding 3/14/12

  36. NASA Centers and Facilities

  37. Current LaRC System Architecture

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