Department of Defense Change Management Center Financial Management Business Reform Initiative

1. Department of Defense Change Management Center Financial Management Business Reform Initiative Thomas Bloom Briefing November 05, 2001

2. Financial Management Business Reform Initiative Agenda • Purpose Review Project Goals & Objectives and Obtain Sponsorship and Funding for E-Learning & Change Management Activities • The Quadrennial Defense Review Report • The Problem • Proposed Solutions • Fiscal Laws Project & Objectives • Proposed People • Desired Results

3. Financial Management Business Reform Initiative The Quadrennial Defense Review Report Revitalizing the DoD Establishment The need to transform America's military capability encompasses more than strategy and force structure. Transformation applies not just to what DoD does, but how DoD does it. During the same period that the security environment shifted from a Cold War structure to one of many and varied threats, the capabilities and productivity of modern businesses changed fundamentally. The Department of Defense has not kept pace with the changing business environment. A transformed U.S. force must be matched by a support structure that is equally agile, flexible, and innovative. It must be a structure in which each of DoD's dedicated civilian and military members can apply their talents to defend America - where they have the resources, information, tools, training, and freedom to perform. Transforming DoD's outdated support structure is a key step in achieving a more capable fighting force. • DoD maintains between 20 and 25 percent more facility infrastructure than needed to support its forces - at an annual excess cost of $3 to $4 billion. • DoD's financial systems are decades old and not well interconnected, and accounting and auditing processes would struggle to meet the standards of generally accepted accounting principles. • DoD's business processes and regulations seem to be engineered to prevent any mistake. By doing so, these regulations often discourage taking any risk. An infrastructure that needs to be streamlined to match the new reality, financial systems that limit the ability to see and manage the enterprise, and processes that discourage action and reasonable risk at the working level are hallmarks of a mature enterprise that must be transformed. While America's business have streamlined and adopted new business models to react to fast-moving changes in markets and technologies, the Defense Department has lagged behind without an overarching strategy to improve its business practices. To redress this situation and lead the Defense Department's revitalization process, the DoD has established the Senior Executive Council (SEC) led by the Deputy Secretary of Defense and consisting of the Service Secretaries, and the Under Secretary of Defense for Acquisition, Technology and Logistics. The SEC will steer the Defense Department through what will be a challenging period of change. The Defense Department has also created a Defense Business Practices Implementation Board to tap outside expertise as the Department moves to improve its business practices. To focus these efforts, the Defense Department will institute programs to improve its performance in the following areas: • Encourage talent to enter and stay in the military and civilian service; and • Modernize DoD business processes and infrastructure.

4. Financial Management Business Reform Initiative Financial Statement Audits BPA Act 1950 B&A Act 1921 EO 6166 JFMIP Regs A-76 CMIA FAIR PCBC EDI EFT GPRA GMRA CFO Act FASAB Standards KlingerCohen The Problem The Federal Government’s financial management process has been built on a patchwork of “Fiscal Laws” that have been enacted since the formation of the nation. Like snowflakes, these Fiscal Laws have fallen and have built upon one another to form an ineffective foundation upon which modern technology cannot be built and related advantages cannot be achieved. Pete Aldridge, USD (AT&L) Wednesday, August 15, 2001 – “…the real problem is, and that is if you look at the tooth-to-tail ratio in the department, we have far more tail than we do tooth. The overhead structure is out of balance with the procurement structure and the force structure. And that the challenge within the departments is to go after those overhead activities that they would find to be marginal and to reallocate those resources back to procurement and the things they need for readiness.” The following is an excerpt from the Quadrennial Defense Review Report. Although directed at the Force, the goal equally applies to the transformation of the Defense Finance and Accounting Service: To achieve these operational goals, the Defense Department must transform military training. Three basic tenets describe the changes the Department will implement to transform training in parallel with the transformation of its missions and forces: • Use distributed learning technologies to reengineer individual training and job performance.

5. Financial Management Business Reform Initiative Fiscal Law Proposed Solution • Rebuild the Fiscal Law foundation – Enact New Legislation that supports a modern financial management structure: • Based upon modern technology and following a rapid prototype methodology in knowledge center - change management philosophy and process approach. • Designed by people who have the expertise, experience, and understand the federal financial management process and the politics. • Managed by communicating goals and objectives, establishing key factors for measuring success, and empowering people to do what needs to be done. • Establish a Vision of the DoD financial management environment that represents: • A “Virtual” efficient and effective DoD workplace – reduced overhead burden. • E-Government – Electronic Commerce - Internet based. • Enterprise-wide - commercial operated and managed • Entrepreneurial based and utilizing commercial banking and financial institution services & practices. • DoD secured, regulated, audited, and analyzed. E-Government Virtual Workspace Virtual Workspace

6. Financial Management Business Reform Initiative Fiscal Laws Project & Objectives Advisory Committee Activity Identify legislative changes that will support improvements in the efficiency and effectiveness of DoD financial management systems. Draft legislation that will facilitate the implementation of technological and process changes in the operation of DoD financial management systems E-Learning & Change Management Activity Implement a Prototype E-Learning & Change Management system that will capture and distribute the financial management knowledgebase to current and future DoD/DFAS staff. Capture and distribute the Financial Management Business Reform Initiative Advisory Committee knowledgebase to improve the dissemination of information and improve the effectiveness of the change management process.

7. Financial Management Business Reform Initiative Proposed People Proposed Members Steering Committee: • Michael Wynne • Mary Margaret Evans • Thomas Bloom • Jerry Williams/Mark Forman • Karen Alderman Advisory Committee: • John Cherbini • Frank Derville • Irvin Faunce • Gerald Murphy • Anthony McCann • Clyde McShan • James Reid • William Shelton • Frank Sullivan • Ronald Young • DoD Staff 3-5 ----------------------------------- Federal Position ------------------------------ Deputy Under Secretary of Defense for Acquisition & Technology Director Defense Reform Office Director Defense Finance and Accounting Service Office of Management & Budget Joint Financial Management Improvement Program (JFMIP) GAO, Deputy Director, Accounting & Financial Management House of Representatives, Chief Financial Officer Treasury, Deputy Commissioner, Financial Management Service Treasury, Fiscal Assistant Secretary DHHS, Assistant Secretary Management & Budget Commerce, Deputy Chief Financial Officer Energy, Deputy Controller Veterans Affairs, Associate Deputy Assistant Secretary, Financial Policy Veterans Affairs, Deputy Chief Financial Officer Federal Accounting Standards Advisory Board, Executive Director Enterprise-wide Perspective – Retired & Active Duty – Financial Oriented

8. Financial Management Business Reform Initiative Desired Results Advisory Committee Activity • Identification of Fiscal Laws Impeding F/M Technological Changes • Identification of F/M Technological and Process Changes • Consult with Central Financial Agencies and Congressional Staff • Draft Legislation to Support F/M Technological and Process Changes E-Learning & Change Management Activity • Install Prototype E-Learning & Change Management System • Track Advisory Committee Activities In CMS Knowledgebase • User Test Prototype E-Learning System with 1000 DFAS Users • Develop F/M Curriculum and Author Two E-Learning Courses • Implement & Evaluate E-Learning System