Cost Management Certificate Course CMCC Naval Postgraduate School

Cost Management Certificate Course (CMCC) Naval Postgraduate School CMCC 12 -5 Week 3 Cost Management and U. S. Army Section II: General Fund Enterprise Business System Frank A. Di. Stasio 19 -20 March 2012 © DISTASIO ASSOCIATES, LTD

Course Outline • Section I: Cost Management – – – Why cost management? Focus Concept of Operation Analysis Exercise • Section II: Cost Management and GFEBS – Development – Implementation • Section III: Using Cost Management – Cost culture – Cost controlling 3/18/2018 © DISTASIO ASSOCIATES, LTD 2

General Fund Enterprise Business System (GFEBS) Goals: OSD approved in May 2005 • Provide decision support information to sustain Army warfighting capability • Provide analytic data and tools to support the Army enterprise • Reduce the cost of business operations • Improve accountability and stewardship Enable decision-makers across the Army to – • Better capitalize on the resources we have • Better determine and justify the resources we need 3/18/2018 As of 5 Jan 2010 3

Secretary And Chief Of Staff Of The Army Testimony 2011 “… we must give our people the essential tools that will enable them to carry out their cost management responsibilities. Toward this end, we have fielded the General Fund Enterprise Business System (GFEBS) to more than 11, 000 users at 14 major installations. As reported by the Government Accountability Office, GFEBS development is on schedule and on budget. Much more than an accounting system, GFEBS is the Army’s new business system. It gives managers a greatly improved capability to manage the cost, schedule and performance of their programs and, at the same time, is the centerpiece in our progress toward full auditability of our financial statements. ” The Honorable John M. Mc. Hugh, Secretary Of The Army and General Martin E. Dempsey, Chief Of Staff United States Army, March 2011, Army Posture Statement 3/18/2018 4

Why Continuing Leadership Emphasis? Well-Informed Decisions Begin With Good Data • Situation: – Army leaders and managers need to make well-informed and timely decisions – Most decisions impact across many functions and organizations – Well-informed decisions require relevant, accurate and timely analyses that integrate data from many functional areas • Requirement: – Move to modern systems that include open, horizontally integrated data to enable better informed decisions; including: ü General Fund Enterprise Business System (GFEBS) ü Logistics Modernization Program (LMP) ü Global Combat Support System-Army (GCSS-A) ü Integrated Personnel & Pay System (IPPS-A) GFEBS integrates data from across the Army 3/18/2018 5

Where We Are and … Where We Are Going Current Situation GFEBS Solution § Implements a single web-based system § Standardizes processes Armywide § Involves maintaining many systems § Implements standard data structures § Requires many costly interfaces § Requires entering data in several systems § Records transactions in real-time and provides real-time access to data § Inhibits efficient sharing of data § Integrates financial and non-financial/ § Impedes producing comprehensive and performance data from functional areas accurate decision data § Applies commercial-off-the-shelf (COTS) § Hinders responding timely to questions Enterprise Resource Planning (ERP) § Requires time-consuming and costly § Complies with Do. D’s Business Enterprise reconciliations Architecture (BEA) SAP System View (SV) 1 3/18/2018 As of 31 Dec 2009 6

Technical Characteristics Of The Army’s GFEBS Solution • Commercial Off-the-Shelf (COTS) – Configure and not custom-building software – Provides ‘best practices’ inherent in software – Enables system updates and enhancements without re-writing code • Enterprise Resource Planning (ERP) Systems – Integrates and optimizes business processes across the enterprise – Includes most business processes for an optimized solution – Enables sharing of common data among all business processes • SAP product – The most widely used ERP solution in the world – Customers include DLA, Navy, NASA, IRS, Wal-Mart and Daimler AG • Benefits Include -– Complies with over 1, 100 accounting and real property requirements – Enables transformation to a cost culture Capitalizing on COTS and ERP benefits requires accepting business process changes 3/18/2018 7 As of 31 Dec 2009

General Fund Enterprise Business System Objectives Financial Accounting system: • Records financial transactions in single system Army-wide • Complies with statutory & regularity requirements for funds control and accounting • Includes real property and other asset data for accountability Cost accounting system: • Allocates or assigns cost data and provides full cost • Relates costs to outcomes/outputs/ services and performance • Enables cost-benefit, comparative, and other cost analyses • Enables cost planning & control Management support system: • Provides visibility of transactions in real time across the Army • Provides access to continuing data • Enables analyses • Supports wellinformed decisions to: Ø Leverage available resources Ø Improve program & budget decisions Estimate of progress: 3/18/2018 As of 28 April 2011 8

Transaction Illustration Simultaneously Updates Related Records Transactions Entered FI – Financial Acct. & Mgmt. FM – Funds Acct. & Mgmt. Simultaneous Updates • FI - None • FM - Commitment • CO - None Purchase Request • FI - None • FM - Obligation • CO - None Purchase Order CO – Cost Acct. & Mgmt. MM – Materials Mgmt. and Procurement Payment PPE – Property, Plant & Goods Receipt Equipment [PM, PS, RE, AA] SD – Sales & Reimbursables 3/18/2018 • FI - AP/Cash • FM - Disbursement • CO - None • FI - Expense/AP • FM - Expenditure • CO - Expense 9

Financial Accounting Compliance Statistics Federal Financial Management Improvement Act (FFMIA) 5% 95% “Substantially Compliant” Designation from AAA Standard Financial Information Structure (SFIS) (BEA 8. 0) 9% 91% SFIS Compliant Determined by DCMO Audit Business Enterprise Architecture (BEA 8. 0) 2% 98% 3/18/2018 98% Full Compliance Self-Assertion RPIR Compliant with BEA 8. 0 RIPM Compliance OSD Evaluation Pending 10

Cost Accounting Capability Includes • Implements a standard cost structure for collecting full and comparable data from across the Army • Includes cost planning, cost analysis and cost control capabilities for use as cost data become available • Enables cost reporting, reviews and analysis across the Army • Supports cost management training to develop skilled analysts and to capitalize on cost management capability • Provides data and tools to enable the Army to institutionalize a “Cost Culture” Cost Management applies across the organization 3/18/2018 11

Cost Accounting Capability Enables Cost Management Brigade data may be for: • specific brigade X • average Bde in command • average Bde across the Army X X X Heavy X Light Stryker Bde SUST Functional data may be for: • total cost for school • total cost for course • specific costs of interest Force Generation $ for Reset $ for Ready/Train $ for Available Training (Ind) $ / Student Tng Day $ / Course Day ARFORGEN data may be for: SUST • SUST specific pool, e. g. , Ready • specific function in pool • average Bde in pool Training (Unit) $ / Mile $ / Flying Hour $ / Weapon System Base Support Personnel $ / Service $ / Brigade $ / Installation 3/18/2018 X Military - $ / Soldier Civilian - $ / FTE Contractor - $ / FTE Flexible and responsive to Army information needs Equipment $ / Brigade - New $ / Brigade - Conversion Ratio: Spt $ / Brigade $ As of 7 Jan 201012

Management Reports Cost Management Report Unit Cost Report Cost By Budget and Plan Report Cost By Cum Cost by Non-Cum Cost By Partners Non-Cum Cost By Actual Cost By Real Property 3/18/2018 PP&E Reporter Real Property Inventory Report Usage of My Objects (%) Vacancy by Usage Type Portfolio by Regional Location Lease-In by Regional Location Owned Real Estate by Regional Location Occupancy Report 13

Deployment Schedule By Command And Wave 1 1 Apr 2009 Wave 2 1 Apr 2010 Wave 3 1 Oct 2010 10% 5% 20% 80% 5% 20% FORSCOM TRADOC Wave 5 1 Apr 2011 0. 5% USAAC 95% 80% 90% 1% 2% Wave 6 1 Jul 2011 Wave 8 a 1 Apr 2012 Wave 7 1 Oct 2011 Wave 8 b 1 Jul 2012 20% 100% 98% 100% 30% HQDA/OA 22 Wave 4 1 Jan 2011 100% 100% AMC 100% EUSA 2% SMDC USARNO 100% USARSO 10% 100% USARCENT USARPAC 90% USAREUR 5% 100% 10% USAASC 100% 10% USARAF 100% 5% ATEC USMA MDW 50% 90% 1% USARC 100% 2% 1% 10% 40% IMCOM ARNG 5% 10% 30% 1% 5% EUCOM JIEDDO 100% MEDCOM NETCOM SOUTHCOM 100% CIDC AFRICOM 50% 100% ARCYBER 20% 60% 45% 80% 40% 7% 80% 78% 100% 90% 85% 100% 98% 100% 92% 100% We are at 86% of all users 100% 14

Wave 7 Go-Live And Cumulative Deployment Data • 4, 200 additional end users – 39, 050 end users cumulative • 10, 280 additional civilian employees for payroll – 168, 232 cumulative civilian employees for payroll • 343 additional Funds Centers – cumulative: 1, 506 • 12, 120 additional Cost Centers – cumulative: 51, 152 • 22 additional locations – 180 total locations • 6 additional commands went fully operational – FORSCOM, TRADOC, USARPAC, USARC, CIDC and USSOUTHCOM – 13 commands were fully operational: OA 22, Accession Command, EUSA, USARNO, USARSO, USAREUR, USARAF, ARCYBER, USMA, MDW ARNG AFRICOM and EUCOM • $ 24. 5 billion allotted (as of 2 nd Quarter FY 12) 3/18/2018 15

End Users -- Most Are NOT From Resource Management Office End Users Most common positions of nearly 40, 000 • Accountant • Budget Analyst • Engineer & Scientist • Health Specialist • IT Specialists • Legal Admin • Logistics Supervisor • Operations Analyst • Program Manager • Property Manager • Purchasing Agent • Quality Assurance Specialist • Resource Manager • Staff Assistant • Supply • Technician NOTE: As of Wave 7 October 2011 GFEBS is a transaction based system and the preponderance of transactions begin in operational organizations 3/18/2018 16

Implementation Is Not The End Of Development • O&S examples – Establishing internal “help desk” capability at commands • E. g. , OA-22, ARNG, MEDCOM, FORSCOM and DFAS – Redesigning Purchase Request workflow and MIPR process • Refining and enhancing initial functionality – Public works: Day-in-the-life ‘end-to-end’ cases – Project systems: developing for acquisition processes – Business Intelligence: • Improving current reports – Splitting cumulative and non-cumulative • Adding new reporting capability, e. g. , “Cost By” reports • Future new capabilities – Procure to Pay (P 2 P) – Sensitive Activities 3/18/2018 17

General Fund Enterprise Business System Is Transforming the Army • New system with analytic tools and capabilities • New business processes – Capitalizes on “best practices” embedded in ERP • New management structures and data concepts – Single Instance of entering and then sharing data • New roles, skills and knowledge for end users – Opportunity for individuals to develop skills with state-ofthe-art ERP system and cost management techniques • Complies with statutory and regularity financial accounting requirements GFEBS is transforming financial management and management practices in most functions with the new cost management capability 3/18/2018 18

GFEBS And Army Audit Readiness Secretary of Defense Panetta: “… I've directed the department to cut in half the time it will take to achieve audit readiness for the Statement of Budgetary Resources so that by 2014 we will have the ability to conduct a full-budget audit. We owe it to the taxpayers to be transparent and accountable for how we spend their dollars. ” Audit readiness re-enforces the case for the GFEBS solution 3/18/2018 19

Achieve Audit Readiness By 2014 Assertion And ERP Deployment Timeline We are here Notes: § GFEBS waves correspond to deployment at specific sites. § “Assert” means Army is ready to be audited in that area. § Exams are evaluations by independent public accounting firms. 3/18/2018 20

GFEBS And Army Cost Management Concept of Operations Capture and Valuate Data in GFEBS (CO module) The cost accounting features of GFEBS 3/18/2018 captures cost and related performance data, and supports cost management 21

General Fund Enterprise Business System Leadership LTG Joseph E. Martz Military Deputy for Budget, Assistant Secretary of the Army (Financial Management & Comptroller) Robert M. Speer Principal Deputy Assistant Secretary of the Army (Financial Management & Comptroller) A collaborative team of ASA (FM&C) and PEO-EIS Ms. Kristyn E. Jones Director, Financial Information Management Mr. Roger A. Pillar Director, Functional Program LTC Stephen Lockridge Director, Deployment & Transformation Mr. Doug Wiltsie Program Executive Officer for Enterprise Information Systems COL Patrick W. Burden GFEBS Project Manager https: //wiki. kc. us. army. mil/wiki/Portal: GFEBS 3/18/2018 As of 12 September 2011 22