Fourth Estate/Defense-Wide

Update Session

Washington-ASMC National Capital Region PDI

March 8, 2018

• Budget Overview

Ms. Anne J. McAndrew (Moderator): Director, Military Personnel & Construction

• O&M Defense-Wide Budget Perspectives

Monique Dilworth: Director, Operations

• Investment Defense-Wide Budget Perspectives

Mary Ann McAfee: Associate Director, Investment

• Congressional Update

Mr. Michael Benjamin: Associate Director, Budget and Appropriations Affairs

• Fourth Estate Audit UpdateMs. Mobola Kadiri: Director, Financial Improvement and Audit Readiness

• Financial Management Workforce Update

Ms. Glenda Scheiner: Director, Human Capital and Resource Management

The Changing Business Environment within the Fourth Estate – an FM Perspective2

OUSD(C) Panel Composition

Fourth Estate Service Hour Discussions

FY 2019 President’s Budget

Overview

Ms. Anne J. McAndrew

Director, Military Personnel and Construction

OUSD(C)

National Security Strategy4

• Respond to growing political, economic, military, information competitions

– Revisionist powers such as China and Russia

– Regional dictators such as Iran and North Korea

– Transnational threats, including jihadist terrorists and transnational criminal organizations

• Protect four vital national interests

– Protect the American people, homeland, and way of life

– Promote American prosperity

– Preserve peace through strength

– Advance American Influence

A Strategy of Principled Realism

2

National Defense Strategy

• Compete, Deter, and Win to Preserve Peace through Strength

– Expand the competitive space leveraging all elements of national power

• Competition with China and Russia is central challenge

– Continue efforts to deter and counter North Korea, Iran, and terrorists

• Sustain U.S. influence and ensure favorable regional balances of power

– Build a more lethal, resilient, agile, and ready Joint Force

– Strengthen alliances and attract new partners

– Reform the Department’s business practices for greater performance and affordability

Great Power Competition is now the Primary Focus

3

FY 2019 National Defense Budget Request

(Dollars in Billions)

DoD – Military - Base Budget Request $617

DoD - Military - Overseas Contingency Operations (OCO) 69

Total DoD Military (051) $686

Other National Defense (053/054) – such as Dept of Energy 30

Total National Defense (050) $716

• Budget driven by the National Defense Strategy

• FY 19 PB - $74 Billion (10% real growth) over DoD’s current CR levels

• Appreciative of the Congress enacting the Bipartisan Budget Act of 2018

• We are committed to being good stewards of the taxpayers’ money

4

A Strategy Driven Budget

0%

5%

10%

15%

20%

25%

30%

35%

40%

1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020

DoD Outlays

Defense Outlays vs. Gross Domestic Product FY 1940 – FY 2019

5

2010 2011 2012 2013 2014 2015 2016 2017 2018* 2019

DoD Outlays % 4.5% 4.4% 4.1% 3.7% 3.4% 3.1% 3.1% 3.0% 3.1% 3.1%

1944

35.5%

1953

11.3%1968

8.6% 1985

5.7% 2010

4.5% 2019

3.1%

“America can afford survival” – Secretary Mattis

*Reflects annualized Continuing Resolution funding levels

$470

$490

$510

$530

$550

$570

$590

$610

FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19

FY 2011 Enacted with Inflation FY 10-11-12 Actuals Original BCA Caps Prior BBA Caps

Original BCA Caps

FY 2018 CR*

Prior BBA Caps

Defense Base Budget(Dollars in Billions)

6

-$406.5 billion

FY 2018 Request

Begins Recovery from over $400 Billion of Lost Capability

FY 2018 BBA

*FY 2018 CR ($529B) + $15B of OCO-for -base requirements BCA = Budget Control Act BBA = Bipartisan Budget Acts (2011, 2013, and 2018)

FY 2019 Request

$0

$100

$200

$300

$400

$500

$600

$700

$800

FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23

DoD Funding from FY 2010 Through FY 2023

Numbers may not add due to rounding(Then Year Dollars in Billions)

Base Budget OCO/Other Budget

(Discretionary Budget Authority)

524

580 606

691 687

645

560578 581

163 159 115

82 85 6382

528 528 495 496 497 521

7

5

Missile Defense*

617

686

69

CR

*Division B, P.L. 115-96, DoD Missile Defeat and Defense Enhancements Appropriations Act, 2018

2020

2020

681 694 722

701 714727 742

530 707523

59

83

612

Increases funding $74 Billion (10% real growth) over CR Levels

FY 2019 President’s Budget Military End Strength

1/ FY 2017 Actuals

2/ FY 2018 PB Request. FY 2018 NDAA (P.L. 115-91) increases FY 2018 PB end strength by 9.5K (Army +8.5K (Active +7.5K Reserve +0.5K; Guard +0.5K); USMC +1.0K).

8

Builds Capacity & Lethality – FY 2019 +25.9K and +56.6K by FY 2023

Military Component FY 20171/ FY 20182/ FY 2019 FY 2023 Δ FY18-19 Δ FY18-23

Active Components (AC)

Army 476,245 476,000 487,500 495,500 +11,500 +19,500

Navy 323,944 327,900 335,400 344,800 +7,500 +16,900

Marine Corps 184,514 185,000 186,100 186,400 +1,100 +1,400

Air Force 322,787 325,100 329,100 338,800 +4,000 +13,700

TOTAL AC 1,307,490 1,314,000 1,338,100 1,365,500 +24,100 +51,500

Reserve Components (RC)

Army Reserve 194,318 199,000 199,500 200,000 +500 +1,000

Navy Reserve 57,824 59,000 59,100 59,200 +100 +200

Marine Corps Reserve 38,682 38,500 38,500 38,500 -- --

Air Force Reserve 68,798 69,800 70,000 70,200 +200 +400

Army National Guard 343,603 343,000 343,500 344,500 +500 +1,500

Air National Guard 105,670 106,600 107,100 108,600 +500 +2,000

TOTAL RC 808,895 815,900 817,700 821,000 +1,800 +5,100

Army AC + RC 1,014,166 1,018,000 1,030,500 1,040,000 +12,500 +22,000

Navy AC + RC 381,768 386,900 394,500 404,000 +7,600 +17,100

Marine Corps AC + RC 223,196 223,500 224,600 224,900 +1,100 +1,400

Air Force AC + RC 497,255 501,500 506,200 517,600 +4,700 +16,100

TOTAL AC + RC 2,116,385 2,129,900 2,155,800 2,186,500 +25,900 +56,600

Major Investments in the FY 2019 Budget

9

FY 2018 Request FY 2019 Request

Qty $B Qty $B

Aircraft

F-35 Joint Strike Fighter (Air Force, Marine Corps, Navy) 70 10.8 77 10.7

KC-46 Tanker Replacement (Air Force) 15 3.1 15 3.0

F/A-18E/F Super Hornet (Navy) 14 1.3 24 2.0

AH-64E Apache Attack Helicopter (Army) 63 1.4 60 1.3

VH-92 Presidential Helicopter (Marine Corps) - 0.5 6 0.9

P-8A Poseidon (Navy) 7 1.6 10 2.2

CH-53K King Stallion (Marine Corps) 4 1.1 8 1.6

Shipbuilding

Virginia Class Submarine 2 5.5 2 7.4

DDG-51 Arleigh Burke Class Destroyers 2 4.0 3 6.0

Littoral Combat ships (LCS) 2 1.7 1 1.3

CVN-78 Class Aircraft Carrier 1 4.6 - 1.8

Fleet Replenishment Oiler (T-AO) 1 0.5 2 1.1

Towing, Salvage, and Rescue Ship (T-ATS) 1 0.1 1 0.1

Expeditionary Sea Base - - 1 0.7

Space

Evolved Expendable Launch Vehicle (Air Force) 3 1.9 5 2.0

Global Positioning System (GPS) (Air Force) - 1.1 - 1.5

Space Based Infrared System (Air Force) - 1.5 - 0.8

Numbers may not add due to rounding

(Base + OCO)

Includes Procurement and Research, Development, Test and Evaluation (RDT&E) funding

FY 2019 Budget

• Driven by the National Defense Strategy

• Improves the lethality and capability of the Joint Force

• Begins reforming DoD’s business operations by using best practices to centralize common services

• Needs Congress to pass this budget on time – end Continuing Resolutions

10

“This national defense strategy will guide all our actions, aligning the

department's three lines of effort to gain synergies. But we recognize no

strategy can long survive without necessary funding and the stable,

predictable budgets required to defend America in the modern age.”

– Secretary Mattis

Defense-Wide

Budget Perspectives

Ms. Monique Dilworth

Director, Operations

OUSD(C)

Defense-Wide Budget Update

• FY 2018 – Proposed additional funding resulting from the FY 2018 Bipartisan Budget Agreement

• O&M Flexibilities requested due to late arrival of funds

• Greater scrutiny on how we spend the additional funds

• Mid-year review coming soon!

• FY 2019 - Defense-Wide comprises 17%, or $115.8 billion, of the President’s Budget Request (includes base and OCO funding)

• Be able to make the link between your programs and the National

Defense Strategy

• O&M, Defense-Wide justification materials – good improvement!

Staffer days are coming up

• FY 2020 – What to expect:

• OMB initiative to move enduring OCO costs into the base budget.

• Greater use of data analytics during the Program Budget Review

2

Career Talk – OUSD(C) Needs You!

Immediate Supervisor is most important person at any point in

time. Move on and get a fresh start if the relationship is not

supportive

1. Write very well – even your emails! This will set you apart.

Find opportunities to write if your current job doesn’t require

much of it.

2. Produce high quality work 100% of the time! Know your stuff.

– Prepare documents that easily convey information to leadership.

– Make it easy for your leadership to understand (it’s not about you and how

smart you are). Always keep information concise and simple.

– The reward for good work is more work, but usually more interesting and

high visibility work!

3. Get along well with others! (inside and outside of your

organization)

– People are always watching. You are interviewing for your next promotion

on a daily basis.

Resumes – Avoid copying your position description!3

Defense-Wide

Budget Perspectives

Ms. Mary Ann McAfee

Associate Director, Investment (Ground/Sea/Other)

OUSD(C)

Congressional Update

Mr. Michael Benjamin

Associate Director, Budget Appropriations Affairs

OUSD(C)

Congressional Update

FY 2018/2019 Budget Deal

CR Expiration

FY 2018 Budget Briefings

FY 2018 Omnibus Timeline Challenges

FY 2019 Posture Hearings/Issues

Joint Select Committee on Budget Process Reform

Appropriations Leadership Changes

Another Continuing Resolution??2

Fourth Estate

Audit Update

Ms. Mobola KadiriDirector, Financial Improvement and Audit Readiness

OUSD(C)

DoD Consolidated Audit

• DoD has started its first full financial statement audit

o Select defense agencies and funds are subject to stand-alone audits

o Remaining defense agencies, activities and funds will be audited as part of DoD’s consolidated financial statement audit

• The ODCFO will represent management to the auditors, but all of the Fourth Estate will be subject to audit annually. We will be using auditor findings to measure progress at the accountable levels and provide feedback into senior executive/organizational assessments

2

DoD Consolidated Audit StructureComprised of Over 24 Stand-Alone Audits and an Overarching Consolidated Audit

3

DoD-Wide Consolidated Audit Performed by DoD OIG

Included in the Consolidated Audit

5% Budget, 3% Assets

Those DoD reporting entities not undergoing stand-alone

audits will be included in the consolidated audit.

DoD OIG will perform internal controls and substantive testing

over activities and balances.

Stand-Alone Audits

95% Budget, 97% Assets

DoD OIG (as the Consolidated Auditor) will assume responsibility for or make

reference to the audit opinions of each component auditor (performed by an

independent public accounting firm).

Army

General Fund

Air Force

General Fund

U.S. Army Corps

of Engineers –

Civil Works

Military

Retirement Fund

Medicare-Eligible

Retiree Health

Care Fund

DCAA

DFAS Working

Capital Fund

DHA-CRM

USTRANSCOM

USSOCOM

DoD Classified

DLA

Strategic

Materials

DLA

Working Capital

Fund

DLA

General Fund

DeCA

DHPDISA General

Fund

DISA

Working Capital

Fund

DoD OIG

Army Working

Capital Fund

Navy

General Fund

Navy Working

Capital Fund

Air Force Working

Capital Fund

U.S.

Marine Corps

General Fund

No Opinion Modified Unmodified

JCS

(incl. NDU)DTRADCMA

DARPADoDEAMDA

DAU

DHRA

OEADSS DTIC DMA

CBDP

DSCAWHS

Other TI-97 Funds

Provided to Army by

OSD

Other TI-97 Funds

Provided to Navy by

OSD

Other TI-97 Funds

Provided to Air Force

by OSD

DOTE DPAA DTSA DFAS GF MHPI

Burden Sharing

Account by Foreign

Allies, Defense

Support for U.S.

Relocation to Guam

Activities, Defense

Host Nation Support

for U.S. Relocation

Activities, Defense

DoD Education

Benefits Fund

Emergency

Response

Fund, Defense

Homeowners

Assistance Fund,

Defense

Mutually

Beneficial

Activities

Voluntary

Separation

Incentive

Trust Fund

Defense

Gift Fund

National

Security

Education

Trust Fund

Defense

Cooperation

Account

ODCFO Fourth Estate Audit Support &

Oversight - what’s new?• The ODCFO is performing additional functions in support of financial management operations and audit

regimen:

o Performing Fourth Estate financial statement review activities

o Developing tools, documentation and training

Universe of transactions

NFR tracking tool

o Instituting a risk based A-123 Program with additional emphasis on fraud as required by the OMB A123 and fraud reduction and data analytics act

o Monitoring resource allocation and oversight for remediation and sustainment

o Maximizing the use of Defense Agencies Initiative (DAI) capabilities

Focus on implementing existing DAI capabilities: budget formulation, direct treasury disbursing, and purchase request data standard/procurement data standard, acquire to retire (property)

Emphasis is on process standardization and efficiency

4

• Beginning with Q2 FY 2018 financial statement information, OUSD(C) FIAR will be performing new financial statement

analysis oversight procedures on ODO Financial Statements.

• AUD-IT will have the capability to produce the output referenced below by the end of Q2 2018

• ODOs will be expected to work with OUSD(C) FIAR to resolve issues identified during monthly tasks and document

and evidence quarterly fluctuations.

*For the purposes of ODO financial statement analysis tasks, variance analysis refers to the analysis of variances between accounting system detail and accounting system trial balances.

**For the purposes of ODO financial statement analysis tasks, fluctuation analysis of quarterly fluctuations in account balances from the previous quarter of the same year and the same

quarter of the previous year. Documentation of the analysis will include the business reasons for fluctuations.

Fourth Estate Financial Statement Review Activities

Header (Arial, 14 pt)

5

The ODCFO Auditable Universe of Data –

Intelligence Tool

• The Auditable Universe of Data – Intelligence Tool (AUD-IT) is a UoT tool that is being developed by ODCFO

• It is an integrated, web-based system that houses transactional data from all DoD accounting systems and major feeder systems that generate accounting events

• AUD-IT provides standardized and normalized UoT for Reporting Entities

• AUD-IT is being used to support audits of the Fourth Estate by:

– Reconciling financial statement data, including:

o General ledger details to the unadjusted trial balance

o Financial statement balances to adjusted trial balance to unadjusted trial balance

– Providing a universe of data for audit sampling and testing

6

As part of its oversight of the Fourth Estate, ODCFO will be responsible for

collecting, prioritizing, and assigning Fourth Estate findings

DoD Audit Feedback Cycle

7

Pre-

Planning

Phase

Planning

Phase

Internal Control

PhaseTesting Phase

Reporting

Phase

Each Organization

Collects and

Prioritizes Findings

Organization

Leadership

Assigns

Findings for

Action

Responsible

Parties

Develop and

Implement

Corrective

Actions

Planning

Phase

Internal Control

PhaseTesting Phase

Reporting

Phase

Year 1 Audit Year 2 Audit

Audit Finding

Audit Finding

Audit Finding

Auditor

Validates

Corrective

Actions and

Closes or

Reissues

Findings

Reissued Finding

A-123 Cycle

to Sustain

Closed

Fin

din

g

Audit

Finding

Audit

Finding

Applicable Stakeholders Support Remediation Efforts

Tracking significant audit findings allows senior leaders to hold responsible parties accountablefor addressing root causes of issues and closing audit findings

Audit Findings (NFRs) Status Reporting

Dashboards can be filtered by fiscal year, open/closed status, reporting entity, organization responsible for the finding, etc.

All Reporting Entities

All Fiscal Years

All Reporting Entities

(Notional)

Air Force

All Fiscal Years

0

500

Total

Closed Conditions by Fiscal YearAs of xx/xx/xxxx

FY2018 FY2019 FY2020 FY 2021

All Reporting Entities

0

500

Air Combat Command Air Education and TrainingCommand

Air Force Global StrikeCommand

Air Force Special OperationsCommand

NFRs Issued by Major CommandAs of xx/xx/xxxx

Issued Closed

0

200

400

Army Navy Air Force USMC Fourth Estate ServiceProvider

NFRs Issued by Material Weakness Area

Equipment Assets FBwT IT Financial Reporting

-10%

10%

30%

50%

FY19 FY20 FY21 FY22 FY23 FY24

% Closed NFRs at end of Fiscal Year

AF Army MC Navy 4th Estate Service Provider

0 200 400 600 800 1000 1200 1400

Equipment Assets

Fund Balance with Treasury

Information Technology

Other

Status of NFRs by MW Area

Open Closed

8

A-123 Program Strategic Approach: Shifting

focus from FY 2017 through FY 2018

Prior Approach Drive Strategy and Improvements Drive Sustainment

• Reliance on self-reporting of MWs from components.

• Limited oversight throughout FY from PSAs and SAOs to support Annual SOA

• Conduct comprehensive risk assessment and control identification to determine testing area focus in FY 2018.

• Perform testing of controls that are properly designed and remediation is complete.

• MW CAP tracking and progress reports

• Incorporate areas where remediation is complete into live A-123 Internal Control Program testing plans.

• Train (MICP Day) and develop and

distribute guidance/toolkits.

• Provided “high risk” areas for program

based on DoD-wide MW Areas reported

through FY 2016 AFR.

• Reconcile to DoDIG/GAO Audits

• Plan and execute control testing based

on risks and material weaknesses

reviews.

• Data calls to gather population of MWs

reported by DoD Components.

• Annual compilation and reporting of SOA

• Drive standardization on DoD-wide risk and

control deficiencies definition and

assessment criteria.

• Increase program management oversight

and ensure component coordination and

accountability.

• Routine monitoring of remediation efforts (prior NFRs and newly identified).

• Testing of key business processes by DoD

Components and by DCFO as assigned.

• Validate remediated material weaknesses.

• Routine monitoring of remediation efforts

• Annual testing within A-123 Internal

Control Program

• Maintain A-123 Internal Control

Program website with posted

toolkits

• Monitor milestone progress through

dashboards.

FY 2019 OutwardFY 2017 FY 2018

Goal: Strong Internal Control Environment

ProactiveReactive

Eval

uat

e “h

ealt

h”

of

the

curr

ent

co

ntr

ol

envi

ron

men

t ac

ross

Dep

artm

ent.

9

Financial Management

Workforce Update

Ms. Glenda Scheiner

Director, Human Capital and Resource Management

OUSD(C)

Financial Management Workforce Update

• Senior Leader Attendance at Outside Events Policy

• Direct Hire Authority Update

• Expeditionary Civilian Workforce

• Individual Development Plan (IDP) Pilot

• Instructor-led Virtual Training Pilot

• Coming Soon: FM STARs Pilot

2

Open Q & As