Maximizing Purchasing Power in a Constrained Environment
The Congressional Budget Office (CBO) report on the “Long-Term Implication of the 2021 Future Years Defense Program” observes that the President’s Defense budget request for Fiscal Year (FY) 2021 is four percent less than the FY 2020 Defense appropriation; furthermore, the CBO estimates that total funding for the Defense budget remains relatively flat through 2025. Given these constraints presented by current and future budgets, the focus of Defense agencies should shift towards transforming capabilities to enable efficiencies and maximize purchasing power.
In its “Fiscal Year 2020 Army Annual Financial Report,” the Department of the Army shares a similar sentiment to the CBO’s report surrounding the current budgetary environment and the importance of “hold[ing] [itself] accountable to results that inspire greater efficiencies, [that] will ultimately lead to an increase in purchasing power.” While shrinking budgets can hinder agencies’ ability to achieve and succeed beyond their missions, as a Service-Disabled Veteran-Owned Small Business (SDVOSB) that has guided Defense agencies thorough some of the toughest budgetary and financial environments, Washington Business Dynamics, LLC (WBD) sees the Army’s current fiscal challenges as opportunities to succeed and achieve efficiency and maximum purchasing power.
Employing Reform to Foster a Commitment to Fiscal Responsibility to Achieve the Mission
Among the Strategic Goals discussed within its annual financial report, the Army highlights the importance of Reform to “control and reduc[e] the cost of overhead and management structures…[and]…[i]nstilling a strong cost- and efficiency-conscious culture across the Army…to deliver value to the Warfighter.” This emphasis on Reform includes the need to refine and adapt business transformation initiatives to “optimize cost savings and improve the Army’s ability to deliver readiness at the best value.” Among its efforts to improve its logistics, program management, buying practices, and other operations, the Army highlights four desired end states, which are as follows:
- Striving to eliminate all process activity that does not directly lead to enabling operational capability and adaptability;
- Possessing a multi-disciplinary capability and institutionalizing various levels of this capability in Army training and schools;
- Employing technologies to streamline the Army force generation processes; and
- Continuing to improve the adaptability of generating processes through organizational redesign, innovation, and integration.
Further contributing to its efforts to improve and reform to achieve greater fiscal responsibility, the Army performed audits against its General Fund and Working Capital Fund to determine whether its internal controls over financial reporting and compliance complied with the requirements of the Federal Financial Management Improvement Act of 1996. Despite the material weaknesses identified within the Army’s audit, WBD sees these audits as positive first steps for the Army to achieve its four desired end states identified above. The results of this audit provide tangible areas of improvement in which the Army can eliminate ineffective operations, obtain capabilities, employ innovative technologies, and improve adaptability. Based on our own experience as financial management advisors and reformers, WBD recommends some of the following actions that can contribute to the Army’s financial reform efforts, such as:
- Adapting Modernized Business Practices and Frameworks: The Army’s annual report highlights the importance of adapting new technologies to achieve reform. As Defense agencies become increasingly technological in nature, it is equally as important that they adapt business practices and frameworks that are tailored to the incorporation of technology in all aspects of an organization, including the realm of financial management. Frameworks, such as Technology Business Management (TBM), can enable agencies to strategically align portfolios, manage business outcomes, incorporate stakeholders, and track financial resources to maximize efficiencies and eliminate activities that do not lead to operational adaptability.
- Electronic Recordkeeping: The Army’s annual financial report highlights insufficient supporting documentation that poses a challenge for accurate financial statements, and situations such as these can lead to inefficiencies. Although each Federal department and agency may have unique missions, structures, and initiatives, embracing Federal initiatives, such as the Federal Electronic Records Modernization Initiative (FERMI) can lead to cost-effective, modernized, standardized, and interoperable sets of records to enable accurate financial statements. WBD has worked with Defense agencies develop acquisition strategies acquire unique solutions, such as electronic records management solutions, to achieve reform and efficiency.
- Dedicated Internal Control Teams: The Army’s annual financial report emphasizes the responsibility of its management to manage risks and maintain effective internal controls “to ensure the integrity of [the Army’s] reporting systems, programs, and operations annually.” WBD applauds the Army’s efforts to improve upon its internal controls and recommends continued investment into dedicated internal control teams to identify areas of improvement and drive organizational redesign, innovation, and integration.
Adapting Financial Management for the Information Age
“In an effort to enhance financial management practices…continued transformation is dependent upon meeting the demands of the information age.” WBD echoes this outlook espoused within the Army’s annual financial report. Although some may question the need to change already-existing, repeatable, and well-functioning processes, striving to eliminate process activities for more efficient ones, possessing multi-disciplinary capabilities, employing technologies, and improving adaptability will ensure that the Army maintains an overwhelming advantage in not only the combat environment, but the fiscal environment as well.
WBD provides financial management advisory services to Defense agencies based on a thorough examination of each agency’s full financial potential and purchasing power capability. Learn more on how WBD is dedicated to the improvement of agencies’ financial standing and adapting fiscal capabilities to the rapidly changing information age.