US Navy ERP Financial Process Improvement and Audit Readiness
Federal Financial Process Improvement & Audit Readiness Support
Project Description: In preparation for being audit ready, a US DOD agency has developed a comprehensive Financial Improvement Program (FIP), which has identified major business segments for focused attention. The FIP Plan has various stages including Discovery, Corrective Action, Audit Readiness Assertion, Validation and under Audit or Sustainment. At the same time the agency also developed and deployed ERP which is based on SAP. This was designed to replace the agencies aging financial systems, to standardize business operations and provide financial transparency/total asset visibility across the enterprise, while improving the efficiency and effectiveness of financial management processes. During the Discovery phase the agency identified various deficiencies in the new ERP relative to audit readiness. Main Sail was contacted to support the analysis needed of various business processes to develop Corrective Action Plans to address the deficiencies in ERP. Main Sail was asked to help due to extensive experience with ERPs, the financial and operational environments.
CorpEx Summary: Main Sail was responsible for analyzing various processes in the ERP to improve the efficiency and effectiveness of those business processes, as well as to support compliance with the Financial Improvement Program (FIP). Over the past three years, Main Sail has supported various initiatives ranging from contract reconciliation, cash posting and reconciliations, master data controls, and review of requirements being developed for the new Security Cooperation Enterprise System (SCES), which will have extensive interfaces with ERP.
The first area Main Sail assisted in was the analysis of the reconciliation capability between the entitlement and payment records of the agency, the primary contract payment system, and the accounting records in ERP. They had a control weakness where accounting records were not supported by entitlement records. The value of differences between the two systems were unknown, but anecdotal evidence such as prevalidation rejects (requests to validate sufficient obligation availability existed before payment), negative unliquidated obligations (overpayments), unmatched disbursements (corresponding obligation record in ERP not found after payment), lost discounts, among other abnormal balance issues all indicated the need for a reconciliation capability. The agency conducted a pilot project to determine audit readiness of a specific program. The program primarily consists of contracts, and all contracts are accounted for in ERP. They had to reconcile 113 contracts, for which they completed the reconciliation manually using screen prints provided by a client. It took them about 4 months and about $142K of billable labor hours. This same sort of manual reconciliation if required across all paid contracts for ERP would be extremely expensive, estimated at about $3.1M, and would not be sustainable.
Main Sail analyzed numerous reconciliation tools including ERP. A recommendation and business case were developed to use another tool, which became the basis for an engineering change proposal (ECP) in ERP, which has since been implemented providing a tool for the agency and DFAS to use to support the assertion for the Contract/Vendor Pay (CVP) business segment, which is about 47% of the agencies budget.
Main Sail was then asked to look at other business segments. Using the same analytical capability, Main Sail analyzed business processes, applied knowledge of policy and regulations, insight into the agency and DFAS operations and developed solutions for other ERP control deficiencies. These ranged from cash reporting and reconciliation, interfund billing processes, to master data controls. These efforts required a combination of policy clarifications, ECPs and Change Requests, HEAT tickets in ERP to fix defects in program logic, and education on business processes to subordinate Commands and DFAS. The Main Sail efforts contributed directly to supporting audit readiness in ERP for Funds Balance with Treasury (FBWT), Military Standard Requisition Processing (MILSTRIP) and Financial Statement Compilation and Reporting (FSCR) business segments. Main Sail efforts are continuing on master data controls and efforts with validating requirements with the Security Cooperation Enterprise Solution (SCES), the DOD enterprise solution for the Foreign Military Sales (FMS) program.