Department of the Navy

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Department of the Navy DON Business
Transformation Update Improving Financial
Information Key to a Clean Opinion
Presented to DON Service Day ASMC PDI 31 May
2006
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The presentation today will review our business
process transformation strategy, update key
events since last year, and relate the strategy
to audit readiness.

• The Strategy
• Update on strategic elements
• DON Financial Improvement Program (FIP)
• Audit Context
• Internal Control foundation (OMB-123)
• The way ahead
• Summary
• Learn more during the PDI workshops

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Our strategy involves 4 elements that recognize
the need for an enterprise-wide, integrated
effort, aligning the DON with the Presidents
Management Agenda, DoD Business Transformation,
and Congressional intent.

• DoD Business Enterprise Architecture the
  Blueprint
• Standardize business processes provide data
  standards
• Requires systems portfolio management
• Navy ERP the Cornerstone
• Implement a modern, integrated COTS software
  product
• Reengineer business processes
• Functional Area Manager Process the Transition
  Tool
• Rationalize FM and Business systems portfolio
  management
• Standardize business processes
• DON Financial Improvement Program the
  Integrating Plan
• Considers/integrates elements of Systems,
  Processes and Human Capital
• Documents Business Processes for Audit

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Significant progress has been made on all
elements of our strategy. The DON FM Community
has been engaged at a variety of levels.
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DoD, executing nearly 50 of Federal
discretionary spending, is one of five major
government agencies that has a disclaimer on
their Annual Financial Statements.
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The OSD Financial Improvement and Audit Readiness
(FIAR) near-term focus areas comprise most of the
DoD assets and liabilities and are focus areas
for the DON.
ASSETS
PRIORITIES
Military Equipment Real Property
Fund Balance With Treasury
LIABILITIES
Environmental Liabilities
Medicare Eligible Retiree Health Care Liabilities
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For the DON, Military Equipment, Fund Balance
with Treasury, and Real Property comprise 78.3
of Total Assets, and Environmental Liabilities
represent 58.3 of Total Liabilities. Initial
audit preparation efforts are focusing in these
areas.
Other 67.6B 21.7
Military Equipment 140.2B 45.0
Environmental Liabilities 17.1B 58.3
Other 12.2B 41.7
Real Property 17.6B, 5.6
Fund Balance with Treasury 86.1B 27.6
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The DON Financial Improvement Program (FIP) plan
includes target dates to assert readiness for
audit. These dates are included in the OSD FIAR
plan.
Assertion dates recently revised based on
expanded scope resulting from discovery efforts.
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The FIP Validation approach is a rigorous process
designed to identify weaknesses, if they exist.
It also aligns with A-123 Financial Reporting
requirements.
Internal Control Analysis
Process Documentation
Risk Analysis
Findings
Continuous Monitoring
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The FIP efforts are organized by organization and
by Financial Statement line items, each with a
different, but connected, mission.
Vertical
Horizontal
NAVAIR NAVSEA SPAWAR SSP NAVSUP ONR USMC
Original Focus Areas FBWT General PPE Real
Property Military Equipment Environmental
Liabilities MERHCF
Systems Acquisition
LANTFLT PACFLT BUPERS NETC RESFOR USMC
DON Program Management
Other Areas A/R Cash and Other Monetary Other
Assets A/P Debt Environmental Liabilities Other
Liabilities Appropriations Received Obligations
Incurred
Fleets Personnel

• Oversee DON FIP efforts
• Interface to OSD FIAR
• Manage budget funding
• Provide FIP guidance and prioritization
• Provide FIP tools and infrastructure
• Review Command deliverables
• Coordinate facilitate business process change

NAVFAC CNI
Infrastructure
FSA AAUSN ONI NSMA
Admin Functions
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Efforts, as we move forward, will begin to shift
focus from discovery to integration to corrective
action and standardization.
Integration
Discovery / Documentation
Corrective Action / Standardization
Sustainment
We are here
Communication
Standardization/Corrective Action

• Corrective actions to address known deficiencies
  are executed.
• Material deficiencies discovered in process
  analysis are corrected.
• Corrective action plans for unique Command
  deficiencies are executed at the Command level
• Central teams facilitate the execution of global
  plans for Enterprise deficiencies
• Action is taken to standardize improve
  processes.

Discovery
Integration

• Discovery section based on dedicated efforts
  inside of focus areas or Command VPMP
• Lead organizations identified to document
  particular processes.
• Additional organizations will perform discovery
  based on the documentation provided by the lead
  organizations

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We are committed to the concept that the benefits
of a clean audit, i.e., better management data,
should outweigh the cost of change. This
represents the value proposition and for many,
a major paradigm shift.
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Business process transformation recognizes the
need for an enterprise-wide, integrated effort,
aligning DON with the Presidents Management
Agenda, DoD Business Transformation, and
Congressional intent.
DoD Business Enterprise Architecture (DoD
Financial Improvement and Audit Readiness (FIAR))
Current Environment (Stove-piped)
DON Business Transformation
Future Environment (Integrated)
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To summarize, we reported our FY 2005 financial
results emphasizing our progress to date and
emphasizing improving stewardship of resources
moving forward in FY 2006.

• Resources effectively used to support current
  assignment and future transformation.
• Financial Reports submitted within required
  timeframes and using prescribed standards.
• DON Audit Committee is in use
• FMs Strategic Plan Initiatives charting course
  for continuous improvement.
• Human Capital Development
• Business Practice Modernization
• Customer Communications

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Several PDI workshops will provide more detailed
information on these Business Transformation
topics.

• Service Day
• FIP Overview/Lessons Learned- Gil Gardner
• Systems Transition to Navy ERP- Bill
  Aldrich/Beverly Veit
• Internal Controls- Two Perspectives- Lessie
  Turner/Steve Sninsky
• Randy Exley/Greg Sinclitico
• PDI Program Topics
• BTA Updates
• A-123
• ERP Lessons Learned
• USMC Financial Improvement Initiative
• Business Transformation Success Stories