Review of Fiscal Law

December 4, 2002

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Overview Purpose & Objective

Challenges

Assertions

Partnership

Basic Approach

Fiscal Law Review

Process

Project Organization

Envisioned Changes

Project Activities & Timeframe

Cost

Next Steps

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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 Fiscal Year 2005 President’s Budget.

ObjectiveImplement an Overarching Network of Fiscal Laws that will provide an

Integrated and Flexible Support Foundation for DoD Financial Management Operations into the 21st Century

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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

Pete Aldridge, USD (AT&L) Wednesday, August 15, 2001– “…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.”

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Assertions Congress receptive to DoD financial streamlining recommendations DoD Fiscal Policy can accommodate commercial “best practices” DoD resources available to manage the exercise President’s 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.

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Partnership CMC/OSD (Comptroller) partner to:

– Engage key stakeholders to bolster support for Fiscal Law modernization

– Scope modernization efforts to address immediate Fiscal Law concerns and impediments

– Transform our current way of doing business to respond to dynamic business environment

– Craft framework to support and promote business reform and financial modernization

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Basic Approach Management – CMC & OSD Controller

– 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 – Subject Matter Experts - private sector –

former civilian agencies SES financial managers

– Contractor Administrative Support• SAIC• Keane• Financial Management Services, Inc.

Two distinct “Modules”– Financial Management Law– Contract Law

Initially specialize in each module– Focus on expertise within each module

End product will ensure consistency in overall recommendations

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Review of Fiscal Law

•Appropriation Law•Anti-Deficiency Act•Disbursements & Collections•Accountability

• Acquisition Law• Procurement Law

Financial Mgt Contract Law

Fiscal LawModules

Executive SponsorChange Management Center

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Process CMC Consortium Led by Science Applications International

Corporation (SAIC)

– Keane Consulting Group

– Financial Management Services, Inc. (FMSI)

Consortium Has Subject Matter Experts for each Module

– Develop “As Is” Fiscal Law

– Conduct interviews with current key decision-makers/managers

• Basic question: “What needs to be changed and why?”

– Develop Draft “To Be” Fiscal Law

After completion: Submit to Section 800 “Fiscal Law Advisory Panel”

– Current Public/Private Decision-Makers

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Project Organization

Advisory Panel & Subject Matter Expert Approach for Fiscal Law Modernization

DoD Executive Sponsor

Fiscal Law Advisory

Panel

Change Management Center Team

Fiscal Law Subject Matter

Experts

Fiscal Law Legislative Changes

Fiscal Law Contractor

Support

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Envisioned ChangesLegislative 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)

– Possible 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.

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Project Activities & TimeframePhase I – Scope Identification (01/1/03 – 06/30/03)

Identify issues for review – Subject Matter Expert Panel:

– Contract Law

– Financial Management Law

• Appropriation Law

• Anti-Deficiency

• Disbursing & Collection

• Financial Management Accountability

Conduct interviews to understand the current fiscal environment

– DoD managers

– Congressional staff, CBO, GAO, OMB, FASAB, & JFMIP

– Private sector experts

Conduct research and analysis of applicable and most critical areas of statute, regulation and process

Define scope of analysis & Key Performance Indicators

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Project Activities & TimeframePhase 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

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Project Activities & TimeframePhase 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 President’s Budget

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CostSupport Services

Contractor Support

Subject Matter Experts

Technology Support

– Internet Web Services

– Project & Knowledge Management Software & Services

DOD Internal Support Services

Travel & Sundry

Total Cost

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Next StepsExecutive Sponsor Drives Change Establish Executive Sponsor/CMC Partnership

Identify & Allocate Funding

Identify Scope

Identify DoD Technical Resources

Identify/Establish Advisory Panel