Review of Fiscal Law December 4, 2002 DRAFT

Change Management Center 2 DRAFT Overview Purpose & Objective Challenges Management Directives Partnership Approach Project Activities & Timeframe Cost Next Steps

Change Management Center 3 DRAFT Purpose & Objective Purpose To conduct a comprehensive review of current Fiscal Laws and associated regulations and directives, and recommend legislative changes as appropriate for inclusion in the Presidents Budget Objective Implement an Overarching Network of Fiscal Laws that will provide an Integrated and Flexible Support Foundation for DoD Financial Management Operations into the 21st Century

Change Management Center 4 DRAFT Presidents Management Agenda supports change: –The Financial Management Initiative improves how the Government manages its money – reducing, for instance, the billions in erroneous payments the Government makes every year –The E-Gov Initiative harnesses the power of the Internet to make the Government more productive Congress receptive to DoD financial streamlining recommendations SECDEF: Improving Financial Management in Top Ten Challenges Overlapping Congressional/Administrative financial rules Limited DoD Freedom to Manage Disconnect between fiscal policy and business processes GAO: DoD financial modernization requires complimentary policy/process modernization No wall-to-wall review of Fiscal Law Management Directives

Change Management Center 5 DRAFT Partnership Approach Management – CMC & OSD –Senior Advisory Services –Section 800 Model - Creation of an Advisory Panel to identify, justify, and recommend legal and structural changes to complex DoD issues –Financial Management Advisory Group –Appointed by Executive Sponsor – Contractor Administrative Support –SAIC –Keane –Financial Management Services, Inc. (FMSI)

Change Management Center 6 DRAFT Partnership Approach (Cont.) Divide Project into distinct Modules –Appropriation Law –Anti-Deficiency Act –Disbursement and Collection –Financial Management Accountability Initially specialize in each module Initial findings, Quick Fixes, Business Process Reengineering (BPR) End product will ensure consistency in overall recommendations

Change Management Center 7 DRAFT Project Activities & Timeframe Phase I – Scope Identification ( 01/01/03 – 4/30/03 ) Identify issues for review – Subject Matter Expert Panel: –Appropriation Law –Anti-Deficiency –Disbursing & Collection –Financial Management Accountability Interview Public and Private Stakeholders –DoD managers –Congressional staff, CBO, GAO, OMB, FASAB, & JFMIP –Private sector experts Analyze and prioritize critical reform opportunities in statute, regulation and process –Provide Executive Sponsor Initial Findings – Quick Hits (60 & 120 days) Define scope of analysis & Key Performance Indicators NOTE: The end date of Phase I will need to be moved to04/30/03 if submission of proposed legislation is required to be submitted with the Presidents FY05 Budget and related interviews and financial management analysis may be required to be reduced.

Change Management Center 8 DRAFT Project Activities & Timeframe Phase II – Recommendation Development (7/1/03 – 12/31/03) Establish Advisory Panel Identify & Establish Congressional Champion Establish Staff, SME, Technical Expert Working Groups –Review and validate project scope –Identify issues –Propose recommendations for change & performance results expected Process or policy Regulatory Legislative Effectiveness & Efficiency Improvements Provide IPRs to Advisory Panel on Working Group progress Finalize Working Group recommendations NOTE: The end date of Phase II will need to be moved to 09/30/03 if submission of proposed legislation is required to be submitted with the Presidents FY05 Budget and related interviews and financial management analysis may be required to be reduced. The begin date for Phase II would also be moved to 05/01/03.

Change Management Center 9 DRAFT Project Activities & Timeframe Phase III – Final Report & Action Model Implementation Plan (01/01/04 – 9/30/04) Conduct Advisory Panel review Prepare final report –Background –Analysis and justification –Recommendations –Outreach and Communications Plan –Draft Legislative/Regulatory Language –Implementation Plan Submit recommendations for Presidents Budget NOTE: The end date of Phase III will need to be moved to 02/28/03 if submission of proposed legislation is required to be submitted with the Presidents FY05 Budget and related interviews and financial management analysis may be required to be reduced. The begin date for Phase III would also be moved to 10/01/03. The project team would remain in operation to respond to legislative questions and plan implementation strategies and related costs.

Change Management Center 10 DRAFT Cost Support Services Period of Performance 01/01/03 Through 03/31/04 (15 Months) Contractor Support Subject Matter Experts Internet Web Services Costs Travel Total Contractor DOD Internal Support Services Next Steps $2,055, $1,390, $340, $180, $3,966, $1,487, $843, $195, $120, $2,647, Executive Sponsor Action Items Establish Executive Sponsor/CMC Partnership Identify/Establish Advisory Panel Consider FACA Issues Identify & Allocate Funding Confirm Scope Provide DoD Technical Resources Coordinate OSD – Legislative Affairs Requirements

Change Management Center 11 DRAFT Back-Up Slides

Change Management Center 12 DRAFT Expected Changes Legislative Change Examples Anti-Deficiency Act –Problem - Fund managers can not pay vendors for purchases to required to perform work for working capital fund customers. –Possible Solution - Modify over-expenditure requirement to allow Working Capital Funds to either 1) over-expend fund balance with treasury or authorize borrowing authority from treasury equal to agency accounts receivable balance. –Result – Vendors are: 1`) paid timely, 2) provided increased working capital liquidity, 3) reduced borrowing cost, and 4) either reduced product or service cost or profits to be reinvested or returned to stockholders to be reinvested or used. Disbursing Officer Act, Executive Order 6166, Prompt Payment Act –Problem – Vendors invoices can not be paid except by authorized government disbursing officers & interest penalties are assessed for late payment (Prompt Payment Act) –Solution – Change Disbursing Officers Act, Executive Order 6166 & Prompt Payment Act to allow vendors to Electronically PULL payments from treasury general account equal to one months invoice for products or services and post audit paid invoice and adjust next month invoice for discrepancies, –Result - Vendors are: 1) paid timely, 2) provided increased working capital liquidity, 3) either reduced product or service cost or profits to be reinvested or returned to stockholders to be reinvested or used, and 4) Government payment processing cost, invoice examination and disbursing costs are reduced.

Change Management Center 13 DRAFT Federal Advisory Committee Act (FACA) Pro –Transparent, High Visibility –Use of Private Sector Recommendations Con –Cumbersome and Time Consuming –Limits use of Private Sector –Limits flexibility of participants FACA Requirements include (Department of Defense Directive ) –Establish a written charter that explains the mission of the committee; –Give timely notice of committee meetings in the Federal Register; –Have fair and balanced membership on the committee; –Open committee meetings to the public, whenever possible; –Have the sponsoring agency prepare minutes of committee meetings; –Provide public access to the information used by the committee; –Grant to the federal government the authority to convene and adjourn meetings; and –Terminate within two years unless the committee charter is renewed or otherwise FACA Trigger –Private Sector Individuals alone or in conjunction with government employees providing consensus advice at the request of a government agency

Change Management Center 14 DRAFT Organization