DEPARTMENT OF THE NAVY Financial Improvement Program

1. DEPARTMENT OF THE NAVYFinancial Improvement Program The FIP on FIAR!!! A Magical Ride, Full of Thrills and Spills Presented by Gilbert Gardner 28 May 2008

2. Agenda • Are we prepared for the thrills ahead? ADKAR • Accomplishments and Lessons Learned • FIP Tools • Value of effort • Future

4. Denotes discussion encouraged related to the slide

5. It’s a Small World After All • Getting the Message out • ASMC / PDI Cleveland; June 2004 • DoN FIP Conference; November 2004 • San Diego FIP Conference; February 2005 • ASMC / PDI Salt Lake City; June 2005 • ASMC / PDI San Diego; May 2006 • Know Your Business / Control Your Future Conference; Nov 2006 • ASMC / PDI Kansas City; May 2007 • FIP Executive Conference; Jan 2008 • ASMC / PDI Orlando; May 2008

6. How Effective has our Communication Strategy Been?

7. Discovery / Documentation Sustainment • Produce Documentation • Generate Process Flows • Perform Risk Analysis • Document & Test Internal Controls • Identify Deficiencies • Develop Plans • Promote Communication/ Change Management • Develop Tools • Perform Control Testing • Identify Resource Requirements • Maintain • Process Flows • Documentation • Internal Controls • Human Development • Audit Where are we today? Integration Discovery / Documentation Corrective Action / Standardization Sustainment We are here Communication Change Management Corrective Action /Standardization • Develop Guidance • Develop SOPs • Address Corrective Action Findings • Promote Standardization • Mitigate Risks • Promote LSS efforts • Perform Data Cleansing • Implement System Solutions

8. NSPS Navy ERP/USMC V-ERP LSS FMO uses the Financial Improvement Program (FIP) as a catalyst for changing the way we do business. The FIP focuses on improving the quality of financial information. It leverages and complements related enterprise-wide initiatives that support a stronger business environment. Accurate, Timely, and Transparent Financial Visibility Financial Improvement Program- Auditability and Internal Controls LSS NSPS Financial Improvement Plan - Standardization - and Internal Controls - Measurement - People Processes Systems DoN Business Transformation Performance Driven Better Resource Decisions

9. Merging BEA Concepts into the FIP • OSD FIAR and BEA has defined a three tier structure for processes • DON is merging its segment concept with the BEA process structure DON Segments fit between the End-to-End Process level and step. Example Procure to Pay segments are Transportation of People and RWO * Has not been defined by BEA

10. Reimbursable Orders Environmental Liabilities Military Equipment Personal Property Working Capital Fund Civilian Pay Real Property Segments are like pieces in a puzzle…

11. Methods for Getting the Job Done • Assigned Responsibility • Some segments have clear lines of association, in these cases, we can assign responsibility to primary owner(s) of a process • Example: NAVFAC and Real Property • Ownership can be determined by the use of a specific system/process • Example: NAVSUP and Transportation of Things • Workgroup/Collaborative Sessions • Where ownership is shared across the organization, we rely on the Workgroup/Collaborative session • FMO facilitates collaboration across commands • Example: Civilian Pay

12. Segment Profile: Reimbursable Work Orders STARS-FL Navy ERP Reimbursable Work Orders

13. Workgroup / Collaborative Effort Methodology • The workgroup/collaborative effort methodology utilizes command involvement through facilitated sessions to document DON business processes/segments. • Phases of the Methodology: • Document Generic Processes with key stakeholders (FMO Facilitated Session) • Includes: Internal Control Assessment, Risk Assessment, Process Flow/Memo • Socialize/Distribute Generic Processes to Commands for Feedback • Identify the gaps • Follow up sessions to improve quality of detail in generic processes • Distribute finalized processes to command as baseline/standard for business process • Commands leverage generic process, but adjust based on specific nuances • Business Process Documentation Complete • Process documentation will serve as a basis for testing under OMB A-123, Appendix A *Command Discovery *FMO Facilitated Session *Follow Up Facilitated Session(s) *Socialize/Receive Command Feedback *Distribution of finalized process Intended to accelerate the discovery process and move DON more quickly to corrective action and control testing

14. As the FIP progresses, A-123 annual reporting cycles begin to encompass an increased portion of DON Business Processes. FIAR/FIP/FII OMB A-123, App A Reporting provides long-term sustainment USMC SBR Annual OMB A-123, App A Reporting Cycles Financial Statement Audits • Attestation Engagements - • Examinations • Reviews • Agreed-Upon Procedures Priority of focus is based on operational and/or program value Disclaimer Opinion

15. Current Appendix A Environment • Reporting of ICOFR is handled at the SECNAV level by FMO, through the A-123 team using FIP data • No command-level or DFAS certification statements to the DON • No SECNAV defined roles and responsibilities for ICOFR other than for FMO • FIP → Appendix A considered a “hand-off” • Appendix A deliverables are viewed as a series of annual tasks to satisfy an annual deliverable • ICOFR weaknesses do not align with specific control deficiencies

16. There’s Nothing Magical About Internal Controls: Appendix A Envisioned State • Reporting of ICOFR by commands, to include certification statements, similar to the Managers’ Internal Control (MIC) Program • Roles and Responsibilities defined in SECNAV Inst 5200.35 • FIP and Appendix A efforts integrated, with coordinated deliverables • Testing of controls • Recording of deficiencies • Streamlined process documentation • Appendix A deliverables are a “state of being” versus a sequential set of tasks • All deficiencies are defined and grouped (as appropriate) for Appendix A reporting purposes

17. Roles and Responsibilities of Key Organizations • FMO/DON FIP PMO • Take ownership of assigned segments • Facilitate and manage activities to ensure auditability • Provide tools, guidance, and direction • Organize and task special working groups • Coordinate and facilitate Command compliance • Monitor and report on progress • DFAS • Focus on Collections and Disbursements, Unmatched Disbursements, Financial Reporting • Implement system changes • Develop and implement process improvements • Transition organization through HPO initiative • Naval Audit Service • Help prepare Commands for assessments/audits • Perform assessments of Command Audit Readiness subject to Agreed Upon Procedures (AUPs) and Examinations

18. Roles and Responsibilities of Commands • Executive Sponsorship • Take ownership of Key Milestone and Financial Improvement Plans • Implement process improvement initiatives associated with Key Milestone Plans • Take ownership of financial information and processes • Strengthen support for the FIP • Project Management • Submit Funding Requests supported by valid business case • Define projects and establish milestones for your FIP efforts • Document business processes and systems • Document and Test internal controls • Identify and Implement Test Plan Procedures • Oversee project execution and review deliverables • Status DON FIP projects and funds execution to FMO • Implement A-123 Tool to support sustainment • Communications • Participate in the TA Work Group and provide feedback to program management • Participate in facilitated working sessions/groups • Review the FIP Tool regularly for updates and changes to the Program

19. Change Does Not Have to be Scary- ADKAR • The ADKAR is an industry best practice change management model that focuses on mapping an organization’s change readiness position within the following elements of the change life-cycle. • Awareness of the need for change • Desire to participate and support the change • Knowledge on how to change • Ability to implement required skills and behavior • Reinforcement to sustain the change • Conduct an on-line survey consisting of both of quantitative and qualitative data to the DON FIP community

20. 2006 & 2008 Comparative Composite ADKAR Response *For a true comparison, this column only includes an average from the first knowledge question. Does not include the additional knowledge question asked in 2008 regarding training.

21. How do we measure progress/success and define accountability? • Assertion of DON Financial Statements (Balance Sheet, SBR, Statement of Net Cost, Statement of Changes in Net Position) • Assertion of Segments (i.e. Reimbursable Work Orders, Civilian Pay, etc.) • Key Milestone Plans (KMP) status (reported monthly to OUSD(C)) • Command Financial Improvement Plans (FIP) and detailed steps for Corrective Action plans • Command Certification of Controls over Financial Reporting • Internal Controls Testing and A-123 • Status of Internal Controls, i.e. Effectiveness/Ineffectiveness of the Controls • Status of FMO-provided FIP funding • Business value derived (i.e. Reduction of prompt pay interest payments, more timely collections, etc.) Segment Status Report

22. Measuring Success • FIP is reviewing progress against certain key variables to develop an overall measure of a Commands progress. Executive Sponsorship No Executive Awareness CO, Comptroller Support Resources Not Engaged Investing Command Resources Discovery No Documentation Completed Validation Packages Corrective Actions Deficiencies with no Plan Executing CA Plans Systems No Transition Plan Using Target Systems Plan No FIP Plan Executing to Plan Operational Metrics No Operational Metrics Integrated Success Measures Sustainment No Control Testing Control Testing in Tool

23. 10 15 8 13 6 11 Russ Gil Karen 5 3 1 Other Phillip Steve Cmd IBM Everyone 96 Projects DoN FIP Confidence index FIP PMO MILPAY PDs RAP RIK Communication MAC COR KM COW / GWOT ART FMS HR - NSPS Bus Transform SIK NAWC NADEPS Investments Budget DFAS C&D Guidance SPAWAR WCF Shipyards Prntg & Repro Contract Devel Real Property RWO Other Contracts NAVSUP WCF Communication Funding EL - Non-DERP Gen PP&E Cash Mgmt USMC WCF Out of Svc Debt Contract Admin EL - Weapons Patents & Royal NAVSEA WCF Funds Rcpt Cash OMA Access EL - DERP DFAS Supt Prompt pay Fuel Oth liabilities Contract Close EL - BRAC FIP Web Master TOT Purchase Card MILSTRIPS FIAR Reporting NRL Audit Support System Flows Travel Contingent Liab Metrics MSC Data Cleansing CLS WAWF Support US SGL Fin’l Reporting NAVFAC WCF NAVFAC FFC SPECWAR SOM Audit Commit CIVPAY NAVSEA PACFLT BUMED OM&S ERP NAVAIR CNIC AAUSN IUS ME SPAWAR ONR ONI Inventory A-123 NAVSUP RESFOR NSMA IVAN USMC GF BUPERS SSP FSA

24. FutureWorld: What’s Next • OMB Circular A-123, Appendix A • Certification of Internal Controls • Process and Control Standardization • Ownership of financial data • Reimbursable Work Orders • Civilian Pay • General Equipment • Guidance • Standardized guidance across the DoN • Sustainment of Improved Processes • Proper resources of the effort, i.e. contractor or in-house • Test internal controls • Systems Environment • Navy ERP will be the future FM system • Develop system interfaces

25. DoN FIP Management Tool • https://www.fmosystems.navy.mil/fip • To request a login, complete the New User form found by clicking the New User button on the Login screen

26. FIP Points of Contact