The Right Path No Shortcuts to Success

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The Right Path No Shortcuts to Success

• Norman Noe
• Director, CIO Policy and Oversight
• Defense Finance and Accounting Service

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Focus

• Completeness, Accuracy, Validity, Reliability and
  above all REPEATABLE
• Policies and processes
• Systems
• Financial Management Practices
• Key is linking processes, systems and financial
  management

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Audits Are Metrics

• They evaluate where an entity is in managing its
  finances
• They generate a score
• Adverse
• Disclaimer
• Qualified Opinion
• Unqualified Opinion
• They provide lessons learned to improve
  performance

Audits are not the only metric Moving beyond
Audit as end of year project requires a
paradigm shift
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Passing Audit The Good News
Time to Pass Audit

• 8 Consecutive Unqualified Opinions
• Meeting submission timelines

Time to Pass (days)
Heroic Effort Normal Operations
Fiscal Year
Time to Pass Audit shrinking!
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Passing Audit The Bad News

• The Burning Platform
• Shortened submission timelines
• Effort to support financial position increasing
• Error rates going up
• Auditors digging deeper to validate Agency
  position

Effort to Pass Audit
Effort ( of data pulls)
Fiscal Year
It is getting harder and harder every year!
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Passing Audit The Whole Story
Apply Discipline
Multiple Interim Samples
Time to Pass (days)
Effort ( of data pulls)
Pass Interim Audit - FY07
Heroic Effort Normal Operations
Fiscal Year
We changed our Paradigm
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Transforming the Paradigm
Linking processes, systems, and financial
management
DFAS Transformation Blueprint
End of Year Audit
Any Day Audit

• 2000-2004
• End of year project
• Audit result focus not process
• Lack of CAVR principles
• Lack of standardization
• Auditor identified deficiencies

• 2005-2007
• Every day process
• Process Discipline
• CAVR principles incorporated
• Standardization through FMIP and FMFIA
• Self-identified deficiencies

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OUTCOME Policies and Processes

• Used Financial Management Improvement Plan (FMIP)
  to
• Standardize and streamline policies and
  procedures
• Improve internal control practices
• Eliminate invalid financial transactions
• Eliminating root causes
• Lean6 approach
• Fact based analysis
• Improving quality of supporting documentation

Audit Actions
All FY05 and FY06 Actions completed
Audit Action Items
Fiscal Year
Transform Financial Management Processes to be
more disciplined
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OUTCOME Systems

• Improved internal control processes
• Eliminated material duplicate or repeat findings
• Linked system compliancy reporting to financial
  audits
• Established a repository for system documentation
  and audit findings

Audit Actions
Minimum number of new audit actions identified
every year
Audit Action Items
Acceptable Range
Fiscal Year
Focus on closing audit actions as soon as possible
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OUTCOME Financial Management Practices

• Wrote down
• 80M AP
• 90M UDO

Aged Amounts (M)
UDO AP
Aged Amount (M)
Error Rates ()
UDO AP

• No recommended audit adjustments
• FY06
• FY07

Error Rate ()
Benefit to customer good financial management
results in accurate billing
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Continuing Success

• Policies and procedures to sustain position
• Enabling compliant systems
• Reports to track and monitor
• Managing within established metrics

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Balanced Scorecard

• Changing the paradigm means changing the culture
• Management needs to measure the right things to
  motivate right changes
• DFAS uses the Balanced Scorecard to monitor
  process improvement

DFAS BSC
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Tri-Annual Review Reporting
ltblankgt - nothing has been done with the
document it has not been reviewed. RV - the
document has been reviewed and found to be
valid RA - the document has been adjusted RW -
the document is awaiting outside action
(contracting, disbursement, de-obligation) RC -
the document is closed.  We are done with this
document.
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What does this mean to you?

• Apply lessons learned to foster financial
  improvement
• Support customers efforts to achieve auditable
  financial statements
• Apply CAVR to all of our processes, systems
  initiatives
• Continue to transform to improve processes and
  procedures
• Series of Transformational Initiatives to improve
  the organization
• Ongoing programs to improve operational processes

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Continued Process Improvement
Our processes are how we accomplish our Mission
Mission Direct, approve, and perform finance and
accounting activities for DoD
The Approach - Process Excellence Program
Planned Results

• Risks identified
• Mitigation plans in place
• Robust internal controls
• Processes documented
• Continuous process improvement

Measuring Success
Process Maturity Level
Level 1 Ad Hoc
Level 2 Managed
Level 3 Standardized
Level 4 Integrated
Level 5 Optimized
By Dec 2008
Today
Future
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Conclusion

• Completeness, Accuracy, Validity, Reliability and
  above all REPEATABLE
• Policies and processes
• Systems
• Financial Management Practices
• Key is linking processes, systems and financial
  management

DFAS Transformation Blueprint
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Questions???
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Point of Contact
Norman Noe II norman.noe_at_dfas.mil 317 510-5864