As the Principal Deputy Assistant Secretary of the Navy (Financial Management and Comptroller) Mr. Charles E. Cook, III assists in the oversight of budget formulation and execution, financial reporting and cost estimating for the Department of the Navy.
Mr. Cook entered the Senior Executive Service in June 1995. He has spent more than 30 years supporting the Department of Defe nse’s financial management community in various commands since 1978.
Since December 2010, the Department of the Navy is working toward greater efficiencies and cost-saving initiatives to meet the Under Secretary of the Navy’s directive to achieve a 25 percent reduction in business IT spending. To meet this requirement, the DON Chief Information Officer has issued multiple policies and there is increased rigor in approving IT purchases, such as the mandated
review of any IT expenditure greater than $1 million in life cycle costs by the Navy and Marine Corps through the Information Technology Expenditure Approval Authority (ITEAA).
At the same time, the department is working to meet DoD mandates to achieve audit readiness of the Statement of Budgetary Resources by the end of calendar year 2014 and to meet the legal requirements to achieve full audit readiness for all DoD financial statements by 2017.
The goals for audit readiness, improving IT business processes and IT cost reductions go hand-in-hand. Leadership is working across the department in strategic partnerships to achieve these objectives. CHIPS asked Mr. Cook to discuss these initiatives in late June.
CHIPS: The department has instituted multiple policies to reduce IT spending and provide greater transparency into the true costs of business IT. Are the policies delivering the results that the department is expecting?
Cook: The indications are certainly there. About a year ago we put in the ITEAA and are still working out the greater specifics as we fit them in with the guidance we recently received from
OSD. Even so, over the past year greater scrutiny has taken place inside the DON and Navy and Marine Corps programs.
I do want to make a key distinction or slight modification to the question. Instead of greater transparency, I think the main point is greater scrutiny. At this time, with fiscal challenges we face,
scrutiny is probably the most critical element and the key to determine how we will spend our limited resources in the future.
CHIPS: In a CHIPS interview with Rear Adm. Joseph Mulloy, Deputy Assistant Secretary of the Navy for Budget (FMB) in November 2011, he said that the department is working to meet the Office
of Management and Budget requirement to file audit-ready reports. Can you talk about the department’s progress in achieving this goal?
Cook: Yes, we are making progress. The key, we believe, to auditability is to get our business processes right. If we do that then auditability will follow. The key partner to auditability
is sustaining auditability once we get there. The only way we can do that is to have tighter controls and improved business processes. We are utilizing a top-to-bottom involvement approach to achieve this goal.
History tells us if change is going to occur it has to occur at the deckplate level, the boots on the ground level. Therefore, to achieve our audit-ready goals, we have a very active dialogue going with our commands and their subordinate commands on the best ways to conduct business on the ground
level within the Department of the Navy. If the field activities have a voice in this process they are going to take ownership of it, and it’s going to effect long-term changes.
These discussions revolve around eight key segments we are focusing on and [we] have a plan to progress through those between now and 2014, in order to get our core business processes right.
CHIPS: When you talk about processes, are you talking about the actual process or the way the department’s business systems process transactions?
Cook: Yes, to both. Of the eight segments we are looking at, hire toretire is one of them, which looks into our human resources process. This includes how we go about hiring people
and paying them to the point when they leave federal government; that whole end-to-end business process of looking at the business transactions that take place in bringing somebody on board until they leave federal service. Acquire to retire is that acquisition process of buying goods and services, and those related types of business processes. What we are looking at is how do we make that happen? How do we buy a ship, how do we buy an airplane? What are the key business events that take place in that process? (See Figure 1.)
What we are finding is there is a lot of variety that makes auditability a challenge. I think that’s been the overall challenge to DoD. Job one has been to accomplish the mission, which is national security. In accomplishing the mission there is a lot of variety and that’s a challenge to auditability on the business side. We are working the balance of how to minimize the number of business processes, while giving confidence we are on top of our business processes and know where the money is going and how it’s being spent, in order to ensure our processes and business systems are
auditable and support the overall core mission of national security.
CHIPS: You spoke to this in your previous response, but one of the things that Rear Adm. Mulloy mentioned is the need to standardize the business processes among the major commands. Do you see that happening? For example, each of the systems commands will have the exact same processes, use the same business systems, the same transactions, from one end of the Navy to the Marine Corps… is that what you are looking at?
Cook: That’s our goal. To back up a little bit, there are 13 basic financial transactions that allocate the funds, obligate the funds, and dispense the funds. Theoretically, we could try to limit ourselves to the fewest options possible — 13 — but that is infeasible given the variety of activities taking place every day by the Navy and Marine Corps across the globe. Here’s an example,
and I’ll use the Marine Corps because they are further down the road than the Navy. The Marine Corps mapped those 13 basic processes against their 17 or 18 bases and stations. The argument
would be that if they are doing things differently, 17 times 13 is 221 different ways they would be doing things if they were doing them all differently. But when they mapped it out they found they are actually doing things 700 different ways.
There is no way an auditor could come in and look at 700 different business processes and be cost effective with the audit. So the Marine Corps took the comptrollers and threw them in a room and told them not to come out until they took the 700 and got it closer to 13. They came out with 58
necessary choices to accomplish those 13 transactions.
The Marine Corps is a fitting example ofthe challenge of variety in that it is a very young force; 70 percent of the Marine Corps is always on its first tour of duty and only does one tour of duty. So if I’ve got a 19-year-old I have to move and he has to learn an entirely new business process that obviously cuts into his four years of effective duty. So one of the benefits of going to 58 agreed-upon transactions you learn that no matter what base or station you are at you follow the same process, so that’s a time-saver right there.
Moreover, it positively affects the schoolhouse training curriculum because it can teach to the practical application of financial management rather than theory. This enables the Marine or civilian coming out of the schoolhouse to hit the ground running and that’s a good thing.
The other part which we don’t talk about much is DFAS (Defense Finance and Accounting Service). Our partner DFAS no longer has to keep track of how each base or station conducts its
business practice as they now know that the Marine Corps has a single standard for the whole end-to-end process allowing DFAS to improve and become more efficient. The Navy is pursuing that same path; but still has a ways to go.
CHIPS: That’s fascinating sir, I didn’t realize that the detail was down to that level.
Cook: Oh, yes. The benefit of the Marine Corps is that the DON views them as a single business enterprise even though they have many major subordinate commands. The Navy has 18 different major commands and the variety of business activity just explodes by comparison. The Navy has set a goal to meet or beat the Marine Corps’ 58 processes. It’s great if they get there. I’m not sure if they will immediately but that’s the benefit of two services under one Secretary spurring each other on and encouraging one another to excellence which is a good thing.
CHIPS: I thought it was interesting that your office was one of the signing authorities for the DON’s policy of “Mandatory Use of DON Enterprise Licensing Agreements.” Why did your office think it was important to have its voice in that?
Cook: We have a tight relationship with the DON CIO (Terry Halvorsen). Nothing happens without networking and money in this town, and the DON CIO knew that it needed to partner
with us to support the mandate by the Under Secretary of the Navy to reduce IT spending by 25 percent. As the comptroller community is able to view where all the resources are going, we help provide some additional governance with the DON CIO to make sure we are taking advantage of the
enterprise licensing agreements and the opportunity to save money.
CHIPS: The DON CIO is very inclusive; he wants everybody to be working toward the same goals of improving business processes and reducing business IT costs.
Cook: What you’ll find is that with Mr. Halvorsen, Mr. (Eric) Fanning (Deputy Under Secretary of the Navy and Deputy Chief Management Officer, Office of the Under Secretary of the Navy) and Ms. (Gladys J.) Commons (Assistant Secretary of the Navy for Financial Management and Comptroller) there has to be that very strong relationship because those three domains are intertwined and overlap. Additionally, we all have to be part of the conversation.
CHIPS: Is there anything else you would like readers to know about moving toward the goal of an audit-ready Department of the Navy?