OUSD (Comptroller) Business Integration Office (BIO) Mary Kemp, OUSD(C) BIO June 10, 2015 Update on OUSD(C) Initiatives Overview and Path Forward

OUSD (Comptroller) Business Integration Office (BIO)

Mary Kemp, OUSD(C) BIO

June 10, 2015

Update on OUSD(C) Initiatives Overview and Path Forward

10-June-15 | Slide: 2

Enterprise Business Model

Customer Driven Focus

•Vendor Pay

• Contract Pay

• Travel

• IPAC/IGT

• Interfund

• Transportation Pay

•Military Pay

• Civilian Pay

•Reimbursables

D

oD In

itiati

ves

Define Process

Identify Systems

Define Data

Require-ments

Develop Implemen

-tation Plan

Im

prov

ed A

udita

bilit

y

F

eder

al G

over

nmen

t Acc

ount

abili

ty

Mission and VisionCompliance

• Compliance

•Direct to Treasury Disbursing

•DCAS Reconciliation

•Govt. Wide Accountability

• IGT/IPP

• FIAR

FIARAssessable

Units

FM Functional Strategy

Fe

dera

l Ini

tiativ

es

Initiatives Overview


Problem Statement

DoD FBWT auditability cannot be sustained with today’s cumbersome

monthly cash reporting & recon processes and disparate systems


DoD Challenges and Requirements

Challenge Requirement

Source Document Errors Utilize data validation earlier in end-to-end business processes

Inconsistent edits (ERP, entitlement, DCAS, DDRS, Treasury) Leverage a standard validation service

Non-Standard Recon Processes and Tools Transition to a DoD Centric Model

Point to point interfaces Utilize a data broker in lieu of point-to-point interfacing

Large unsupported JVs and use of suspense accounts to balance cash

Business Process that eliminates out of balances on a daily basis

Compliance with US Treasury GWA/CARS daily reporter mandate

Design DoD-wide process and align systems to ensure compliance

Direct Cite/Cross-Disbursing Business ProcessDrive business process change to IPP or funding realignment, minimizing Cross-Disbursing transaction volume


What is the Magnitude - Analyzing the Problem?

Problem Impact

Initiatives

Cash Traceability &Reconciliation

Data Management

Drawdown Plan

Implementation of DSSN Payment & Collections

GTAS Project

IPP Project

Treasury Disbursing Project

In-Transits $26 Billion

Undistributed $3.9 Billion

Unsupported Accounting Entries $164.46 Billion

Intra/Inter governmentalEliminations $93 Billion

Budgetary / Proprietary Differences $7 Billion

FBWT• Treasury Reports

• Statement of Accountability

(SOA)/ Statement of Transactions (SOT)

• Year Closing Statement


DCD/DCWCentral data repository

Cash Traceability*Enterprise Daily Cash

Reporting and Traceability (DCAS)

Many Initiatives Affect FBWT:

Sub-Allotments*, **Execution and internal

controls

OversightImplement

enterprise standards

Change Management

Promote organizational

change

CARS Implementation

Interfund Reporting

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 Drawdown

Transitions and sunsetting

DSSN Drawdown Reporting1219/1220

Funds Distribution*, **Electronic funds

distribution

Contingency Operations

Support

GTASSingle reporting

requirement

Sensitive Activities

Classified data

CATWG


Initiative: Cash Accountability Model

System Improvement• Single system – Defense Cash Accountability System

– to perform expenditure reconciliations

• Adapt legacy disbursing systems to perform daily disbursing using Treasury standards

• Reduce the number of systems reporting to Treasury

Standardization• Formation of DoD Cash Accountability Working

Group

• Expand development of data standards around a FBWT Business Enterprise Architecture

• Leverage Treasury Shared Services processes and procedures

Process Improvement• Single DoD solution for Cash Reconciliation and

Reporting

• Leverage ERP capabilities to perform Treasury Direct Disbursing functions

• Partner with Treasury and DoD Disbursing Offices to implement CARS and GTAS reporting

Microsoft PowerPoint Presentation

Cash Notional Target


Initiative: Treasury Disbursing

Systems Improvement• Reduction in expenditure “touch points”

• Native ERP functionality leveraged

Standardization• Aligns with Gov’t wide business process, facilitates

big data analytics for improper payments, debt ceiling management etc.

Process Improvement• Supports Treasury/GWA modernization

• Standardization of reconciliation processes

• Improve data quality and consistency across entire E2E processes by reducing errors


Initiative: SLOA Validation Service

Systems Improvement• Provide a mechanism that source systems can use to

validate transactions prior to their dispatch on the E2E process

• Improve enterprise analytics through exposure of SFIS/SLOA financial data

Standardization• Improve data quality by enforcing standard data

structures for DOD financial information

• Exploit GEX to transport SLOA-compliant financial transactional data between core E2E financial, feeder, disbursing and reporting systems.

Process Improvement• Supports Treasury/GWA modernization

• Standardization of reconciliation processes

• Improve data quality and consistency across entire E2E processes by reducing errors

Microsoft PowerPoint Presentation

SCS Integration


IGT – Introduction

One of DoD’s key material weaknesses is an inability to

reconcile inter/intra-governmental (IGT) activity and

balancesUnbalanced intra/inter governmental (IGT)

buy/sell activities accounted for $33.6 billion net difference in FY13


“A major reason for the disclaimer is the government’s inability to adequately account for and reconcile intra-governmental transactions between departments and agencies. This reform activity supports effective financial management through the achievement of a clean audit opinion; the elimination of material weaknesses; and the production of timely, accurate financial information to help guide decision-making.”

Office of Management and Budget, Executive Office of the PresidentSource: Federal Financial Management 2009

“DoD financial management systems cannot produce the transaction-level details and supporting documentation necessary to reconcile buyer and seller data and support IGT eliminations on the applicable DoD financial statements.”

Source: DoD IG Report No. DODIG-2015-056

The IGT Problem – at the Federal & DoD Levels:


IGT is also known as…

Military Interdepartmental Purchase Requests

(MIPRs)Reimbursables

Buy/Sell Transactions

Interagency AgreementsIPAC

INTERFUND – Out of Scope


Why is IGT a material weakness?

RequestingAgency

ServicingAgency

Goods and/orservices

Out of balance


Decentralized IncompatibleSystems

Lack of Standards

High VolumesWorldwide

Why is IGT a material weakness?


FY15-Q1 FY15-Q2

Unsupported Adjustments 39.361 54.096

Supported Adjustments 0.204 0.202

$5.00

$15.00

$25.00

$35.00

$45.00

$55.00

IGT Eliminations - Journal Vouchers

in B

illio

ns

FY15 Q2

FY15 Q1

FY15-Q1 FY15-Q2

Supported Adjustments $204.6m $202.3m

Unsupported Adjustments $39.36b $54.10b

Supported & Unsupported Entries – IGT JVs


Challenge Requirement IPP

Lacking documentation for auditProvide for a data warehouse of IGT transactions for audit, research and analysis

Buyer and seller transactions and accounting are out of balance, unable to reconcile (in part due to lack of common identifier)

Need common identifier to synchronize buyer and seller accounting transactions (including proper general ledger treatment) using clearinghouse methodology

Proof of receipt and acceptance Require appropriate users to record receipt and acceptance, preserve for audit

Buyer and seller not in full agreement on terms and details transactions

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

Prompt response to audit findingsNeed affordable and rapidly delivered solution to meet DoD audit readiness campaign plan

Lack of visibility of current status of IAA including remaining period of performance, available funding, unfilled orders, filled orders and paid orders

Must preserve association and provide a common identifier for all transaction components throughout life cycle of agreement, and provide a consolidated view of the information

DoD transaction volumes and diverse systems

Must handle DoD volume and interface with DoD systems using DoD Global Exchange solution and SLOA

DoD Challenges and Requirements


Backup


Review of Audit FindingsFinding FY15

RequirementIPP

RequirementIPP

Existing RWO Audit Findings:

- “(Reporting Entity) has not been able to isolate…RWO transactions from the rest of the (Reporting Entity) financial transactions”

- Transactions were recorded in the improper period (NFR 2014-RWO General-001)

- Improper recording of (Reporting Entity’s) Intra-appropriation (APPN) reimbursable activity (NFR 2014-RWO-002)

- Lack of sufficient audit evidence to substantiate transactions (NFR 2013-RWO-003)

- Improper recording of collections (NFR 2014-RWO-004)

- Lack of routine tie out of feeder systems to the GL accounts. (NFR 2013-RWO-005)

1. Develop a MOU with each trading partner and agree to terms including receipt and acceptance, reconciliations, adjudication of required adjustments, and KSD retention

2. Identify a universe of transaction level detail for each trading partner.

3. With DFAS assistance, perform monthly reconciliations of transaction level detail with the trading partner to identify variances at the MIPR level.

4. Adjudicate the variances and identify adjustments required to align the transaction level detail for each trading partner.

5. Perform and record appropriate receipt and acceptance procedures

6. Maintain KSDs, per the MOU, which support the transaction level detail as well as receipt and acceptance

Provide for a data warehouse of intra-governmental transactions for audit, research and analysis

Need common identifier to synchronize buyer and seller accounting transactions (including proper general ledger treatment) using clearinghouse methodology

Require appropriate users to record receipt and acceptance, preserve for audit

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

Must preserve association and provide a common identifier for all transaction components throughout life cycle of agreement, and provide a consolidated view of the information

DOD IG Findings:

“Inaccurate and unsupported intra-governmental account balances continues to be one of the long-standing material control weaknesses preventing DoD from achieving audit readiness on the DoD Agency-wide basic financial statements.” – Report No. DODIG-2015-056

“DFAS personnel should use supportable transaction-level details (that is, the actual elimination amount) to reconcile and eliminate IGTs.” – Report No. DODIG-2015-056

Must handle DoD volume and interface with DoD systems using DoD Global Exchange solution and Standard Data Sets


Invoice Processing Platform

Enabling “controlled” E2E IGT transactions Reengineering the IGT business process Leveraging Treasury’s shared service

Systems & Business Controls = Auditability


Change Manageme

nt

Develop Implementation Outreach IPP-IGT Implementation Guides Unified Communications Strategy Online Presence for the IGT Module of

IPP Speaking Engagements and User

Symposiums Distance Learning and Train-the-

Trainer Strategy FM Career Workforce Training

Modules

Standards & Policy

Approval of Buy/Sell IGT Views in DoD Business Enterprise Architecture

Guide revisions to applicable Laws, Regulations, and Policies, and Provide Implementing Instructions from FIAR Guidance

Development and Oversight of Management Internal Controls Programs (OMB A-123)

Metrics

Improve Quality of Information

Principles of TQM and Lean

Create Integrated Project Plan and Schedule

Monitor & Report on Project Status

Establish SMP & Project Metrics & Produce Reports

Data Requireme

nts

Intergovernmental Data Standard

IPP for IGT Business Rules

GEX Data Mapping

IPP for IGT Reporting Capability

System Change Requests

Future State IPP/IPAC

Governance Structure

Data Requireme

nts

Standards & Policy

MetricsChange

Management

It’s all Important!


Key Enablers to Success

IAA

GEXSLOA

& PRDS

Creative Abrasio

n

Creative Resolution

Creative

Agility


Pre-GEX


Post-GEX

GEX


IGT Target


Key Process Changes

–Support Agreement Role in IGT

–Documented Performance & Receipt

– IPAC Pay & Chase


APRIL MAY JUNE JULY AUGUST SEPTEMBER

Kickoff and Conduct

Pilots

25% Reimb. Auth. On IPP

GT&Cs

Development of Enterprise System ECPs

50% Reimb. Auth. On GT&Cs

Release GT&C Memo

Draft Intra-governmental

Data Standard

(IGDS)

Release IGDS for Review

IPP-IGT Implementatio

n Memo

Receive and Analyze IGDS

Feedback

Development of Enterprise

GEX Maps

MILESTONES

Milestone Occurrence

LEVEL OF EFFORT

Less

More

PRIORITY

Lowest

Highest

PHASE

Planning

Develop-

mentPolicy

Six Month Outlook


Adoption: IPP Becomes More Valuable with Increased Use

2-Party Buy/Sell Transactions

Wave 1 – Early AdoptersFY15

25% (of DoD reimb auth) in IPP

~$12B

FY 15 Target: 50 % of Reimb Authority reflected in IPP as GT&C

Early adopters critical to informing requirement gaps, defining change management activity

IPP “value” increases with each new connection/adopter

Outcomes from early adopters :

– Develop implementation guide to direct the process for future “connections”

– Document unique trading partner requirements

– Aid OJT desktop guide development

50% (of DoD reimb auth) in IPP ~$24B

500 transactions per month

DoD Reimbursable Authority

DoD

P

olicy

Dir

ecti

ve

Wave 2 – FY16


Questions?Mary Kemp, OUSD(C) BIO

[email protected]


Mary L. Kemp is lead accountant in the Business Integration Office, Office of the Under Secretary of Defense (Comptroller). She has 30+ years of service as an auditor, budget analyst, accountant, and systems analyst with Department of the Army, Defense Finance and Accounting Service and OUSD(C). She is a past president of ASMC’s CNY Leatherstocking Chapter, a Lean 6 Sigma Green Belt, Certified Defense Financial Manager, and DoD Financial Management Level 3 certified. She just completed her Master's Degree coursework and will graduate in June from the National Defense University.

Mary L. Kemp – OSD(C) Business Integration Office

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OUSD (Comptroller) Business Integration Office (BIO) Mary Kemp, OUSD(C) BIO June 10, 2015 Update on OUSD(C) Initiatives Overview and Path Forward