Course Introduction/ Determine the Difference Between Internal and External Reporting © Dale R. Geiger

2

Terminal Learning Objective Task: Determine the difference between internal and external reporting Condition: You are training to become an ACE with access to ICAM course handouts, readings, and spreadsheet tools and awareness of Operational Environment (OE)/Contemporary Operational Environment (COE) variables and actors Standard: with at least 80% accuracy: Define the 4 characteristics of accounting information Identify key components of GFEBS output Classify GFEBS reports as internal or external © Dale R. Geiger 20113

Cost Maturation Process Single Use Estimated Future Cost Cost Benefit Analysis Cost Informed Decisions Single Use Estimated Future Cost Cost Benefit Analysis Cost Informed Decisions Persistent Use Expected and Actual Cost Continuous Improvement Cost-Managed Organizations Persistent Use Expected and Actual Cost Continuous Improvement Cost-Managed Organizations Universal Use Planned & Actual Cost Role Based, Org Based, Output Based Control Cost-Managed Enterprise Universal Use Planned & Actual Cost Role Based, Org Based, Output Based Control Cost-Managed Enterprise Cost War Cost War High Cost War Full Insurgency Intensity Conflict Spectrum Operations Starting here (Some work is being done now) TARGET © Dale R. Geiger 20114

Transforming the Army: Four Requirements for Success Transforming the Army: Four Requirements for Success Need Status Action Leadership Team with ACE to create “informed” leaders Exploit existing strong leadership capabilities ACE Build strong staff, strong organization Select, develop ACEs (Asst to Comdr – Enterprise) Design and deliver advanced training Process Modify “winning the cost war” template as needed Cost Info Use new tools as they come online © Dale R. Geiger 20115

Principles of Cost Analysis and Management Targeted at entry level CP11 Personnel, Sergeants, Lieutenants, Junior Captains Course Length: Three Weeks Pre-requisites: On Line Math Refresher Intermediate Cost Analysis and Management Targeted at mid career CP11 Personnel, Staff Sergeants and above, Senior Captains, Majors and above Course Length: Three Weeks Pre-requisites: On Line Math Refresher ACE Development: PCAM & ICAM © Dale R. Geiger 20116

All CEs will require basic, advanced, and master skills with a concentration in:  Readiness – Capacity management and force cost analysis  Materiel – Logistics and working capital funds cost analysis  Human Capital – Manpower cost analysis  Services & Infrastructure – Services and capital asset costing FAs and CPs that are common to all CEs should train to become a master in any CE Stackable Credentials * NOTE: Stackable credentials are based on Financial Management (BC36/CP11) career field demands for cost management, which is the Army maximum; other career fields will use a subset of these requirements. Based on the Financial Management Career Field © Dale R. Geiger

ICAM Develop advanced cost management skills Next step for those already fulfilling the role of ACE or who wish to become and ACE © Dale R. Geiger 20118

Purpose of Course Develop skills in Cost Management Includes conference, demonstration and practical exercises, and case study Emphasizes critical thinking Introduces Excel templates to facilitate calculations Introduce and apply skills in Leadership Driven Management Heavy emphasis on case studies requires students to analyze real-world scenarios. © Dale R. Geiger 20119

Remember Valley Forge Refer to the article by Ms. Matiella Why does the Army need to become more cost effective? What is the difference between Cost Benefit Analysis and a Cost-Managed Organization? How do fiscal constraints pose an “asymmetric threat”? How should we respond? © Dale R. Geiger

Program of Instruction Overview Understanding Cost Applying the Process Learning the Process Cost Benefit Analysis CBA Examples Cost Management After Action Review Cost Management Cases Cost Control Theory Org Based Control Role Based Control Output Based Control Change Management Week One Week Three Week Two © Dale R. Geiger

What Do Accountants Do? © Dale R. Geiger

What Do Accountants Do? Provide INFORMATION that is USEFUL to Decision Makers Information must be RELIABLE Free from Bias Verifiable Information must be RELEVANT Will make a difference in the decision Timely – frequency and lag time Relevance is in the eye of the User © Dale R. Geiger

What Do Accountants Do? Provide INFORMATION that is USEFUL to Decision Makers Information must be RELIABLE Free from Bias Verifiable Information must be RELEVANT Will make a difference in the decision Timely – frequency and lag time Relevance is in the eye of the User © Dale R. Geiger

What Do Accountants Do? Provide INFORMATION that is USEFUL to Decision Makers Information must be RELIABLE Free from Bias Verifiable Information must be RELEVANT Will make a difference in the decision Timely – frequency and lag time Relevance is in the eye of the User © Dale R. Geiger

What Do Accountants Do? Provide INFORMATION that is USEFUL to Decision Makers Information must be RELIABLE Free from Bias Verifiable Information must be RELEVANT Will make a difference in the decision Timely – frequency and lag time Relevance is in the eye of the User © Dale R. Geiger

What Do Accountants Do? Provide INFORMATION that is USEFUL to Decision Makers Information must be RELIABLE Free from Bias Verifiable Information must be RELEVANT Will make a difference in the decision Timely – frequency and lag time Relevance is in the eye of the User © Dale R. Geiger

What Do Accountants Do? Provide INFORMATION that is USEFUL to Decision Makers Information must be RELIABLE Free from Bias Verifiable Information must be RELEVANT Will make a difference in the decision Timely – frequency and lag time Relevance is in the eye of the User © Dale R. Geiger

Who are the Users? Users may be INTERNAL or EXTERNAL Internal users are: Managers and Leaders What types of Decisions might they make? What information might they need? External users are: Investors, Creditors, Regulators and Legislators What types of Decisions might they make? What information might they need? © Dale R. Geiger

Who are the Users? Users may be INTERNAL or EXTERNAL Internal users are: Managers and Leaders What types of Decisions might they make? What information might they need? External users are: Investors, Creditors, Regulators and Legislators What types of Decisions might they make? What information might they need? © Dale R. Geiger

Who are the Users? Users may be INTERNAL or EXTERNAL Internal users are: Managers and Leaders What types of Decisions might they make? What information might they need? External users are: Investors, Creditors, Regulators and Legislators What types of Decisions might they make? What information might they need? © Dale R. Geiger

Who are the Users? Users may be INTERNAL or EXTERNAL Internal users are: Managers and Leaders What types of Decisions might they make? What information might they need? External users are: Investors, Creditors, Regulators, Legislators and Citizens What types of Decisions might they make? What information might they need? © Dale R. Geiger

External User Needs Examining an organization’s performance over time demands CONSISTENCY Assures users that the information is prepared in the same manner over multiple time periods Deciding whether to fund competing organizations or programs demands COMPARABILITY Assures that the information from all organizations is prepared according to the same set of principles © Dale R. Geiger

External User Needs Examining an organization’s performance over time demands CONSISTENCY Assures users that the information is prepared in the same manner over multiple time periods Deciding whether to fund competing organizations or programs demands COMPARABILITY Assures that the information from all organizations is prepared according to the same set of principles © Dale R. Geiger

External User Needs Examining an organization’s performance over time demands CONSISTENCY Assures users that the information is prepared in the same manner over multiple time periods Deciding whether to fund competing organizations or programs demands COMPARABILITY Assures that the information from all organizations is prepared according to the same set of principles © Dale R. Geiger

External User Needs Examining an organization’s performance over time demands CONSISTENCY Assures users that the information is prepared in the same manner over multiple time periods Deciding whether to fund competing organizations or programs demands COMPARABILITY Assures that the information from all organizations is prepared according to the same set of principles © Dale R. Geiger

External User Needs Examining an organization’s performance over time demands CONSISTENCY Assures users that the information is prepared in the same manner over multiple time periods Deciding whether to fund competing organizations or programs demands COMPARABILITY Assures that the information from all organizations is prepared according to the same set of principles © Dale R. Geiger

Consistent Combat Ship 16" guns cruise missiles landing gates periscope ballistic missiles flight deck submersible hull helicopter pad torpedo tubes © Dale R. Geiger

Learning Check Which characteristic requires timely information? Which characteristic requires verifiable information? Why would users demand consistency? © Dale R. Geiger

Two Sides of the Same Coin required compliance structured audit stable consistency & comparability purpose goal methodology test dynamics user need needed learning customized use responsive continuous improvement external reporting managerial costing © Dale R. Geiger

Two Sides of the Same Coin external reporting managerial costing © Dale R. Geiger

Two Sides of the Same Coin external reporting managerial costing © Dale R. Geiger

Two Sides of the Same Coin external reporting managerial costing © Dale R. Geiger

Two Sides of the Same Coin external reporting managerial costing © Dale R. Geiger

Two Sides of the Same Coin external reporting managerial costing © Dale R. Geiger

Two Sides of the Same Coin external reporting managerial costing © Dale R. Geiger

Example External Report: Tax Return Why? How? Test of success? Dynamics? Internal Report: Checkbook Why? How? Test of success? Dynamics? © Dale R. Geiger

Research: System Uses at 59 Federal Organizations © Dale R. Geiger

Research: System Uses at 59 Federal Organizations © Dale R. Geiger

Research: System Uses at 59 Federal Organizations © Dale R. Geiger

Research: System Uses at 59 Federal Organizations © Dale R. Geiger

Research: System Uses at 59 Federal Organizations © Dale R. Geiger

Research: System Uses at 59 Federal Organizations © Dale R. Geiger

Research: System Uses at 59 Federal Organizations © Dale R. Geiger

Learning Check What are the basic uses for Cost Accounting systems? Should all cost systems be the same? Why or why not? © Dale R. Geiger

What about GFEBS? General Fund Enterprise Business System Used Army-wide Permits real-time posting of financial transactions Reports costs according to Budget-relevant and non-Budget-relevant Cost Objects Are GFEBS reports internal or external? © Dale R. Geiger

Unit Cost Report © Dale R. Geiger

Unit Cost Report This report shows the actual and planned quantities and actual and planned (average) unit cost for various SKFs (Statistical Key Figures) such as Headcount. © Dale R. Geiger

Discussion Questions Who would use this report? How might they use it? If you were the Senior Leader of this organization, would you be surprised that your cost per headcount was $78,919.20? What would you want to know about that number? Would this be an internal or external report for you? © Dale R. Geiger

Learning Check What characteristics would identify a report as internal to an organization? What characteristics would identify a report as external to an organization? © Dale R. Geiger

Conclusion Needs for internal cost information are as varied as the organizations themselves External cost reports: Facilitate comparison of organizations by external users Are unlikely to meet internal management information needs © Dale R. Geiger