Review of Fiscal Law

December 6, 2002

Judith S. Boyd

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Overview

Purpose & Objective

Challenges

Management Directives

Partnership Approach

Project Approach

Project Activities & Timeframe

What We Need From You

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Purpose & Objective

Purpose• Comprehensive review of the laws and associated rules, directives and

processes governing DoD Financial Management to support the President’s Management Agenda.

Objective• Recommend the legal changes, modifications and repeals necessary to

transform DoD financial management into a coordinated network of laws that will result in a flexible and integrated foundation for the 21st Century.

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Challenges

Overlapping / Conflicting Congressional/Administrative financial rules

Limited DoD “Freedom to Manage” Disconnect between fiscal policy and business processes No “wall-to-wall” review of Fiscal Law GAO: DoD financial modernization requires complimentary

policy/process modernization

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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

Congress seems receptive to DoD financial streamlining recommendations

SECDEF: Improving Financial Management in “Top Ten”

Management Directives

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Partnership Approach Management – Executive Sponsor & DoD Components

– Fiscal Law Advisory Panel• Identify, justify, and recommend legal, regulatory and process

changes– Contractor Support

• SAIC• Keane• Financial Management

Services, Inc. (FMSI)– Complementary to FMEA/FMMP

DoD Executive Sponsor

Steering Group

Fiscal Law Contractor

Support

Government Expert Advisors &

Working Group

Fiscal Law Advisory Panel

(“Section 800”)

Congress

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Project Approach

“Modular” Approach

Final Deliverable: Strategic Plan for Fiscal Law

Develop and Implement Comprehensive Legislative Recommendations

Interim: “Quick Hits” Tactical Opportunities

Process Transformation

Regulatory Changes

Coordinated Project Approach to avoid redundancies and maximize success

Review of Fiscal Law in context with FMEA/FMMP and Contract

Law/FASA

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Project Activities & Timeframe

Phase I – Scope Identification (01/01/03 – 6/30/03*)

Identify issues for review– Review and validate project scope– Identify issues– Propose recommendations for change & performance results expected

• Legislative• Non-legislative

Interview Public and Private Stakeholders– DoD managers– Congressional staff, CBO, GAO, OMB, FASAB, & JFMIP– Private sector experts

Analyze and prioritize critical improvement opportunities in statute, regulation and process

– Provide Executive Sponsor Initial Findings – “Quick Hits” (60 days following FMEA report release)

Define scope of analysis & Key Performance Indicators

*Assumes FMEA report release on 4/30/03

Phase 1: 01/01/03 – 6/30/03

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Project Activities & Timeframe

Phase II – Recommendation Development (05/01/03 – 9/30/03)

Establish Advisory Panel

Identify Role and Engage OSD Legislative Affairs

Spin off “Quick Hit” opportunities for implementation (ongoing)

Provide IPRs to Steering Group Provide recommendations for initial Advisory Panel review

Finalize legislative recommendations

Phase II: 05/01/03 – 9/30/03Phase 1: 01/01/03 – 6/30/03

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Project Activities & Timeframe

Phase III – Final Report & Action Model Implementation Plan (10/1/03 – 02/28/04)

Prepare final report

– Background

– Analysis and justification

– Recommendations

– Outreach and Communications Plan

– Draft Legislative/Regulatory Language

– Legislative Strategy

Conduct final Advisory Panel review

Submit recommendations for President’s Budget

Begin Phase IV planning for ongoing Fiscal Law review

Phase III: 10/1/03 – 02/28/04Phase II: 05/01/03 – 9/30/03Phase 1: 01/01/03 – 6/30/03

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What We Need From You

Continue Advocacy for MID 909

Determine Executive Sponsor

Further Guidance/Your Insights

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Back-Up Slides

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Alternative Timetables

Option 1

• FY05 President’s Budget = 70% solution (Feb 04 PB)

Option 2

• FY05 out-of-cycle = 100% solution possible (May 04)

Option 3

• FY06 President’s Budget = 100% solution (Feb 05 PB)

Option 4

• SECDEF mandated “800 Panel” = 100% solution (May 03/May04)

• Congress affirms the SECDEF actions (???)

Option 5

• Congressionally mandated “800 Panel” (FY91 NDAA Review of Acquisition Law) = 100% solution (???)

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Cost

Total Estimated Cost $5.0M (15 months)

Contractor Support

Subject Matter Experts

Internet Web Services Costs

Travel

Total Estimated Cost

$2.6M

$1.7M

$0.5M

$0.2M

$5.0M

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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)

– 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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Federal Advisory Committee Act (FACA) FACA Trigger

– Private Sector Individuals alone or in conjunction with government employees providing consensus advice at the request of a government agency

Pro– Transparent, High Visibility– Use of Private Sector Recommendations– Led review of acquisition law (FY91 NDAA)

Con– Cumbersome and Time Consuming– Limits use of Private Sector– Limits flexibility of participants

FACA Requirements include (Department of Defense Directive 5105.4) – 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