The Chief Financial Officers CFO Act of 1990 Helping the Marine Corps Become Compliant

1
The Chief Financial Officers (CFO) Act of
1990Helping the Marine Corps Become Compliant

• Ronald Rhodes, CGFM
• August 23, 2007

2
Using the CFO Act to Drive Change

• To satisfy CFO Act requirements, agencies must
  change the way they do business
• Success demands that critical internal
  stakeholders (Business Domain Owners) are engaged
  systematically and on a sustained basis
• Finance
• Acquisition
• Human Capital
• Logistics
• CFO Act framework establishes uniform
  expectations across the business domains
• Helps coral ongoing (stovepiped) change
  management efforts and synchronize them to an
  overarching strategic plan

3
Agenda

• A Brief History of Accounting
• Congressional View Circa 1990
• CFO Act Objectives
• Compliance Payoffs
• Compliance Enabled by People, Processes and
  Technology

P A G E 3
4
A Brief History of Government Accounting
Wall St. Crash
435 Hammer
NYC Bankruptcy
ENRON
Acts of
5
Agenda

• A Brief History of Accounting
• Congressional View Circa 1990
• CFO Act Objectives
• Compliance Payoffs
• Compliance Enabled by People, Processes and
  Technology

P A G E 5
6
Congressional view circa 1990
If DoD does not know what it has in terms of
assets and liabilities, how on earth can it know
what it needs? Senator Charles Grassley
February 2001
7
Agenda

• A Brief History of Accounting
• Congressional View Circa 1990
• CFO Act Objectives
• Compliance Payoffs
• Compliance Enabled by People, Processes and
  Technology

P A G E 7
8
Chief Financial Officers Act of 1990 Objectives

• Improve financial systems and accounting data
• Enhance internal management controls
• Establish uniform accounting standards
• Improve management systems
• Improve accountability and measure performance
• Realize eventual cost savings and efficiencies
• Provide quality information for management

9
Agenda

• A Brief History of Accounting
• Congressional View Circa 1990
• CFO Act Objectives
• Compliance Payoffs
• Compliance Enabled by People, Processes and
  Technology

P A G E 9
10
Compliance Payoffs

• Produce relevant and reliable financial
  information
• Link strategic planning to programming, to budget
  formulation to budget execution to financial
  statement reporting (PPBER)
• Increase accuracy and predictability of future
  programming resource needs, based upon accurate
  historical financial data
• Improve quality information for Congressional
  Budget Justification Materials
• Improve ability to answer congressional queries
  accurately and quickly
• Improve budget execution resource management data
  for program and project managers
• Improve planning process by having more relevant
  and reliable financial information

11
Agenda

• A Brief History of Accounting
• Congressional View Circa 1990
• CFO Act Objectives
• Compliance Payoffs
• Compliance Enabled by People, Processes and
  Technology

P A G E 11
12
Compliance enabled by People, Processes and
Technology

• Auditable financial statements
• Improved resource allocation and accountability
  of Marine Corps resources worldwide
• Improved development of long-range decisions
• Improved operational art to achieve strategic
  goals through the design, organization,
  integration, and conduct of strategies

13
The Marine Corps Challenge

• Crafting and transmitting a message that
  resonates in the USMC
• Conforming to Federal/DoD Financial Management
  Regulatory Environment
• Moving ahead with legacy systems
• Marine Corps is the only Service not developing
  an COTS-based ERP

14
The Marine Corps is a combat forcenot a
business. To be successful, however, we need to
support warfighting excellence with well-managed
business processes that are both effective and
efficient.
General Michael W. Hagee33rd Commandant, United
States Marine Corps
15
Value Propositions
123 million (FY 2000 2004 OM Costs)
Fund Peacetime Depot Maintenance for 5th Echelon
Repair for one year
Prevent Reverted Balances
15.7 million (Appropriation Act FY 2005)
Support Operating Budget of First Marine
Division
Avoid Congressional Reductions due to past
Reverted Balance
23 million (Appropriation Act FY 2005)
Buys 2 Rifle Companies (420 Marines)
Reduce Supporting Establishment cost by 1 by
improved understanding of cost
6 Million (7 of Projected FY 2005 DFAS Bill)
Buys 2 Rifle Platoons (110 Marines)
Reduce the DFAS bill
16
CFO Act Compliance Framework
Chief Financial Officers Act
Federal Financial Management Improvement Act
(FFMIA)
Federal Managers Financial Integrity Act (FMFIA)
17
USMC Compliancy Actions

• Functional Testing of Systems for FFMIA
  Compliance
• Electronic Integration of Business Systems with
  the USSGL
• Electronic Integration of Accounting System and
  Financial Reporting System
• Electronic Integration of Accounting System and
  Business Enterprise Information System (BEIS)
  (Pilot)
• Documentation and Standardization of Business
  Processes
• Documentation and Standardization of Financial
  Business Processes
• Documentation and Standardization of Financial
  Reporting
• Identification of Internal Control Points
• Testing of Internal Controls
• Performance Monitoring
• Implementation of Standard Financial Information
  Structure Phase I (SFIS)
• Integration of OSD Systems Transition Plan
• Ensure Non-Duplication of DoD Systems Performing
  Identical Functionality
• Regulatory Compliance

18
How Were Helping

• Functional Testing of Systems for FFMIA
  Compliance
• Identification of Internal Control Points
• Testing of Internal Controls
• Regulatory Compliance

19
CFO Act Compliance Framework
Chief Financial Officers Act
Federal Financial Management Improvement Act
(FFMIA)
Federal Managers Financial Integrity Act (FMFIA)
20
Federal Financial Management Compliance Framework
FFMIA Goal Reliable, Timely Accurate
Information
FSIO Core Financial System Requirements
Federal Accounting Standards(FASAB)
Federal Systems Requirements
U.S. Standard General Ledger
21
Federal/DoD Financial Management Compliance
Framework
FFMIA Goal Reliable, Timely Accurate
Information
DoD Enterprise Transition Plan (ETP)
FSIO Core Financial System Requirements
DFAS Blue Book
Federal Accounting Standards(FASAB)
Federal Systems Requirements
U.S. Standard General Ledger
DoD FMR
SFIS
Treasury FM
OMB Circulars
22
GAO Perspective

• Agency financial systems continue to be a hurdle
  to effective management because they cannot
  produce information needed to make effective
  decisions for day-to-day operations
• 17 of the 24 CFO Act Agencies failed to
  substantially comply with at least one of the
  three requirements under the FFMIA
• Efforts to modernize financial management systems
  have often exceeded budgeted costs, experienced
  delays in delivery dates and not provided the
  anticipated system functionality and performance.
• The problem is particularly serious in the
  Department of Defense

Government Accountability Office, Long-standing
Financial Systems Weaknesses Present a Formidable
Challenge, 3 August 2007, GAO-07-914
23
FFMIA System Requirement Review Process
24
FFMIA Testing Reveals Interconnections. . .
25
How Were Helping

• Functional Testing of Systems for FFMIA
  Compliance
• Identification of Internal Control Points
• Testing of Internal Controls
• Regulatory Compliance

26
CFO Act Compliance Framework
Chief Financial Officers Act
Federal Financial Management Improvement Act
(FFMIA)
Federal Managers Financial Integrity Act (FMFIA)
27
Federal Managers Financial Integrity Act
Federal Managers Financial Integrity Act (FMFIA)
OMB Circular A-123 Overall Process
A-123 Appendix A ICOFR Process
28
Integrating IC into an Agencys Culture

• Federal Managers Basic Responsibilities
• Guidance
• Oversight/Supervision
• Readiness/Training
• Performance Management
• Process Improvement
• SOPs/Process Flows
• Process Standardization
• Risk Management/Internal Control
• Identification
• Assessment
• Mitigation/Control
• Risk Reviews/Monitoring
• Self-Assessment/Self-Testing
• Corrective Actions

29
Marine Corps Managers Internal Control Program
(MCMIC) Two Distinct Processes
Over Financial Reporting Process
Overall Process
30
Marine Corps Managers Internal Control Program
(MCMIC)
Overall Process
Over Financial Reporting Process

• New Program (A-123 Appendix A)
• Senior Assessment Team
• Top Down (No Assessable Units)
• Single Assurance Statement
• RFR Coordinators/REA testing
• Focus on Financial Reporting

• Traditional Program
• Senior Management Council
• Bottom up (Assessable Unit-based)
• 5000 rolled-up SOAs
• RFR/REA Coordinators
• Covers everything in USMC

Exhaustive
Selective
31
LMIs Internal Control Vision

• Mission support. The internal control program
  must make sense to all levels of management and
  enhance managers ability to accomplish their
  mission objectives. Helps get the job done!
• Compliance. The internal control reporting
  program should comply with standards, guidelines,
  and orders. Low bar - should be easy to do!
• Accuracy. The program should accurately report on
  an entitys internal control posture for two
  distinct processes The Overall process and Over
  Financial Reporting process. In addition, it
  should use a right-sized reasonable assurance
  standard appropriate for each assurance
  statement.
• Ease of use. The program should implement
  easy-to-use reporting programs tailored to each
  assurance statement requirement. The reports
  should be useful to inform management decisions
  and be by products of day-to-day activities.

32
The Official Line. . .
33
USMC Financial Improvement Initiative (FII)
Warfighting Excellence Powered by Timely,
Accurate, Useful Information Supported by Well
Managed Business ProcessesValidated in Sound
Financial Statements