BMMP--a progress report.

Most Department of Defense (DoD) financial management professionals know the difficulties that the Department faces in modernizing its business and financial management systems and processes. These challenges concern the Congress, the Department's leadership, taxpayers and, most importantly, members of the armed services. Many of these challenges are the result of redundant and poorly integrated financial management and other business information systems.

In fiscal year (FY) 2004 alone, the Department will spend billions for business systems. Clearly, it takes a lot of time, money, and people to run Defense Department business operations; but we can and we must do better! Why? Each dollar spent on business operations means one less dollar for the core mission of the warfighter.

Over the years, the Department initiated many efforts to modernize and transform its business operations. In the past, efforts were tailored to a single DoD Component or business practice, which often resulted in poorly integrated and stove-piped systems and processes.

With respect to the broader DoD mission, scholars have referenced a number of case studies and reports identifying poorly coordinated, stove-piped military operations as the key reason for passage of the Goldwater-Nichols Act, which directed a shift toward joint operations within the Department. Although the Goldwater-Nichols Act is still reverberating throughout the Department--and challenges remain--we see today an unprecedented degree of cooperation in military operations.

In many respects, the 2001 report to the Secretary of Defense, titled "Transforming the Department of Defense Financial Management, a Strategy for Change" (the Friedman Report), reached similar conclusions about DoD business and financial management practices (that is, they are stove-piped and poorly integrated).

As a result of that report, Secretary Donald Rumsfeld chartered the Financial Management Modernization Program, later renamed the Business Management Modernization Program (BMMP), to fix long-standing problems in DoD business and financial management processes.

In establishing the BMMP, Secretary Rumsfeld set business operations on an unprecedented course towards cross-functional and cross-organizational cooperation. In many respects, this approach parallels (and supports) the joint operations concept used by the Unified Combatant Commanders to ensure integrated operations among the military services. Figure 1 lists BMMP goals and objectives.

Figure 1: BMMP Goals and Objectives

GOAL 1: Provide timely, accurate, reliable information for Business
Management

OBJECTIVE 1.1 Achieve unqualified audit opinion on 2007
consolidated DoD financial statements

OBJECTIVE 1.2 By 2007, achieve total visibility and accurate valuation
of assets to include Operating, Materials, and Supplies (OM&S);
inventory; and Property, Plant and Equipment (PP&E)

OBJECTIVE 1.3 By 2007, achieve total personnel visibility to include:
military service members, civilian employees, military retirees, and
other U.S. personnel in a theater of operations (including contractors
and other federal employees)

OBJECTIVE 1.4 Provide DoD decision makers timely access to business
information

GOAL 2: Enable improved Business Operations

OBJECTIVE 2.1 Adopt the Business Enterprise Architecture (BEA) for
acquiring, managing, and providing material and personnel in support
of the Warfighter

OBJECTIVE 2.2 Systematically enable efficiency and productivity
improvements to DoD business operators

After two busy years, the BMMP has made considerable progress in building the foundation that the Department needs to succeed in business transformation. In the last year alone, BMMP personnel developed a Business Enterprise Architecture (BEA), established a governance structure, and developed a program strategy. This foundation provides the tools we need to implement integrated business transformation.

Business Enterprise Architecture

Delivery of the BEA marked a significant accomplishment. The architecture identifies the Department's business processes and helps identify, plan for, and implement opportunities to improve them. Essentially, it is an integrated blueprint for business transformation.

The architecture also includes work products that describe future DoD business operations. Work products consist of models, diagrams, tables, and narratives, which together translate the complexities of DoD business activities into simplified yet meaningful representations of future business operations. Such operations are described in logical terms (for example, business processes, rules, information needs and flows, users, and locations) and technical terms (hardware, software, data, communications, security standards, and protocols).

The architecture also includes a transition plan that charts a course to improved business operations. The BEA will help the Department move to a future business environment in a cost-effective, efficient, and timely manner, while minimizing the impact of transition on current operations, organizations, and personnel.

BMMP personnel delivered the initial version of the architecture in April 2003. Future versions of the architecture and of the follow-on transition plan will capture the refinements needed to transform business operations on an incremental basis.

Along with the BEA, the BMMP created an inventory of financial and business systems. The current inventory includes 2,274 systems and can be sorted either by DoD business lines or by DoD Component. This systems inventory enables the Department to identify and reduce systems through an aggressive portfolio management and systems review process.

In fact, by law, the Office of the Under Secretary of Defense (Comptroller) (OUSD(C)) must approve and certify at each stage in the systems acquisition process all investments in business and financial systems exceeding $1 million. Such reviews include new systems as well as upgrades to existing systems. The purpose of these reviews is to ensure that the system or a proposed change is consistent with the architecture.

Governance

Governance describes business transformation duties and responsibilities within the Department. To put it more simply, it is the process that allows business process (domain) owners and the heads of the DoD Components to integrate business systems and practices in a unified manner. The BMMP's integrated governance model is a first for DoD business operations.

Four major entities compose the BMMP governance: the Executive Committee, the Steering Committee, the Domain Owners, and the business transformation program office in the OUSD(C), which is known as the Directorate for Business Management and Systems Integration. Integration with the DoD Components occurs at each point in the governance process.

The Executive Committee provides strategic direction to the BMMP. It is co-chaired by the Under Secretary of Defense (Comptroller) (USD(C)) and the DoD Chief Information Officer (CIO), who report directly to the Secretary of Defense and the Deputy Secretary of Defense. Members include the Under Secretaries of the Military Departments, and the other Principal Staff Assistants (PSAs) in the Office of the Secretary of Defense (OSD) with business process responsibilities, the Under Secretary of Defense for Acquisition, Technology and Logistics and the Under Secretary of Defense for Personnel and Readiness.

The Steering Committee provides advice to the Executive Committee and is also a forum for resolving cross-service and cross-business area issues. It is co-chaired by the Principal Deputy Under Secretary of Defense (Comptroller) (PDUSD(C)) and the DoD Deputy Chief Information Officer. Members include selected assistant secretaries from the military departments and the principal deputy PSAs responsible for DoD business areas.

The Department's PSAs manage the seven business line owners, known as Domains. Their representatives meet regularly to discuss strategy for business transformation through a forum known as the Domain Owner's Integration Team (DO/IT). Figure 2 lists the seven domains and their domain owners.

Figure 2: BMMP Domain Owners

BMMP Domain Owners

* Accounting & Finance--Under Secretary of Defense (Comptroller)
* Acquisition--Under Secretary of Defense for Acquisition, Technology
  and Logistics
* Human Resources Management--Under Secretary of Defense (Personnel
  and Readiness)
* Installations & Environment--Under Secretary of Defense for
  Acquisition, Technology and Logistics
* Logistics--Under Secretary of Defense for Acquisition, Technology
  and Logistics
* Strategic Planning & Budgeting--Under Secretary of Defense
  (Comptroller)
* Technical Infrastructure--Assistant Secretary of Defense (Networks
  and Information Integration)

The Directorate for Business Modernization and Systems Integration (BMSI) is responsible for developing governance as well as maintaining the BEA, the transition plan, and the systems review and compliance process. The BMSI staff works with those PSAs having business process responsibilities, and their designees, to implement business transformation across the Department.

Moving forward, the BMMP will continue to refine the governance and will begin building the processes, charters, and directives needed to ensure integration and ultimately will enable transformation at all levels across the Department.

Program Strategy

How will the Department implement a complex, enterprise-wide solution such as the BMMP? The overall strategy includes four discreet actions:

* Build and extend the enterprise architecture

* Establish a governance process

* Reduce redundant, outdated, and stove-piped systems using a systems review and portfolio management process

* Reengineer processes using an incremental approach

We expect the BMMP to be implemented in three increments. Increment 1 includes achieving an unqualified audit opinion on the DoD's FY 2007 consolidated financial statements; asset valuation; plan, procure, and pay; total asset visibility; and improved human resource management.

Increments 2 and 3 are still under development but will include functions such as integrated Life Cycle Management; planning, programming, budgeting, and execution; expanded human resource management; total force management; and integrated performance management reporting.

As we define a BMMP increment and identify associated business capabilities, teams of subject matter experts will work in facilitated sessions to identify leading practices, discuss alternative approaches, and build end-to-end business solutions that are compliant with the BEA. The

reams will include subject matter experts from the process owners (domains), as well as affected DoD Components.

As business solutions and related requirements are defined, the cognizant domain owner will designate a program manager, likely a Program Executive Office (PEO) in one of the DoD Components, to procure and field an enterprise-wide solution using the existing acquisition processes.

Unqualified Audit Opinions

An unqualified audit opinion is a key goal of Increment 1. Why? First, the Chief Financial Officers Act of 1990 requires annual audits of the executive departments of the United States Government. In March 2003, the Comptroller General of the United States issued a disclaimer stating he was unable to issue an audit opinion on consolidated financial statements for the U.S. Government, principally because the Department of Defense is unable to produce auditable financial statements using its legacy systems.

Second, an audit is a methodology (a step-by-step process) to ensure that controls are in place, processes are documented, and fraud is deterred. If an auditor uncovers deficiencies and weaknesses, management has an opportunity to develop a plan for corrective action. Leaders at all levels of the Department make decisions every day to use human resources, military hardware, and dollars based on available information.

Once the Department produces auditable financial statements--and achieves an unqualified opinion--then the DoD leadership can make resource decisions with confidence that those decisions are based on accurate and reliable financial and business information.

Third, the unqualified audit opinion provides assurance to our stakeholders that the Department responsibly uses the resources entrusted by the American taxpayers in accordance with generally accepted accounting principles and with the appropriation laws passed by the Congress.

A Creditable Beginning

A good program is defined by the value it provides. The Department's ambitious BMMP transformation will provide value for everyone. Eliminating stove-piped processes and systems, integrating business practices, and deleting duplicate processes will make everyone's job easier and make more resources available for the warfighter. Everyone will benefit from reliable and accurate business information.

The journey to transform DoD business operations to an integrated, unified manner has begun. We completed noteworthy accomplishments over the past year, but there is still a lot of hard work ahead. Through business transformation, the BMMP will provide the warfighter with the world-class business operations needed to support the Department's many missions at home and abroad, which are to provide the military forces needed to deter war and protect the security of the United States.

For more information about the BMMP and its products, please visit the Web site at www.dod.mil/comptroller/bmmp/ pages/index.html.

Defense Finance and Accounting Service Earns "Clean Opinion," Releases Stakeholders' Report

(From a DFAS press release dated December 29, 2003)

The Defense Finance and Accounting Service earned its fourth consecutive "unqualified opinion" from outside auditors, according to its recently released stakeholders' report for fiscal year 2003.

The unqualified, or clean, opinion from Urbach Kalm & Werlin LLP is the highest mark available and demonstrates DFAS' commitment to excellence in financial management. The DFAS FY 2003 Stakeholders' Report, along with the agency's audited financial statement, is available on the Web at http:// www.dfas.mil/about/ar_index.htm.

"In fiscal year 2003, the DFAS team made great strides in improving our service on the people who defend America," said Patrick T. Shine, acting director of DFAS. "We pushed the quality of our products and services up while reducing the costs of finance and accounting for the Department of Defense. DFAS' success in 2003 prepares the ground for even better service to our customer and greater value for the American taxpayer in 2004."

Robert Jennings serves as the Change Management Team Lead in the Business Modernization and Systems Integration (BMSI) Office.