FIAR_Industry_Day_Slides_8_Mar_17_v2.pptx

Industry Day Event Financial Improvement and Audit Readiness (FIAR) Ms. Elizabeth Bryant MSgt Theresa Haynes Ms. Sharnte Crown

AFDW/PK

March 15, 2017

B r e a k i n g B a r r i e r s … S i n c e 1 9 4 7

Welcome & Admin. Items

WELCOME!

The intent of today’s Industry Day is threefold:

Enhance industry’s understanding of the FIAR Requirements Obtain useful and relevant feedback from industry before release of the formal solicitation Provide Industry an opportunity to meet with the US Government (USG) in closed one-on-one sessions to present information and seek clarification of any requirements Although proprietary/competition sensitive information is not sought in this setting, parties that intend to reveal such information must clearly identify it and any restrictions on its use by the USG

Avail yourself of this opportunity to engage in Q&A and present any information that you deem worthy for consideration Silence cell phones in meetings No photography / recordings during any event

DO NOT DISCUSS OR EXCHANGE ANY CLASSIFIED INFORMATION

Side conversations in the lobby please No sales presentations - Focus is on the FIAR requirement only Information presented today may be subject to change and is not binding upon the Government

After the event, all questions, comments or concerns with the FIAR Project (including the draft PWS and other information provided to industry) shall be directed only to the AFDW Contracting focal points Parties that do not comply with this restriction may be excluded from any solicitation One-on-One Sessions are by prior registration only Any remaining slots are on a first come first serve basis Schedule is very constrained – Be on time & Finish on time Please use the Questionnaire / Comment forms

INDUSTRY DAY AGENDA

SAF/FM

Industry Day Ms. Becky Allen

SAF/FMFA

Accountability from Flightline to Bottomline

Headquarters U.S. Air Force

Agenda Congressional Background Contract and Audit Timeline Current FIAR Progress FY 16 SBA Results

Congress’ Desire – Fix it Landmark Legislation:

The Chief Financial Officers Act of 1990: Created CFO position within cabinet level agencies, directed OMB to prepare a 5-year Federal Financial Management Improvement Plan and established pilots for agency financial statement audits The Government Management Reform Act of 1994: Expanded CFO Act of 1990 by requiring annual auditable financial statements The Federal Financial Management Improvement Act of 1996: Required agencies to implement compliant financial systems Refined Guidance:

NDAA FY02: Directs DoDIG to stop auditing financial statements until management asserts they are ready for audit NDAA FY10: Legislates DoD’s established audit readiness dates NDAA FY14: Legislates audit of FY18 financial statements opinions NLT March 31, 2019 NDAA FY15: Directs a ranking of all military departments and Defense Agencies Continued Congressional interest HASC Panel - Utilize the expertise of CPAs with financial statement audit experience in its audit readiness efforts

CFOA

FY14

NDAA

FY13

NDAA

GMRA

FFMIA

FY10

NDAA

FY05

NDAA

FY02

NDAA

Audit Timeline

11/15/18 1st FS Audit Opinion Aug 2012 FIAR Support Contract Award

FY15

1st SBA 12/1/17

FY18 FS

Audit Starts

FY17

3rd

SBA

FY16

2nd SBA 9/3018

FYE

Today

Key Balances

FY2016 SBA Audit Recap FY2016 SBA audit report was issued by the IPA on 21 November. The AF received another Disclaimer of Opinion.

Report on Internal Controls identifies five material weaknesses (2 new*):

DoD Accounting Policies and Procedures* Air Force Accounting Polices and Procedures* Financial Reporting Oversight and Monitoring of Internal Controls Financial Information Systems FY2016 SBA audit exit brief was held on 15 November. EY was again complimentary of the AF’s partnership and progress. An indicator of AF progress in FY2016 are the accounting-type issues identified by EY, instead of only audit-type issues.

DoD accounting policies and procedures ► Operational issues and allocations related to common procurements ► Trading partner adjustments are not fully supported USAF accounting policies and procedures ► Insufficient documentation supporting the basis for estimates recorded using MORDs ► Inaccurate recording of recoveries ► Other transactions not recorded in accordance with USSGL ► Obligation and disbursement transactions recorded in the improper period Financial reporting ► Lack of sufficient centralized financial statement analytical function to identify and respond to posting errors, missing data or unusual activity ► USAF has communicated intent to not focus on remediating certain GAFS-R deficiencies, however DEAMS deficiencies have also been identified ► Lack of sufficient reconciliations for certain areas (e.g., MILSTRIP) Oversight and monitoring of internal controls ► Lack of an effective internal control program ► Insufficient monitoring of CUECs ► Inability to maintain or provide sufficient documentation in a timely manner Financial Information Systems ► User Access/Access Controls ► Configuration Management/Change Control ► Segregation of Duties ► Interface Controls

FY16 SBA Audit – AU Testing Breakdown

SBA

As of November 08, 2016

SBA

As of November 08, 2016

FY16 NFRs – 5 relate to financial reporting FY15 NFRs (reissued) – 1 travel and 1 MILSTRIP

FY16 SBA Audit – Request Type Overview PBCs, Samples, and Follow-Ups Status by AU As of November 08, 2016

FY16 NFRs – 5 relate to financial reporting FY15 NFRs (reissued) – 1 travel and 1 MILSTRIP

FY2016 and FY2015 (FM) NFR Comparison

* NFR applicable to multiple AUs/Processes

Enduring Audit Readiness

Enduring Audit Readiness Entity Level Controls OMB Circular A-123 Program Compliance & Administration Update cycle memos, risk assessments, Test of Design (TOD), Test of Effectiveness (TOE), reporting, SIDs Service Providers MOUs Briefings/metrics

For each assessable unit updated cycle memos, risk assessments, testing plans, TOD results, TOE results, reporting For each SSAE 18 a monitoring report of analysis and CUEC results Updated Master Controls Catalog Update MOUs Briefings/metrics Performance Measures Cycle Memo Updates- made within 15 days of control gaps being identified. Include actionable recommendations.

Test plans include detailed risk based assessment and are provided at least 7 days prior to testing Test results metrics w/in 30 days of testing Annual Statement of Assurance-accurately reflects all material weakness and significant deficiencies Training-adequate & timely coverage of new/revised control assessment/testing approaches (allows incorporation into annual testing cycle) No more than 5% Deviation from standard

MOUs updated (ready for coord) within 30 days of new info/updates id’d from service providers

“Coaching/Advising” elements 28 assessable units 321 key controls

243 CUEC

~20 SSAE 18s 20 MOUs

Monitoring reports are established in “draft ready for review” from no later than August 30 each fiscal year

Key Deliverables

Corrective Actions

Corrective Actions Develop and implement CAPs for self-identified deficiencies, NFRs Confirm, Plan (including root cause analysis), Design, Implement, Validate Population Completeness/Universe of Transactions Mission Critical Asset Manual Reconciliations Valuation Baseline & Go Forward Sustainment Accruals Corrective Action Plan for each SID/NFR Monthly CAP reports Monthly recon reports Monthly baseline reports Briefings/metrics Internal and external NFR and CAP reporting trackers Performance Measures 75% of implemented/closed CAPs retested by the IPA auditor/other audit entity do not identify the same failures (75% CAPS closed without repeat write-ups) TARGET INCENTIVE: No repeat failures for 95% of implemented/closed CAPs associated with priority 1 NFRs

No more than 25% Deviation from standard

75% of CAPS designed to effectively include evidence of proper analysis & ID future/target state impacts, assessments, and corrective actions related to BPR (within 6 weeks of NFR) Evidence of adequate coord w/ bus process & system owners & related stakeholders 95% of NFRs and CAPs accurately reflected in internal/external CAP trackers Development/Implementation of Corrective Actions & related Business Process Re-engineering Tracking & Reporting CAP Development 28 Assessable Units 52 Financial CAPs (22 SIDs, 57 NFRs) 64 MCA SIDs (141 SIDs) 11 MCA Manual Reconciliations TBD Manual Valuation Baselines

IPA Audit Liaison Support

IPA Audit Liaison Audit Infrastructure & Liaison (Site visits, PBCs, samples) GF Financial

GF MCA

WCF process that are the same as GF SharePoint Developers for Audit Response Tool (GF & WCF) AF as a Service Provider PBCs & Samples (SG, USTRANSCOM, SOCOM, others) IT Audit Support Audit Response Tool audit stats, load & acceptance reports Trip reports Briefings/metrics Performance Measures Back up plans for any known functionality issues with automated means/tools used for responding communicating during the audits are initiated within 24 hours, to include communication of the back-up plan to all stakeholders No more than 5% Deviation from standard 95% of communication with MAJCOMs and auditors provide within 24 hours of request 95% audit response tool requirements meet stated objectives of the requirements Facilitate Proper/Timely Comm with Stakeholders 28 Assessable Units 49 AF Systems 1 SharePoint Site/5 Subsites IPA Financial Statement Auditor drives volumes

IT Support

FIAR IT Systems /Integration/Support Performance Measures No more than 5% Deviation from standard 49 AF Systems 7 High Complexity or Impact 11 Medium Complexity or Impact 31 Low Complexity or Impact Assessing IT compliance in legacy and target environments OMB Circular A-123, Appendix D (FFMIA) CAP Review & Tracking (FISCAM, NFR, BlueBook) New Systems FISCAM & BlueBook Review Assistance in drafting policy/guidance to address enterprise audit issues Risk Management Framework DEAMS SSAE 18 Assertion & Audit Support Assessment Reports Monthly CAP reports & metrics DEAMS SSAE Assertion & Annual Control Testing & associated reporting Strategy action plans for critical risk areas

Senior level management meeting on bi-weekly basis to address potential issues, way forward, and recommend implementable actions Maintain effective/on-going communication to SAF/FM leads and OPRs Identify key information for system change requests and support the AF in the SDDP process Within 30 days of identifying control gaps and related necessary IT system changes, provide draft system change requests identifying necessary IT system key controls/updates Within 30 days of known business process changes impacting IT systems/initiatives, documents necessary control requirements and related key information to support service development and delivery

Change Management

Change Management Strategic Communication plan Change management support financial statement audit business processes changed by CAPs Audit best practices Strategic actionable plan for critical risk areas Drafting of FIAR Plan Status Report input Annual Strategic Communication Plan Monthly Newsletters FIAR Plan Status Report input Strategy/action plans for critical risk areas Performance Measures Documents potential forthcoming issues and proposed ways forward in an actionable plan within 30 days of a known critical issue/risk area arising Facilitate Proper/Timely Comm with Stakeholders

Admin PMO Source Selection Sensitive IAW FAR 2.101 & 3.104

FIAR Sppt Program Mgt/Admin Program Management Quality Control Program

Key Deliverables Staffing batches Monthly invoices Travel invoices Lapse rate report Contract deliverables POA&Ms Template Management & Updates Monthly Workstream summary report Burn reports Program Management Review Briefing Performance Measures Less than 5% Lapse Rate across all key personnel positions Workload balanced effectively, to include minimized use of subcontractors, resulting in minimal negative mission impact

Qualified Key Personnel on job at contract start, unless previously negotiated by CO Vacancies filled w/ qualified personnel w/21 calendar days of vacancy (unless in writing by CO) AND No mission impact due to vacancies or unqualified personnel Provide & Retain Qualified Key Personnel (as identified in Management/Staffing Plan) Maintain Stable Workforce Deliverable/Schedule Management 100% deliverable requirements met/received on time AND Critical information is accurate Small Business Maintain min small business requirements or proposed goals (whichever is greater for each category) – Failure to maintain overall SB requirement of 26% considered major non-conformance

Conflicts of Interest:

Personal and Organizational Joel B. Lofgren

AFDW/JA

Pride…Teamwork…Success Overview Purpose Laws and Rules Personal Conflicts of Interest Organizational Conflicts of Interest

Purpose of Ethics Ensure you avoid the actual or appearance of impropriety in the procurement process and serve your client – the Agency itself

The Requiring Authorities – organizations/units/offices within the Agency with a need or requirement

Ethics rules ensure we perform our mission with the public interest in mind and uphold the public’s confidence in the integrity of the Government

Overall Ethics rules ensure we act as good stewards of funds and protect the integrity of the contracting process

Laws and Rules Federal Acquisition Regulation (FAR) Joint Ethics Regulation (JER) 18 U.S.C. §208 – Acts Affecting a Personal Interest 5 CFR Part 2635 – Standards of Ethical Conduct for Employees of the Executive Branch FAR Parts 9.5 – Organizational Conflicts of Interest 41 U.S.C. 423 – The Procurement Integrity Act (PIA) Implementing regulations at FAR Subpart 3.104 Plus miscellaneous other statutes and regulations Rule: The CO has ultimate responsibility over the acquisition process, contract, and contractor personnel matters.

Personal Conflicts of Interest Personal conflict of interest: Government employee has a financial interest, personal activity, or relationship with a contractor that could impair the employee’s ability to act impartially and in the best interests of the Government Government personnel who participate in the procurement process must remain impartial and maintain public trust and confidence Penalties: Criminal, Civil, or Administrative

Participants – evaluators, requirement developers, advisors

You may not participate personally & substantially in any Government matter that would have a direct and predictable effect on the interests of you, your spouse, your child, an organization in which you are serving as an officer, director, trustee, general partner or employee or an organization in which you are seeking employment

The CO may disqualify you from participating in a government matter that affects the financial interests of you, a member of your household, a relative with whom you have a close relationship, or an organization in which you are an active participant

- Civil: $50K penalty per violation OR the amount of compensation received

- Criminal: Up to 5 years in prison and/or a fine

- Administrative: Cancel the procurement (Pre-award); Terminate the contract (Post-award); Suspension or debarment; Removal or other adverse personnel action

- You cannot seek outside employment with a contractor

Organizational Conflicts of Interest (OCI) Organizational Conflict of Interest (OCI): A contractor is unable or potentially unable to provide the Government with impartial or objective assistance or advice and/or due to their role in the Government a contractor has an unfair competitive advantage over other potential offerors. FAR 2.101

Also known as “Unfair Competitive Advantage”

Three Types:

Unequal Access to Information Impaired Objectivity Biased Ground Rules

Contractor obtains knowledge that gives the company an edge. Can take them out of the running or cause the entire requirement to be cancelled.

Organizational Conflicts of Interest (OCI) Unequal Access to Information: a contractor has access to non-public information (e.g. Government or other contractor) that provides that contractor with a competitive advantage in proposing to a solicitation This information can be obtained through actions of the Contractor company or personnel or Government personnel An incumbent does not have an OCI just by being the incumbent. If the incumbent gains access to non-public information that gives the company an advantage that is an OCI.

Why you must be extremely careful when planning your follow on requirement.

Organizational Conflicts of Interest (OCI) OCIs must be disclosed to prevent a perception of bias, favoritism, or unfair competitive advantage A CO, upon learning of an actual or potential OCI, must investigate.

Depending on the nature of the OCI, it may be resolved via mitigation, wavier, or by cancelling the contract Documents to protect against OCI: NDAs, Professional Service Agreements, OCI Statements for each Source Selection, FAR 9.5 included in the PWS

OCI – GAO Standard GAO has consistently held that:

GAO will review a CO determination regarding significant potential conflicts but they will not substitute their judgment where an agency has given reasonable consideration to the matter It is the protestor’s burden to identify hard facts that indicate the existence or potential existence of a significant conflict – mere inference or suspicion is insufficient

Methods for use by a CO:

Investigations – based on appearance or actual to determine if hard facts exist Mitigation – OCI Plans or Statements of Non-Compete in the PWS; assign a different CO or CS

Acquisition Milestones Acquisition Milestones and Key Issues

Draft Acquisition Milestones Industry Day Mar 2017 Request Business Clearance Aug 2017 Issue solicitation Sep 2017 Receipt of proposals Nov 2017 Award Aug 2018 Period of Performance Basic Contract Aug 2018 - 31 Jul 2019 Option Period 1 Aug 2019 - 31 Jul 2020 Option Period 2 Aug 2020 - 31 Jul 2021

* The above dates are subject to change

Potential Customers Secretary of the Air Force, Financial Management (SAF/FM) Air Force Space Commander (AFSPC) Air Force Life Cycle Management Center (AFLCMC) Air Force Material Commander (AFMC) United Statement Transportation Command (USTRANSCOM) Air Force Surgeon General (AF/SG) National Guard Bureau (NGB) *Possibility of Additional Customers

*The government is still conducting research with possible additional stakeholders

Special Contract Requirements Security This requirement will require all personnel to obtain a Secret Clearance Must possess or obtain a facility security clearance (FCL) at the classification level of SECRET prior to performing on the contract DD254 will be issued with the formal solicitation Government Facilities The Government anticipates 50 work spaces for FIAR Contractor employees SAF/FM spaces only Contractor must provide a facility beyond the 50 FTEs

Data Rights Potential Data Rights Clauses for FIAR solicitation:

DFARS 252.227-7013 – Rights in Technical Data – Noncommerical Items DFARS 252.227-7014 – Rights in Noncommercial Computer Software and Noncommercial DFARS 252.227-7015 – Technical Data – Commercial Items DFARS 252.227-7017 – Identification and Assertion of Use, Release, or Disclosure DFARS 252.227-7019 – Validation of Asserted Restrictions—Computer Software DFARS 252.227-7025 – Limitations on the Use or Disclosure of Government-Furnished Information Marked with Restrictive Legends DFARS 252.227-7028 – Technical Data or Computer Software Previously Delivered to the Government DFARS 252.227-7030 – Technical Data – Withholding of Payment DFARS 252.227-7037 – Validation of Restrictive Markings on Technical Data

Major Task Areas Enduring Audit Readiness Corrective Actions IPA Audit Liaison Support FIAR IT Systems/Integration/Support Strategic Communication & Change Management Program Management/Admin

Draft CLIN Structure for FIAR

Best Value Tradeoff Process The Government is considering a full tradeoff process between non-cost factors and cost/price Anticipated award will be made to the offeror proposing the combination most advantageous to the Government based upon an integrated assessment of the evaluation factors and subfactors The Government may accept other than the lowest priced proposal or other than the highest technically rated proposal to achieve a best-value contract award The following evaluation factors and subfactors, ranked in order of importance, will be used to evaluate each proposal

Draft Evaluation Criteria Full Trade-off Technical OCI Plan (Pass/Fail Criteria) Management Plan Staffing Plan Transition Plan Methodology to Complete Tasks Contracting Team Arrangement (Subcontracting Plan)

Past Performance Recency – Last 3 years, w/6 months continuous service Relevancy – IPA Audit/Advisor services for Fortune 500 company comparable in size to annual AF budget of $160B

Price Total Evaluated Price (Price Realism and Reasonableness) Total Compensation Plan

Questions and Answers

Back Up

SSAE 18 Service Organization Controls (SOC)

SOCs continued

SID/NFR CAPs Comparison by AU/Process – SBA

* Number of SIDs and CAPs currently in-progress as of 28 February 2017 ** Number of NFRs does not have a direct one-to-one relationship with the number of CAPs *** Total NFR amount is the combination of FY16 issued NFRs and FY15 re-issued NFRs

SID CAPs Comparison by AU/Process - MCA

* Number of SIDs and CAPs currently in-progress as of 28 February 2017

IT Issues Comparison by Functional Area

* Number of CAPs currently in-progress as of 15 February 2017

All Adjustments (GAFS-R and DDRS)

*Based on FY 2016 Data

Volumes

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Microsoft_Excel_Worksheet1.xlsx Sheet1

SBA - General Fund Summary

FY 2016 FY 2015

IPA Request Type Total Document Count Total Document Count

PBC 1,103 1,765 3,473 4,671

Sample 3,735 85,747 4,007 12,824

Follow-Up 647 941 2,191 1,903

TOTAL 5,485 88,453 9,671 19,398

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