MID 920: Implementing Integrated DoD Financial Management Systems

1. MID 920: Implementing Integrated DoD Financial Management Systems Introduction of Kathy Kittrell, Accounting and Finance Domain In the next 30 minutes, this presentation will give you: A brief context for DoD financial management change, Highlights of the Acc & Fin Domain transformation strategy that emphasize integrated core financial management systems, and An overview of MID 920. Introduction of Kathy Kittrell, Accounting and Finance Domain In the next 30 minutes, this presentation will give you: A brief context for DoD financial management change, Highlights of the Acc & Fin Domain transformation strategy that emphasize integrated core financial management systems, and An overview of MID 920.

2. FY04 DoD Year-End Financial Reporting Conference � July 28, 2004 Page 2 Why Change? Our nation is facing unprecedented challenges that are exerting increasing pressure on our personnel and fiscal resources. As Mr. Rumsfeld has stated on numerous occasions ... �While our troops operate in a fast-paced world of high-tech weaponry � the men and women who support them here at home still slog through red tape and regulations that are decades old. We must be as agile, flexible, and adaptable as the forces we field in battle.�  The purpose of BMMP is to correct this problem. We are engaged in developing, coordinating, and managing a systematic approach to achieving the operational concept depicted here (OV-1) � transforming our business operations to provide world-class services to the Warfigher and other DoD customers. Fortunately, we are in a position like never before to capitalize on revolutionary technology advancements. Advancements that enable businesses � like the business of defense � to lower costs; improve operational efficiency; make real-time, data-driven decisions; and foster innovation. The end result will be a larger percentage of DoD financial resources to equip Warfighters, Congressional reporting with confidence, and a technology-driven infrastructure that enables management flexibility, visibility, and efficiency. Our nation is facing unprecedented challenges that are exerting increasing pressure on our personnel and fiscal resources. As Mr. Rumsfeld has stated on numerous occasions ... �While our troops operate in a fast-paced world of high-tech weaponry � the men and women who support them here at home still slog through red tape and regulations that are decades old. We must be as agile, flexible, and adaptable as the forces we field in battle.� The purpose of BMMP is to correct this problem. We are engaged in developing, coordinating, and managing a systematic approach to achieving the operational concept depicted here (OV-1) � transforming our business operations to provide world-class services to the Warfigher and other DoD customers. Fortunately, we are in a position like never before to capitalize on revolutionary technology advancements. Advancements that enable businesses � like the business of defense � to lower costs; improve operational efficiency; make real-time, data-driven decisions; and foster innovation. The end result will be a larger percentage of DoD financial resources to equip Warfighters, Congressional reporting with confidence, and a technology-driven infrastructure that enables management flexibility, visibility, and efficiency.

3. FY04 DoD Year-End Financial Reporting Conference � July 28, 2004 Page 3 Toward an Integrated Business Environment and Improved Financial Management BMMP Focus: Implement a modern, net-centric DoD business environment that supports the Warfighter�s needs Increment 1 Achieve unqualified audit opinion for consolidated DoD financial statements, including related processes to achieve asset accountability and address other material weaknesses Achieve total personnel visibility to include: military service members, civilian employees, military retirees, and other US personnel in a theater of operations (including contractors and other federal employees) Increment 2 Align acquisition practices with government and industry best practice benchmarks Achieve total asset visibility and accurate valuation of assets (includes operating, materials and supplies; inventory and property; plant and equipment) Enhance force management through position accountability and visibility (military and civilian) Improve military healthcare delivery through a more efficient healthcare claims system, more accurate patient diagnostic coding, and joint medical material asset visibility Improve environmental safety and occupational health Increment 3 Implement Planning, Programming, Budgeting and Execution (PPBE) process improvements in accordance with Joint Defense Capabilities Study recommendations for a capabilities-based PPBE process Achieve integrated total force management Improve installation management BMMP strategy embraces an incremental approach to change ... with emphasis on continuous and in-depth improvement as the strategy matures (� moving from Increment 1 to 2 to 3) We are now focusing on Increment 1 � particularly obtaining an unqualified audit opinion on FY07 consolidated statements. To date, work has involved reengineering of accounting and financial management business processes and the definition of capabilities requirements. As a result of this work, we�re making solid progress in the development of business rules (for BEA integration) and a robust, end-to-end enterprise business process model (EBMP) To address critical information requirements, we�re focusing on SFIS, USSGL, and working with Components to improve data quality � which we�ll address further in this briefing BMMP strategy embraces an incremental approach to change ... with emphasis on continuous and in-depth improvement as the strategy matures (� moving from Increment 1 to 2 to 3) We are now focusing on Increment 1 � particularly obtaining an unqualified audit opinion on FY07 consolidated statements. To date, work has involved reengineering of accounting and financial management business processes and the definition of capabilities requirements. As a result of this work, we�re making solid progress in the development of business rules (for BEA integration) and a robust, end-to-end enterprise business process model (EBMP) To address critical information requirements, we�re focusing on SFIS, USSGL, and working with Components to improve data quality � which we�ll address further in this briefing

4. FY04 DoD Year-End Financial Reporting Conference � July 28, 2004 Page 4 Acc & Fin Domain Our Charter � One of six Domains and a mission area developed to work collaboratively to expand the Business Enterprise Architecture Our Role � Serve as the primary agent for the transformation of finance, accounting operations, and financial management functional processes Our Vision � Includes the standardization of DoD financial information structure and management business rules, processes, and procedures compliant with authoritative guidance established by the Federal Accounting Standards Advisory Board (FASAB), US Treasury Department, and Office of Management & Budget We�re working with the DoD FM community to analyze existing business processes and related systems to consolidate, modernize, and migrate to the BEA. We embrace the vision that DoD will be managed in an efficient, business-like manner in which relevant, timely, and reliable financial information � affirmed by clean audit opinions � is available on a routine basis to support informed decision-making at all levels throughout the Department. Our objectives are to: Standardize DoD accounting and FM business rules, processes, and procedures Comply with GAAP and FASAB Lay the foundation and infrastructure to sustain an unqualified audit opinion Make reliable, timely and accurate financial information accessible to decision-makers We�re working with the DoD FM community to analyze existing business processes and related systems to consolidate, modernize, and migrate to the BEA. We embrace the vision that DoD will be managed in an efficient, business-like manner in which relevant, timely, and reliable financial information � affirmed by clean audit opinions � is available on a routine basis to support informed decision-making at all levels throughout the Department. Our objectives are to: Standardize DoD accounting and FM business rules, processes, and procedures Comply with GAAP and FASAB Lay the foundation and infrastructure to sustain an unqualified audit opinion Make reliable, timely and accurate financial information accessible to decision-makers

5. FY04 DoD Year-End Financial Reporting Conference � July 28, 2004 Page 5 The Framework: New Rules, New Tools Part of the Acc & Fin near-term plan focuses on implementing a new, modernized framework to support a netcentric DoD business environment. The DoD standardized implementation of the USSGL, the Standard Financial Information Structure (SFSI), and standardized costing methodology are three critical foundation support tools to enable DoD to achieve and sustain a clean audit opinion. For the USSGL, we are identifying what data elements the Acc & Fin Domain needs. The other Domains are defining how that will be defined in terms of �coding� that data field. Acc & Fin is working to ensure standardization, control, and reporting at the transaction level through core accounting rules and requirements that are grounded in GAAP and FASAB. For the past year, we�ve been engaged in business process workshops to define the integrated process flow and once implemented, these will enable the Department to sufficiently address the material weaknesses identified by the audit community. Results of the working sessions will be included in BEA v2.2 (July 31 release). Incremental rollout of the process and technology changes is being supported by leveraging the work already identified in the MRFIP submitted by the Services and Agencies to specify where accounting and finance processes have broken down. By mapping processes and the Acc & Fin touch points from an end-to-end perspective, we will strengthen auditability through internal controls and the correct timing and sequencing for business event transaction processing. This mapping has resulted in the EBPM � a soup-to-nuts depiction of DoD planning, source/acquire, execute, and terminate/dispose, and the critical financial information flows.Part of the Acc & Fin near-term plan focuses on implementing a new, modernized framework to support a netcentric DoD business environment. The DoD standardized implementation of the USSGL, the Standard Financial Information Structure (SFSI), and standardized costing methodology are three critical foundation support tools to enable DoD to achieve and sustain a clean audit opinion. For the USSGL, we are identifying what data elements the Acc & Fin Domain needs. The other Domains are defining how that will be defined in terms of �coding� that data field. Acc & Fin is working to ensure standardization, control, and reporting at the transaction level through core accounting rules and requirements that are grounded in GAAP and FASAB. For the past year, we�ve been engaged in business process workshops to define the integrated process flow and once implemented, these will enable the Department to sufficiently address the material weaknesses identified by the audit community. Results of the working sessions will be included in BEA v2.2 (July 31 release). Incremental rollout of the process and technology changes is being supported by leveraging the work already identified in the MRFIP submitted by the Services and Agencies to specify where accounting and finance processes have broken down. By mapping processes and the Acc & Fin touch points from an end-to-end perspective, we will strengthen auditability through internal controls and the correct timing and sequencing for business event transaction processing. This mapping has resulted in the EBPM � a soup-to-nuts depiction of DoD planning, source/acquire, execute, and terminate/dispose, and the critical financial information flows.

6. FY04 DoD Year-End Financial Reporting Conference � July 28, 2004 Page 6 Why Corporate Integration of FM Systems? Standardize on SFIS and USSGL for Department-wide consistency and management visibility at the transaction level Prepare annual financial statements that fully disclose financial data, including full cost of DoD programs and activities (compliance with CFO Act of 1990) Comply with Federal Financial Management Requirements (FFMRs), federal accounting standards, JFMIP, and BEA How are we operationalizing the modernized framework of SFIS, USSGL, and cost accounting standards? Primarily, through integrated, standardized accounting and financial systems. The main objective is to implement standardized business processes that have been re-engineered around industry best practices and CFO Act-compliant standard financial software systems to collect and provide accurate information and in near real-time. Given the size and complexity of DoD, we would never be able to achieve and sustain an unqualified audit opinion nor produce timely, reliable financial information for enterprise-level management without systems integration at a �corporate� level. And today, the technology exists for us to deliver a DoD-wide integrated accounting and financial infrastructure. To get to green on the PMA scorecard, we must think beyond OMB�s requirements for a clean audit and on-time financial statements (which is 45 days after close of the fiscal year) � we must demonstrate we can produce accurate financial information on demand, and that the information is being used to make decisions and manage performance. In the to-be environment, SFIS and USSGL data attributes will be implemented within source systems, eliminating DoD�s need to translate -- or crosswalk -- between multiple business languages. In the interim, Components should begin mapping their data to SFIS to meet the goals of the MRFIPs. How are we operationalizing the modernized framework of SFIS, USSGL, and cost accounting standards? Primarily, through integrated, standardized accounting and financial systems. The main objective is to implement standardized business processes that have been re-engineered around industry best practices and CFO Act-compliant standard financial software systems to collect and provide accurate information and in near real-time. Given the size and complexity of DoD, we would never be able to achieve and sustain an unqualified audit opinion nor produce timely, reliable financial information for enterprise-level management without systems integration at a �corporate� level. And today, the technology exists for us to deliver a DoD-wide integrated accounting and financial infrastructure. To get to green on the PMA scorecard, we must think beyond OMB�s requirements for a clean audit and on-time financial statements (which is 45 days after close of the fiscal year) � we must demonstrate we can produce accurate financial information on demand, and that the information is being used to make decisions and manage performance. In the to-be environment, SFIS and USSGL data attributes will be implemented within source systems, eliminating DoD�s need to translate -- or crosswalk -- between multiple business languages. In the interim, Components should begin mapping their data to SFIS to meet the goals of the MRFIPs.

7. FY04 DoD Year-End Financial Reporting Conference � July 28, 2004 Page 7 Statutory Requirements for DoD CoreAcc & Fin Systems It�s the Law � Mandates compliance certification for DoD FM and mixed system investments over $1 million PL 107-314, Sec. 1004 PL 108-87, Sec. 8084 Institutes a discipline of enterprise architecture-driven FM systems BEA must drive system selection Requirements are driven by the business of defense and the strategy of netcentric information and interoperable systems MID 920 ensures Components� core Acc & Fin replacement systems use USSGL and JFMIP-certified software MID 920 seeks to uphold the public laws that were established to ensure DoD IT management oversight and investment control: PL 107-314, Section 1004 � the Bob Stump National Defense Authorization Act for FY03 requires that before an amount in excess of $1 million may be obligated for a DoD financial system improvement, the DoD Comptroller must determine that the defense financial system improvement is necessary and that it is compliant with the BEA PL 108-87, Section 8084 � the DoD Appropriations Act, 2004, requires that an FM system, a mixed information system, or a system improvement of more than $1 million may not receive approval for Milestone A, B, or FOC until the DoD Comptroller certifies, with respect to that milestone, that the system is being developed and managed in accordance with the BEA. This recent legislation levies certification requirements for DoD financial management systems and mixed information systems to ensure new /revised DoD FM systems and mixed systems are compliant with the BEA. Lawmakers and the Administration are mandating that Federal agency financial executives take a long view in making IT procurement and investment decisions. As a strategic planning tool, the BEA will help guide and ensure that we institute disciplined investing for the Department�s $19 billion business systems budget (FY04) and that the USSGL-based integrated business systems environment is consistent with the Department�s GIG architecture and netcentric strategy. (Budget data source: GAO) MID 920 seeks to uphold the public laws that were established to ensure DoD IT management oversight and investment control: PL 107-314, Section 1004 � the Bob Stump National Defense Authorization Act for FY03 requires that before an amount in excess of $1 million may be obligated for a DoD financial system improvement, the DoD Comptroller must determine that the defense financial system improvement is necessary and that it is compliant with the BEA PL 108-87, Section 8084 � the DoD Appropriations Act, 2004, requires that an FM system, a mixed information system, or a system improvement of more than $1 million may not receive approval for Milestone A, B, or FOC until the DoD Comptroller certifies, with respect to that milestone, that the system is being developed and managed in accordance with the BEA. This recent legislation levies certification requirements for DoD financial management systems and mixed information systems to ensure new /revised DoD FM systems and mixed systems are compliant with the BEA. Lawmakers and the Administration are mandating that Federal agency financial executives take a long view in making IT procurement and investment decisions. As a strategic planning tool, the BEA will help guide and ensure that we institute disciplined investing for the Department�s $19 billion business systems budget (FY04) and that the USSGL-based integrated business systems environment is consistent with the Department�s GIG architecture and netcentric strategy. (Budget data source: GAO)

8. FY04 DoD Year-End Financial Reporting Conference � July 28, 2004 Page 8 DoD to Fulfill Federal Fiscal Management Responsibility CFO Act of 1990: Integrated FM systems supporting DoD accounting needs are key to effective financial management FFMIA of 1996: ALL Federal agencies to comply Implement/maintain systems that meet Federal FM system requirements (JFMIP) Support Federal accounting standards (FASAB) Apply USSGL at the transaction level OMB Use COTS JFMIP-certified softwarefor replacement of core FM systems (A-127) In addition to legislative requirements, MID 920 emphasizes principles of fiduciary stewardship. The existing systems that DoD uses for accounting and financial management are blamed for causing significant financial management problems that are preventing all of the Federal government from obtaining an unqualified audit opinion. The GAO found material weaknesses in the government's accounting for assets, liabilities, and the cost of government operations and contingencies. The DoD is the primary source in these 3 areas, as a quote from the Honorable David M. Walker, CG of US attests ... �GAO was unable to express an opinion as to whether the US Government�s consolidated financial statements were fairly stated for a sixth consecutive year. Our inability to express an opinion was based primarily on serious financial management problems at the Defense Department, the government�s inability to adequately account for certain intragovernmental transactions, and � government�s inability to properly prepare consolidated financial statements.� We cannot continue to operate in a stove-piped, decentralized manner when it comes to financial management. The Department simply must be a better steward -- and accountable -- of taxpayer dollars. To that end, we must be able to aggregate accounting and financial information to make better decisions, internally, and to report financial operations and performance, externally. Integrated USSGL-based core systems will alleviate the numerous data calls, manual reconciliations, and unsupported adjustment entries that contribute to our inability to obtain unqualified audit opinion. MID 920 stipulates that the Department fulfill its fiscal responsibility through using software systems that comply with JFMIP, support the regulatory US Standard General Ledger at the transaction level of detail, and meet Federal accounting standards.In addition to legislative requirements, MID 920 emphasizes principles of fiduciary stewardship. The existing systems that DoD uses for accounting and financial management are blamed for causing significant financial management problems that are preventing all of the Federal government from obtaining an unqualified audit opinion. The GAO found material weaknesses in the government's accounting for assets, liabilities, and the cost of government operations and contingencies. The DoD is the primary source in these 3 areas, as a quote from the Honorable David M. Walker, CG of US attests ... �GAO was unable to express an opinion as to whether the US Government�s consolidated financial statements were fairly stated for a sixth consecutive year. Our inability to express an opinion was based primarily on serious financial management problems at the Defense Department, the government�s inability to adequately account for certain intragovernmental transactions, and � government�s inability to properly prepare consolidated financial statements.� We cannot continue to operate in a stove-piped, decentralized manner when it comes to financial management. The Department simply must be a better steward -- and accountable -- of taxpayer dollars. To that end, we must be able to aggregate accounting and financial information to make better decisions, internally, and to report financial operations and performance, externally. Integrated USSGL-based core systems will alleviate the numerous data calls, manual reconciliations, and unsupported adjustment entries that contribute to our inability to obtain unqualified audit opinion. MID 920 stipulates that the Department fulfill its fiscal responsibility through using software systems that comply with JFMIP, support the regulatory US Standard General Ledger at the transaction level of detail, and meet Federal accounting standards.

9. FY04 DoD Year-End Financial Reporting Conference � July 28, 2004 Page 9 Snapshot of JFMIP Functional Overlap This slide begins to show you how fragmented and decentralized our FM systems really are. This chart reflects our analysis of 30 systems, within the Domain inventory as of June 30, based on real data provided by the Components. This high-level systems analysis uses the 54 JFMIP functions (shown on the far right column) and reveals several interesting views: 1. First, we can begin to see where systems are redundant in functionality. For example, the ISB �row� indicates a lot of functional overlap with other systems. Because of redundancy and/or significant cost to achieve BEA and JFMIP compliance, ISB, EDM, and ODS are �low-leverage� systems and appear to be candidates for retirement. 2. Second, the large white areas reflect the fact that systems are very specialized. Each was developed over time to fill a gap in functionality. 3. Third, this analysis highlights where we can converge on JFMIP capabilities. The blue areas indicate systems with greater than 60 percent of the particular JFMIP function count shown. For example, the fairly solid blue columns of DEAMS, GFEBS, and Navy ERP indicate high-leverage systems. These appear to be candidate systems for the core Acc & Fin portfolio. This analysis is ongoing as part of our PfM process, and we�re assessing additional systems every week. Eventually we�ll evaluate the 400-500 systems within the Acc & Fin Domain.Sys acronyms: ISB=Installation Supply Buffer, EDM=Electronic Document Management, ODS=Operational Data Store, DWAS=Defense Working Capital Accounting System, GAFS-R General Accounting and Finance System - Re-engineeredThis slide begins to show you how fragmented and decentralized our FM systems really are. This chart reflects our analysis of 30 systems, within the Domain inventory as of June 30, based on real data provided by the Components. This high-level systems analysis uses the 54 JFMIP functions (shown on the far right column) and reveals several interesting views: 1. First, we can begin to see where systems are redundant in functionality. For example, the ISB �row� indicates a lot of functional overlap with other systems. Because of redundancy and/or significant cost to achieve BEA and JFMIP compliance, ISB, EDM, and ODS are �low-leverage� systems and appear to be candidates for retirement. 2. Second, the large white areas reflect the fact that systems are very specialized. Each was developed over time to fill a gap in functionality. 3. Third, this analysis highlights where we can converge on JFMIP capabilities. The blue areas indicate systems with greater than 60 percent of the particular JFMIP function count shown. For example, the fairly solid blue columns of DEAMS, GFEBS, and Navy ERP indicate high-leverage systems. These appear to be candidate systems for the core Acc & Fin portfolio. This analysis is ongoing as part of our PfM process, and we�re assessing additional systems every week. Eventually we�ll evaluate the 400-500 systems within the Acc & Fin Domain.

10. FY04 DoD Year-End Financial Reporting Conference � July 28, 2004 Page 10 Core Acc & Fin Systems Integration Strategy The Acc & Fin Domain vision is to have a common financial business infrastructure with standardized applications, interfaces, and processes supported and enabled by integrated financial management data. Our strategy is to leverage those systems and core financial management capabilities that will eliminate the stove-piping that has hindered the Department�s ability to generate decision-quality information and a clean audit. Key to realizing this strategy is the standardization of intelligent, integrated system interfaces. DEAMS� analysis of what people have spent on interfaces has revealed costs of upward of $100K per interface, and GFEBS analysis shows ~$500K per interface. The current rough estimate of DoD systems integration savings from a single ERP solution, rather than multiple ERP vendor systems, is $2 billion annually. It�s important to note that whenever one of these multiple systems changes, we would again incur costs to integrate if the interface is not in the same ERP family. The elements of our strategy are to capitalize on those programs that have the broadest core accounting capabilities � programs such as DEAMS, GFEBS, and Navy ERP. These programs are strategic in our IT portfolio because they are truly cross-functional; employ JFMIP-certified COTS technologies, standard interfaces, and the new SFIS and business rules; and enable USSGL-required information to be captured once and reused across the enterprise. This latter capability is crucial to avoiding the need to write yet more interfaces to consolidated systems, which would only yield the next-generation of costly cross-walks. In turn, this just perpetuates the stove-piped situation that we�re in today. Finally, we are embracing the DoD guidance of �buy before build, and reuse before buy.� And today�s COTS ERP, relational, and web-based technologies can readily provide a foundation for this strategy. Our long-term view is a financial management infrastructure that will be scaleable and will help us achieve the interoperability so necessary to supporting a netcentric military. Data source: DO/IT brief April 15, 2004The Acc & Fin Domain vision is to have a common financial business infrastructure with standardized applications, interfaces, and processes supported and enabled by integrated financial management data. Our strategy is to leverage those systems and core financial management capabilities that will eliminate the stove-piping that has hindered the Department�s ability to generate decision-quality information and a clean audit. Key to realizing this strategy is the standardization of intelligent, integrated system interfaces. DEAMS� analysis of what people have spent on interfaces has revealed costs of upward of $100K per interface, and GFEBS analysis shows ~$500K per interface. The current rough estimate of DoD systems integration savings from a single ERP solution, rather than multiple ERP vendor systems, is $2 billion annually. It�s important to note that whenever one of these multiple systems changes, we would again incur costs to integrate if the interface is not in the same ERP family. The elements of our strategy are to capitalize on those programs that have the broadest core accounting capabilities � programs such as DEAMS, GFEBS, and Navy ERP. These programs are strategic in our IT portfolio because they are truly cross-functional; employ JFMIP-certified COTS technologies, standard interfaces, and the new SFIS and business rules; and enable USSGL-required information to be captured once and reused across the enterprise. This latter capability is crucial to avoiding the need to write yet more interfaces to consolidated systems, which would only yield the next-generation of costly cross-walks. In turn, this just perpetuates the stove-piped situation that we�re in today. Finally, we are embracing the DoD guidance of �buy before build, and reuse before buy.� And today�s COTS ERP, relational, and web-based technologies can readily provide a foundation for this strategy. Our long-term view is a financial management infrastructure that will be scaleable and will help us achieve the interoperability so necessary to supporting a netcentric military. Data source: DO/IT brief April 15, 2004

11. FY04 DoD Year-End Financial Reporting Conference � July 28, 2004 Page 11 How is Acc & Fin implementing USSGL across DoD? Standardization/compatibility of DoD-wide FM systems with USSGL process DoD USSGL Library Developing library of DoD standard accounting transactions Using library as baseline to institutionalize USSGL across Components Defining each specific accounting transaction that results from a business event (e.g., ordering depot level repair parts) Standard Financial Information Structure (SFIS) A comprehensive, standard �business language� that defines financial information that supports all DoD-wide budget, cost/performance management, and external reporting requirements Initial SFIS and USSGL Library favorably received by OMB, DoD IG, and Treasury SFIS will eliminate the need to translate between multiple business languages. This initiative standardizes the externally reported data elements with a name, definition, proposed length, authoritative source, and life cycle relationship to the transaction. Implementing SFIS in the to-be environ is a major undertaking. Full implementation of the SFIS as the Department�s standard business language requires that all new and migrating business subsystems by compliant with SFIS. Beginning in September, the system assessments will identify which systems have the ability to conform to the SFIS and have USSGL capabilities. We are developing the USSGL library for DoD by decomposing the USSGL and defining each accounting transaction that results from a business event. This library will be our baseline to implement the USSGL DoD-wide. >>> For OMB, DoDIG, and Treasury, SFIS and USSGL briefed at concept level, and we provided the data outline for external reporting >>> Also, we anticipate that in the Fall, the Acc & Fin Investment Review Board (IRB) will be stood up. The IRB will provide executive oversight to system assessment decisions regarding inclusion in Acc & Fin portfolio of core FM systems. In the interim environment, data mapping and transformation will be used to meet the goals of the MRFIP. As transactions are generated from source systems they will continue to cite legacy business terms. These legacy terms need to be mapped/transformed to SFIS terms and the transactions will be posted to a central general ledger. SFIS will eliminate the need to translate between multiple business languages. This initiative standardizes the externally reported data elements with a name, definition, proposed length, authoritative source, and life cycle relationship to the transaction. Implementing SFIS in the to-be environ is a major undertaking. Full implementation of the SFIS as the Department�s standard business language requires that all new and migrating business subsystems by compliant with SFIS. Beginning in September, the system assessments will identify which systems have the ability to conform to the SFIS and have USSGL capabilities. We are developing the USSGL library for DoD by decomposing the USSGL and defining each accounting transaction that results from a business event. This library will be our baseline to implement the USSGL DoD-wide. >>> For OMB, DoDIG, and Treasury, SFIS and USSGL briefed at concept level, and we provided the data outline for external reporting >>> Also, we anticipate that in the Fall, the Acc & Fin Investment Review Board (IRB) will be stood up. The IRB will provide executive oversight to system assessment decisions regarding inclusion in Acc & Fin portfolio of core FM systems. In the interim environment, data mapping and transformation will be used to meet the goals of the MRFIP. As transactions are generated from source systems they will continue to cite legacy business terms. These legacy terms need to be mapped/transformed to SFIS terms and the transactions will be posted to a central general ledger.

12. FY04 DoD Year-End Financial Reporting Conference � July 28, 2004 Page 12 Accounting and Finance Systems MID 920: Currently two new Acc & Fin-sponsored core systems in development to ensure USSGL-compliance DEAMS - Defense Enterprise Accounting Management System GFEBS - General Fund Enterprise Business System Program offices to coordinate with Domains to ensure DEAMS/GFEBS compatibility with other applicable systems MID 920: Standardizing core Acc & Fin systems across DoD Not pursue/obligate resources on any USSGL-compliant core system until DEAMS and GFEBS are demonstrated effective Must consider DEAMS/GFEBS, complying with open competition policies, when analyzing alternatives for new core systems MID 920: Subsidiary financial systems, transaction processing systems, and mixed systems Use USSGL and meet JFMIP requirements for functional area Currently, there are two new FM system initiatives that meet MID 920 requirements that are sponsored by the Acc & Fin Domain. These systems are DEAMS and GFEBS. DEAMS is the Defense Enterprise Accounting Management System and GFEBS is the General Fund Enterprise Business System. Both of these systems will be deployed Department-wide to support core accounting and finance operations. As stated in MID 920, all Components that operate core accounting and finance systems that do not have an Acc & Fin Domain-approved USSGL FM system in place or under development must consider either DEAMS of GFEBS as the USSGL system � once these systems are proven effective. The DEAMS and GFEBS program offices will coordinate across the BMMP Domains to ensure that DEAMS and GFEBS functionality is compatible with other financial management and feeder systems. Standardization of systems is key to executing our strategy. Standardization provides many cost-saving benefits, as has been proven-out in industry. It will ensure that all Acc & Fin operations and interfaces are consistent, cost-effective and efficient. Standardizing on DEAMS and GFEBS will enable Components to avoid re-competing contracts to obtain the functionality they need to achieve compliance and streamline operations. The end result is a savings in both time and money for DoD and ultimately the Warfighter. Once MID 920 is signed, Components performing core Acc & Fin functions, not having an Acc & Fin Domain-owner approved USSGL FM system in place or under development shall not pursue or obligate funds until DEAMS and GFEBS are demonstrated effective. If DEAMS and GFEBS prove effective, you must consider these platforms in your analysis of alternatives that will ultimately result in a decision to procure a material solution. DoD subsidiary financial systems, transaction processing systems, and mixed systems must also use USSGL and meet JFMIP requirements for their respective functional area.Currently, there are two new FM system initiatives that meet MID 920 requirements that are sponsored by the Acc & Fin Domain. These systems are DEAMS and GFEBS. DEAMS is the Defense Enterprise Accounting Management System and GFEBS is the General Fund Enterprise Business System. Both of these systems will be deployed Department-wide to support core accounting and finance operations. As stated in MID 920, all Components that operate core accounting and finance systems that do not have an Acc & Fin Domain-approved USSGL FM system in place or under development must consider either DEAMS of GFEBS as the USSGL system � once these systems are proven effective. The DEAMS and GFEBS program offices will coordinate across the BMMP Domains to ensure that DEAMS and GFEBS functionality is compatible with other financial management and feeder systems. Standardization of systems is key to executing our strategy. Standardization provides many cost-saving benefits, as has been proven-out in industry. It will ensure that all Acc & Fin operations and interfaces are consistent, cost-effective and efficient. Standardizing on DEAMS and GFEBS will enable Components to avoid re-competing contracts to obtain the functionality they need to achieve compliance and streamline operations. The end result is a savings in both time and money for DoD and ultimately the Warfighter. Once MID 920 is signed, Components performing core Acc & Fin functions, not having an Acc & Fin Domain-owner approved USSGL FM system in place or under development shall not pursue or obligate funds until DEAMS and GFEBS are demonstrated effective. If DEAMS and GFEBS prove effective, you must consider these platforms in your analysis of alternatives that will ultimately result in a decision to procure a material solution. DoD subsidiary financial systems, transaction processing systems, and mixed systems must also use USSGL and meet JFMIP requirements for their respective functional area.

13. FY04 DoD Year-End Financial Reporting Conference � July 28, 2004 Page 13 Accounting and Finance Systems (con�t) Acquisition strategies/contractual vehicles structured to enable Components to leverage DoD-wide software licensing (ESI) JFMIP-certification-approved configuration to be installed with software Government to own system configuration items Components can use software products procured under DEAMS and GFEBS programs Using JCIDS process and incremental/modular implementation ICD reflects required capabilities in BEA 2.2 to implement transformation for Acc & Fin and SPB Domains Additional six BEA-certified Acc & Fin systems BSM, Navy ERP, LMP, GCSS-Army, NSA ERP, DFAS eBiz All new USSGL FM systems and system improvements will use and implement only JFMIP-certified software. The contracts for these systems will require the vendor to deliver the software with the JFMIP-certification-approved configuration installed in the software. The systems must be compatible with each other and interface with DFAS systems. The government will own DEAMS and GFEBS configuration items, enabling the DoD to control its own software system baselines. Reuse of the code will be overseen by the DoD, giving Components the benefit of sustaining their solutions within their respective baselines. Currently we have a final draft of the Initial Capabilities Document (ICD) that describes future capabilities to all BEA 2.2 implementation users that result from DoD transformational changes. This ICD is structured to support three PMA objectives of improved financial performance, e-government, and budget and performance integration. The ICD articulates the required Acc & Fin capabilities as defined by the Enterprise Business Process Model (EBPM). Also, it�s important for you to know that the EBPM associates all authoritative requirements � such as Public Law, Treasury Financial Manual, OMB Circulars, Executive Orders, JFMIP, and the FAR � to applicable business process steps. Using the JCIDS process, new capabilities will be fielded using a spiral development approach, which we would be unable to do if not using COTS technology. Also, there are six additional systems within DoD that are BEA-certified and these are listed here. These systems must also conform to MID 920 requirements of USSGL and JFMIP. Through core ERP-driven Acc & Fin system initiatives, we�ll be better positioned to take advantage of streamlined acquisition strategies and enterprise-wide licensing agreements � breaking down barriers to efficiency and more effective business operations. All new USSGL FM systems and system improvements will use and implement only JFMIP-certified software. The contracts for these systems will require the vendor to deliver the software with the JFMIP-certification-approved configuration installed in the software. The systems must be compatible with each other and interface with DFAS systems. The government will own DEAMS and GFEBS configuration items, enabling the DoD to control its own software system baselines. Reuse of the code will be overseen by the DoD, giving Components the benefit of sustaining their solutions within their respective baselines. Currently we have a final draft of the Initial Capabilities Document (ICD) that describes future capabilities to all BEA 2.2 implementation users that result from DoD transformational changes. This ICD is structured to support three PMA objectives of improved financial performance, e-government, and budget and performance integration. The ICD articulates the required Acc & Fin capabilities as defined by the Enterprise Business Process Model (EBPM). Also, it�s important for you to know that the EBPM associates all authoritative requirements � such as Public Law, Treasury Financial Manual, OMB Circulars, Executive Orders, JFMIP, and the FAR � to applicable business process steps. Using the JCIDS process, new capabilities will be fielded using a spiral development approach, which we would be unable to do if not using COTS technology. Also, there are six additional systems within DoD that are BEA-certified and these are listed here. These systems must also conform to MID 920 requirements of USSGL and JFMIP. Through core ERP-driven Acc & Fin system initiatives, we�ll be better positioned to take advantage of streamlined acquisition strategies and enterprise-wide licensing agreements � breaking down barriers to efficiency and more effective business operations.

14. FY04 DoD Year-End Financial Reporting Conference � July 28, 2004 Page 14 DEAMS One integrated system to process and record all budgetary, accounting, and vendor pay transactions Joint initiative (USTRANSCOM, Air Force, and DFAS) COTS solution Incremental deployment schedule: 1.1 - Scott AFB (USTRANSCOM, AMC HQ, other Scott tenants) 1.2 - Remaining USTRANSCOM components 2 - Air Force 3 - Other DoD agencies Just a quick overview of the Defense Enterprise Accounting Management System (DEAMS) � DEAMS is a new enterprise FM program for seamless integration of defense billing and accounting services. The DEAMS solution integrates: Enterprise financial data (budgetary, accounting, vendor pay transactions) Funds commitment and management (appropriations and WCFs) Accounting and finance (capture, validate, report financial data for decision-making) DEAMS is key strategic element of DoD business transformation because it: Is truly cross-functional (involves USTRANSCOM, Air Force, DFAS, Acc&Fin Domain) Meets requirements of MID 920 Will capture information once � reuse it across the Department As mentioned earlier, DEAMS will take advantage of the evolutionary deployment of needed capabilities, using COTS, as depicted by the increments you see here. Just a quick overview of the Defense Enterprise Accounting Management System (DEAMS) � DEAMS is a new enterprise FM program for seamless integration of defense billing and accounting services. The DEAMS solution integrates: Enterprise financial data (budgetary, accounting, vendor pay transactions) Funds commitment and management (appropriations and WCFs) Accounting and finance (capture, validate, report financial data for decision-making) DEAMS is key strategic element of DoD business transformation because it: Is truly cross-functional (involves USTRANSCOM, Air Force, DFAS, Acc&Fin Domain) Meets requirements of MID 920 Will capture information once � reuse it across the Department As mentioned earlier, DEAMS will take advantage of the evolutionary deployment of needed capabilities, using COTS, as depicted by the increments you see here.

15. FY04 DoD Year-End Financial Reporting Conference � July 28, 2004 Page 15 GFEBS New core FM capability to administer general fund accounting � eliminating many feeder systems and need for costly interfaces Provide six core financial management functions: � General ledger � Funds distribution � Accounts payable � Cost accounting � Accounts receivable � Financial reporting Envisioned functions: � Budgeting � Real property accountability Provide web-based, online, real-time transaction and information capability Be accessible to the Installation Management Agency (IMA), Army National Guard, US Army Reserve, and all Army organizations world-wide, excluding Army Corps of Engineers A few words about the General Fund Enterprise Business System (GFEBS) � GFEBS will provide six core FM functions that you see here, with future functionality to support budgeting and real property accountability. GFEBS meets the requirements of MID 920. GFEBS emphasizes minimal creation of interfaces from feeder systems to the new system. A COTS solution will be selected that enables the functionality of legacy systems, wherever feasible, to be incorporated into the COTS software product to obtain needed data. The existing FM functionality is built primarily on the COBOL platform. GFEBS is also an incremental release, and is being developed by the Army jointly with DFAS. The Army operates funds distribution and execution in a decentralized manner, and currently cannot aggregate funds status at the enterprise level very easily. Financial data is frequently obtained through data calls, which entail substantial workarounds and manual reconciliations. For example, under the current environment the Army maintains 76 databases to reconcile data and product reports. The need for a centralized, integrated system is significant. A few words about the General Fund Enterprise Business System (GFEBS) � GFEBS will provide six core FM functions that you see here, with future functionality to support budgeting and real property accountability. GFEBS meets the requirements of MID 920. GFEBS emphasizes minimal creation of interfaces from feeder systems to the new system. A COTS solution will be selected that enables the functionality of legacy systems, wherever feasible, to be incorporated into the COTS software product to obtain needed data. The existing FM functionality is built primarily on the COBOL platform. GFEBS is also an incremental release, and is being developed by the Army jointly with DFAS. The Army operates funds distribution and execution in a decentralized manner, and currently cannot aggregate funds status at the enterprise level very easily. Financial data is frequently obtained through data calls, which entail substantial workarounds and manual reconciliations. For example, under the current environment the Army maintains 76 databases to reconcile data and product reports. The need for a centralized, integrated system is significant.

16. FY04 DoD Year-End Financial Reporting Conference � July 28, 2004 Page 16 What does MID 920 mean to you? All Components that operate core Acc & Fin systems shall plan, program, and budget to implement USSGL-compliant systems Include resources in FY06-11 BES If no USSGL-compliant core system in place or approved for development now, then: Determine your requirements based on BEA Assess capabilities of DEAMS and GFEBS Clean up and validate existing financial data Current proposed COTS systems must comply with BEA as it evolves MID 920 seeks to accomplish a single transformational change: That the replacement systems supporting DoD Components� core accounting and financial operations use USSGL and JFMIP-certified software programs. To that end, you need to start budgeting now for core replacement systems. If you do not have a system in place or in development that meets MID 920 requirements, you can budget to use DEAMS or GFEBS. Recall that these acquisitions will provide a contracting vehicle to purchase needed Acc & Fin USSGL and JFMIP-certified capabilities. You should be analyzing your Acc & Fin requirements now using the BEA, JFMIP requirements, OMB A-127, and the USSGL. We anticipate shortly that we will have available the DoD USSGL Library and SFIS to help you begin understanding transaction-level reporting data requirements. Begin assessing the capabilities of DEAMS and GFEBS -- as these are MID 920 compliant. Regarding data cleanup, you need to validate and correct erroneous financial data, starting with balance sheet accounts. MID 920 seeks to accomplish a single transformational change: That the replacement systems supporting DoD Components� core accounting and financial operations use USSGL and JFMIP-certified software programs. To that end, you need to start budgeting now for core replacement systems. If you do not have a system in place or in development that meets MID 920 requirements, you can budget to use DEAMS or GFEBS. Recall that these acquisitions will provide a contracting vehicle to purchase needed Acc & Fin USSGL and JFMIP-certified capabilities. You should be analyzing your Acc & Fin requirements now using the BEA, JFMIP requirements, OMB A-127, and the USSGL. We anticipate shortly that we will have available the DoD USSGL Library and SFIS to help you begin understanding transaction-level reporting data requirements. Begin assessing the capabilities of DEAMS and GFEBS -- as these are MID 920 compliant. Regarding data cleanup, you need to validate and correct erroneous financial data, starting with balance sheet accounts.

17. FY04 DoD Year-End Financial Reporting Conference � July 28, 2004 Page 17 What does MID 920 mean to you? (con�t) Non-Core Acc & Fin Systems Subsidiary financial systems, transaction processing systems, and mixed systems must use USSGL and meet JFMIP requirements for the functional area Achieving compliance will be handled through Acc & Fin SCR process SCR process focuses on ensuring BEA compliance and addressing one or more material weakness and Increment 1 objectives Regarding non-core Acc & Fin systems, which include the types listed here, these must also be brought into compliance with JFMIP and USSGL. System improvements to achieve compliance will be handled through the Acc & Fin SCR process. As part of our portfolio management process, the Acc & Fin Domain will review SCRS greater than $1 million, which will be used to fund improvements to systems to support the unqualified audit opinion. System owners will submit a business case as set of Comptroller Briefing charts plus a workbook that answers BMSI�s 26 questions related to Comptroller certification. Additionally, Acc & Fin will review program budget data as part of the SCR compliance assessment. SCRs must address one or more material weaknesses and Increment 1 objectives in order to receive Acc & Fin Domain approval. Finally, recall the OUSD(C) system initiatives memo of October 12, 2001 states that all new financial management systems and related non-financial (feeder) system initiatives (those which had not received a Milestone A decision prior to release of MID 920) must obtain Comptroller written concurrence prior to requesting approval to enter Milestone A.Regarding non-core Acc & Fin systems, which include the types listed here, these must also be brought into compliance with JFMIP and USSGL. System improvements to achieve compliance will be handled through the Acc & Fin SCR process. As part of our portfolio management process, the Acc & Fin Domain will review SCRS greater than $1 million, which will be used to fund improvements to systems to support the unqualified audit opinion. System owners will submit a business case as set of Comptroller Briefing charts plus a workbook that answers BMSI�s 26 questions related to Comptroller certification. Additionally, Acc & Fin will review program budget data as part of the SCR compliance assessment. SCRs must address one or more material weaknesses and Increment 1 objectives in order to receive Acc & Fin Domain approval. Finally, recall the OUSD(C) system initiatives memo of October 12, 2001 states that all new financial management systems and related non-financial (feeder) system initiatives (those which had not received a Milestone A decision prior to release of MID 920) must obtain Comptroller written concurrence prior to requesting approval to enter Milestone A.

18. FY04 DoD Year-End Financial Reporting Conference � July 28, 2004 Page 18 Getting to an Unqualified Audit Opinion on FY07 Financial Statements Start Now! Clean up and validate accounting and financial data in support of your financial improvement initiative to achieve FY07 unqualified audit opinion on statements Analyze what changes you need to make to existing systems and processes to support the Mid-Range Financial Improvement Plan Plan early to schedule your assessment of SCRs that directly support your financial improvement initiative Analyze and budget for software and system integration services for POM 06 and 07 Begin developing your change management strategy These are the activities you should be engaged in now as we move toward completion of Increment 1, which is: Achieve unqualified audit opinion for consolidated DoD financial statements, including related processes to achieve asset accountability and address material weaknesses Achieve total personnel visibility to include: military service members, civilian employees, military retirees, and other US personnel in a theater of operations (including contractors and other federal employees). As part of your Mid-Range Financial Improvement Plan �the Component roadmaps to ensure interim improvements � address corrective actions; milestone completion dates; costs, and dates when improved areas will be ready for external assessments and audits. Mitigate risks to achieving an unqualified audit opinion on the FY07 statements and begin reducing unnecessary system capability duplication. These activities should be reflected in the upcoming planning and programming cycle. And finally, MID 920 will help usher in major change. Educate your organization on the benefits of an integrated, DoD-wide financial management infrastructure � internally and to the American people. Help them understand how new technology will open new doors � individually and corporately. Change is here to stay. So let�s embrace it. These are the activities you should be engaged in now as we move toward completion of Increment 1, which is: Achieve unqualified audit opinion for consolidated DoD financial statements, including related processes to achieve asset accountability and address material weaknesses Achieve total personnel visibility to include: military service members, civilian employees, military retirees, and other US personnel in a theater of operations (including contractors and other federal employees). As part of your Mid-Range Financial Improvement Plan �the Component roadmaps to ensure interim improvements � address corrective actions; milestone completion dates; costs, and dates when improved areas will be ready for external assessments and audits. Mitigate risks to achieving an unqualified audit opinion on the FY07 statements and begin reducing unnecessary system capability duplication. These activities should be reflected in the upcoming planning and programming cycle. And finally, MID 920 will help usher in major change. Educate your organization on the benefits of an integrated, DoD-wide financial management infrastructure � internally and to the American people. Help them understand how new technology will open new doors � individually and corporately. Change is here to stay. So let�s embrace it.

19. FY04 DoD Year-End Financial Reporting Conference � July 28, 2004 Page 19 For Those We Serve �