Cost Awareness of Financial Operations in Theater Army

Cost Awareness of Financial Operations in Theater Army Day 2010 June 2, 2010 Steve Bagby - MG Phil Mc. Ghee – COL Sawyers In Tune with Army Financial Management

Agenda ü Operationalizing Cost Management § Cost Education and Training § Cost Management - Policy / Guidance / GFEBS Support § Resource Informed Requirement Processes ü USARCENT Financial Management Operations ü Financial Management School § GFBES Sustainment Training Products § Cost Management and Cost Accounting Courses In Tune with Army Financial Management 1

Cost Culture - Cost Management Single Use Estimated Future Cost Persistent Use Expected & Actual Cost Universal Use Planned & Actual Cost Informed Decision Making Continuous Improvement Cost-Benefit Analysis Cost Managed Enterprise Cost Culture Cost War High Cost War Full Spectrum Insurgency Intensity Conflict Operations Starting here (some work is being done) Role Based, Org Based, Output Based Control TARGET In Tune with Army Financial Management 2

Cost Management Cost Planning – Operational managers set cost targets and efficiency goals – Plan cost based on outputs produced Cost Planning Resource Informed Decisions – Take action based on analysis and external demands – Change targets – Change resources – Change quantity / quality Full Cost Measurement – Accurate, timely and relevant data – Connecting operational output/performance data to financial data – Allocate Overhead, Unfunded Costs, Indirect Support Cost Accounting Cost Management Process Cost Controlling Cost Analysis – Variances Cost – Trends and forecasting Analysis – Product, service or activity cost by expense (labor, material, contracts, etc…) – Understanding full costs of organizations, operations, products and services – Comparison Analysis & Benchmarking In Tune with Army Financial Management 3

Cost Management Enablers Policy & Guidance Training (Operational & Resource Mgrs) Cost Management 101 - Cost Management Overview - Cost Object (ERP) Definitions - Cost Flow Methods - Cost Analysis and Reporting Tools GFEBS – Cost Management Training These courses are either computer-based or instructor-led training classes to learn how to operate within the GFEBS cost module. Cost Management Certificate Course The program of instruction (POI) is designed to teach the fundamentals of cost management with a view to developing a cadre of Army personnel who are professionally knowledgeable, analytically competent, and personally motivated to serve as proactive change agents within their respective Enterprise line and staff organizations. Self Study-Cost Management Community of Practice https: //www. us. army. mil/suite/page/593701 Cost Management Courses in all Professional Development Programs In Tune with Army Financial Management 4

Cost Informed Decisions Cost Benefit Analysis Costs Benefits n l ip tio g l ne sh ies ne iza nin terie der rson ri n t ilit a ai c c a g Tr Pe Fa Le Do Or Ma Formal Thinking Domains Generate Capability Gaps / Requirements The Value of Cost Benefit Analysis: q Supplements professional experience and judgment with sound analytical techniques q Ability to make better resourced-informed decisions q Results in a strong “value proposition” Top Down Initiatives Force Design Update QDR/TAA/Portfolio – Business Area Reviews Army Campaign Plan Process Concept Plan (TDA Updates) JCIDS /AROC Basis of Issue Plan Ao. A Studies Acquisition Process Installation/MILCON/Sustain Unit/Institutional Training AMC/G 4 Depot /Sustainment/Ammo ONS/JUONS/Rapid Transition Decision Forums/ Approval Various FD SA/CSA VCSA SA/CSA AROC /JROC ORDAB SAG/Other Milestones MILCON IPT Train’g Plan AMC AR 2 B/AROC POM / BES Manning Equipping Training Sustaining Organizing Installation In Tune with Army Financial Management 5

USARCENT Financial Management Operations Theater Army Financial Management Report Imperatives • Visibility • Accountability • Transparency • Oversight • Controls Do. D Resources FM/Contract Systems Mgmt/System Accts Theater FM Initiatives • FM/Contracting systems • Cost culture • Cost of war • FM doctrine Cost Analyst Team Lean Six Sigma Team Link end-to-end processes Model and analysis Effect major cost drivers Banking Team Lean out inefficiencies Materiel Enterprise Maximize e-commerce Strategic Partners $714 M Cost Avoidance FY 10 Monthly Disbursements $396 M Credibility v 2 as of 18 APR 10 Exceptional Stewardship • Performance metrics • Resource informed • Cost savings • Cost avoidance • Process efficiencies • Near cashless Theater $434 M Cost Savings 91% EFT Payments Confidence $1, 148 M 1 % Goal 9% Cash Payments Trust 6

GFEBS Sustainment Training Products The US Army Financial Management School will implement GFEBS financial management training products no later than 1 OCT 2011 in order to sustain FM Community knowledge and skills Instructor Led Training Cost Management (80 hrs) Financials (80 hrs) GFEBS PM Training (53 Courses) Non FM Training Support Roles Packages d. L Products Distributed Learning (d. L) GFEBS Essentials (20 hrs) Reimbursables (20 hrs) Funds Management (24 hrs) Spending Chain (50. 5 hrs) Project Systems (8 hrs) Technical Training Principles Cost Act/Mgmt (120 hrs) Education Intermediate Cost Act/Mgmt (120 hrs) GFEBS Material w/in Legacy Courseware (AIT, NCOES, Functional Courses) In Tune with Army Financial Management 14

Cost Management (CM) within Professional Military Education FM BOLC Course: Purpose: • Provide CM foundation. • Introduce cost concepts and terms. • Describe the Army’s cost culture. • Relate CM to GFEBS capabilities. Audience: 2 nd Lieutenants Length: 8 Hours • • Content: • • • Cost Management (CM) Cost Culture within the Army Cost Terms and Concepts Cost Benefit Analysis (CBA) Practical Exercise FMCCC • Introduce advanced Cost Accounting and CM concepts. • Cost Benefit Analysis (CBA) case study. • Develop communications skills to influence leaders decisions. Captains 16 Hours • • • Cost Management (CM) Cost Accounting (CA) Cost Benefit Analysis (CBA) Practical Exercise Cost Decision Briefings Intensive Group CBA Exercise In Tune with Army Financial Management 8

Cost Management (CM) Functional Courses Course: Purpose: Target Audience: Course Length: Prerequisites: Principles of Cost Accounting & Management (PCAM) Intermediate Cost Accounting & Management (ICAM) • Offer a basic cost management and cost accounting functional course • Provide underlying cost accounting (CA) and CM principles, theories, and application. • Prepare military and DA civilians to leverage CM tools within GFEBS • Build on the PCAM course and provide more advanced CA and CM concepts. • Provide an increased focus on analysis, reporting, and communication skills. • Provide the knowledge necessary to fully leverage the CM and analytic tools within GFEBS. SGT, LT, CPT, entry level CP 11 Personnel SSG, SFC, CPT, mid level CP 11 Personnel 3 Weeks Math d. L Prep Course, PCAM • • Course Content: • • Cost Management Principles Cost Term/Concepts Cost Accounting Cost Benefit Analysis Variance Analysis Practical Exercises • • • Cost Management Cost Accounting Cost Management Paper Cost Management Briefings Cost Benefit Analysis Intensive Case Studies/Exercises In Tune with Army Financial Management 9

Cost Management and Cost Accounting “Achieving Readiness at Best Value” Soldier Support Institute Principles of Cost Accounting and Management Intermediate Cost Accounting and Management PCAM • Cost Terms • Cost Concepts • Fundamentals of Cost Acct. and Cost Mgmt • Practical Exercises Cost Management Certificate Course CMCC ICAM • Cost Flow Methods • Analysis and Reporting • Practical Exercises • Complex Case Studies LT SGT Naval Postgraduate School CPT SSG • Managerial Costing • Operations Management • Cost Control • Organizational Development MAJ SFC LTC / COL MSG / SGM End State: FM Community possesses the knowledge and skills necessary to leverage cost management and cost accounting In Tune with Army Financial Management 17