FIAR

�The Department understands its fiduciary responsibility to Congress and to the American people to spend their money wisely. Part of that responsibility is making sure that the defense enterprise itself runs as effectively�and efficiently�as possible. So the Department is continually updating, adapting, and improving its processes�including decision-making, acquisitions, and auditing.�

- Deputy Secretary of Defense, Gordon England

FIAR Plan September 2008 Update

FIAR Plan March 2008 Update

FIAR Plan September 2007 Update

FIAR Plan June 2007 Update

FIAR Plan September 2006 Update

FIAR Plan June 2006 Update

The Financial Improvement and Audit Readiness (FIAR) Plan was first published in December 2005

Oversight

The oversight process is essential. Various Offices of the Secretary of Defense and the Components must be held accountable for accomplishing their respective corrective activities reflected in the FIAR Plan. Monthly and quarterly progress reviews are scheduled at various levels within the Department. Oversight is conducted by the Components over their own progress. The Deputy Secretary of Defense and Under Secretary of Defense (Comptroller) monitors progress across the Department.

Progress reviews ensure that the plans' business elements are properly executed. Monthly reviews of the FIAR Plan priorities are conducted by the Deputy Chief Financial Officer (DCFO) with counterparts in the Office of the Under Secretary of Defense (OUSD) Acquisition, Logistics, and Technology (AT&L) and OUSD Personnel and Readiness (P&R) senior leadership. The DCFO is presented with the specific status (e.g., Completed, On Schedule, Behind Schedule) of each priority area key milestone to be completed in the current quarter and subsequent quarter. Accomplishments during the last 30 days and plans for the next 30 days are presented for the key milestones that the OUSD(C), OUSD(AT&L) and OUSD(P&R) are responsible to complete.

Quarterly reviews are conducted by both the USD(Comptroller) and DCFO. Quarterly reviews currently require the Military Department Assistant Secretaries for Financial Management/Comptroller and the Assistant Deputy for Programs and Resources of the U.S. Marine Corps to present their overall progress, issues, and accomplishments. These reviews are the venue for discussing and approving changes to FIAR Plan key milestones. Only the USD(Comptroller) can approve changes to the FIAR Plan key milestones. The DCFO quarterly progress reviews also monitor the progress of non-priority areas.

Executive Steering Committee

The Financial Improvement Executive Steering Committee (ESC) reviews, approves and prioritizes financial statement items that Components have asserted as being candidates for assessment and audit. The ESC also centrally plans audit and assessment funding and evaluates results. Chaired by the Deputy Chief Financial Officer, members include the Deputy Comptroller (Program and Budget) and the Director of the Defense Finance and Accounting Service. The Deputy Inspector General serves as an independent, permanent advisory member. The ESC meets at least quarterly.

ESC Charter

The FIAR Committee

A FIAR Committee chaired by the Deputy Chief Financial Officer, with executive-level representatives from the Office of the Under Secretary of Defense (Comptroller), Military Departments, Defense Logistics Agency, and Defense Finance and Accounting Service, provided core leadership for developing the structure and priorities of the FIAR planning process. The FIAR Committee is advised by the Inspector General, Department of Defense.

The Principal Deputy of the Under Secretary of Defense (Comptroller) approved the FIAR Committee Charter on July 7, 2005.

FIAR Committee Charter

The FIAR Subcommittee

The FIAR Subcommittee comprises highly experienced and knowledgeable, senior representatives from each FIAR Committee member's organization. The Subcommittee plays a vital role in assisting the FIAR Committee and FIAR Directorate in developing and managing the FIAR Plan.

The Subcommittee meets monthly to assist the FIAR Committee and FIAR Directorate in developing strategies and plans for expanding, managing, and overseeing the FIAR Plan. The Subcommittee is kept informed of FIAR Plan progress and issues and recommends actions to resolve them. Additionally, FIAR Plan management processes and procedures that impact the Components are vetted with the Subcommittee prior to proposing these items to the FIAR Committee for approval.

Senior Assessment Team

The Office of Management and Budget Circular A-123 Appendix A requires the Department to identify and review the key processes supporting its financial reports; identify risks and associated internal controls; and test controls. As a result of the tests, the Department must assert whether internal control over financial reporting is effective. The Circular also requires the Department to establish a senior assessment team (SAT) to oversee this process. Established on November 4, 2005, Acting Deputy Secretary of Defense (Comptroller) established the SAT. The SAT is chaired by the Principal Deputy Under Secretary of Defense (Comptroller) and comprises representatives from the Principal Staff Assistants within the Office of the Secretary of Defense and the Military Departments. Detailed guidance for implementing this requirement was issued on November 8, 2005.

SAT Team

FIAR Plan Overview

The Department of Defense is the largest agency in the federal government. The Department owns 86 percent of the government's assets. Missions are not limited to warfighting but include humanitarian efforts, peacekeeping missions, evacuation assistance, and homeland security.

The Financial Improvement and Audit Readiness Plan (FIAR) Plan prioritizes and focuses the Department's efforts to improve processes and internal controls in areas that will have the most impact on financial information needed by DoD decision makers. It identifies financial deficiencies and necessary corrective activities.

Sound financial management and reform is critical to the Department's success. The sheer size of DoD adds urgency and dictates an incremental approach to resolving its problems and setting a successful course. Because DoD is made up of many individual departments and agencies, the Department needs a single, comprehensive, and integrated plan to organize and efficiently manage financial management improvement. Success will be achieved in a step-by-step process that proceeds until all objectives are met.

Purpose

Good financial management relies on decisions that make the best use of every dollar spent. Good financial decisions depend on timely, reliable, and accurate financial information. The Financial Improvement and Audit Readiness (FIAR) Plan identifies critical activities for improving internal controls, resolving auditor identified weaknesses, optimizing fiscal stewardship, and achieving audit readiness. It targets problems arising from such things as weak or nonexistent internal controls, incomplete and inaccurate information, or systems that cannot properly process data and information. Milestones for resolving problems and achieving success are established and monitored so that decision makers can explore a broader range of options with greater confidence.

FIAR Plan Principles

Institute one DoD financial improvement plan with tiered Component plans and accountability.
Employ a collaborative management process.
Use a prioritized, incremental approach.
Integrate Transformation programs across Components.
Optimize performance through standardized processes, controls, and systems.
Learn from each other's approaches, challenges, and successes.

FIAR Planning Tool

The FIAR-Planning Tool (FIAR-PT) contains the detail Component financial improvement plans, high-level milestone plans of the Business Management Modernization Program Enterprise Priority Initiatives and the assessment and audit plans of the Office of the Inspector General. The FIAR-PT is Internet accessible and was developed by the FIAR Directorate, Office of the Under Secretary of Defense (Comptroller) to supply a standard tool for the Components to manage their financial improvement plans.

The FIAR-PT is Microsoft Project based and is maintained on an Office of the Under Secretary of Defense (Comptroller) server. The FIAR-PT is password protected, and user accounts are approved and recommended by the DoD Components and initiative owners and controlled by the FIAR Directorate and Defense Finance and Accounting Service. The FIAR Directorate provides user training as needed and help-desk/call-in support during normal working hours (Eastern Time).

Benefits of the FIAR Planning Tool

Real-time visibility of identified deficiencies, corrective actions, tasks, milestones, accomplishments and progress
Standardized plan formats and data requirements
Dedicated Internet site for Web-based FIAR Plan access and communication (under construction)
Availability of accountable individuals, organizations and POC names and contact information
Means for documenting and communicating the results of reviews of the plans

Access to the FIAR Planning Tool
To become a FIAR Planning Tool user and user support, email the FIAR Support Team at: FIARSupport@osd.mil

FAQ's

1. Does the FIAR Plan focus exclusively on audit?

No. The FIAR Plan is about improving the Department's financial management controls and processes so that reliable information is available to support management in making decisions. An independent audit is one measure of reliability and serves as one measure of progress.

2. Is the FIAR Plan integrated with other Defense business transformation efforts?

Yes. The FIAR Plan integrates with Defense-wide business transformation in three ways. First, the FIAR Plan uses the systems solutions managed through Enterprise Transition Plan. Second, the Business Enterprise Architecture establishes a uniform framework and facilitates continuity in systems and process improvements. Third, the FIAR Plan goals align with business transformation goals and specifically aim to improve the same set of capabilities.

3. How does the FIAR Plan relate to the DoD Enterprise Transition Plan?

The Enterprise Transition Plan addresses transformation, meaning it addresses the creation of something that today does not exist or it massively overhauls an existing process or system. The scope of that transformation is at the DoD-wide level and crosses all lines of business. The FIAR Plan addresses financial improvement and the processes that affect financial management. Where transformation efforts solve a problem identified in the FIAR Plan, the FIAR Plan uses the Enterprise Transition Plan solutions. However, some problems do not require transformation. For example, for environmental liabilities, the hazardous sites need to be identified, estimates for the cost to clean up prepared, and the total of those estimates reported. This is work that must be done in order to improve financial management of environmental liabilities, but this work does not require transforming systems DoD-wide.

4. Why is DoD using an incremental approach?

The size of DoD, its many organizations, and the many types of business being conducted together warrant an incremental approach. Additionally, the incremental approach makes the process manageable.

5. How will DoD ensure accountability and progress?

The Deputy Secretary of Defense has made the FIAR Plan a clear priority for the Department and will be briefed quarterly on progress. Through the FIAR Planning Tool, the Office of the Secretary of Defense can track the status of planning actions and monitor each organization's progress. Being able to see and measure progress is one of the major differences between this plan and previous attempts to improve financial management. Additionally, the Department's progress is being carefully monitored by Office of Management and Budget as part of the scorecard for the President's Management Agenda.

Methodology

The Five Business Rules

The Department of Defense needed an organized process for examining its operations, diagnosing problems, planning corrective actions, and preparing for audit. Such a process needed establish discreet and sequential phases so that appropriate milestones could be set and progress easily measured. As a result, the Under Secretary of Defense (Comptroller) (USDC(C)) issued business rules laying out five standard steps each Component must follow when planning financial management improvements. The business rules sequence planning and executing a comprehensive financial management plan. Improvement activities on balance sheet line items may progress through the phases independent of other activities. At any given time, a Component should be able to report in what phase they are working. The five steps are:

Discovery and Correction. Management reviews its policies, processes, controls, and systems and identifies deficiencies that impede accuracy, reliability, or timeliness. Management takes appropriate corrective actions.

Validation. Management confirms that the corrective actions successfully resolved the impediment. The scope of the validation is at the discretion of management.

Assertion. Management asserts to the Inspector General of the Department of Defense (IG, DoD) the reliability of the financial information. A detailed assertion process is in place. Assertion packages are submitted by the Components to the DoD Financial Improvement Executive Steering Committee. The Committee reviews the package to make sure the Component is presenting an assertion that will likely pass the scrutiny of an independent audit. Once approved by the Executive Steering Committee, the Component makes the funding available to the IG, DoD who then can move forward with the assessment.

Assessment. The IG, DoD does a limited review of controls and procedures to determine if the financial information is ready for a full financial audit.

Audit. The IG, DoD audits the organization's financial information that was asserted and assessed. This work may be done in-house by the IG, DoD or contracted to an Independent Public Accountant.

OMB Circular A-123, Appendix A

The Business Rules for financial improvement align with the requirements of OMB Circular A-123. The Circular requires organizations to identify key financial reports and describe the underlying processes through flowcharts and narratives. Using the flowcharts as process baselines, each organization identifies major risks and the controls in place to mitigate those risks. These activities align with the Discovery phase of the DoD Business Rules.

For controls that management believes are already functioning effectively, the Circular requires management to test those controls. This requirement aligns with the Validation phase, which requires Components to test and evaluate procedures. The testing requirement of the Circular and the testing requirements of the Business Rules are essentially the same. Tests done for Appendix A may meet the Business Rules requirement and reasonably evidence that solutions are in place and are working. Conversely, tests done under Validation are useful tests for the Circular's requirements. Identified deficiencies will flow directly into each Military Department and Defense Agencies' Financial Improvement Plan and be aggregated into the FIAR Plan.

The Department emphasizes fixing processes and controls first so that they yield accurate and reliable numbers. Management can then use the results of control tests to assert for both internal control and financial statements. Appendix A requires management to prepare an assertion for internal control. This Appendix A requirement aligns with the requirement to assert to auditors as to the reliability and accuracy of information.

Business Transformation Integration

Defense-Wide Business Transformation
The highest level of integration between the FIAR Plan and overall defense business transformation has already been achieved in that the Components used solutions from the Enterprise Transition Plan to resolve problems identified in their Financial Improvement Plans. Integration did not stop there.

Milestones in the Enterprises Transition Plan are described as capabilities. For example, the Department wants to improve its ability to satisfy the needs of internal and external customers by issuing or transporting forces, inventory, materials, or equipment. This capability is titled "Deliver Property and Forces." Capabilities are grouped into several categories, including the "Financial Visibility" category. Financial Visibility means that management has quality information for making financial and operational decisions. Financial Visibility is integral to the FIAR Plan. By working toward improving the same capabilities, the Enterprise Transition Plan and the FIAR Plan advance common goals. The capabilities for Financial Visibility follow:

Forecast, Plan, Program, and Budget. The ability to develop, review, evaluate, and support financial forecasts, plans, programs, and budgets and integrate them with appropriate performance indicators to achieve effective business operations and program goals.

Manage Financial Assets and Liabilities. The ability to identify, classify, value, and manage fiscal assets, to include accounts receivable; and liabilities, to include accounts payable from acquisition inception to disposal or liquidation.

Funds Allocation, Collection, Disbursement, and Control. The ability to control and distribute funds based on appropriation and authorization laws, and the ability to monitor such funds against available balance.

Manage General Ledger. The ability to record proprietary and budgetary general ledger (USSGL) transactions in accordance with accounting standards of the Federal Accounting Standards Advisory Board, Generally Accepted Accounting Principles and regulatory requirements. The ability to define the use of, and rules to control, USSGL accounts, and the ability to conduct GL analyses and reconciliations.

Managerial Accounting. The ability to accumulate, classify, measure, analyze, interpret, and report cost and other financial information useful to internal and external decision makers. Reviewing the execution of an organization's program or project resources to ensure they are effectively being used to meet objectives.

Financial Reporting. The ability to provide relevant financial visibility and real-time information dashboards for DoD decision makers; the ability to summarize financial information for the purpose of producing mandatory reports in compliance with regulatory requirements; and the ability to develop discretionary reports in support of other requirements.

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