Rear Adm. Joseph Mulloy assumed responsibilities as Deputy Assistant Secretary of the Navy for Budget (FMB)/Director, Fiscal Management Division, OPNAV (N82) in October 2009.
The Office of the Assistant Secretary of the Navy, Financial Management and Comptroller produces numerous products and provides many services of interest to the public. This includes the annual President's Budget submission for the Department of the Navy and detailed justification materials, aligning resources with the priorities of the Secretary of Defense, Secretary of the Navy, the Chief of Naval Operations and the Commandant of the Marine Corps.
These are summarized in the "Highlights of the Department of the Navy Budget," an annual publication. FMB provides guidance concerning the organization and functioning of comptroller organizations throughout the Navy and Marine Corps. This includes oversight and reduction of the information systems needed to achieve the objective of producing timely, accurate and audit-ready financial information.
Due to the national economic crisis and by direction of the Secretary of Defense, the Department of the Navy is conducting strategic reviews and efficiency efforts across the department. In December 2010, the Under Secretary of the Navy, Robert O. Work, issued a memorandum, "Department of the Navy (DON) Information Technology (IT)/Cyberspace Efficiency Initiatives and Realignment," directing the DON Chief Information Officer, Mr. Terry Halvorsen, to find efficiencies and cost savings in how the department delivers IT/cyberspace capabilities and information resources management. Mr. Work targeted a 25 percent reduction in business IT spending.
The Chief of Naval Operations, Adm. Jonathan W. Greenert, and Under Secretary Work have said that every program in the DON is under scrutiny to achieve the department's objectives for cost savings and efficiency. CHIPS asked Rear Adm. Mulloy to discuss the role his office is playing in helping the department meet its share of the anticipated reduction in the DoD budget.
CHIPS spoke with Rear Adm. Mulloy Nov. 22, 2011.
CHIPS: Before we go to my questions, do you have any opening comments?
Mulloy: The DON's IT infrastructure is the backbone of our ability to manage resources, operate the supply chain, improve the infrastructure and communicate effectively. We cannot function without robust IT to enhance the capability of our workforce and continue productivity improvements. IT is more than just business architecture; it's more than just communications. IT truly is an enabler for fleet operations, fleet execution, and it is actually part of our weapons systems.
In addition, the IT budget is a partnership between FMB and the DON CIO, which supports the strategic vision and framework for the DON information environment. FMB asks hard questions to ensure IT requests are justified and aligned with the DON's ongoing IT efficiency efforts. In these challenging times, we have to learn to do more with less, and I have no doubt we will succeed and come out leaner and meaner while continuing to provide first-rate support to our warfighters.
CHIPS: In December 2010, Mr. Work directed the DON CIO, Mr. Terry Halvorsen, to closely examine the department's business IT spending to achieve a 25 percent reduction in costs over five years. Secretary Work said that identifying and managing IT costs are difficult because IT is a critical infrastructure that cuts across every program in the DON. How is your office helping to track and identify where IT dollars are spent?
Mulloy: As part of the Department of the Navy budget, no single budget line exists for business IT. However, there are business rules for program and budget IT business resources within the framework of OMB Circular A-11 and the Clinger-Cohen Act. Requirements are identified as part of the Program Objective Memorandum (POM) process, which includes input from combatant commanders to ensure we meet our responsibility to train, equip and deploy naval forces.
These requirements are validated by the Chief of Naval Operations and Commandant of the Marine Corps, as well as functional area managers. A goal of the current IT budget process is to increase granularity. Using a bottom-up budget approach, the Naval Information Technology Exhibits/Standard Reporting System (NITE/STAR) captures details for the approximately $7 billion annual DON IT budget. The DON uses the same methodology and systems to report actual spending for business IT and National Security Systems (NSS) to the Office of the Secretary of Defense (OSD) and the Office of Management and Budget (OMB).
IT budgets are developed through an integrated process, supporting the DON CIO and the Office of the Budget in the Office of the Assistant Secretary of the Navy (Financial Management and Comptroller), to validate the completeness of IT budgets, ensuring compliance at each level of management oversight. The DON is committed to IT efficiencies and managing costs. We are continuing to do so by identifying how much we are spending on IT, strengthening the DON's IT governance and reducing DON business IT costs.
CHIPS: An area that's getting a lot of attention across the federal government is data center consolidation. What are your thoughts on that?
Mulloy: Data center consolidation provides an opportunity for efficiencies and cost savings, and it is one area where we are making great strides. The Navy has already closed 13 data centers with plans to close 22 more in FY12 and 58 by FY17.
By consolidating data centers, we realize savings in several areas: decreased maintenance costs to sustain data centers, decreased energy costs to operate data centers, and decreased hardware and software costs. We have new policy on data storage and data centers that establishes a moratorium on all investment of increased data storage capacity. Before purchasing additional data center capacity, we must first determine that existing capacity is insufficient to meet the need.
We must also determine that it is not more cost effective to expand capacity into one of the existing NMCI (Navy Marine Corps Intranet), SPAWAR (Space and Naval Warfare Systems Command) or Marine Corps enterprise or regional data centers. Together, these initiatives support our end state — an efficient, streamlined and integrated data center portfolio supporting warfighting and business requirements at minimal cost.
CHIPS: How are IT requirements reported? How are you working to standardize reporting methods in the DON?
Mulloy: IT requirements are reported through: (1) the normal budget process by appropriation, and (2) the Information Technology (IT)/National Security Systems (NSS) budget in the OSD single data repository for the IT/NSS Budget, which has more than 1,170 categories.
The DON has consistent guidance for assessing program costs and is following the lead of the Federal CIO in the ‘25 Point Implementation Plan to Reform Federal Information Technology Management' to plan, develop, manage, operate and govern IT toward the goals that produce efficient and effective IT.
CHIPS: What additional information can you provide about changes to the Standard Accounting and Reporting System (STARS) that support greater audit ability within the department's financial system?
Mulloy: The major change to STARS resulting from audit readiness assessments allows end-to-end traceability of financial transactions. STARS-FL execution codes are mapped to United States Standard General Ledger (USSGL) codes, but the historical mapping has not been consistent. By updating STARS, we will ensure future STARS-FL transactions are accurately and reliably mapped to USSGL codes. We're also researching historical transactions back to FY 2007 to align with current structured query language (USSQL) mapping.
CHIPS: In his memorandum of 19 July 2011, the DON CIO established a policy requiring review and service level approval by the Information Technology Expenditure Approval Authority (ITEAA) of any IT expenditure greater than $1 million (life cycle). Is this threshold still valid, or has that threshold been adjusted since the 25 percent or $2 billion reduction in IT savings was targeted?
Mulloy: The $1 million threshold for review and approval of IT expenditures by Navy and Marine Corps ITEAAs remains in effect. It is our expectation that this approval process will identify and control spending, contribute to a smaller DON IT ‘footprint,' and help to ensure that items purchased will smoothly integrate into our future architecture without generating unusual support costs.
CHIPS: When you briefed the fiscal year 2012 budget roll-out at the Pentagon, Feb. 14, 2011, you said that the department is working to meet the requirements of the law for federal agencies to file audit-ready financial statements. How can the department's business IT systems, such as Enterprise Resource Planning, help meet this requirement?
Mulloy: To achieve financial audit ability, we have to strengthen the controls in our end-to-end business processes, such as civilian and military pay, and contractor pay. IT systems are integral components of these business processes, and all of our business systems must be surveyed for audit readiness on our way to financial audit ability.
This includes major accounting systems like the Standard Accounting and Reporting System and Navy Enterprise Resource Planning. Navy ERP has an embedded array of strong internal controls over Navy business processes, which will increase the likelihood that the financial data, which rolls up into our financial statements, is accurate and reliable. In addition, there is an ongoing working group to ensure that business processes (including the way we employ our business systems) are standardized among all of our major commands.
Fewer variations in the way we do business will result in greater efficiency through streamlining, with fewer internal controls necessary. This will also increase the accuracy and reliability of financial data. Incidentally, we have moved our repair parts inventory management under Navy ERP, and this has resulted in efficiencies, which will improve asset reporting on our financial statements.
CHIPS: Based on your past experiences with IT and budgets, what are your thoughts as we move forward on IT efficiencies for the DON?
Mulloy: There is a balancing act with IT requirements. In our development of POM 13, the Secretary of the Navy has had us build on the Secretary of Defense's efficiency initiatives from the FY 2012 President's Budget and continue the identification and implementation of efficiencies to enable increased investment in warfighting capabilities.
The DON continues to assess options that allow for the necessary balance between sustainment of operations, preservation of fleet readiness, and support of our Sailors, Marines and their families, based on fiscal reality and force structure requirements. As part of this process, we are reviewing all areas of our budget plans for savings. Nothing is off the table. We are facing different challenges with the current fiscal environment and in order to find savings and plan for the future, we are identifying savings through efficiencies.
As you mentioned, the Under Secretary tasked the DON CIO to achieve a 25 percent reduction in costs over five years. This was later defined to the requirement to find $2 billion in business IT savings. As a result, some of our processes have been updated to better manage our spending. Now, approval is required before spending over a certain threshold, the business case for IT requirements must be shown, and IT investments must be assessed for efficiency and effectiveness. This focus on IT efficiencies forces us to spend from a strategic, enterprise-wide perspective while saving money.
CHIPS: Do you have any closing remarks?
Mulloy: I think it's a very exciting time. Major budget changes are upon us, and IT will play a large part. The focus of the CNO indicates, and it's clear from the Under Secretary and the DON CIO, that IT is a crucial element of our focus as we manage these changes. The new 10th Fleet commander [Vice Adm. Michael S. Rogers] is a former JCS J2 (Joint Chiefs of Staff director for intelligence) and a cryptologist.
We're in a business IT world but we recognize IT is also part of defending and maintaining ourselves in a cyber world. Like great navigators, I think the Navy has properly put our focus on the world ahead of us. We are going to completely integrate these areas of DON CIO, 10th Fleet, N2/N6 (Deputy Chief of Naval Operations for Information Dominance/Director of Naval Intelligence and Deputy CIO – Navy) and SPAWAR to make the department run leaner but also realize that the networks can be viewed as a weapons platform.
Everything on it [the network] can either be helping us or potentially be used to hurt us. For example, a weakness in LOGCOP, our logistics common operating picture, could be an in-road to our networks and our overall IT capabilities — we need to defend all of it, and we need to enable all of it.
Office of the Assistant Secretary of the Navy Financial Management and Comptroller: www.finance.hq.navy.mil/FMC/.
Office of the Assistant Secretary of the Navy Financial Management and Comptroller Office of Financial Operations: www.fmo.navy.mil/.