Defense Business Transformation Report on Progress & Challenges

Important Progress… DoD Business Enterprise Clarity Horizontal Business Process Transformation Focus Business Alignment to Warfighter Needs Capabilities, not Systems, as Deliverables Accountability

Important Progress… Business Mission Alignment Real Property & Installation Lifecycle Mgmt Financial Management Materiel Supply & Service Management Weapon System Lifecycle Management Human Resources Management Legal IT HR Plng Budget Design & Dev Procure-ment Storage Transport Main-tenance Dispos-ition W A R F I G H T E S Eliminate stovepipes, drive end-to-end process optimization.

Important Progress… Tiered Accountability DoD-Enterprise Layer Enterprise Shared Services and System Capabilities Enterprise Rules and Standards for Interoperability Navy Architectures Transition Plans Systems Solutions AF Army TRANS COM DFAS DLA DOD Business Transformation Agency (BTA) The DoD-Enterprise layer provides the thin “backbone” layer of common services required for full Departmental interoperability – the “corporate requirements” for business operations. Components design and implement their own solutions within the framework of DoD-Enterprise rules and standards. We have established the Defense Business Transformation Agency to execute DOD Enterprise Level Transformation.

Important Progress… Enterprise Transition Plan (ETP)

Our MOST Important Progress… Delivering Business Capabilities Selected Highlights From Our First Six Months: Deployed hand-held based common supplier engagement capability for unit level contingency contracting in theater. Completed initial military equipment valuations for warfighting assets – a major step in financial visibility. Began implementation of enterprise level spend analysis capability for DOD wide procurement activity. Completed financial reporting capabilities using Standard Fiscal Codes for the Army and six defense agencies. Established a DOD wide warehouse for defense civilian personnel data.

Business Transformation Agency Roles & Responsibilities Translating DOD Enterprise Priorities into Technical Requirements Investment Oversight Ensuring Alignment to Corporate Requirements Accountability for the DOD Business Enterprise Architecture and Transition Plan Program Execution for DOD Enterprise Business System Acquisition Programs Ensure alignment of priorities to warfighter needs

Much Work Remains… Establish a culture of continuous improvement Continue delivering on commitments in the Enterprise Transition Plan Close remaining open issues in the Business Enterprise Architecture Build a culture of enterprise business excellence in the newly established Business Transformation Agency Build momentum

Why We Are Succeeding Joint Warfighting demands integrated operations – including business operations. Unprecedented senior leadership engagement at the top of the DOD. Defined DOD Corporate requirements and resultant impact on scope management – a private industry-style approach. Continuity – ability to leverage learning from past three years and focus now on implementation.

BACK-UP (Financial Audit)

Integrated Financial Improvement And Audit Readiness Picture What about the clean audit? Financial Improvement and Audit Readiness Plan (FIAR) DoD FIAR Plan Roadmap to Financial Improvement and Auditability Integrated Financial Improvement And Audit Readiness Picture Enterprise Transition Plan and Initiatives Component Financial Improvement Plans OIG Assessment and Audit Plans Component Transition Plans

Projected Audit Progress ’05 - ’07 2006 Assets Liabilities No Changes Military Equipment - Baseline Army - $96,720.0 - 7.6% Navy - $140,280.0 - 11.0% Air Force - $92,270.0- 7.2% FY 2006 Additions: Military Retirement Fund - $197,856.7 - 16% Medicare-Eligible Retiree Health Care Fund (Qualified) - $60,740.9- 5% 2005 -$895,434.0 - 48% Care Fund (Qualified) -$538,401.0 - 29%

Projected Audit Progress ’07 - ’08 2007 Assets FY 2007 Additions: Fund Balance With Treasury Air Force GF - $62,273.0 - 4.9% Liabilities Army GF- $86,799.0 - 6.8% Air Force WCF - $1,164.2 – 0.1% Real Property DLA - $1,175.2 - 0.1% No Changes 2008 FY 2008 Additions: Environmental Liabilities Navy Ships/Subs - $12,487.2 - 0.7%

Projected Audit Progress ’09 - ’10 Environmental Liabilities Air Force DERP - $6,552.8 - 0.3% Medicare-Eligible Retiree Health Care Fund -$538,401.0 - 29% Army DERP & Non DERP -$40,290.0 - 2.2% Navy DERP & Non DERP - $4,563.3 - 0.2% DLA DERP & Non DERP - $325.2 - <0.1% Health Care Fund - $60,740.9- 5% Fund Balance With Treasury Navy GF & WCF- $86,712.6 - 6.8% DLA GF & WCF- $629.8 - <0.1% Real Property Army - $22,986.8 - 1.8% Navy - $20,281.8 - 1.6% Air Force CIP -$4,759.7 - 0.4% (Navy achieves FASAB Compliance for Military Equipment.) FY 2010 Additions: 2009 Assets Liabilities 2010 FY 2009 Additions: