FIAR Status Update 17 July 2014

1. AF Life Cycle Management Center FIAR Status Update17 July 2014 Randal Bowen AFLCMC/FM-FZ DSN: 785-3013 randal.bowen@us.af.mil

2. BLUF Provide a High Level Overview of FIAR and LCMC Impacts/Status 2

3. Overview • Background • Guidance/Strategy • AFMC Approach • Current Status/Examples • Challenge(s) • How You Can Help

4. What is FIAR? FIAR IS: • An enterprise-wide effort to: • Document and standardize business processes • Implement/enhance internal controls • Standardize data • Provide reasonable assurance that financial statements are presented fairly • An initiative that involves all Functional Communities and MAJCOMs FIAR IS NOT: • An initiative of the current administration • Just a legal requirement • The sole responsibility of the FM Community

5. The CFO/FIAR Evolution NDAA 2010 audit ready by Sep 2017 Incentives for components that have financial statements validated as ready for audit on or before September 30, 2017 Federal Financial Management Improvement Act (FFMIA) of 1996 Chief Financial Officer (CFO) Act of 1990 Financial Improvement and Audit Readiness Focus on Balance Sheet Line Items (2005-2009) SECDEF Memo GF SBR by 2014, Increased Emphasis on MCA’s Government Management Reform Act (GMRA) of 1994 Unqualified Opinion All Stmts 2014 2017 1990 1993 1994 1995 1996… 2000… 2005… 2009 2010 2011… Air Force produced first financial statements for FY95 Government Performance and Results Act (GPRA) of 1993 VCSAF and Under SECAF letter on FIAR FIAR Priorities Focused on Statement of Budgetary Resources and Existence and Completeness of Mission Critical Assets Unqual. Opinion GF SBR Previous audit readiness target dates 2009 - USD(C) Refocused Efforts on Information Most Used for Decision Making DoD Only Federal Agency Without a Positive Audit Opinion 5

6. Tone from the Top “Transforming financial management and achieving audit readiness is the law. General Welsh and I are committed to meeting these requirements, which are critical to maintaining the trust and confidence of Congress and the American people, and which will ultimately strengthen our Air Force.” “In support of this essential effort, I directed SAF/FMP to provide monthly updates on IT system Corrective Action Plans. These IT remediation efforts are critical in establishing the trust and confidence of our stakeholders and ultimately in strengthening our Air Force.” Source: SECAF 12 May 14 Memos: FIAR Update & Improving IT Controls Deborah Lee James, SECAF “As we continue to assess our readiness and design, implement, and test corrective actions, we believe a concerted effort and laser focus will be required in order for us to meet the 2014 deadline.“ "Strengthening our financial systems, and the associated controls around those systems, remains our most critical challenge. Despite this challenge, the Air Force believes we will benefit greatly from an audit of our [Schedule of Budgetary Activity] in 2015, and further delays would place our goal of being ready for a full financial statement audit in 2017 at risk.“ Source: May 14 OSD FIAR Plan Status Report to Congress Eric Fanning, USECAF

7. Why is Financial Improvement & Audit Readiness Important? • Comply with Laws • Requires financial statement audits • National Defense Authorization Act (NDAA) 2013 requires Statement of Budgetary Resources auditability by 30 Sep 2014 • NDAA 2010 requires full financial statement auditability by 30 Sep 2017 • Verify Correct Allocation of Funds • Verify that all resources are allocated to approved mission priorities in a legal manner • Make Better Use of Resources • Provide better information for timely, informed decision-making and identify funds for other purposes • Understanding the value proposition • extends beyond auditable financials – accountability, cost control, operational improvement • Increase Public Trust • Reassure the public and Congress that the Air Force is a good steward Good audit results improve an organization’s creditability

8. DoD Four Wave Strategy Current Position Wave 1: (Done!) • Focus on the flow of money from receipt by Treasury to distribution to the Services Wave 2: (FYE 2014) • Life-cycle of funds (commit, obligate, spend) • Audit trail for all funds Wave 3: (CYE 2015) • Asset Accountability • Book-to-Floor/Floor-to-Book Inventory • Proof of Ownership of Assets Wave 4: (FYE 2017) • Full financial statement audit • Incl. AF Working Capital Funds

9. How Did We Adapt? • Organized to focus on goals/objectives • HQ AFMC Strategic Plan • AFMC FIAR Governance Structure • AFMC Learning/ Training Model • Commander’s Report Card • Wins/ Accomplishments Commander Involvement

10. HQ AFMC Strategic Plan AFMC Priority: Demonstrate Cost Effectiveness Across All Mission Areas Goals: • Demonstrate Cost Effective Mission Execution • Achieve and Maintain Financial Accountability/ Auditability (3.2.1.) • Stmt. of Budgetary Resources • Mission Critical Asset Accountability • Full Financial Statements • IT Controls

11. AFMC FIAR Governance Structure Chair: AFMC/CC Members: AFMC/CV/CA, Center CC/CV/CA & HQ Directors/Deputies AFMC Council Ctr/HQ Staff Council Prep Chair: AFMC/FM, Director Members: HQ Directors/Deputies & Ctr FMs FIAR Team Chair: AFMC/FM, Senior Financial Advisor Members: Center & 2-Ltr FIAR OPRs Execution arm of the FIAR Team; oversees and coordinates audit readiness initiatives across the Command FIAR Division (HQ AFMC/FMI) Enduring Requirement

12. SBR Timeline As of 22 Jul 14 12

13. Compliance Learning/Training Model Before Instruction Before and During Instruction Check for Understanding Phase Instruction End Instruction Sequence Reach consensus of “Right” by auditing standard Start An Instructional Sequence on Assessable Area Think about and use what you learn to motivate employees on “Why” and “How” we change the norm Random Sampling Write Curriculum and Decide Objective of Training Update Training Based on Results Grade Analyze Results for any Trends MAJCOM Collaboration with AFAA Sustainment Phase Provide Feedback and Training Add to IG Unit Effectiveness Inspection as a Focus Area Add to Base/Center Quality Assurance Programs as a Quality Assurance Review 95% Assurance Achieved Recycle Train to a Standard

14. Commander’s Report Card SBR As of 22 Jul 14 14

15. Civilian Pay Testing Results Nov 13-Apr 14 AFRL AFNWC AFSC AFTC AFMC AFLCMC GOAL 95% Lower scores due primarily to missing documentation & incomplete delegation of authority forms (DD 577s)

16. Civ Pay Checklist • 1A.  Verify supervisor approved any additional hours worked (comp time earned, overtime, etc.) • 1B.  Request for additional hours includes pay pd, justification, name, grade, date, time, & number hrsrequested for each individual. • 1C.  Verify line of accounting data is present on AF Form 428 • 1D. Verify line of accounting data has been certified • 1E. Verify AF Form 428 is retained in accordance with records retention regulations. • 2A.   Verify accounting data is reviewed by resource manager and signed by a supervisor. • 2B. AF IMT 3821 retained in accordance with retention regulations • 2C.  AF IMT 3821 contains effective date, name, office symbol of employee. • 3A.  Verify accounting classification in DCPS agrees with the AF IMT 3821. • 3B.  Employee's time and attendance is properly recorded in DCPS. • 4A.  Completed DD 577. • 4B.  Name, title, organization of appointing authority. • 4C.  Effective date of appointment. • 4D.  Name, title, organization, address and phone number of appointee. • 4E.  Block 13 appoints appointee to certify time and attendance. • 4F.  Must be signed and dated by both the appointing authority and appointee. • 4G.  Provided DD 577s match signatures on 428s, leave requests and time cards. • 5A.  Leave taken is properly approved by the employee's supervisor (signed time card). • 5B.  Date, time, type and number of hours requested are on the leave request. • 5C.  Verify that leave request was retained two weeks after pay period. • 6A.  Supervisor has approved time and attendance action (annual leave, travel comp or comp time). • 6B.  Supporting documentation is present for time and attendance other than regular hrs (credit hrs, travel comp, over time, etc.). • 7A.  Time and attendance is annotated on time card. • 7B.  Employee signs for any changes to timecard • 7C. Supervisor signs time card (digitally or hand written). • 7D.  Verify timecard is retained in accordance with retention regulation.

17. DD 577 Example Approval Date (CAC) Approval Date (Stated) Effective Date Acknowledgement Date (CAC)

18. MCA Timeline As of 23 Jun 14 = AFMC Owned

19. Commander’s Report Card MCA Overall Readiness with IT Status 19

20. GFE Commander’s Report Card Establish Baseline of GFE Contracts/Assets Sustain Baseline of GFE Contracts/Assets 20

21. Status/ Summary of GFE Spreadsheets as of 11 Jun 14 *Number of lines of data reviewed* estimated, spreadsheets my have spaces between line items, or contractor formatted data sheets +/- 10 to totals

22. GFE Contract Issues • ID of GFE contracts requires matching input from FPDS-NG, Center SOCCER responses, & IUID Registry • Review reveals miscoding / low confidence in automated data —requires manual verification of 750+ AFMC contracts • Developing path to correct errors & to clarify base support vs GFE • Numerous contracts will require clause updates • Numerous “GFE” contracts validated to date do not include all six required clauses • Some awarded prior to current regulation; some contracts don’t include GFE • CONWRITE revised to pre-select all GFP clauses for Cost, T&M contracts – and, when applicable, FFP • SPS & ACPS already contained this logic • Manual review of 1500+ Cost-Type contracts required • PK/AQC/AQX to set burn-down plan, metrics for contract updates • Top USAF Programs? Complexity? Period of performance? Dollar value? GFE value? Contract Type?

23. Challenges to Meeting Our Goals • Time • 2014 is here for AF General Fund Statement of Budgetary Resources, 2017 is not that far away for the rest…Time is of the essence • Automated Systems Environment • Need to implement process and IT mitigating controls to offset legacy system weaknesses • Need to ensure Systems Controls (FISCAM) and Business Enterprise Architecture (BEA) compliance

24. How can you help? • Your Involvement • Look at what you are doing • Ensure the documents are correct before you sign them • Will an person outside the organization understand the description of what you are buying • Is the LOA complete and correct. Modifications changing Line of Accounting muddies the audit trail and causes rework. • Perform Quality Reviews as required in your functional guidelines • Answer data calls quickly with all required documentation, Auditors only give us 3-5 days to reply WE WILL WIN!

25. Call to Action “Being able to audit this Department’s finances is a high priority for me and for the Department’s senior leadership. It should also be a high priority for each of us.” Chuck Hagel “If we can but prevent the government from wasting the labours of the people, under the pretence of taking care of them, they must become happy.” Thomas Jefferson

26. Acquire and Support War-Winning Capabilities UNITY OF PURPOSE TRUST AND CONFIDENCE SPEED WITH DISCIPLINE • Product • Deliver Cost Effective Acquisition Solutions • Deliver Affordable and Effective Product Support • Process • Launch High Confidence Sustainable Programs • Standardize and • Continuously Improve Center Processes • People • Develop and • Place Right • Person at Right Time • Assure a Safe, Secure, and • Quality Work • Environment DELIVER TO COMMITMENTS