OFFICE OF THE UNDER SECRETARY OF DEFENSE (COMPTROLLER)

OFFICE OF THE UNDER SECRETARY OF DEFENSE (COMPTROLLER)

OFFICE OF THE UNDER SECRETARY OF DEFENSE (COMPTROLLER) DoD Financial Management Strategy Why Accelerate the FM Target Environment? Drew Morgan Director, Business Integration Office of the Secretary of Defense - Comptroller March 2015 v4 DoD Financial Management is Aligned with Higher-Level Strategic Goals OUSD(C) Strategic Management Plan FY 2011-2017 Champion Acquire Ensure a strong and capable financial management workforce resources necessary to meet national defense objectives the legal, effective, and efficient use of DoD resources Changes Affecting Everyone Emerging FM Certification Program Downward Pressure on DoD Top Line Demands for Financial Auditability Desired Outcomes The Right Skill Sets and Career Framework Getting More out of the Program to

Support Mission Confidence in Public Stewardship and Improved Efficiency Strategic Management Goals Strategy to Budget to Execution Knowing DoD Strategic Cascade is the Start of Knowing How You Fit in 2 Burning Platform Compelling Need for Rapid Business Integration Optimum Enterprise Balance Inherently Government Federal Shared Services Commercial Outsourcing Drastic Budget Cuts/Mission Growth Operational Effectiveness Visibility, Transparency Audit Deadlines 20 1 5- W ea re He r e Federal-wide Department Installation/ Command ODO/Component Challenges Laws, Regulations, Policies Culture Scarce Expertise KEY Foundational Pieces Now In Place:

OSD-C/DCMO Governance DITPR DoD IT Shared Services Strategy Standards [BEA, SFIS, SLOA, PDS] Audit Deadlines 3 Convergence of Government Standardization Efforts DoD Procure-to-Pay Treasury GWA and IGT Acquisition Standards Global Data Standard Federal Transparency Areas FM Data Standards 4 FIAR Financial Improvement and Audit Readiness How Do We Sustain Audit? 5 FM Functional Strategy Goals and Outcomes Improve Auditability Eliminate Material Weaknesses Audit Readiness Lack of Internal Controls Initiatives Execute FIAR strategy Accurate Posting to G/L Non-Standard Processes Implement Standards Improve

Interoperability Goals Improve, Standardize, and Reengineer FM processes Challenges Support Decision Making Establish Data Standards Duplicative Processes Maximize FM Capabilities Achieve Positive ROI Lower Cost of FM Operations Improve Interoperability Too Many Interfaces Eliminate Legacy Systems Too Many Systems 6 Reduce Total Cost of FM Operations and Enable Sustained Audit by Reducing FM Systems and Simplifying the Environment IT Budget Reconciliations, Rework, Redundant and Manual Processes, Unsupportable Balances Auditability, Complexity and Issues, Point to Point, Data Calls, Information Uncertainty Internal Controls, Material Weaknesses, Non-Standards 7 Integrated Financial Improvement Grand Strategy FM Standards

& Compli ance OSD FIAR Plan Guidance SSAE16 FISCAM Standard Processes & System s Direct Treasury Disbursing Daily Cash Reporting Intra/InterGovt. TransInvoice Payment Platform (IGT / Delinquent IPP) Debt Managemen t Treasury System RollOut Standard PPBE Leverage Technology Maximize and Leverage ERPs Standard Transaction Broker & Business Analytics Funds Distribution SFIS/ SLOA * Aligns with the DoD Strategic Management Plan (SMP) Busi ness Outcom es * Interoperability among business systems

USSGL SubAllotment Execution Cost Managemen t Busi ness Results Shared Services Stronger Internal Controls impacting financial reporting and auditability End-to-end funds traceability and linkage between budget and expenditures Compliance with Govt-wide Accounting (GWA) Initiatives Better financial information for business decisions Auditable financial statements Transparency of financial data Enterprise Planning, Program Budget & Exec. (PPBE) 8 Target FM Business Systems Environment Enterprise-wide Standard Data, Processes and Systems Component Capabilities Functional Areas FM Budget Inventory Acquisition

Payroll/Personnel Travel Logistics NGRMS, DTS, IPPS, DCPS, EFD Business Warehouse/Analytics (BEIS- DCD/DCW, EBI, BI tool) Standard Transaction Broker (STB) (GEX) Core Acct/ ERPs: (DAI , EBAS, Navy ERP, GFEBS, DEAMS,EBS, GCSS-A, LMP, MSCFMS, GCSS-MC, SABRS,FAMIS) Reporting/Cash (BEIS(DDRS,DCAS) 1099-TRP, CORAS,SORS) Disbursing (ADS,DDS, ERPs(Direct Treas. Disbursing)) Treasury (GTAS, CARS, USA Spending) Portal Vendors We Can Achieve This by Executing the FM Functional Strategy 9 Reducing the Number of Systems and Interfaces Through Standards & ERPs Offers the Most Potential for Simplifying the Environment and SUSTAINING AUDITABILITY Not sustainable at current budget levels # Systems, Interfaces, Manual Processes 327 Systems 2,000+ Point-to-Point Interfaces Numerous Manual Reconciliations Unsupportable Balances

327 327 FM FM Systems, Systems, Budget Budget == $719M* $719M* Simplified Environment and Improved efficiencies TARGET - ~120 systems - ~ $220 million - Reduce Interfaces via Standard Transaction Broker - Minimize Reconciliations - Supported Balances Potential Savings to: Repurpose to the Mission To Date: 285 Systems 42 retired = ~$7M budget savings FY14 FY15 FY16 FY17 Auditability sustainable at current & future budget levels FY18 FY19 Auditability FY20 FY21 FY22 10 Simplified Cash Accountability A Entitlement Da il B

y Real-time Validation DCAS 3 levels of automated recon X 1 enterprise process = FBWT auditability D Treasury (CARS) FBwT / GLAC Route/Validate Reconciliation C ly th n Mo G/L DDRS Whats Next: DCAS functionality tested Automated feed from Treasury CARS Re-engineer Reconciliations TJS, WHS, Army GFEBS, DLA To Be Tie Points DCAS (B) DCAS (B) G/L (C) = = = Treasury (D) G/L (DDRS) (C) Treasury (D) 11 Direct Treasury Disbursing NTDO Variation Examples External Entitlement CAPS, STARS1 Pay, DCPS

External Entitlement & FRB DJMS, MOCAS, GFEBS, DAI Disbursing System ADS, DDS (to FRB for EFT) GFEBS, CMA, DHS DoD CAnT Treasury PIR DoD CAnT FRB (EFT pay) TDO Variation Examples ERP Self Entitled Treasury PIR Treasury PAM DoD Cash Notional Target Whats Next: GFEBS TDO for SelfEntitled o Include TFOs TJS and WHS Pilot TDO for TFOs in Apr-15 DLA TDO Oct-15 Additional Implementations 12 Intergovernmental Transactions (IGT) in Treasurys Invoice Processing Platform (IPP) 13 Governmentwide Treasury Account Symbol Adjusted Trial Balance System (GTAS) Agencys Financial Statements DFAS/DoD DDRS Central Accounting System Edits FMS 2108 / Combined Statement Treasury Annual Reporting

GTAS GFRS FMS OMB SF 133 Program and Financing Schedule Presidents Budget DoD Compliancy with GTAS Reporting Requirements and Attributes 14 Electronic Funds Distribution (EFD) OSD Level EFD Phase 1 - Post EFD Phase 3 (Budget structure down to Presidents Budget BLI) (EFD contains all appropriated funds; General and Non-General) FUNDS DISTRIBUTION Handles the initial OUSD(C) FAD distribution to the original allotment holder; delivers funding via interface EFD includes DoD Appropriated Funds (General (less BRAC) and Non-General) down to BLI (Includes TI-57, TI-21, TI-17, and TI-97 funds) Includes SFIS elements BS, POA, BA, BSA, BLI at this level (Below Pres Bud BLI) EFD now handles the sub-allotment of TI-97 funds within the original allotment holders organization and the sub-allocation of funds to other Defense Organizations EFD carries forward SFIS/SLOA elements identified above and includes the B13 Budget Allotment Line Item (BALI), B12 Suballocation Code (Limit), CA1 (Org Code), O3 (FSN) Will add USSGL to Funds Distribution ACCOUNTING SYSTEMS EFD Component Field Level EFD Phase 2 AFM: TI-57

Funds below BLI GFEBS: TI-21 General Funds below BLI *PBAS: TI-21 Non-General Funds PBIS: TI-17 funds below BLI TI-97 funds below BLI Component Accounting Systems Receives TI-97 FAD interface file from EFD at each level of distribution and begins executing funds when they are distributed to the final allotment holder TI-21, TI-57, and TI-17 field level FADs will be arriving from GFEBS, AFM, and PBIS respectively; (TI-21 Non-General Funds will be distributed via PBAS-FD until Army determines future plan) DEAMS GAFS-R GFEBS SOMARDS STANFINS SABRS NAVY -ERP STARS -FL EBS EBIZ WAAS EBAS DAI CEFMS

Manual Automatic 15 Standard Line of Accounting (SLOA) Contract Pay Contracting Systems AF ConWrite Army PADDS DLA SPS (May-15) DLA eProc (Feb-14) MOCAS Support Systems DFAS Support Systems DFAS MOCAS (Aug-17) DLA EFD Accounting Systems Treas Reporting (PIR, CARS) DFAS SCRT (Aug-17) AF DFAS EUD DLA EDA DEAMS DFAS DFAS BAM DFAS DCAS EAS GAFS-R Army LMP (Jan-15) Army

GFEBS (May-15) Army CEFMS DLA DDRS (N/A) DLA WAWF DLA EBS DLA DAI JS EBAS Legend Navy SLOA Ready Dates Not Provided DFAS SFIS Configured Treas PAM/SPS SLOA Long-term Plan STARS DFAS SABRS Disbursing Systems SLOA Ready by GWA Not SLOA Applicable DFAS MOCAS (Aug-17) ERP NOT GEX Connected Most Accounting Systems are already GEX connected 16

Global Exchange (GEX) SFIS/SLOA 1. Translation: legacy data to SLOA for legacy-to-target exchanges Centralized Service (SCS) 2. Validation: SFIS/SLOA 3. Business Rules: Apply data elements between and validate business systems rules to data exchanges Routing of any file type Transfer of data between systems Partner System Partner System GEX Partner System Partner System Consolidation of point-to-point interfaces Partner System Partner System Partner System 17 How Does SLOA Support the FM Strategic Initiatives? FM Strategic Initiative Outcomes How SLOA Enables Each Outcome Software tracks and records audit trail at each exchange of data, business rule modification, format transformation, etc. Enables matching transactions between multiple accounting/feeder systems in 1-to-1 format which can be easily reconciled Enables cleaner end-to-end transactional flow and processing Standard Line of Accounting (SLOA) Improved E2E FM Information Exchange Enables clean interoperability across the enterprise E2Es Proper

Posting of Transactions in DoD Financial Workbooks define and reformat subset of SFIS data (SLOA) into standard SFIS/USSGL Compliance and Systems definitions Validation SFIS Compliance Plans as part of Component OEPs Data compliance with Treasury and OMB standards Enterprise Funds Distribution/Next transactions to the Budget/Funds Distribution data capability to formulate, distribute, track and Links Generation Resource Management Integrated Transformed, standard data for allocation and distribution of funds execute the DoD budget identically across the enterprise System (EFD/NGRMS) Enables automatic matching of disbursement to accounting system (near real-time recon) Standard FBWT Daily Recon Process Direct Treasury Disbursing Enables routing ERP data directly to Treasury Provides necessary data to prepare a Direct Treasury Pay Ready File Treasury Reporting - GWA compliance by Oct. 14 Enables translation of TAS/BETC standard data elements to ADS Government-wide Accounting (GWA) Daily Standard FBWT Daily Recon Process Consolidates DSSNs into standard repository for daily reporting Standardize IGT Process DoD-Wide Enables standardized MIPRs necessary data to perform eliminations Intragovernmental Transactions Eliminate manual processes and multiple forms Intakes data formats into single central repository from multiple buyer systems and transforms it into a standard format, and vice versa (IGT) Single Repository for IGT Orders for audit readiness Reduce IGT Eliminations material weakness Standard buyer and seller data provides data matching and reconciliation Enables matching and analysis of invoice data to obligation data in realDelinquent debt collections to treasury after 90 days, time and analyzes discrepancies between the two Delinquent Debt Management using re-engineered processes Provides flags against delinquency business rules and provides error report when rules are violated (document LOAs overpaid, etc.) Take advantage of imbedded controls within ERPs E2E Process Improvement Maximize ERP Capabilities Eliminates inefficiencies and reliance on feeder systems Eliminate redundant capabilities in the

E2Es Reduces need to point-to-point interfaces & downstream errors Already connected to the GEX Reduce/Minimize Point-to-Point Interfaces Standard Transaction Broker Minimizes need to reconfigure legacy systems Enables translation, validation, and routing between key E2E systems Near real-time, standards-based information and Software provides detailed reports at each exchange of data, business rule Business Intelligence Tools analytics from authoritative sources modification, format transformation, etc. Enables use of cost management codes and OCC for cost reporting Consistent cost data and management across the Cost Management Provides the cost management information on every purchasing Department transaction which will facilitate Full Cost Accounting Financial Improvement and Audit Readiness (FIAR) SBR Assertion FY 2014 Financial Statement Assertion FY 2017 18 Sample Component Oracle System JITC USSGL/SFIS/SLOA Verification Results 1.43% 0.65% 100.0% Not Compliant Compliant 16.47% 42.11% 80.0% 100.00% 60.0% 90.91% * 40.0% 20.0% 0.0% Chart of Accounts Posting Logic SFIS Business Rules Validation DDRS Trial Balance

SLOA Interfaces SFIS 10.0 Interfaces Areas for USSGL/SFIS/SLOA Compliance: 1) 2) 3) 4) 5) 6) 2 February 2015 System Posting Chart of Accounts to the DoD Chart of Accounts Posting Logic SFIS Attribute Base Configuration DDRS SFIS Trial Balance SLOA Interfaces/Data Exchanges SFIS 10.0 Interfaces/Data Exchanges 19 Joint Interoperability Test Command (JITC) USSGL/SFIS/SLOA Verification Phased Schedule by System Business Rules Review Emerging Results Briefing Signed Report CAP Due Date FAMIS-CS 28-Aug 9-Dec 23-Jan 23-Mar EBAS-D 14-Nov 26-Jan 20-Feb 6-Apr

EBAS-JS 24-Oct 9-Feb 20-Feb 20-Apr DCAS 20-Feb 6-Mar 30-Mar 30-May DDRS 27-Feb TBD TBD TBD TBD TBD TBD TBD DEAMS Jul-15 TBD TBD TBD DAI Jul-15 TBD TBD TBD LMP TBD

TBD TBD TBD Navy ERP Mar-16 TBD TBD TBD GFEBS-SA Jun-16 TBD TBD TBD DCD/DCW TBD TBD TBD TBD GCCS-MC TBD TBD TBD TBD DHA-ECS TBD TBD TBD TBD DDS TBD

TBD TBD TBD WAWF TBD TBD TBD TBD System EBS 2 February 2015 20 Enterprise Cost Management Framework 21 Enterprise Cost Management Framework Aligned to SLOA Cost Elements SLOA Component defined data elements roll up into the Enterprise Framework Ties Component managerial accounting to enterprise managerial accounting Allows Components to determine lower level line item breakout of funding documents (e.g. Payroll, Contracts, etc. EBAS-D has all of these SFIS Cost Elements Cost Cost Center Center Activity

Activity Project Project Cost Cost Center Center Work Work Order Order Numbe Numbe rr Function Function al al Area Area Cost Cost Elemen Elemen tt Illustrative Mapping 22 Further Leveraging Integrated ERP Capabilities Offers the Most Potential for Reducing the Number of Systems and Interfaces Standard Business Intelligence and Analytics FM Functional Strategy Core Financial System Functions/Capabilities Budgetary Resource Management Translation to Capabilities Available Today in the Core FM ERPs Execution-Level Planning Programming Budget Planning and Formulation Exhibit Generation Funds Distribution & Control Prior-Year Actuals Feed Payment Management Matching & Payment Warehousing Disbursing Receivables Management

Billings & Collections IPACS Core FM FM Initiatives are now underway leveraging all of these ERP capabilities Funds Balance with Treasury Management Budget Execution/ Funds Mgmt/ Funds Control (General & Working Capital Funds) Commitments, Obligations, Expenditures, Reimbursables General Ledger Management US Standard General Ledger (Budgetary and Proprietary) Cost Management Financial Reporting Cost Accounting (GFEBS,DAI Navy ERP) Cost Accumulation and Allocation Timekeeping (Navy ERP uses T&A) Treasury and OMB Reporting (Standard Feeds) ERPs Offer Additional Capabilities for Other Functional Areas Acquisition Inventory Payroll/ Personnel Travel Logistics ERP capabilities maximized today Initiatives underway to further leverage Further leveraging needed Enterprise PPBE ConOps and Cost Management Framework / Proof of Concept underway Standard Interfacing / Business Integration 23 FIAR

Financial Improvement and Audit Readiness How Do We Sustain Audit? Why accelerate DoDs FM Target Environment? 24 Urgency to Implement FM Initiatives Key Takeaways: Mandate for 2017 Audit Limited and declining resources require streamlined and simplified processes as well as simpler footprint (systems and infrastructure) Long-term sustainability Investments and divestments must be meaningful and coordinated Standards (data, process and controls) are imperative to unify enterprise systems and processes Strategic perspective overcomes stovepipes 25 Questions/Discussion 26 Back-up 27 Simplified Cash Accountability PIR/SPS CL CL E11) Treasury ST/GSA ST/GSA GFEBS MAP-6 (Reclass) CL CO D10) FBWT Reconciliation D10= C9 & B8 D10= D9 & B8 New Recon: B8 & D9 B8) Mo nth -en d Cas h

Bal anc es DDRS IN A5) Accept/Reject Data C9) Month-end Trial Balance MAP-X (Trial Balance) Accounting Systems *Civilian Payroll *Military Payroll *Unliquidated Balances *Suspense Accounts *Accounts Receivable IN Army & ODO CL Navy CO Air Force CL CL For: MAP-X (Cash Recon) CO CO SF1080 / SF1081 MAP-6 (Cash Reporting) CL CL CO CO IN IN A6 of A6 )) Recon Recon of transaction transaction Sent // Recon

of A3)Sent Posted (Detail Level) A4&A5 Disbursing/ For: CAR CAR Balances Balances ST/GSA By: By: A4) Expenditure Accounting Data MAP-6 Reporting) (Cash DCAS Source Record ID TAS BETC Amount SDN Limit Posting Results Cd Transaction Post Date MAP-X (Trial Balance) Data Repository A7) Re-class DCAS MAP-X (Mtly Acct Stmt) IN IN CO CO A3) Recon of Disbursing /CAR Balances (Department ;; 1329/1400 Level) Recon of (Department 1329/1400 Level)

A3) Disbursing/ For: CAR Disbursing/ CAR Balances ADS IN IN Target: GEX. DCAS, or Direct MAP-X (Cash Recon) By: By: (IN/CO/CL (IN/CO/CL Networks) Networks) (Transaction (Transaction Reporting Reporting System System // Collection Information Collection Information Repository) Repository) By: By: A1) Expenditure / Collection Data (Daily) Entitlement / Disbursing Systems MAP-X (Daily Acct Stmt) TRS/CIR MAP-5 (Collection) (Government-wide (Government-wide Treasury Treasury Account Account Symbol Symbol Adjusted Adjusted Trial Trial

Balance Balance System) System) (Central Accounting Reporting (Central Accounting Reporting System) System) D9) Account Statement (Monthly) SF215 MAP-5 (Pay/Coll) GTAS CARS Payment Payment Information Information Repository/Standard Repository/Standard Payment Payment System System MAP-5 (Payment) A2) Account Statement (Daily) NTDO/TDO/SelfDisbursed/Non-DoD MAP-5 (Pay/Coll) ST/GSA ST/GSA ---On SBRs--- CL ---On SBRs--- CO ---On SBRs--- IN ---On SBRs--- DCD/DCW DCD/DCW 1)

Cash 1) Cash Accountability Accountability Repository Repository 2) Business 2) Business Intelligence Intelligence Layer Layer for for Reconciliations Reconciliations Denotes new interface/process Denotes possible data conversion to/from SLOA via SLOA Centralized Service (SCS) 28 Why do we need a standard transaction broker? TODAY Point-to-Point Spaghetti Expensive!!! Extremely difficult to Manage or Standardize TARGET Hub and Spoke Cheaper, Easy to Standardize and Manage, More Scalable * GEX is the De Facto Standard for Integration among 4 th Estate Business Systems, and is being evolved to serve as the Target Standard Transaction Broker. 29

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