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Managing Your Budget In a Declining Economy June 2010

Managing Your Budget In a Declining Economy June 2010. Army Day. COL C. A. Cruse, Chief Mr. Todd Nethery, Chief OMA Budget Formulation OMA Current Operations Army Budget Office, ASA (FM&C). Pentagon Math. Imbed Video of Abbot and Costello 7 X 13 = 28. Agenda. Setting the Stage

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Managing Your Budget In a Declining Economy June 2010

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  1. Managing Your BudgetIn a Declining EconomyJune 2010 Army Day COL C. A. Cruse, Chief Mr. Todd Nethery, Chief OMA Budget FormulationOMA Current Operations Army Budget Office, ASA (FM&C)

  2. Pentagon Math Imbed Video of Abbot and Costello 7 X 13 = 28

  3. Agenda • Setting the Stage • DoD Budget Growth • Army Budget • Challenges Ahead • Managing Your Budget • Conclusion • Building the Next Army Budget

  4. Setting the Stage • “Therefore, as the Defense Department begins the process of preparing next year’s Fiscal Year 2012 budget request, I am directing the military services, the Joint Staff, the major functional and regional commands, and the civilian side of the Pentagon to take a hard, unsparing look at how they operate – in substance and style alike.” Secretary of Defense Robert M. Gates Eisenhower Library, Abilene, Kansas 8 May 2010

  5. OSD Top Line

  6. Army Funding Trends $1.7 Trillion in 10 years Business practices changed. DepSecDef 9 Apr Memo: “POM 12-16 “ OEF OIF GTA Surge Responsible Drawdown * OCO appropriations include war and non-war funding

  7. Army Budget Growth OMA FY 2000 $18.9B FY 2011 $33.9B *Contract growth includes CLS

  8. Challenges Ahead • OCO Shrinking • OCO to base movement • Increased limitations/rules • U.S. Economy • Health care • Banking reform • Housing foreclosures • Oil spill • Unemployment • Peace Dividend • Following Korea, Vietnam, and Gulf War I • A 17 – 22% reduction to the DoD budget • What will the reduction be after OIF/OEF?

  9. DoD Funding vs. GDP

  10. Managing Your Budget • “…to convert sufficient ‘tail’ to ‘tooth’ to provide the equivalent of the roughly two to three percent real growth…” Secretary of Defense Robert M. Gates • Set the Stage • Requirements ≠ Funding • Schedule 8s • Concept plans • Business School Answer • Divesture • Streamlining • Reduction in overhead • Eliminate redundant processes Over 300 Schedule 8s and Concept Plans approved for FY 2011 to compete for funding… but there is no funding!

  11. Managing Your BudgetSetting the Stage • Business School Answer • Divesture • Wants vs. Needs • Change in Mission • Streamlining • Supposed to be cleaner • Careful that we do not streamline into a mission failure • Reduction in Overhead • Fastest growing component of budget • Relationship to centralization of systems – finance, accounting, human resources, IT networks/communications • Elimination of Redundant Processes • Do I have to do this? Why? • Recommendations to Find the Savings • Budgeting • Execution • Follow through!

  12. Managing Your Budget Find the Savings in the Budget • Budgeting • Currently – Last years’ plus 2-3% • Set the baseline • Are the models still accurate? • Create a Cost Culture • Physical upgrades to access control points will equal a 26% reduction in guard requirements • 1SG Barracks Initiative – recoup excess BAH; $130M savings in ten years • Defending the Budget • Idea formed • G8/PAE POMs for the idea with the PEG • ABO documents the idea in a “stub” • Army defends the idea to OSD • Army briefs and defends the idea to Congress • Congress appropriates budget If my grandmother can not understand the new idea, it will probably not get funded!

  13. Managing Your Budget Find the Savings in Execution • Get/Keep your commander involved • Live within your means—the base is the base • Get everyone invested • Reviews • Joint Reviews • Periodic Reviews—tradition vs. actual requirements • 5th Quarter analysis • Program Budget Advisory Committee • Develop a requirements consideration process • Accurate accounting--$$ in the details • Truth in lending • Cost/Benefit analysis; cost estimation • Train your subordinate unit resource managers • Moral courage . . . . Why Do We Reward 100% Obligation?

  14. Managing Your Budget Find the Savings in the Follow Through • After Action Reviews • Do the Models Give You What You Need? • Rate Adjustments for Estimation • What about Overhires? • Temporary • Permanent • Publish Successes – Reward Successes! Do You Conduct AARs? Do You Follow Thru?

  15. Conclusion • “I say the patriot today is the fellow who can do the job with less money.” President Dwight D. Eisenhower • Take Aways: • OCO limitations/rules • Status quo will not do • Involve your leaders and get everyone invested • Create a “cost culture” • Live within your means • Aim for success

  16. Building the Next Army Budget

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