Fourth Estate/Defense-Wide Update Session. Washington-ASMC National Capital Region PDI March 9, 2017

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1 Fourth Estate/Defense-Wide Update Session Washington-ASMC National Capital Region PDI March 9, 2017

2 Welcome Mr. Mark Easton Deputy Chief Financial Officer, OUSD(C) 2

3 Fourth Estate Service Hour Discussions Developing an Increased Reality of a Fourth Estate Business Enterprise DoD in the Midst of Transition... Budget Constraints and Uncertainty People Are Still Our Most Valuable Resource... Human Capital Initiatives and Implications Balancing Efficiency and Mission Support... Expectations for Fourth Estate Business Enterprise in Support of the Warfighting Mission Chasing an Audit Opinion... Increased Demands for Standardization and Transparency Applying an Enterprise Cost Framework Fourth Estate Missions May Vary but Backroom Operations of How We Do Business Must Be Much More Standard and Efficient 3

4 Fourth Estate Service Hour Discussions Panel Composition Mr. Mark Easton (Moderator), Deputy Chief Financial Officer, OUSD(C) Budget Overview Ms. Gretchen Anderson, Director, Program and Financial Control, OUSD(C) Defense-Wide Budget Perspectives Mr. Tom McClutchy, Associate Director, Defense-Wide Programs, OUSD(C) Fourth Estate Audit Update Ms. Mobola Kadiri, Acting Director, Financial Improvement and Audit Readiness, OUSD(C) Financial Management Workforce Initiatives Ms. Glenda Scheiner, Director, Human Capital and Resource Management, OUSD(C) The Changing Business Environment within the Fourth Estate an FM Perspective 4

5 Budget Overview Ms. Gretchen Anderson Director, Program and Financial Control, OUSD(C) 5

6 FY 2018 Budget Estimates Submission Fiscal Guidance issued Feb 28 Limited Issue Papers Submission from CoComs, PSAs Mar 9 Issue Paper Review Complete Mar 17 BES, SDCS Due Mar 20 3-Star Programmers: FY 2018 PBR Mar 20 DMAG PBR FY 2018 Mar 22 Budget justification material due to OSD Mar 22 Program Review Mar 22 TBD Program Review 3-Star, DMAG TBD Budget Review Mar 22 TBD Budget Lock TBD Components submit PB18 exhibits to OUSD(C) TBD Final Submission May 1 Note: OMB has not published a timeline for submission of the FY 2018 President s Budget request. FY 2017 FY 2019 PPBE Status Today FY 2017 Planning Program/Budget Congressional Congressional Action Action Execution Execution FY 2018 Planning Program Budget Congressional Action Execution FY 2019 Planning Program Budget Congressional Action Execution FY14 Q2 Q3 Q4 FY15 Q2 Q3 Q4 FY16 Q2 Q3 Q4 FY17 Q2 Q3 Q4 FY18 Q3 FY19 Q2 Q4 Q2 Q3

7 Defense-Wide Budget Perspectives 7

8 Fourth Estate Audit Update Ms. Mobola Kadiri Acting Director, Financial Improvement and Audit Readiness, OUSD(C) 8

9 Overview of Consolidated Audit Strategy Reporting Entity Audit Structure Use the Work of Component Auditors Consolidated auditor to assume responsibility for or make reference to audit opinions of each component auditor Perform Independent Testing Consolidated auditor to perform internal controls and substantive testing over activities & balances Tier 1ᵃ (74% Budget, 82% Assets) Tier 2ᵇ Tiers 3 and 4 Eliminations Army GF & WCF Navy* GF & WCF Air Force GF & WCF Other Tier 1 Entities (e.g. USACE, Military Ret. Trust Fund) 21% Budget 15% Assets (e.g. DLA, SOCOM, DISA) Tier 3 4% Budget 2% Assets (e.g. WHS, DARPA, DTRA) Tier 4 1% Budget 1% Assets (e.g. DHRA DSS, DFAS GF) Intra-Tier 2 Intra-Tier 3/4 Consolidated Financial Statements OMB Designated Entity Audits OMB Designated Entity Audits OMB Designated Entity Audits OMB Designated Entity Audits DoD Designated Audits DoD Designated Examinations Immaterial Entities Inter-Tier Tiers Description Consolidated Audit Coverage Tier 1: OMB Designated Entity Audits Tier 2: DoD Designated Audits Mandated by OMB Bulletin No to prepare and issue audited financial statements annually Includes Military Departments (GF and WCF), USACE, and Military Retirement Trust Fund Directed by DoD to prepare and issue audited financial statements annually on a stand-alone basis Includes DLA (GF, WCF, and Strategic Materials), USSOCOM, DISA (GF and WCF), DHP, USTRANSCOM, IC Agencies, MERHCF, DeCA (GF and WCF), DFAS (WCF), and DCAA Use the Work of Component Auditors Group Auditor may assume responsibility for the work of the Reporting Entity s Component Auditor, or make reference to the audit of the Component Auditor. Group Auditor may determine additional procedures need to be performed if the work of the Component Auditor is insufficient. Group Auditor will determine whether Reporting Entities have been completely and accurately consolidated into DoD agencywide financial statements. Tier 3: DoD Designated Exams Tier 4: Immaterial Entities Directed by DoD to undergo annual audit readiness examinations Includes WHS, MDA, DSCA, DoDEA, DARPA, CBDP, DTRA, DCMA, JCS, and Other TI-97 Funds Provided to the Army by OSD Identified as not material to DoD agency-wide financial statements either individually or collectively Includes all remaining Reporting Entities in the Fourth Estate not identified in the other Tiers Perform Independent Testing Group Auditor will perform analytical procedures at the group level. Group Auditor will perform sufficient audit procedures to conclude that the DoD agency-wide financial statements are fairly stated. 9

10 NDAA Scoring of Audit Readiness Status Large Defense Agencies Large Defense Agencies Progress Toward Full Financial Statement Audit Readiness DISA WCF DISA GF DLA Strategic Materials DLA WCF DLA GF USTRANSCOM USSOCOM DHP 0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 70.00% 80.00% 90.00% % Current Progress as of 01/ /2016 DMAG 03/2016 DMAG 03/ /2016 Current Progress as of 01/

11 NDAA Scoring of Audit Readiness Status Mid-Tier Defense Agencies Mid-Tier Defense Agencies Progress Toward Full Financial Statement Audit Readiness DARPA MDA CBDP DSCA DCMA DTRA JCS WHS DoDEA 0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 70.00% 80.00% 90.00% % Current Progress as of 01/ /2016 DMAG 03/2016 DMAG 03/ /2016 Current Progress as of 01/

ODCFO Representation and Governance Activities Governance of DoD-Wide Audit Governance of 4 th Estate Audit Provides Strategy/Guidance NDAA Rankings Notice of Findings (NFR)/ Corrective Action (CAP)

12 ODCFO Representation and Governance Activities Governance of DoD-Wide Audit Governance of 4 th Estate Audit Provides Strategy/Guidance NDAA Rankings Notice of Findings (NFR)/ Corrective Action (CAP) Tracking Addressing Enterprise-Wide Dependencies Prepare Information Related to Sensitive Activities Coordination of DoD-wide Consolidated Audit A-123 ICOFR/ICOFS/SOA Processes Coordinating Service Provider support Component Report Cards - measuring Defense Agencies progress in areas within their control Notice of Findings (NFR)/ Corrective Action (CAP) Tracking Provides Audit Infrastructure Audit liaison End-to-end process documentation Training Build universe of transactions capability Entity-level controls Review and feedback on CUECs 12

13 Financial Management Workforce Initiatives Ms. Glenda Scheiner Director, Human Capital and Resource Management, OUSD(C) 13

14 Human Capital Initiatives Human Capital and Resources Update Reduction in Force Voluntary Separation Incentive Pay Eliminations Major Headquarters Activities Reductions Civilian Workforce Hiring Freeze Financial Management Direct Hire Authority Review and Reform Initiative: Services Requirements Review Board Efficiencies DoD FM Certification Update 14

15 Open Q & As 15

Key Elements to Support All Four Financial Statements & the 2017 Goal

Office of the Under Secretary of Defense (Comptroller) Key Elements to Support All Four Financial Statements & the 2017 Goal ASMC National PDI May 2014 Ms. Gretchen Anderson, Mr. Andrew Morgan, Mr. Stephen