Accounting for transformation.

Background

Transformation: Everyone in the Department of Defense (DoD) has heard the term. Most have read about the objectives and the imperative for change, and a few have wondered what it means to them and what their role should be in the process.

Auditable Financial Statements: Nearly everyone in the Department (at least those in the budget, accounting, and finance workforces) has heard the term. Most have read about the objectives and the imperative for improvement, and a few have wondered what it means to them and what their role should be in achieving this result.

Then Under Secretary of Defense (Comptroller) Dov S. Zakheim linked the two concepts in congressional testimony: "As we transform our nation's defense posture, it is critical that we reform the management of the Department's finances. Just as we are transforming our military forces and combat capabilities, we must with equal vigor transform our business practices and systems. In that way, the Department may not only reap the benefits of greater efficiency but also apply those resources directly to our warfighting capability." (1)

Proper financial management, in part evidenced by proper accounting, is a critical enabler for achieving organizational strategy. (2) Achieving ah unqualified audit opinion is important and will consume considerable resources, including the time and attention of the DoD financial management workforce.

But in addition to the financial accounts, DoD managers and financial management professionals must pay attention to other accounting practices. In this author's view, financial accounting is not the type of accounting for which that workforce should be devoting the most attention to best support the Department's strategic objectives. The DoD leadership must resist the temptation to believe--and should educate their stakeholders in the same--that achieving ah unqualified opinion does not necessarily mean that the Department's financial house is in order.

In fact, there is more to do. This article critically examines the relationship between accounting and transformation and sheds some light on the distinction between managing financially and financial management.

Achieving an Unqualified Audit Opinion

A lot of attention has been paid to accounting within the Department, particularly since the passage of the Chief Financial Officers Act of 1990, and rightly so. Once the dust settled from the closure of the books for fiscal year (FY) 2003, 20 of the 24 federal CFO Act agencies had received unqualified audit opinions; the Department remains among the group still incapable of passing ah independent audit. Anyone seriously looking at this issue would predict that it is just a matter of time until the Department is the only agency in that category. Already, there is significant pressure to achieve auditability from the President, the Office of Management and Budget, the Congress, the Government Accountability Office, and the public.

As seriously as the Department may have taken this problem in the past, surely the imperative will grow in the next few years. And if past is prologue, the "fix" likely will be a painful process for those in the budgeting, accounting, and financial management fields. Obtaining the first unqualified audit opinion takes devoted and sustained leadership, a lot of time and money, relationship-building between line and staff management and between the organization and its auditors, short-term solutions to overcome system shortcomings, and a significant effort by the workforce in each DoD Component to achieve that first clean audit. (3)

Sustaining these clean audits is even harder. (4)

So How Is the Department Doing?

The leadership appears more devoted now than at any time in the Department's history, including the late 1980s when the Defense Management Review process served as the catalyst for the organizational overhaul of DoD accounting and the creation of the Defense Finance and Accounting Service (DFAS). The current administration created the Office of Under Secretary of Defense (Comptroller) (USD(C))largely in order to address this problem. This office is heading the Business Management Modernization Program (BMMP) that has created (through contract with IBM and a team of other firms) the Business Enterprise Architecture (BEA) for those systems that have a significant impact on financial management and accounting.

We know leadership is serious for two reasons: First, the leadership put a moratorium on the construction, purchase, of major modification of existing systems; and, second, it is allocating the necessary resources to support the effort.

The cost of developing and fielding the BEA alone was over $100 million. Implementing it, of course, will be significantly higher. Direct outlay across the Future Years Defense Program (FYDP) will approximate $100 million per year to develop the systems, another $60 million per year for the business transformation, and yet hundreds of millions more for audit readiness and financial statement audits.

Even so, there will be other direct costs, as well as indirect costs. Since many of the indirect costs of this effort will be borne across the Department and its Components, no one has a full picture of the total eventual cost, but estimates routinely exceed a billion dollars.

Transformation throughout the Department is expensive: Stryker brigades, Joint Strike Fighters, Littoral Combat Ships, and the like cost tens of billions of dollars. But the Secretary of Defense is willing to forgo some of these changes in exchange for improved accounting--as gauged by auditability of the Department's financial statements. The problem of inaccurate and untimely accounting has received lip service in the past, but never a billion dollars (across the FYDP).

In another development, the Inspector General of the Department of Defense (IG,DoD) has reported upon improved relations between his office and that of the USD(C) and a reorganization of the IG,DoD financial auditing operation in an effort to accelerate the Department's attainment of an unqualified opinion)

The Comptroller General recently observed, "Secretary of Defense [Donald] Rumsfeld's vision and approach for transforming the Department's full range of business processes is serious and encouraging." (6) The goal is to first achieve ah unqualified audit opinion on the Department's FY 2007 financial statements while improving the accuracy and timeliness of financial information and the addition of more robust analytical capabilities.

Inherent in the BMMP, but not receiving as much attention, is that while auditable statements are important, an unqualified audit opinion is not what the Department really needs. Rather, the Department needs accounting systems that accurately record transactions, provide proper data for resource allocation decisions, and ensure compliance with fiscal law. That's three different objectives, requiring three different types of accounting, each with its own techniques, audiences, objectives, outputs, and vocabulary.

Three Types of Accounting

Ask a recent master of business administration graduate how many different types of accounting he or she studied and the likely response will be "Two": financial accounting and managerial (of cost) accounting. Within the Department, accounting is performed three ways: financial, managerial, and budgetary. This article will next consider the three types of accounting. This process will consider that obtaining an unqualified audit opinion--while an important outcome--is not the only of best way to support transformation goals. To do this, I suggest that it is necessary to make the distinction between managing financially and financial management.

Financial Accounting

Financial accounting is what one sees in a corporation's annual report: balance sheets, income statements, and statements of cash flow and owner's equity. Terms associated with financial accounting include profit, earnings before interest and taxes, depreciation, and revenue recognition. Financial accounting is performed in accordance with generally accepted accounting principles to ensure comparability across entities and over time. The rules are rigid and strict; there is governmental oversight. The focus is on the accurate and reliable capturing, re cording, categorizing, and presenting of historical events. The intended audience is outsiders: For a corporation, the outsiders are those in the capital markets (potential lenders and investors); for a government agency, the outsiders are those with a financial interest (legislators and taxpayers).

While auditable statements are important, an unqualified audit opinion is not what the Department really needs. Rather, the Department needs accounting systems that accurately record transactions, provide proper data for resource allocation decisions, and ensure compliance with fiscal law.

Managerial Accounting

Managerial accounting is what one doesn't see in a corporation's annual report. It is the internal analysis conducted by the corporation to weigh one decision against the next: Should we expand this plant? Should we drop that product line? Should we buy or lease a specific capability? What does it cost to provide this service versus an alternative?

Terms associated with managerial accounting include weighted average cost of capital, allocation, cost driver, internal rate of return, and profit center. There are common tools and practices for managerial accounting, but no generally accepted management accounting principles; there is no government oversight. The focus is on internal management decisions about the organization's mission and scope of operations, so management decides what to count and the basis for accounting. The audience is internal; in fact, the data is so proprietary that corporations typically wouldn't dream of sharing it within their industries of with the government or the public. Within the Department, this type of accounting enables working capital fund activities to set their rates based on unit cost.

Budgetary Accounting

Budgetary accounting is what government employees are most familiar with. It is the process of budgeting, justifying, and accounting for appropriations. Terms associated with budgetary accounting include commitment, expenditure, apportionment, obligation, authority, and disbursement. There are strict rules embedded in federal law and principles articulated by the Comptroller General; there is significant oversight. The focus is on compliance with the law--that funds have been spent in accordance with the purpose, time, and amount that restrictions attached to the appropriation. The audience is both internal and external. There is no corporate analogy, though--try discussing the concept of "obligation" with a commercially focused certified public accountant or a college accounting professor and gauge his of her reaction.

Determining the Best Course of Action

Let us return, then, to the requirement for an unqualified audit opinion. An unqualified opinion means that the audience for the financial statements can believe the numbers they read. That's all. An unqualified opinion simply states that there is no evidence to cause the auditors to believe that the financial statements are misleading. Generally accepted government auditing standards are based on a standard of the American Institute of Certified Public Accountants that states: "The financial statements are presented in accordance with generally accepted accounting principles." (7)

This does not mean that the organization is well managed, only that ir seems to accurately capture, classify, record, and report transactions. Thus, achieving a clean opinion will not imply that the Department is managed well, but it may buy the Department and administration political capital.

The administration can claim credit for solving a longstanding problem. Congressional oversight may be more collegial with more faith in departmental financial reporting. And members of the Congress may be slightly more inclined to believe DoD budgets if they can believe the accounting. But even that would be an inappropriate interpretation of the audit finding. While the financial accounting could indicate adherence to prior budgets, the reverse is not valid.

As the DoD Comptroller said (when in her previous DoD role), "It is important to note that our financial systems and processes were developed to support the budget and appropriations process. Therefore, they unfortunately do not generate the type of financial information that meets the needs of the Department's decision makers." (8)

Corporations that care about the long term do not manage through their financial accounting. They worry about financial accounting only insofar as ir satisfies the Securities and Exchange Commission (for regulated corporations) and their stockholders and how financial results affect their ability to attract inexpensive capital.

Instead, the typical corporation will make strategic decisions about its future using its managerial accounting data since those data are forward-looking and useful to members of the management team as they evaluate alternative courses of action. If the Department intends to transform, it must look forward (using managerial accounts) in building budgets, not backward (using financial accounts) or at what worked last time (using budgetary accounts).

The Link to Transformation

It is one thing to manage one's finances well; it's another thing altogether to manage in a financial way. Let me explain. Financial management is focused "on the money." Ir answers such questions as, Have we overspent? Have we spent the right appropriation for the task? What are our unfunded requirements? Have we resolved our problem disbursements? While financial management is stewardship and accountability, it is not an agent for change.

On the other hand, managing financially can be defined as the use of appropriate financial data to make informed decisions about alternative courses of action to affect the direction of the organization. As the Department considers reallocating resources as a means to effect change, senior leadership requires financial information that is timely, reliable, and relevant?

Where is that information? It should be in the accounting systems, but not all of ir is. And what is there generally is not in a useful form. (10) To drive home the point, let us view the notion of managing the Department through the lenses of the three forms of accounting.

Using Financial Accounting

If DoD leaders manage by using financial accounting data, they essentially are driving by looking in the rearview mirror. Financial accounting data is a history book, and while having a broad knowledge of history is important, one leads best by considering the historical context of contemporaneous and potential events. By not looking forward, DoD leaders cannot create or exploit opportunities. Those corporations that manage by fixating on the bottom line and financial accounting targets (for example, quarterly earnings per share) suffer sub-par performance over the long run. This is because the management team is focused on optimizing an extremely short-term metric rather than focusing on the long-term strategic health of the organization.

The Department is susceptible to this style of thinking and must resist the temptation to believe that achieving an unqualified opinion implies that all is well from a financial perspective. Likewise, stakeholders must be educated so that they do not jump to the same conclusion. The unqualified opinion means only that a fundamental problem of financial management was solved, which is only one part of the foundation necessary to manage financially. There is much more to do after obtaining that opinion.

Using Budgetary Accounting

Skipping to the third type of accounting, if DoD manages using budgetary accounting data, it remains in the status quo: planned obligations and expenditures reflected in a budget based on an FYDP driven by topline figures of a political origin. This is not managing financially; it is managing with a legalistic and a political focus.

Managing politically, however, is not necessarily bad. The Department, after all, is a government organization, resourced through a process that is highly political. (11) Acknowledging the political reality is extremely important to DoD leadership, and political decisions should be facilitated with the availability of proper financial data. The Department will stagnate, however, if it chooses to use only budgetary data to underpin decisions on strategic resource allocation.

Look at a budgeting performance model to illustrate this point. For example, a mathematical algorithm or a model is used to compute the budget requirement for the operating expenses of Navy warships. The algorithm predicts the cost in various budget subcategories (for example, fuel, spare parts, services) using several independent variables. The data used in the algorithm are the actual expenditures from the fleet for the preceding years. This seems logical until one considers that the amount expended by a warship is exactly the same as the amount provided to the warship.

The incentives in the appropriation process reward spending precisely what one is provided, not precisely what one needs. It is difficult to obtain more funds since those entities that don't currently need their funds are reluctant to offer them for use by others, fearing that it will result in smaller allocations in the succeeding year. Thus, when one ship legitimately needs more funds than another, the allocation process obscures it; the difference is not apparent in the expenditure data. Statistically, it is not surprising, then, to find the variable that best predicts spending is the fiscal year, (12) and there is no distinction in spending patterns between ships of the same class. (13)

The Department likes these models because they provide an illusion of rigor to the process--they seem logical and they appear accurate. Of course they appear accurate: They've been designed to predict their own outputs. That is, the amount that is budgeted--based on the model--is what is spent, and those spending data are red back into the model to predict future budgets.

Over time, the complexity of the model grows (inferring rigor) and its "precision" is refined. Unfortunately, precision is not the same as accuracy; the modal is merely predicting past spending patterns. By looking only at historical budgetary data (as opposed to cost data), the Navy cannot accurately budget for the true future cost of operating its warships, particularly when force structure, missions, and employment are changing.

None of this is to say that the budgetary accounts are unimportant. They are tremendously important--especially in execution. The Department must account for the spending of taxpayer dollars in a manner that links back to the appropriation that funded the activity. Compliance with fiscal law is the objective of the budgetary accounts (a necessary function) but is not very useful for budgeting if the organization desires to change. If the organization desires to remain stable, then budgeting in a manner consistent with prior-year appropriations probably is prudent. On the other hand, an organization that wants to transform must use other tools.

Using Managerial Accounting

Finally, if DoD leaders manage using managerial accounting, they begin to look at costs rather than expenditures and at the future rather than the past. The focus is on what it costs to provide a service, deliver a capability, or procure something, not just what was spent. This focus, for example, would concentrate on all of the costs associated with an aircraft flying hour, a ship steaming day, or a tank operating mile. Clearly, these are not just those transactions recorded in the past in the financial statements or those that may be charged properly to the operation and maintenance appropriation. Rather, all of the costs are considered: direct, indirect, and allocated general and administrative costs; this year's and downstream (considering present value); DoD- and contractor-borne.

Both the line and the financial managers at working capital fund activities have a Fairly good sense of the managerial cost concept since they operate in the realm of full cost recovery. The acquisition community also considers cost as an independent variable when developing acquisition strategies, but that community still manages those programs using primarily budgetary accounting data.

In fact, few managers in the Department regularly think in managerial accounting terms--and few have the tools to provide the data to manage financially even if they did have that focus. The budget models are a good example of the inappropriate substitution of spending data for cost data. Why, then, does the Department not manage using managerial accounting?

The reasons previously have been alluded to: Senior leaders have not had or used the tools, they don't necessarily understand them, and they don't have the data to "operationalize" them. The first two go together since the tools will not be used if they are not understood. As one DoD official put it, "Until recently DoD financial management has been focused almost exclusively on accounting for annual budget appropriations, not producing clean financial statements and other requirements." (14)

Effecting change will be a long and slow and expensive process that will require strong and consistent leadership and strong external advocacy from the Congress. Why? It changes the power dynamics and the allocation of resources--two significant change management issues in any government organization.

This is why achieving an unqualified opinion is a double-edged sword: On one hand, it evidences a maturation of the accounting processes within the Department. But its visibility and symbolism may also provide a False sense that the financial house is in order, when only the foundation has been laid. Leadership may claim a victory in the war when only the first battle was won.

Elements Vital to Change

How does the Department change its thinking? Education and incentives are keys. The leadership needs to become familiar with economic concepts, such as incrementalism and marginal utility, and with strategic accounting concepts, such as transaction-based costing and value chain analysis. (15) A consultant's two-hour briefing on the wonders of his of her proprietary activity based costing/activity based management tool is dangerously inadequate; so is the latest bestseller on the business rack.

Executive MBA programs are in order for the senior-level folks, but the education process must start at an earlier stage in one's career. Members of the uniformed leadership spent the early part of their careers as operators and warfighters, and those skills are what the military services reward. But by the time these officers reach the grade of O-5 or O-6, many of them are man aging resources of some type. Similarly, DoD civilians may begin in technical fields, but once they reach the GS-14 of -15 level, they too are oftentimes managing resources. Tools for managing financially need to be part of leadership development education.

Incentives are another vital element. Humans are economic creatures and will respond based on how rewards and censures are distributed. Incentives must be created to encourage managing in a financial manner. Those who do it well should be rewarded; those whose analysis is weak should be corrected.

The other reason the Department does not manage financially is that the right data are not available. The Friedman Report--the findings of which are the basis for the BMMP--concluded, "Current DoD financial, accounting and feeder/operational management systems do not provide information that could be characterized as relevant, reliable and timely. Nor is the 'support of management decision making' generally an objective of the financially based information currently developed of planned for future development." (16) Without good cost data, comparisons between competing requirements cannot be made adequately, accurate budgets cannot be developed, and allocations will at best be less than optimal (and even may be antithetical to strategic objectives). This is a more difficult problem than the education problem, since it can't be resolved until the education problem is solved.

Until it is known what data are required and how those data will be used, they will be nearly impossible to get. Unknown is the cost to operate the warship because the right question wasn't asked: If there were no incentives to spend exactly what was allocated, rather the incentive was to spend the minimum essential to meet the ship's mission, how much would the ship have spent in what categories and why; and what portion of the supporting activities' costs were attributable to this ship?

Acquiring this information, then analyzing the cost drivers would enable the Department to manage and budget in the financial manner advocated in this article. The informed questions might be: Given what I know about the nature of the costs to operate and support the ship and given its planned employment and modifications for the next fiscal year, how much should be budgeted? What do the alternatives cost?

The BMMP is attempting to correct these data deficiencies, but a new BEA or suite of new systems is not a panacea. As one looks at the BMMP, it is important to remember that NT + OO = COO; that is, New Technology plus an Old Organization equals a Costly Old Organization. (17) The organization needs to change as well as the technology. It is imperative that the DoD financial management workforce and especially line management understand the objectives of the new architecture, the new business models, the new tools and techniques. Then all must embrace the change, not resist it. It is the only way in which the Department's accounting will support the warfighter and the objectives of transformation.

As the Principal Deputy Under Secretary of Defense (Comptroller) stated, "The overarching challenge facing us is to reform DoD business processes and systems. That will require both an overhaul of those processes and systems and a cultural change for the people using them." (18)

Conclusion

There is a lot of pressure on the Department to get an unqualified audit opinion. Whether that goal is reached by FY 2007 or not, the Department will get there. It will be hard. Unfortunately, once there, the Department will not yet have arrived at the place it needs to be. "Irrespective of the unqualified opinions on their financial statements, many federal agencies do not have timely, accurate, and useful financial information and sound controls with which to make informed decisions and to ensure accountability on an ongoing basis." (19)

Simultaneously, the Department is transforming operations, tactics, weapons systems, and doctrine. Financial resources must be allocated in a manner that is accurate, adequate, defensible, and executable.

"The Department of Defense will be managed in an efficient, business-like manner in which accurate, reliable, and timely financial information, affirmed by clean audit opinions, is available on a routine basis to support informed decision making at all levels throughout the Department." (20)

Old methods and old techniques are not appropriate to the task. Members of the financial management workforce need to develop the expertise and tools to ensure that they are accounting appropriately for DoD's resources. In short, they need to transform their technologies and approach to financial management.

All three forms of accounting need to be improved. Improving financial accounting will earn the critical unqualified audit opinion and raise confidence in DoD's management practices. Improved budgetary accounting will ensure compliance with ever-increasing legislative requirements. Improved managerial accounting will enable the analysis needed to realign resources so that they may effect transformational change in the Department. "The budget needs to employ new metrics and measures and processes--relying more on long-term estimates and present value concepts in making resource allocation decisions. Neither current budget reporting nor financial statements are designed to [do this]." (21)

As members of the financial management workforce, we are an integral part of DoD's transformation. We must take an active role in transformation efforts in the back office; for if we don't transform our own practices and skill sets, it will hamper the Department's effort to effect the transformation required by the front end--the warfighting element.

Endnotes

(1) Zakheim, Dov S., Statement Before the Senate Armed Services Committee Subcommittee on Readiness and Management Support, 6 March 2002.

(2) Lanzillotta, Larry J., Statement Before the House Committee on Government Reform Subcommittee on Government Efficiency and Financial Management, 25 June 2003. See also Zakheim (2002); Rumsfeld, Donald H., Internal DoD Memorandum entitled "Financial Management Information in the Department of Defense," 19 July 2001; the vision statement and charter for the Financial Management Modernization Program led by the Under Secretary of Defense (Comptroller) http://www.dod.mil/comptroller/bmmp/pages/mission.html (Accessed 29 December 2003); Rumsfeld, Donald H., Remarks Delivered at The Pentagon, 10 September 2001, http://www.defenselink.mil/speeches/2001/s20010910-secdef.html (Accessed 29 December 2003); and Ippolito, Dennis S., "Federal Budget Policy and Defense Strategy," monograph, Strategic Studies Institute, U.S. Army War College, 15 February 1996.

(3) Brook, Douglas A., Audited Financial Statements: Getting and Sustaining "Clean" Opinions, monograph, (Washington: The PricewaterhouseCoopers Endowment for the Business of Government, July 2001). See also Bush, George W., The President's Management Agenda for Fiscal Year 2002, available through the Executive Office of the President, Office of Management and Budget at http://www.whitehouse.gov/omb/budget/fy2002/mgmt.pdf (Accessed 5 January 2004).

(4) Walker, David M., Testimony Before the Subcommittee on Government Efficiency and Financial Management, Committee on Government Reform, House of Representatives, 8 April 2003. Available as GAO Report 03-572T.

(5) Granetto, Paul J., Statement Before the Subcommittee on Government Efficiency and Financial Management, House Government Reform Committee on Defense Financial Management, 25 June 2003.

(6) Walker.

(7) U.S. Government. General Accounting Office. Government Auditing Standards, 2003 Revision, GAO Document 03-673G, June 2003.

(8) Jonas, Tina, Statement Before the House Government Reform Committee Subcommittee on Government Efficiency, Financial Management and Intergovernmental Relations, 20 March 2002.

(9) Rumsfeld, 19 July 2001 (note 2).

(10) Walker.

(11) Jones, Lawrence R. and Jerry McCaffrey, Budgeting and Financial Management in the Federal Government, (Greenwich, CT: IAP Press, 2001). See also Wildavsky, Aaron and Naomi Caiden, The New Politics of the Budgetary Process, 4th ed., (New York: Longman Press, 2001); Schick, Allen, The Federal Budget: Politics, Policy, Process, revised edition, (Washington, DC: Brookings Institution Press, 2000); Thompson, Frederick and L. R. Jones, Reinventing the Pentagon: How the New Public Management Can Bring Institutional Change, (San Francisco: Jossey-Bass Publishers, 1994); Owens, Mackubin Thomas, "Micromanaging the Defense Budget," The Public Interest, No. 100, Summer 1990, pp. 131-146; Gansler, J. S., Affording Defense, (Cambridge, Massachusetts: MIT Press, 1989); and many others.

(12) Hascall, Andrew M., Andrew M. Matthews, Mihaly Gyarmati, William K. Gantt and Zsolt Hajdu, "Analysis of the Ship Ops Model's Accuracy in Predicting U.S. Naval Ship Operating Cost," MBA Professional Report, Naval Postgraduate School, June 2003.

(13) Gorman, Tadd H., "Effect of OPTEMPO on Ship Operational Costs," Master's Thesis, Naval Postgraduate School, December 2003.

(14) Lanzillotta.

(15) An excellent resource for these concepts is Shank, John K. and Vijay Govindarajan, Strategic Cost Analysis: The Evolution from Managerial to Strategic Accounting, (Boston: Irwin, 1989). Readers should note that there is an updated version of this text, Strategic Cost Management: The New Tool for Competitive Advantage, (New York: The Free Press, 1993).

(16) Freidman, Stephen, Transforming Department of Defense Financial Management: A Strategy for Change, Final Report, Institute for Defense Analysis report to the Secretary of Defense, 13 Apri1 2001.

(17) This formula is not my invention, but rather one that has circulated widely in the information technology management community. Its exact origin is unknown to the author.

(18) Lanzillotta.

(19) Walker.

(20) Rumsfeld, 2001a.

(21) Walker.

Commander Philip J. Candreva, SC, USN, is a member of the financial management faculty of the Graduate School of Business & Public Policy at the Naval Postgraduate School, Monterey, California. His prior assignments included two roles at the Naval Supply Information Systems Activity: director of ERP Implementation and director of the Management and Comptroller Department. He also served ashore as the deputy for Financial Management for Research and Engineering at the Naval Air Systems Command and on the staff of the Navy Supply Corps School. Afloat, he was a division officer in the U.S.S. Puget Sound (AD-38) and the supply officer in the U.S.S. John Rodgers (DD-983). He holds a B.S. degree from Penn State University and an M.S. degree (with distinction) from the Naval Postgraduate School. He is a member of the Acquisition Professional Community, and he currently serves as vice president of the Monterey Chapter of ASMC.