1. DRAFT Fiscal Law Proposal

2. Fiscal Law Project 2 DRAFT Fiscal law is the body of law that governs the availability and use of federal funds and accountability for federal financial management. Only Congress has the ability to appropriate funds to be spent by federal agencies. Congress imposes limitations on federal financial managers that limits spending and dictates financial control through: –Contract Law Procurement Official Authorities - Federal Acquisition Regulations - –Financial Management Law Appropriation Law - Purposes for which the money is spent, Period of availability for obligation, and Maximum amount an agency may spend on particular elements of a program Anti-Deficiency Act – Limitation on apportionment, obligation, and expenditure Disbursement and Collection – Authorizing, certifying, and disbursing Officer delegations, collection and deposit of public monies Financial Accountability – Accounting, reporting, audit, and internal control Background

3. Fiscal Law Project 3 DRAFT EO 6166 FAIR CFO Act PCBCCMIAGMRAGPRAEFTEDI A- 76 JFMIP Regs Klinger Cohen Financial Statement Audits FASAB Standards B&A Act 1921 BPA Act 1950 Pete Aldridge, USD (AT&L) Wednesday, August 15, 2001 – …the real problem is, and that is if you look at the tooth-to- tail ratio in the department, we have far more tail than we do tooth. The overhead structure is out of balance with the procurement structure and the force structure. And that the challenge within the departments is to go after those overhead activities that they would find to be marginal and to reallocate those resources back to procurement and the things they need for readiness. The following is an excerpt from the Quadrennial Defense Review Report. Although directed at the Force, the goal equally applies to the transformation of the Defense Finance and Accounting Service: To achieve these operational goals, the Defense Department must transform military training. Three basic tenets describe the changes the Department will implement to transform training in parallel with the transformation of its missions and forces: Use distributed learning technologies to reengineer individual training and job performance. The Federal Governments financial management process has been built on a patchwork of Fiscal Laws that have been enacted since the formation of the nation. Like snowflakes, these Fiscal Laws have fallen and have built upon one another to form an ineffective foundation upon which modern technology cannot be built and related advantages cannot be achieved. The Problem

4. Fiscal Law Project 4 DRAFT Assumptions Current fiscal law represents a set of cumbersome laws, regulations, and policies that are perceived by federal agencies as excessively : –Complicated –Legislated –Regulated –Audited –Ambiguous A wall-to-wall review of fiscal law has not occurred Impacts on Federal Agencies

5. Fiscal Law Project 5 DRAFT Challenge Altering the perception of and making improvements to the current DoD fiscal environment requires assembling the justification necessary to prompt reform, through: –Regulation changes –Process improvements –Statutory changes DoD IG Audits –Limited integration of DoD financial systems create and perpetuate inefficiencies –Six year backlog of contract closure actions –DFAS has 148 debt collection cases worth $12.6 million GAO –Contractors refunded $488 million in overpayments in FY 2001 –DoD business practices remain ineffective Addressing Fiscal Law Impediments in DoD

6. Fiscal Law Project 6 DRAFT Solution Rebuild the Fiscal Law foundation – Enact New Legislation that supports a modern financial management structure : Based upon modern technology and following a rapid prototype methodology in knowledge center - change management philosophy and process approach. Designed by people who have the expertise, experience, and understand the federal financial management process and the politics. Managed by communicating goals and objectives, establishing key factors for measuring success, and empowering people to do what needs to be done. Establish a Vision of the DoD financial management environment that represents : A Virtual efficient and effective DoD workplace – reduced overhead burden. E-Government – Electronic Commerce - Internet based. Enterprise-wide - commercial operated and managed Entrepreneurial based and utilizing commercial banking and financial institution services & practices. DoD secured, regulated, audited, and analyzed.

7. Fiscal Law Project 7 DRAFT Approach Creation of an Advisory Panel to identify, justify, and recommend legal and structural changes to complex DoD issues –Consensus for change by utilizing appropriate subject matter and support resources Section 800 Panel focused on streamlining DoD procurement –Panel Membership: recognized public/private experts in the law –Final Report: Analysis of each law, including: Legislative history Description of current role of the statue Recommendation to retain, repeal, or modify 800 Panel Results –600 statute changes/300 repeals –Enactment of FASA, FARA(Clinger-Cohen) Section 800 Model

8. Fiscal Law Project 8 DRAFT Approach Executive Sponsor – project champion Appointed Advisory Panel –Membership Sources include: –Comptroller (Modernization, Audit, Budget, Policy) –DoD Financial Community (DFAS, DCMA, etc.) –Service Branches –DoD Agencies –General Counsel –Legislative Affairs –Private Sector Trade Associations –Other DoD/non-DoD members determined by Executive Sponsor Change Management Center –Contractor support staff –DoD Technical Experts (current/retired) –Subject Matter Experts – DoD and private sector Advisory Panel for Fiscal Law Modernization

9. Fiscal Law Project 9 DRAFT Project Organization DoD Executive Sponsor Fiscal Law Advisory Panel Change Management Center Team Fiscal Law Subject Matter Experts Fiscal Law Legislative Changes Approach: Advisory Panel & Subject Matter Expert Approach for Fiscal Law Modernization

10. Fiscal Law Project 10 DRAFT Identify issues for review – Subject Matter Expert Panel: –Anti-Deficiency –Disbursing Offices Act & Executive Order 6166 –Financial Management Accountability – Budget & Accounting Procedure Act - 1950 Conduct interviews to understand the current fiscal environment –DoD managers –Congressional staff –Private sector experts Conduct research and analysis of applicable and most critical areas of statute, regulation and process Define scope of analysis Project Activities & Timeframe Phase I – Scope Identification (01/1/03 – 06/30/03)

11. Fiscal Law Project 11 DRAFT Establish Advisory Panel Establish Staff, SME, Technical Expert Working Groups –Review and validate project scope –Identify issues –Propose recommendations for change Process or policy Regulatory Legislative Provide IPRs to Advisory Panel on Working Group progress Finalize Working Group recommendations Project Activities & Timeframe Phase II – Recommendation Development (7/1/03 – 12/31/03)

12. Fiscal Law Project 12 DRAFT Project Activities & Timeframe 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 FY05 Presidents Budget Phase III – Final Report & Action Model Implementation Plan (3/1/03 – 8/31/03)

13. Fiscal Law Project 13 DRAFT Next Steps Executive Sponsor Drives Change –Establish Executive Sponsor/CMC Partnership –Identify Scope –Identify DoD Technical Resources –Identify/Establish Advisory Panel