Financial Management in Agriculture

							                       Department of the Navy
                     Financial Improvement Plan



                                        January 6, 2010




Office of the Chief Financial Officer                     0
Achieving an Unqualified Opinion


   “The DofN FIP team’s primary objectives are –
   1.) the identification and implementation of
       corrective actions to resolve known
       deficiencies related to the Annual Financial
       Statements; and
   2.) the preparation, documentation and
       validation of processes, data and systems
       that materially affect those statements.”


Office of the Chief Financial Officer                 1
Department of Agriculture -
              Metrics

    Assets of $171 billion, including $85 billion in Loans
    Gross Outlays of $142 billion, Net of $115 billion
    28 Agencies, including the U.S. Forest Service and
     the Food and Nutrition Service
    2 Corporations, including a re-insurance company
    3,000+ County Offices, Research Centers, National
     Forests and Foreign Offices
    631 TAF’s, second only to DOD with 787 (2005)


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Department of Agriculture –
              General Ledgers
 Foundation Financial System (FFIS), implementation
  started in 1996 and concluded in 2002
        All agencies’ Salary and Expense (S&E) accounts and 30% of
              Department’s program spending

 Commodity Credit Corporation ($11 billion) has a
  customized version of FFS installed in 1997
 Rural Development ($ 70 billion in loans) has an
  internally developed G/L, 1972, with loan subsidiaries
 Food and Nutrition Service ($ 60 billion) uses Agency
  Financial Management System (KPMG) in 1992
 Launched SAP on 10/1/09, will migrate all in 3 years.
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Department of Agriculture –
              Significant Financial Systems
  Financial Statement Data Warehouse, 2001
          Consolidates Department Financial Data for reporting.
          The FSDW is the Corporate General Ledger and the Official
                Book of Record!!!

  Integrated Acquisition System, 2000
          Real Time interface with Department’s G/L (FFIS)

  Northrup Grumman’s GovTrip, 2008
          Interfaces with Department’s G/L (FFIS)

  Payroll
          The National Finance Center uses an internally developed
                system to pay 36% of Federal Government’s civilians.


Office of the Chief Financial Officer                                  4
Department of Agriculture –
      Audit History
  First audit conducted on 1988 statements. It took one
   year to prepare and two years to audit. The outcome
   was a disclaimer.
  Prior to 1994, USDA was unable to attain an opinion.
  In 1994 through extraordinary and heroic efforts,
   USDA was able to attain a “Qualified” Opinion. The
   opinion was qualified on Food Stamp Receivables
   and General Property.
  The onslaught of new legislation and the evolution of
   new accounting principles combined with USDA poor
   financial systems ensured similar success would be
   elusive for the next 8 years.
Department of Agriculture –
              Disclaimer on 2001 Financial Statements

 General Property, Plant and Equipment, Net
        “Unable to determine the reliability of real property assets.”

 Credit Program Receivables
        “Enhancements are needed for estimating and re-estimating.”

 Fund Balance with Treasury
        “Unable to obtain sufficient, competent evidential matter.”
        “Reconciliations had not been performed.”

 Financial Management Systems
        Technical limitations and disparate, poorly integrated systems
         compromised data integrity and availability.
        “Longstanding and material problems were caused, primarily,
         by the absence of corporate level oversight.”


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Department of Agriculture –
              General Property, Plant and Equipment
 Conducted inventory to validate existence of all assets
 Standardized estimated useful life for asset classes.
 Contracted with an independent appraiser to establish
  fair market value for assets where acquisition cost
  was unknown or unsupportable.
 Required reconciliations to be performed within 30
  days and corrected in 60 days at Central Location
 Established Executive Performance Expectations and
  considered the results in agency head evaluations.
        A few executives were removed for failure to meet
         expectations.
        One agency was constructively put into receivership by USDA

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Department of Agriculture –
              Credit Program Receivables

 Established a dedicated team of credit program
  experts to coordinate and address process
  deficiencies.
 Accountants, budget professionals, and auditors were
  trained on and certified for Credit Reform.
 Acquired external expertise to develop and document
  subsidy models.
 Established configuration control process to instill
  discipline over model changes.



Office of the Chief Financial Officer                    8
Department of Agriculture –
              Fund Balance with Treasury
 Revised Operating procedures to require detailed
  monthly reconciliations.
 Wrote off amounts that could not be substantiated;
  charging or crediting the appropriate Treasury
  account symbols.
 Timing
        Required reconciliations to be performed within 30 days and
              corrected in 60 days. Currently completed in 14 days.

 Implemented the Automated Cash Reconciliation
  Worksheet System in 2002
        Eliminated manual processing
        Corrected $216.3 million of differences that previously existed

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Department of Agriculture –
      Financial Management Systems
  Implemented a standard commercial off-the-shelf
   financial management software package (FFIS).
   Previously, USDA utilized 43+ varieties of a custom
   developed financial management solution.
    Forced adoption of standard business processes.
    Established configuration control over reference data
     changes (Chart of Accounts, Budget Object Codes,
     Transaction Codes).
    Centralized administration of common data sets (posting
     model, vendor and customer tables).
    Wrote off unsupported accounts receivables, properties, and
     obligations during conversion.

  Automated financial report preparation.
Keys to Success
Corporate Level Oversight –
              Consistency and Discipline
 Financial Statement Presentation
        Mandated format for all agencies in 2002 that was consistent
         with OMB’s “Form and Content”.
        Required stand-alone financial statements to be prepared
         using the Department’s Financial Statement Data Warehouse

 “One Set of Books”
        Trial Balance = Financial Statements = FACTSII = MAX

 Posting Models
        Reviewed over 200,000 FFIS posting models in 2005 for
         USSGL compliance and eliminated 75%.
        Launched Account Relationship Tool in FSDW in 2006.
        Eliminated Agencies ability to use a Journal Entry that
         allowed a non-standard posting model.

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Corporate Level Oversight –
              Consistency and Discipline (Cont’d)

 Launched the Intragovernmental Transactions
  Reconciliation System for all USDA agencies in 2002.
 Automated the preparation of the Statement of
  Financing by transaction and not by General Ledger
  Account.
 Participated in Government-Wide committees to gain
  an understanding of Best Practices
 Conducted Financial Management Training (FMT)
         We have 400+ people come to the FMT session at the
               Washington Convention Center annually to focus on specific
               areas for consistent application and continued education.

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Corporate Level Oversight –
              Consistency and Discipline (Cont’d)

 Measure What’s Important!
        We began issuing monthly metrics to the CFO’s in 2005 for
              abnormal balances, aging and amounts of suspense
              accounts, supplemental 224’s, trading partner differences, etc

 Implement a Quality Management Practice like Lean
  Six Sigma.
        “Continuous Improvement” is another Mantra

 Envision a desired end state and its attributes.
        Develop a plan to get to the end state.
        Be adaptable but disciplined when adversity modifies the plan
         (remember not to sacrifice the targeted end state).
        Work the plan.


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Achieving An Unqualified Opinion -
               Success in 2002

 Success was achieved, and with the exception of a
  few small stumbles, has been maintained.
 A “Clean” Opinion is only a toll plaza for quality
  financial management.
 The challenge for USDA to improve continues in -
         Controls over Unliquidated Obligations.
         Systems to reduce heroic efforts and stabilize operations.
         Internal controls over manual credit reform processes.
         Measurement of control effectiveness, which needs to move
          to monitoring via automation as opposed to repeated testing.
         Internal reporting of information that provides reliable
          consistent information for decision makers.


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Achieving An Unqualified Opinion -




                                  Questions ?


Office of the Chief Financial Officer           15
Contacts



                     Jon Holladay
                     Acting Chief Financial Officer, USDA
                     Jon.Holladay@cfo.usda.gov


                     John Brewer
                     Associate Chief Financial Officer, USDA
                     John.Brewer@cfo.usda.gov




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