Army Financial Management HON Mary Sally Matiella Assistant Secretary of the Army, Financial Management & Comptrol

1. Army Financial Management HON Mary Sally Matiella Assistant Secretary of the Army, Financial Management & Comptroller 23 February 2012

2. Agenda The Defense Budget Cost Culture/Management Challenges to Improving Financial Management Pathway to Auditability Funding Lifecycle DoD Certification Program Framework

3. The Defense Budget • Discretionary spending is ~35% of total federal budget – Defense budget is ~50% of discretionary spending • Increasing emphasis on reducing spending/deficit – Congress and the Administration • Historically, funding levels have decreased as military demand decreases Height of Vietnam War (1968) Height of Cold War (1985) 9/11 (2001) Korean War Armistice (1953) OCO? Gulf War Ends (1991) Vietnam War Ends (1973) BCA BCA impact? FOR OFFICIAL USE ONLY BCA – Budget Control Act of 2011

4. Full Cost Measurement • Accurate, timely and relevant data • Connecting operational output/performance data to financial data • Allocate Overhead, Unfunded Costs, Indirect Support • Cost Planning • Operational managers set cost targets and efficiency goals • Plan cost based on outputs produced Cost Accounting Cost Planning Cost Analysis Cost Management Process • Cost Analysis • Variances • Trends and forecasting • Product, service or activity cost by expense (labor, material, contracts, etc…) • Understanding full costs of organizations, operations, products and services • Comparison Analysis & Benchmarking Cost Controlling • Resource Informed • Decisions • Take action based on analysis and external demands • Change targets • Change resources • Change quantity / quality Cost Culture/Management • ** Cost Management Requires: • Engaged Leaders • Strong Staff (Cost Warriors)

5. Challenges to Improving Financial Management Leadership ERP Internal Control 1. Committed and sustained leadership 2. Effective plan to correct internal control weaknesses 3. Competent financial management workforce 4. Accountability and effective oversight 5. Well-defined enterprise architecture 6. Successful implementation of the enterprise resource planning systems. Architecture Workforce Accountability Risks According to GAO Testimony before the Panel on DOD Financial Management House Armed Services Committee, 28 July 2011

6. Pathway to Auditability Leadership Practices & Policies System • Instill a “Will Do” Culture • Ensures compliance with system, practices, and policy • Track & Resolve problems • Train the workforce • Change Management • “Who”; “What”; “When” • Transaction-level processing • Follow the 5 stages of accounting (funding, commitment, obligations, receipt/accrual, and disbursing) • Standard business practices • Inter-governmental processing • Provide supporting documentation (old & new) • General Ledger Accounts • Transaction-level accounting • Automated Internal Controls • Automated Interfaces • Financial Reporting AUDIT OPINION Statement of Budgetary Resources by 2014 Full Financial Statements by 2017

7. Funding Cycle 1. Funding Available 2. Under Contract/Order 3. Goods/Services Received 4. Invoice Approved 5. Payment made (Outlays) 6. Contract/Order Adjusted/Closed The purpose of financial reports is to inform managers how much of their funding falls into each phase of the lifecycle. The example below uses terminology geared toward contracts and supply orders, but the same lifecycle applies to other major uses of our funds, such as civilian and military labor. 1. Funding Available – Receive and distribute funding to operational organizations 2. Under Contract/Order – Use funding on goods and activities to meet mission goals 3. Goods/Services Received – Document orders are received 4. Invoice Approved – Pay only for goods and services received 5. Payment Made – Ensure payments are processed and recorded 6. Contract/Order Adjusted/Closed – Adjust orders for subsequent changes

8. Level 1 40 CEU/CPE hrs DoD Certification Program Framework • Course Hours to Meet FM Competencies • Content and Course Hours for FM 101 Course & Other Required Courses • Course Hours for Leadership Competencies • Time and Experience in DoD • Developmental Assignments • CEU/CPE Level 2 60 CEU/CPE hrs Level 3 80 CEU/CPE hrs

9. Summary • LEARN • Workforce • FM Systems • Audit Readiness • Resource Informed Decisions WIN Efficient Effective • FOCUS • Cost Culture • GFEBS • Audit Readiness • Workforce • ADAPT • GFEBS • Workforce • Cost Culture • Financial Environment

10. Questions?