1. Fiscal Law Proposal (Removing Impediments and Defining Financial Management in the 21 st Century) Mary Margaret Evans Director

2. Change Management Center 2 The Challenge The relationship between the legislative and the executive branches is poorly defined when it comes to financial management. There are no agreed upon financial reports, key indicators, etc. Because the relationship is unclear, the Fiscal Law that has been enacted is reactive, based on symptoms of this unclear relationship. Outdated and cumbersome fiscal laws are impediments to the creation of a truly streamlined financial system. … financial systems that limit the ability to see and manage the enterprise, and processes that discourage action and reasonable risk at the working level are hallmarks of a mature enterprise that must be transformed. - QDR Report

3. Change Management Center 3 The Assertions It is possible to develop a partnership between Congress (Legislative Branch) and the President/OMB (Executive Branch) so that expectations are clear with regard to accounting information needs. It is necessary to draft proposed legislation that: –balances accountability with trust and freedom to manage –facilitates the implementation of technological and process changes in the operation of the agency financial management systems –allows for testing of proposed new regulations/products before implementing so that Congress has metrics with which to make an informed decision –provides for a defined set of processes for budgeting, managing, reporting and auditing that covers a set of years with built-in flexibility for the unexpected –within the entire Agency budget or within set areas of the Agency It is necessary to develop a Federal fiscal policy set of regulations (Government GAAP) that will enable each Agencys accounting, management and reporting systems to be agile and flexible, while maintaining the Agencys accountability to OMB and Congress. It is possible to develop accounting systems based on a new management model.

4. Change Management Center 4 The Proposal CMC/OSD(C) to partner to: Work with Congress to define the new relationship Build a new Fiscal Law foundation that will: –Manage by communicating goals and objectives –Establish measurable performance criteria –Empower people to do what needs to be done Executes this new Fiscal Law foundation thru an action plan that: –Supports an efficient and effective DoD workplace based on eBusiness principles –Integrates fiscal processes seamlessly with DoD business processes –Supports an entrepreneurial based accounting system that utilizes commercial banking and financial institution services and practices

5. Change Management Center 5 The Phases: Design – Execute - Analyze Phase 0 – Define the Congressional relationship –Define the sponsors –Assemble the working team –Define Fiscal Law impediments Phase 1 – Draft the proposed fiscal law –Create clear performance metrics –Increase financial management flexibility –Provide for the freedom to manage while holding public officials accountable –Allow for testing of promising new regulations/products –Define clear processes for budgeting, managing, reporting and auditing Phase 2 – Implement new Fiscal law Phase 3 – Work permission to test future fiscal law proposals in certain agencies (side by side comparison with old law to be replaced) Six months per phase

6. Change Management Center 6 How Fiscal Law Benefits DoD Compliments the FMMP effort – Clean/Clear laws allow for a streamlined accounting system Sanctions fly before you buy testing process before enacting new fiscal practices Promotes dialogue across stovepipes Promotes the application of tangible business benefits –Real returns on resource investment –Increased efficiency and effectiveness –Introduces best commercial fiscal practices into the government Gives the DoD Managers the Freedom to Manage

7. Change Management Center 7 What We Need From You Be the champion for this process Match CMC resources for the initiative Be the lead for the Senior Leadership Team efforts in DoD Headquarters

8. Change Management Center 8 Backup Slides

9. Change Management Center 9 Members Larry Lanzilotta Ken Krieg Jerry Williams/Mark Forman Karen Alderman David Walker Don Hammond Joseph E. Schmitz Appropriate Hill Staffers --------------------------- Federal Position ------------------------ DCFO Executive Secretary to the SEC, Special Assistant to the SecDef Office of Management & Budget Joint Financial Management Improvement Program (JFMIP) Comptroller General, GAO Fiscal Assistant Secretary, Dept of Treasury DoD IG As Assigned Proposed Senior Leader Team

10. Change Management Center 10 Members John Cherbini Frank Derville Irvin Faunce Gerald Murphy Anthony McCann Clyde McShan James Reid William Shelton Frank Sullivan Ronald Young DoD Staff 3-5 --------------------------- Federal Position ------------------------ GAO, Deputy Director, Accounting & Financial Management House of Representatives, Chief Financial Officer Treasury, Deputy Commissioner, Financial Management Service Treasury, Fiscal Assistant Secretary DHHS, Assistant Secretary Management & Budget Commerce, Deputy Chief Financial Officer Energy, Deputy Controller Veterans Affairs, Associate Deputy Assistant Secretary, Financial Policy Veterans Affairs, Deputy Chief Financial Officer Federal Accounting Standards Advisory Board, Executive Director Enterprise-wide Perspective – Retired & Active Duty – Financial Oriented Proposed Advisory Committee We may also want to think about creating an Advisory Committee for the DoD.

11. Change Management Center 11 Identification of Fiscal Laws Impeding F/M Technological Changes Identification of F/M Technological and Process Changes Consult with Central Financial Agencies and Congressional Staff Draft Legislation to Support F/M Technological and Process Changes Draft regulations Advisory Committee Activity

12. Change Management Center 12 Revitalizing the DoD Establishment The need to transform America's military capability encompasses more than strategy and force structure. Transformation applies not just to what DoD does, but how DoD does it. A transformed U.S. force must be matched by a support structure that is equally agile, flexible, and innovative. Transforming DoD's outdated support structure is a key step in achieving a more capable fighting force. DoD maintains between 20 and 25 percent more facility infrastructure than needed to support its forces - at an annual excess cost of $3 to $4 billion. DoD's financial systems are decades old and not well interconnected, and accounting and auditing processes would struggle to meet the standards of generally accepted accounting principles. DoD's business processes and regulations seem to be engineered to prevent any mistake. By doing so, these regulations often discourage taking any risk.. While America's business have streamlined and adopted new business models to react to fast-moving changes in markets and technologies, the Defense Department has lagged behind without an overarching strategy to improve its business practices.

13. Change Management Center 13 Examples of the Problem Write out problem law addressed, problem was not solved, write out successor law – another layer added. CFO ACT FASAB standards BPA ACT 1950 EFT GPRA CMA