Army Business Processes and Financial Operations

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Slide1

Army Business Processes and Financial Operations

ASMC PDI

Army Day

Slide2

1

1990 - 1995

CFO Act of 1990

DFAS Established

GAO Audit of Army FY 1991 Financial StatementsGPRA

1995 - 2000

Federal Financial Management

Improvement Act of 1996

OUSD(C) Implementation Strategies

2000 - 2005

Financial Management

Modernization Program (FMMP) OMB Cir A-123, Appendix ABusiness ManagementModernization Program (BMMP)Business Transformation AgencyDFAS, DeCA, DCAA, MRF & OIG Audits

2005 & 2010

FIAR Plan

FIAR GuidanceDCMO and MILDEP CMOsCorps of Engineers AuditMarine Corps SBR Audit

2010 - 2017

FIAR Priorities (SBR and E&C)

Incremental Audit Readiness Progress

ERPs DeployedFull Auditability

Road to Audit Readiness

Slide3

DoD IG General Audit Findings

Internal ControlNon-compliant financial management systemsUnsupported accounting adjustmentsUnverifiable intragovernmental transactions and improper support for eliminationsIrreconcilable cash balances with U.S. Treasury Unsupported adjustments in Accounts Receivable Improper method of accounting used for inventory and related propertyUnable to accurately depreciate general property, plant and equipmentMaterial weaknesses exist in numerous areas

SOURCE: DoD IG Report No. D-2007-018

2

Slide4

Compliance with laws and regulationsNot compliant with CFO ActNot compliant with FFMIANot compliant with GPRAFuture complianceBusiness Transformation Agency developed the Business Enterprise Architecture to guide future systems development and integration across DoDProvides a blueprint of DoD business management systems and processes to initiate a comprehensive financial management reform effortDoD IG released draft audit report (December 2009) detailing the Army’s non-compliance with its own Joint Reconciliation Program.DoDIG identified $4M in invalid and $11M in validity unknown unliquidated obligations at one command.Establishes need for implementation of internal controls over review process and guidance for appropriate source documentation procedures to support transactions.

SOURCE: DoD IG Report No. D-2007-018

DoD IG General Audit Findings

3

Slide5

4

Goals of Financial Improvement

Provide timely, reliable, accurate and relevant financial information to decision makers.

Sustain improvements through an effective internal control program.

Produce auditable financial statements.

Slide6

New Direction: USD(C)

USD(C) memorandum, dated 11 August 2009, required DoD Components to:Improve information and processes supporting auditable financial statementsPrimarily focus on improving budgetary information and processes that impact the Statement of Budgetary Resources (SBR)Secondary goal to verify existence and completeness (E&C) of mission critical assetsOUSD(C) FIAR Guidance changed to reflect new prioritiesArmy Financial Improvement Plan is Army portion of the OUSD(C) FIAR Plan

5

Slide7

Recent Army Actions

Under Secretary of the Army Memorandum signed 10 March 2010Supports USD(C) priorities and tasks ASA(FM&C) with developing planAssistant Secretary of the Army (Financial Management & Comptroller)Memorandum signed April 2010Identifies DASA(FO) as leadDirects Army RM community to support effortsSBR Audit Plan and E&C Plan Developed, Funded and Implemented

6

Slide8

Reporting Documents

Financial Improvement and Audit Readiness (FIAR) PlanDoD-level plan to reach favorable audit opinion

Statement of Assurance on Internal ControlsArmy-wide assessment of internal controls

Army Annual ReportArmy-wide Annual Financial Statement

Army Financial Improvement Plan (FIP)Army roadmap to reach favorable audit opinion and produce quality information

7

Slide9

Army FIP Structure

8

Army Financial Improvement Program FIP tasksTactical plan tasks OMB Circular A-123, Appendix A

Gen. Equip(GE, IUS, GFE)

OUSD(C)

FIAR Plan

Inventory

SBR

A/R & A/P

OM&S

Military Equipment

Environ.Liabilities

RealProperty

Air ForceNavyDLADFAS

Business Process Owners

Slide10

Army Financial Improvement Plan (FIP)

OASA(FM&C)OASA(ALT)Army G-1Army G-4CIO/Army G-6DFASPEO-EISTJAGAMCARNGOACSIMAAAAECDoDIGFINCOMIMCOMOUSD(AT&L)USACE

Business Process Owners

Annual statement of assurance

Army-reported material weaknesses

Audit Readiness Validation Plan Tasks

Auditor-identified weaknesses

Business Process Owners

Army Audit Committee

Auditor-identified ICOFR weaknesses

Quarterly

GO-/SES-level

Regular Working

Groups

Senior Level Steering Group (SLSG)

Army FIP Governance

Manager’s Internal Control Program

Management

identified ICOFR weaknesses

9

Slide11

OUSD(C) FIAR Governance

10

Slide12

11

Army GF SBR Assessable Units

Assessable Unit

Lead

Civilian Pay

OUSD(C)

Military Pay

OUSD(C)

Budget Authority – Appropriations Received

OUSD(C)

Budget Authority – Reimbursable Authority

OASA(FM&C)

Obligations – Contracts

OASA(FM&C)

Obligations – TDY

OASA(FM&C)

Obligations – PCS

OASA(FM&C)

Disbursements – (FBWT)

OASA(FM&C) / DFAS

Financial Reporting – Departmental

OASA(FM&C) / DFAS

Financial Reporting – Pre-Departmental

OASA(FM&C) / DFAS

Slide13

12

Army GF SBR Timeline

Complete3/31/119/30/129/30/1210/1/12*10/1/13*10/1/14*10/1/13*10/1/14*10/1/15Begins:10/1/12

Slide14

13

Begin mapping the budgetary execution lifecycle:Budget / reimbursable authority, including allotmentsObligationsDisbursementsFinancial reportingIdentify risks, controls, & potential weaknessesUsing past GAO, DoD IG, and AAA audit reports to guide our workLeveraging lessons learned from other Services and DoD components (USACE, Marine Corps, Department of the Navy)

SBR Discovery Effort Details

Slide15

14

SBR Process Interviews

Conduct interviews

to

obtain details of the budget execution processes

Identify

documents

used in supporting obligations

Gain an understanding of and document the

processes

Identify various systems involved in each process

Capture ‘screens’ or ‘modules’ from the

systems

Review, collect, and scan

supporting documentation

Examine

supporting

documentation for

a limited number of

transactions

to

understand

accuracy of system data

Slide16

15

SBR Internal Controls Analysis

Conduct preliminary

risk and internal controls analysis during

site

visits

Prepare

process narratives, flowcharts, and

risk and control assessments

for the various

budget execution

lifecycle events

at

installations

For

control activities found to be designed appropriately and in place, SBR teams may execute developed test plans for the

budget execution

processes

Slide17

E&C Evaluation Overview

Ensure all assets that are reported exist and all reportable assets are reportedExistence – “Book to Floor”Completeness – “Floor to Book”Generally validated by some type of inventory process

Existence

From PBUSE

to end item

Completeness From end item back to PBUSE

16

Slide18

OASA(FM&C) and Army G-4

determined

initial ‘Quick Wins’ for E&C:Apache Longbow AH-64DAll Source Analysis SystemAircraft Utility UC-35ASmall Tug 900 ClassExpanded list of E&C “Quick Wins” include:Apache AH-64ACH-47F/MH-47G ChinookOH-58D Kiowa Warrior UH-60L BlackhawkUH-60M BlackhawkLight Utility Helicopter

E&C ‘Quick Wins’

17

Slide19

Current business systems support mission requirements, but the ERPs are needed to achieve and sustain auditabilityEffective ERP implementations should eventually improve business environmentERPs provide improved financial controlsBusiness events captured and recorded properlyIn some cases, financial auditability depends on new,more capable systemsImplementation issues may temporarily worsenfinancial management informationManagement attention divertedConversion impact on data qualityChange management maturityImplementation scheduled over the next five years… expect delays

CMO’s

Role isCritical

ERPs Offer Promise… But Also Pose Interim Challenges

ERP Relationship to FIAR

18

Slide20

Key enabler for auditability and visibility/transparencyImproves reliability and availability of information for decision makingImplements a standard financial information structure enabling interoperability between ERPs and other systemsImproves funds control and managementStandardizes business and financial processesAutomates manual processesImproves internal controlsReplaces hundreds of legacy systemsDeployments are scheduled over the next four years

ERP Facts & Benefits

19

Slide21

Contact Information

James WatkinsOASA(FM&C) – Director Audit Readiness(703) 696-5137james.j.watkins@us.army.milChristopher UpsonOASA(FM&C)/IBM – Army SBR and E&C Project Manager(703) 696-5128 cris.upson@us.army.milIman AquilOASA(FM&C)/IBM – Army E&C Lead(703) 696-0476 iman.aquil@us.army.milRick StrasserOASA(FM&C)/IBM– Army SBR Lead(703) 696-5128richard.strasser@us.army.mil

20

Slide22

Back-Up

21

Slide23

Improved information for decision-making

Improved cost visibility for decision making

Improved internal controlsIncreased opportunity to focus on results – outputs and outcomesBetter approach to public expenditureBetter basis on which to allocate resourcesMore financially-aware managersImproved credibility with the Congress, OMB and the public

Benefits of Reforms

22

Slide24

Systems Roadblocks

Maintain necessary historical dataSingle standard transaction-driven general ledger systemProduce account-oriented subsidiary ledgersIntegrate feeder and accounting systems Feeder systems meet financial reporting requirementsProduce sufficient audit trail Record accrual transactions

23

Slide25

DoD Initiatives

Business Transformation Agency (BTA)Previously the Business Management Modernization Program (BMMP)Secretary of Defense's initiative to streamline operations across the military services and defense agencies Introduces the Business Enterprise Architecture, the transition plan and architecture guidance for acquisition programs Business Enterprise Architecture (BEA) Defines DoD’s business transformation priorities and the requisite business capabilities and systems to support these prioritiesReview 1,000+ feeder systemsReplace with enterprise view of standard, integrated business processes and systems technology capabilities

24

Slide26

DoD Initiatives

Wide-Area Work Flow (WAWF)Workflow managed software application that enables vendors to submit and track invoices and receipt/acceptance documents via the webEnables the government to electronically view and process dataOne of the key components of the end-to-end procurement/financial processes implemented under the Paperless Acquisition initiativeItem Unique Identification (IUID)Managed by the OUSD(AT&L), Defense Procurement and Acquisition Policy OfficeA DoD serialized asset management program that will enable easy access to information about DoD possessions and improve the acquisition, repair, and deployment processes

25

Slide27

Army Initiatives

Logistics Modernization Program General Fund Enterprise Business SystemGlobal Combat Support System - ArmyProperty Book Unit Supply EnhancedIntegrated Facility SystemAESIP

Army Environmental Database Restoration (AEDB-R)Army Environmental Database Compliance Cleanup (AEDB-CC)Installation Management CommandArmy FIP Army Audit Committee Funds Control Module

26

Slide28

27

Army Assertion Schedule

Slide29

Coordination

Work with installation staff to finalize site visit results

Consolidate Army site visit informationAssert to “Quick Wins”

PreparationConfirm E&C assessable unitsEstablish E&C FIP tasks (short, medium, and long range tasks)Develop test plansComplete inventory plans for “Quick Wins”

E&C ExecutionArmy execute E&C inventory plansReconcile results to accountable property systems of record

AnalysisGather documentationComplete test plans and internal control testingProduce process flowsPrepare documentation for assertionOutline corrective actions

Quick Wins Time-line: Q1 FY2010 to Q2 FY2011

28

Army E&C Approach

Slide30

General PP&E Category~ Record Count (All Values)~Record/Programs Count (> $100K)*FY 2009 NBVMilitary Equipment N/A135K+$96BGeneral Equipment 6M25K$2B* DoD capitalization threshold varies by General PP&E category

ME Assessable Units

Count

~NBV

Apache AH-64D581$7.7BAll Source Analysis System536$169MAircraft Utility UC-35A22$35.7MTUG Small 900 Class12$32.7M

29

E&C Quick Win Categories

Slide31

Results in Brief

Report No. D-2009-089, 18 June 2009The Army did not have adequate internalcontrols for the existence, completeness, andvaluation of Government property in thepossession of contractors.… locations may not beable to safeguard Government property from unauthorized use, destruction, or loss.

Executive Summary Audit Report A-2006-0249-FFM, 28 September 2006 ….data in DPAS wasn’t complete because we found additional assets during our reverse observations that should have been recorded in DPAS but weren’t. …activities didn’t have adequate local procedures to conduct a 100-percent physical inventory of general equipment, capture improvement costs, or ensure that all necessary data was entered into the system.

Army E&C Challenges

30

Slide32

Financial Improvement Timeline

31

Historical

Recent

Slide33

Army SBR Milestones

32

Slide34

Army E&C Milestones

33

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