February 2006 Newsletter



President's Message

By CAPT Thomas McGuire

President, ASMC Washington Chapter

Greetings everyone!

Only February and it already is starting to feel like spring!

This is an extremely busy time of year for our ASMC Washington Chapter and there is a whole lot going on! Please check our website links and sign up now for the following:

Upcoming Volunteer Opportunities and Events. Amy Anda has put together a very vigorous program with opportunities to participate in the Capital Area Food Bank, the Annual Bunnies and Books Drive (donations should be brought to this Wednesday’s luncheon!), the 11th Annual DC Workathon among others. Your volunteer efforts help some very needy folks and are most appreciated!

Min-PDI. Debra Delmar and her team have been putting together what will undoubtedly be our finest and most ambitious effort to date. It will be held March 9th at the Ronald Reagan Building. We’ll have a great program in a great venue! Please sign up now and also help us spread the word to each and every ASMC Chapter member so that we can maximize attendance.

National PDI. Sign up now while accommodations can still be had!

ASMC National Audio Conference on NSPS. This is scheduled for Wednesday, February 8 at 2 pm and will provide an NSPS overview as well as describe the latest implementation plan. These audio conferences show great promise! Try one!

Our guest at this month’s luncheon is the Honorable Richard Greco, Assistant Secretary of the Navy (Financial Management and Comptroller) at 11:30 a.m. at the Holiday Inn on Eisenhower Avenue in Alexandria. I look forward to seeing you there!!

|Upcoming Events |

|2 Mar 2006 |Executive Board meeting |

|9 Mar 2006 |Mini PDI |

|6 Apr 2006 |Executive Board meeting |

|12 Apr 2006 |Luncheon meeting—OSD sponsored |

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The Honorable Richard Greco, Jr.

Assistant Secretary of the Navy

(Financial Management and Comptroller)

1000 Navy Pentagon

Washington, DC 20350

Luncheon topic: Defense Finance

Richard Greco, Jr. was nominated by President George W. Bush to serve as The Assistant Secretary of the Navy (Financial Management and Comptroller) on September 10, 2004 and was confirmed by the Senate one month later. In his capacity Secretary Greco is the chief financial officer of the Department of the Navy and is responsible for directing and managing the Department's financial activities, including the preparation, justification, and execution of a $126 billion budget; all financial policy, comptroller, accounting, audit, treasury, fiscal, legal, reporting, and Congressional relations functions; and recruiting, training, and leading a financial management workforce of 9,000 people. He also serves on the Department's many governance boards, including the executive steering group of the United States Naval Academy and the Acquisition Integrity Board. For exceptionally distinguished service, the Secretary of the Navy bestowed on Mr. Greco the Distinguished Public Service Award, the Department of the Navy's highest civilian honor.

On June 28, 2002, Mr. Greco was appointed a White House Fellow and assigned to the Immediate Office of the Secretary of Defense, where he served as a special assistant. During his Fellowship year he served in Baghdad for six weeks as a special advisor to Presidential Envoy to Iraq L. Paul Bremer in the areas of private sector development and financial sector modernization. When his White House Fellowship ended, Mr. Greco was appointed Acting Director of Private Sector Development for Iraq at the Coalition Provisional Authority Representative's Office, where he served as the liaison between the international private sector and the Coalition Provisional Authority in Baghdad.

Mr. Greco came to government from the corporate finance house of Stern Stewart & Co., where he was a vice president and managing director. He founded and led Ambrosetti Stern Stewart Italia, a joint venture in Italy that specialized in EVA® corporate governance systems, corporate valuation, fundamental analysis, and financial market research. He was a regular lecturer at the Luigi Bocconi School of Business in Milan, the LUISS School of Management in Rome, and the Italian Association of Financial Analysts, and he served on the board of the Italian-language Journal of Analytical Finance. While at Stern Stewart, Mr. Greco also managed the Government Services Division, which assisted government agencies and enterprises with the implementation of modern corporate finance practices.

Before joining Stern Stewart in 1997, Mr. Greco was an Associate at The Scowcroft Group, an investment advisory firm founded by General Brent Scowcroft, National Security Adviser to Presidents George H. W. Bush and Gerald Ford. There, he advised hedge fund managers and corporate executives on managing the risks of investing internationally, particularly in emerging markets in Africa, Asia, and the former Soviet Union. Also while at The Scowcroft Group, Mr. Greco assisted former President Bush and General Scowcroft in reviewing their book on the foreign policy of the first Bush Administration, A World Transformed.

Mr. Greco is the founder and President Emeritus of The Montfort Academy, a classical high school for boys in Katonah, N.Y. whose curriculum emphasizes academic excellence and character formation. He currently serves as the national president of the American Society of Military Comptrollers (ASMC), a professional association of the nation's 18,000 federal government comptrollers. In 2005 he was honored by the Italian American Museum of New York and by the Order of the Sons of Italy for his contributions to America's cultural heritage. In 2004 he was awarded the Ellis Island Medal of Honor and was named Man of the Year by the National Federation of Italian-American Societies. In 2001 he was elected a term member to the Council on Foreign Relations.

The author of many articles on finance, corporate governance, and foreign policy, as well as a frequent lecturer, Mr. Greco holds an M.B.A. in finance from The University of Chicago Graduate School of Business, an M.A. from The Johns Hopkins University Paul H. Nitze School of Advanced International Studies, and a B.S. in Chemistry Summa Cum Laude, In Cursu Honorum from Fordham University.

NATIONAL NEWS

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Award Deadlines Approaching

Several award categories have deadlines that are fast approaching. Ensure that your chapter members have an opportunity to be recognized... submit a nomination! All award forms and rules are available on the ASMC website! Please keep in mind the following deadlines: (1) Essay Contest and (2) members Continuing Education Grants--28 February.

Sound Off Now on Financial Management Topics

Grant Thornton LLP, along with ASMC, is co-sponsoring a survey on financial management topics. You and your members can use a web-based survey to say what works, and what doesn’t, in the area of defense financial management. You can see what you and your colleagues said at a workshop at PDI 2006 and in an article in the Armed Forces Comptroller Journal. Please ask your members to take this short survey, which should only require 10 to 15 minutes to complete. The survey will be AVAILABLE THROUGH FEBRUARY. To access the survey, go to .

Senior FM Leaders Talk to You from our Web Site

Now you can hear some of our senior FM leaders discussing current issues. Video taped talks from the Honorable Valerie Baldwin (Army FM), the Honorable Richard Greco (Navy FM), and Mr. Zack Gaddy (DFAS Director) can be accessed through the ASMC web site. (Talks from other senior leaders may be provided at a later date.) Each talk lasts from 20 to 30 minutes, and listeners are eligible for CPE credits. There is no charge, but we do ask that you send us an e-mail and tell us whether this new service is useful.

We also plan to put all three talks on a CD and send one CD – at no charge – to each chapter. Chapter presidents should receive the videotapes within a few weeks, and they can be used for chapter meetings or other events. While there is no charge we ask that, if you use the videotapes, you send us an e-mail and let us know whether the taped presentation was useful.

Chapter Leader Audio Conference on March 28

On March 28, 2006 at 2 pm Eastern we plan an audio conference with ASMC chapter leaders. We will focus on the CDFM program – how to “sell” it, how to encourage training for it, and new features. We will also discuss PDI 2006 including what’s new and how to make best use of it. As time permits, we will discuss other new initiatives such as the audio conferences. Throughout, we will seek your comments and answer your questions. There is no charge for the conference, but we ask that – if multiple chapter leaders plan to join – they gather together and use one speakerphone and one phone line. You MUST REGISTER and receive instructions and a PIN number. To register, send an e-mail to Jennifer Sizemore (sizemore@).

Plan to Attend PDI 2006

Registration will open approximately February 15 for PDI 2006 – to be held May 30 to June 2, 2006 in San Diego. The registration fee will be $500 for members registering by May 1, $600 for non-members. Housing reservations will open on about February 2.

This year’s exciting professional development program includes about 100 workshops, Service Day presentations, and an array of high-powered plenary-session speakers dealing with important topics. Also, for the first time we will also offer a pre-conference program of CDFM training. See below for more details. The Chapter Development workshop this year will focus on BRAC, and how it will affect our ASMC chapters and membership. If your chapter is being impacted by BRAC, please register for this PDI workshop.

Work hard and learn during the day; then have fun after working hours. The Padres are in town Tuesday night and the committee plans a group ticket purchase. MWR will have ticket sales tables for other attractions around beautiful San Diego, such as the San Diego Zoo and Sea World. More details on these optional activities will be on the ASMC website in mid-February.

The Chapter Fair will have a beach-side Carnival atmosphere including games, a fortune teller, corn dogs, prizes, and even a dunk tank. Letters have been mailed to all chapters with chapter fair details. Please contact Jane Sumabat at (858) 616-5599 or JANE.SUMABAT@DFAS.MIL if your chapter did not receive a letter and would like to participate in this year’s fair.

CDFM at PDI 2006

A special “pre-conference” session will be held on Monday and Tuesday, May 29-30, which will include intense coverage of examination Modules 1 and 3. This two-day event is intended for those who are already in the CDFM Program and have completed a significant amount of preparation. A second “pre-conference” session will be held on Tuesday, May 30, which will include intense coverage of the new examination Module 4, Acquisition. This one-day event is intended for those who are already in the CDFM Program and have elected to pursue the designation “CDFM with Acquisition Specialty.” Separate registration for these pre-conference events is required, and will be available in mid-February.

PDI workshops are available on Thursday, June 1, that will introduce prospective candidates to the material they will see during their preparation for the CDFM examination modules 1, 2 and 3. These sessions highlight the major topic areas but will not provide the in-depth coverage necessary to prepare for an examination.

CDFM examinations will be offered Tuesday, May 30, through Friday, June 2. Further details are available on the ASMC website.

Communication Assistant Job Announcement

Mary Barfield, the communications assistant at ASMC headquarters, will be leaving ASMC. American Society of Military Comptrollers, a non-profit professional association, seeks a communications assistant to manage quarterly publication and to manage/expand web and other communications.  This is a full-time position at ASMC headquarters in Alexandria,

Virginia (travel is limited). Applicant should have three or more years' experience with communications and/or associations.  Strong computer and web skills required.  College degree preferred.  We offer competitive pay, liberal paid holidays, and a full range of benefits.  Send resume and current salary to resumes@ no later than Feb 20.

Chapter News

Certified Defense Financial Manager:

Congratulations to these members for their hard work and dedication. We look forward to other

members added next month. So let’s get busy!

Raymond Michael Bombac

Alan Brent Christian

Rick Allen Diggs

Scott Samuel Herold

Joseph Clark Windham

William H. Zeh

Chapter POC: Washington Chapter CDFM Program Manager: Ms. Darlene Thompson, CDFM

(703) 692-6548 Darlene.thompson@mda.mil

Farewell:

CAPT. Carlos Ybarra, Washington Chapter Treasurer and Military Aide to The Honorable Richard Greco, Jr., ASN(FM&C), will be leaving active duty on June 1, 2006 and starting his terminal leave on March 13.

Ms. Tory Weaver, Washington Chapter Air Force Vice President and Deputy Director of Workforce Management, will be leaving federal civilian service on March 3.

We will miss CAPT Ybarra and Ms. Weaver but wish them much success on their future endeavors.

Sharon Weinhold and Nancy English retired from Department of the Army in December 2005. As you end your federal civilian career and begin a ‘less hectic’ one of rest and relaxation, it is our hope that you will enjoy this new phase of your life.

January luncheon winner:

The luncheon winner for last month was Richard Warde, DAFC HAF/RMFF.

Free luncheon Raffle:

All luncheon attendees will be entered in a raffle to win 2 certificates good for a future free luncheon admission.  One certificate is for the winner's own use; the other is for the winner to give to a potential new member.

CPE Credit:

For those wishing to get CPE credit for attending the ASMC luncheon, please ensure that you sign in with your service representatives. If you have any questions, contact Charlotte Rodriguez by phone at (703) 695-3962 or by e-mail at Charlotte.Rodriguez@hqda.army.mil.

Upcoming Community Service Opportunities:

Capital Area Food Bank: Join fellow ASMC members for an exciting hands-on volunteer project at the Capital Area Food Bank (645 Taylor St., NE; Washington, DC) on Wednesday, February 22nd from 6:30-8:30 PM. ASMC volunteers will help sort and repackage food for

needy adults, children, and families. This is a great opportunity for members to socialize and network while also giving back to the community. For more information and/or to volunteer, please email asmcdcvolunteer@

Annual Bunnies & Books Drive:

Please bring new stuffed animals and/or books (appropriate for elementary-age children) to the National Capital Regional Mini-PDI on March 9, 2006. All donated items will be distributed in March or early April to children staying at local children’s hospitals. We are also seeking a few volunteers to help deliver and distribute donations, please email asmcdcvolunteer@ if you are interested.

SAVE THE DATE: Saturday, April 29th, 2006

Mark your calendars and join fellow ASMC members for the 11th Annual Hands on DC Work-a-thon. The ASMC Volunteer Team will help paint, landscape, and improve the condition of one of the District’s more than 150 schools during this annual one-day work-a-thon. To join the team and/or to receive additional information, please contact Amy Anda at asmcdcvolunteer@.

Mini PDI:

The 2006 National Capital Regional Mini-PDI will take place at the Ronald Reagan Building and International Trade Center in Washington, D.C. on March 9, 2006.

We are now seeking both Planning and On-Site Conference Volunteers for the 2006 ASMC National Capital Regional Mini-PDI. Serve your profession, hone your skills, network with colleagues, and have more fun as a 2006 ASMC Mini-PDI Volunteer. Please see this web site, for detailed information.

Acknowledgements:

The Washington Chapter would like to thank Janet Vernon for her article on Improving Navy Working Capital Fund Cash Management, beginning on Page 10.

Washington Chapter Officers for 2005-2006

|Name |Title |E-Mail |Phone |

|CAPT Thomas McGuire |President |thomas.f.mcguire@navy.mil |(703)-614-3945 |

|Beverly Velt |Secretary |beverly.veit@navy.mil |(202) 685-6718 |

|CAPT Carlos Ybarra |Treasurer |carlos.ybarra@navy.mil |(703) 692-0902 |

|Elizabeth McGrath |OSD Vice President |Elizabeth.Mcgrath@osd.mil |(703) 695-9715 |

|Lucy Williams |OSD Ass't Secretary |lucy.williams@osd.mil |(703) 571-9183 |

|Robert Benefiel, Jr. |DFAS Vice President |Robert.E.Benefiel@dfas.mil |(703) 607-2848 |

|Sherri’ Anthony |DFAS Ass't Secretary |Sherri.Anthony@dfas.mil |(703) 601-2476 |

|Jim Anderholm |Army Vice President |Jim.Anderholm@us.army.mil |(703) 692-4982 |

|Mary Williams |Army Ass't Secretary |Mary.R.Williams@hqda.army.mil |(703) 693-2818 |

|Ednora Armour-Ohanmu |Navy Vice President |ednora.armour-ohanmu@navy.mil |(703) 614-2768 |

|Brenda LaFleur |Navy Ass't Secretary |LaFleurBL@ |(703) 607-7094 x142 |

|VACANT |USMC Vice President | | |

|Arlillian Coleman |USMC Ass't Secretary |ColemanA@hqmc.usmc.mil |703-614-1045 |

|Tory Weaver |Air Force Vice President |Tory.Weaver@pentagon.af.mil |(703) 614-5398 |

|MAJ Lasheeco Graham |Air Force Ass't Secretary |lasheeco.graham@js.pentagon.mil |(703) 697-9784 |

|Warren Cottingham |USCG Vice President |Wcottingham@comdt.uscg.mil |(202) 267-0484 |

|LT Robert Hart |USCG Ass't Secretary |RHart@elcbalt.uscg.mil |(410) 762-6483 |

|Craig Silcox |Corporate Vice President |csilcox@ |(202) 533-4296 |

|Brian Boshart |Corporate Ass't Secretary |brian.boshart@ |(703) 289-6832 |

 

Advertisement

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IMPROVING NAVY WORKING CAPITAL FUND CASH MANAGEMENT

By Janet M. Vernon, CDFM

Background:

By statutory authority[i], working capital fund (WCF) activities have a buyer-seller relationship and operate under a breakeven concept. Providers recoup the costs of conducting business by charging customers a rate.[ii] Profits are returned to customers by rate decreases and customers absorb losses in rate increases. WCF entities maintain a cycle of business operations similar to private and public sector enterprises with profit and loss or surplus and deficit life cycles. Today’s business-like activities evolved from the original industrial and stock funds of the last century created to provide work and services related to ammunition, ordnance, ship and aircraft refurbishment and repair, as well as replenishment material and supplies for military equipment. Some of these functions continue under the WCF concept today, others transitioned to mission funding when a viable customer base ceased to exist.

The Department of the Navy (DON) is the most diverse of the Department of Defense (DOD) WCFs. Tables 1 and 2 list the DOD WCF business areas by Component.

Table 1:

|Navy Working Capital Fund Business Areas |

|Supply |Depot Maintenance |Research & Development |Transportation |Base Support |

|Navy |Ships |Air Warfare Center |Military Sealift |Public Works Centers |

|Marine Corps |Aircraft |Surface Warfare Center |Command |Naval Facilities |

| |Marine Corps |Undersea Warfare Center | |Engineering Service |

| | |SPAWAR Systems Center | |Centers |

| | |Naval Research Laboratory | | |

Table 2:

| | |DOD Component Business Areas |

| | | |

|Army |Air Force | |

|Business Areas |Business Areas | |

| | |Defense Finance & |Defense Information Systems |Defense Logistics Agency |Defense Commissary Agency |

| | |Accounting Service |Agency | | |

|Industrial Operations |Depot |Financial Operations |Computing Services |Supply |Commissary Resale Stocks |

|Supply |Supply |Information Services |Telecommunications/Enterprise |Distribution Depots |Commissary Operations |

| |Information Services | |Acquisition Services |Reutilization & Marketing | |

| |Transporta-tion WCF[iii] | | |Services | |

| | | | |Document Automation & | |

| | | | |Production Services | |

During operations, planned and actual operating results are used to evaluate the fiscal well being of WCF activities. In its simplest form:

|Revenue – Expenses = Operating Results |

Similar to any business entity the WCF is allowed to apply depreciation expenses to the basic operating result.

|Operating Results + Depreciation = Net Operating Results (NOR) |

NOR can be positive or negative recognizing a gain or loss from business activities. The cumulative effect of NOR is the Accumulated Operating Result (AOR), which must be zero in the budget year.

|Cumulative Net Operating Results = Accumulated Operating Results |

Cash Initiative:

One indicator of WCF solvency is maintaining sufficient cash to meet financial obligations. In 2005, the DON embarked on an ambitious initiative to determine the optimum amount of cash required, and the amount of cash required for each business area.[iv] By agreement between the Congress and the Department of Defense, the annual cash balance requirement is seven days of operational requirements and six months of capital expenditures.[v]

If a negative balance is anticipated at anytime during the fiscal year, action must be taken by the Department and/or activity to avoid such. Insufficient cash to meet current expenditures is an Anti-Deficiency Act Violation[vi], which is reported to the Congress and the President.

Unlike private concerns, WCF entities cannot borrow or sell receivables to maintain cash flow, but raise cash internally through advance billing and cash surcharges. Advance billing[vii] is the process of accelerating the payment of future accounts receivables prior to completing the work or services and earning revenue. Under Title 10 United States Code 2208, the DOD has $1 billion in advance billing authority currently shared among the Army, Navy, Air Force and Defense. DOD must notify the Congress within 30 days of using advance billing authority. Notification to the Appropriations and Armed Services Committees of both chambers must include the reason, the amount, the time period, and actions planned to correct the shortfall. The Director, Revolving Funds, manages this process as delegated by the Secretary of Defense to the Office of the Under Secretary of Defense (Comptroller).

Although advance billing does not impact readiness or operations, its effects may exasperate cash solvency in a later period by interrupting the normal collections and disbursements cycle. Conversely, cash surcharges increase customer rates with the potential to impact funds earmarked for readiness and operations.

In a normal business cycle collections should generate sufficient cash to fund disbursements. A linear relationship should exist between the disbursement and collection cycle and the recognition of revenue and expenses in most of the non-supply[viii] business areas. If, during the normal course of business, the cash cycle cannot maintain positive cash flow, a cash surcharge[ix] may be warranted.

Historically, the Congress has perceived high cash balances within the DOD as potential assets to finance burgeoning requirements. To avoid Congressional reductions, several DOD Components have used various budgetary presentations, such as decreasing the cash balance through lower customer rates and credits to the general fund accounts, in an effort to control who benefits from the perceived asset. Unfortunately, neither strategy provides a credible analysis of the underlying cash flow or business practices.

The first set of challenges is to map the “as is” cash flow process, develop a standardize cash flow process, and to transition from the “as is” to the standard process. The DON began this initiative by tracking the billing and collection of labor costs, which is the largest single expenditure within the WCF. In the Federal sector, the Treasury actually disburses the payroll prior to receiving funds from an activity. This creates a float of three to five days. If the float crosses the end of the accounting period[x] (one month), the disbursement is reflected in the subsequent month. As a consequence, all Navy WCF activities are required to bill customers at least twice a month to reflect all labor billings in the appropriate accounting period. Each category of cost within the WCF will be similarly analyzed. A contactor has been selected to map the cash flow processes and assist the DON in adopting standardized processes.

The second challenge is to identify the tools required to ensure sufficient real time financial accounting data is available to support the managerial decision-making process. Weekly Flash Cash reports have proven insufficient as inter-Service and non-DOD transactions are omitted. Further, current monthly reports do not provide consistent insight into the aging of payments nor the status of accrued liabilities and accrued expenses.

The DON partnering with the Defense Finance and Accounting Service-Cleveland has incorporated the correction of systems deficiencies into the Department’s Financial Improvement Plan (FIP)[xi], since the inability to predict cash balances is directly related to the reliability and timeliness of systems data. Resolution of systemic issues will provide processes and procedures compliant with various internal control and financial statutes and regulations.

The final challenge is corrective action. The DOD and other Components share the DON’s concern and are interested in leveraging study findings throughout DOD.

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[i] Title 10 United States Code 2208. The Department of Defense authority for the establishment and operation of working capital fund entities.

[ii] Working Capital Fund rates are usually set annually to recover all costs of operations. This means prices are set to achieve an Accumulated Operating Result (AOR) in the budget year of zero. Accordingly, prices in the budget year are set to either make up loses or return gains. See DOD FMR Vol. 2B, Chapter 9, for a full explanation of rate setting policies.

[iii] US Transportation Command manages TWCF operations, but cash management is provided by the Air Force.

[iv] Management Initiative Decision (MID) 903 of December 2002 requires the DOD Components to manage WCF cash by business area.

[v] DOD FMR Vol. 2A, Chapter 9, para. 090103.

[vi] A zero or negative cash balance creates an Anti-Deficiency Act violation (Title 31 United States Code 1341(a)(1)(A).

[vii] Advance billing is not the same as an advance payment, which occurs when the Department accepts work from non-DOD and/or non-government sources, or a pre-paid item such as rent or a lease.

[viii] The Supply Management business area has authority to finance short and long-term inventory, which changes the timing between expense and the receipt of revenue.

[ix] A cash surcharge is collected along with the rate from the customers of one or more business areas to rebuild the cash balance to the appropriate amount.

[x] DOD FMR Vol. 1, defines an accounting period as one month.

[xi] The FIP is an event driven plan to attain an unqualified opinion on the Component’s Annual Chief Financial Officer report.

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ASMC Washington Chapter

Newsletter

February 8, 2006 – Sponsored by Navy

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