Proper Execution Alignment Audit Readiness Training Symposium June 2012

1. Proper Execution AlignmentAudit Readiness Training SymposiumJune 2012

2. Agenda • Overview • Background • Areas of Concern • Execution Monitoring Guidelines • Discussion FOR OFFICIAL USE ONLY

3. Overview • Context: Reporting Requirements and Audit Readiness necessitate accuracy and precision • Purpose: Understanding the connection between proper execution alignment and defending our resources • Outcome: Participants will understand their role in improving Navy Medicine’s financial reporting FOR OFFICIAL USE ONLY

4. Background 1 • MTF awards Provider Contract • Enters data into STARS • Flows to SMART 6 2 • Reductions directly impact our ability to provide quality care • M83 pulls execution data from SMART to populate OP32 5 3 • Appropriation and Authorization bills establish funding and program controls based on OP32 • OP32 submitted to OSD(C) via TMA 4 • Congress reviews OP32 data • Uses data to determine policy • and write legislation FOR OFFICIAL USE ONLY

5. Background Key Drivers Improved Execution Tracking & Financial Reporting Congressional & OSD (C) Requirements and Guidance Audit Readiness Execution Baseline Reviews (FY09 - FY11) Quarterly Execution Reviews Unfinanced Requirements & POM Issues FOR OFFICIAL USE ONLY

6. Background • Issues Impacting Navy Medicine’s Budget • Execution Baseline Position (EBP) Review • TMA continues to review Navy Medicine’s budget at the PE level • Variance to PE controls creates “trade-space” – opportunity for TMA to reduce Navy’s budget • President’s order to reduce travel, printing and conferences • SECDEF Memo to reduce travel, printing expenses by 20% from FY10 level • Conferences continue to draw additional scrutiny • OSD monitors compliance via semi-annual data calls • Service Support Contractor reductions • SECDEF Memo in Summer FY10 mandated targeted cuts to Contractor Support Services (CSS) • Cuts would accumulate at 10% per year for FY11-13 and carry forward • OSD monitors compliance via semi-annual data calls FOR OFFICIAL USE ONLY

7. Areas of Concern • Object Class 25 – Contracts Codes and Definition from OMB’s A-11 • 25.1 – Advisory and Assistance Services • 25.2 – Other services from non-Federal sources • 25.3 – Other services from Federal sources • 25.4 – Operation and Maintenance of Facilities • 25.5 – Research and development contracts • 25.6 – Medical Care • 25.7 – Operation and Maintenance of equipment FOR OFFICIAL USE ONLY

8. Areas of Concern Audit Readiness Risk • SMART Execution Data for Object Class 25 FOR OFFICIAL USE ONLY

9. Areas of Concern Audit Readiness Risk • Object Class Code (OCC) 25 Discussion • 25.0 – Not a valid object class per OMB A-11. Do not use this object class when reporting obligations • 25.1 – Data reported here should be consistent with that in the Service Support Contractor reporting to TMA. ***OSD requires that these Contract Services decrease by 10% each year*** • 25.2 – Activities should continue to scrub their books and move contracts to other codes as applicable. Do not assume this OCC is correct because it was always used -- review the contract to determine the appropriate OCC to use. ***OSD requires that these Contract Services decrease by 10% each year*** • 25.5 – Activities should review contracts coded as R&D and move to the correct OCC • 25.6 – Contracts for medical providers should be reported in this OCC FOR OFFICIAL USE ONLY

10. Areas of Concern Audit Readiness Risk • SMART Execution Data for Invalid Object Class • The law requires the President’s Budget to present obligations by object class. Therefore, Invalid Object Class is not a correct option • Object Class 23 is for Rent, Communications, and Utilities. These costs should be transferred from Invalid to OCC 23 • 23.1 - Rental payments to GSA • 23.2 - Rental payments to others • 23.3 – Communications, utilities, and miscellaneous charges FOR OFFICIAL USE ONLY

11. Areas of Concern Audit Readiness Risk • SMART Execution Data for Pharmaceuticals • Obligations for pharmaceuticals should not be reported outside of PE 0807701 / 0807901 and Expense Element 4. • Pharmaceuticals PEs should not include costs for supplies, salaries, travel, equipment or contracts. • Navy’s pharmacy budget has been cut in each of the last EBP rounds due to incorrect coding of pharmacy obligations. FOR OFFICIAL USE ONLY

12. Execution Monitoring • M83 relies on SMART data for external reporting to higher level agencies, so accuracy is key • Drill down to a lower level (go beyond the AGSAG/PE review) – • Track execution across all available measures in the CAD/LOA • Understand ALL of the execution measures being reported for your activity • Validate your execution by the following data elements (at a minimum): • Function/Subfunction (FSF) • Expense Element (EE) • Object Class Code (OCC) • Cost Account Code (CAC) • Track execution against plan and authority with variance explanations/corrective action plans prepared Effective Execution Monitoring LEADS to Audit Readiness FOR OFFICIAL USE ONLY

13. Execution Monitoring • Establish a recurring execution review schedule • Activities should pull STARS and SMART report and review execution across all data elements to ensure accuracy and compliance with guidance • Reach out to M83 and let us know if you require further guidance • We rely on the activities to be the first line of review and they should report problems/areas of concerns to the regions and on to HQ for guidance/clarification Effective Execution Monitoring LEADS to Audit Readiness FOR OFFICIAL USE ONLY

14. Discussion • What are your concerns? • How can we work together to surmount these challenges? • How can HQ do a better job of communicating with you? FOR OFFICIAL USE ONLY