In Tune with Army Financial Management Managing Your Budget In a Declining Economy June 2010 Army Day COL C. A. Cruse, ChiefMr. Todd Nethery, Chief OMA.

In Tune with Army Financial ManagementIn Tune with Army Financial Management

Managing Your BudgetManaging Your BudgetIn a Declining EconomyIn a Declining Economy

June 2010June 2010Army Day

COL C. A. Cruse, Chief Mr. Todd Nethery, ChiefOMA Budget Formulation OMA Current Operations

Army Budget Office, ASA (FM&C)


Pentagon MathPentagon Math

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Imbed Video of Abbot and Costello 7 X 13 = 28


AgendaAgenda

Setting the Stage DoD Budget Growth Army Budget

Challenges Ahead Managing Your Budget Conclusion Building the Next Army Budget

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Setting the StageSetting the Stage

“Therefore, as the Defense Department begins the process of preparing next year’s Fiscal Year 2012 budget request, I am directing the military services, the Joint Staff, the major functional and regional commands, and the civilian side of the Pentagon to take a hard, unsparing look at how they operate – in substance and style alike.”

Secretary of Defense Robert M. GatesEisenhower Library, Abilene, Kansas

8 May 2010

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OSD Top LineOSD Top Line

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Army Funding TrendsArmy Funding Trends

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$1.7 Trillion in 10 years

* OCO appropriations include war and non-war funding

Business practices changed.

DepSecDef 9 Apr Memo:“POM 12-16 “

OEF OIF GTA Surge Responsible Drawdown


Pay29%

Travel3%

Contracts38%

Supplies15%

Transport3%

Rents5%

Equipment5%

Other2%

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FY 2000 $18.9B FY 2011 $33.9B

*Contract growth includes CLS

Army Budget Growth Army Budget Growth OMA OMA

Pay26%

Travel4%

Contracts37%

Supplies17%

Transport5%

Rents6%

Equipment3%

Other2%


Challenges AheadChallenges Ahead OCO Shrinking

OCO to base movement Increased limitations/rules

U.S. Economy Health care Banking reform Housing foreclosures Oil spill Unemployment

Peace Dividend Following Korea, Vietnam, and Gulf War I

• A 17 – 22% reduction to the DoD budget What will the reduction be after OIF/OEF?

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DoD Funding vs. GDPDoD Funding vs. GDP

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0%

5%

10%

15%

20%

25%

30%

35%

40%

1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

$0

$5,000

$10,000

$15,000

$20,000

$25,000

VIETNAM (1968)8.9%

KOREA (1953)11.7%

GULF WAR (1991)4.4%

WWII (1945)34.5%

REAGAN (1986)BUILD UP

6.0%

FY2019*3.3%

GDP (TY $ in B)% of GDP

FY2010*4.6%

(TY $ in B)

Projections:FY09-19 GDP based on OMB and CBO projections*FY09-19 DoD % of GDP based on CBO GDP projections

Key Summary

• FY10 (3.7% excluding OCO, 4.6% including OCO):

─ GDP: $14,405B (CBO est.)

─ Base: $534B

─ OCO: $130B

FY2015*3.5%

OMB OMB ProjectionProjection

CBO CBO ProjectionProjection

Notes:FY10 DoD funding includes $130B for OCOFY11-19 DoD funding includes $50B/year for OCO

CBO CBO ProjectionProjection


Managing Your BudgetManaging Your Budget

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“…to convert sufficient ‘tail’ to ‘tooth’ to provide the equivalent of the roughly two to three percent real growth…” Secretary of Defense Robert M. Gates

Set the Stage Requirements ≠ Funding

• Schedule 8s• Concept plans

Business School Answer Divesture

Streamlining Reduction in overhead

Eliminate redundant processes

Over 300 Schedule 8s and Concept Plans

approved for FY 2011 to compete for

funding… but there is no funding!


Managing Your BudgetManaging Your BudgetSetting the StageSetting the Stage

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Business School Answer Divesture

• Wants vs. Needs• Change in Mission

Streamlining• Supposed to be cleaner• Careful that we do not streamline into a mission failure

Reduction in Overhead• Fastest growing component of budget• Relationship to centralization of systems – finance, accounting, human resources, IT networks/communications

Elimination of Redundant Processes• Do I have to do this? Why?

Recommendations to Find the Savings Budgeting

Execution Follow through!


Managing Your BudgetManaging Your Budget Find the Savings in the Budget Find the Savings in the Budget

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Budgeting Currently – Last years’ plus 2-3% Set the baseline Are the models still accurate?

Create a Cost Culture Physical upgrades to access control points will equal a 26% reduction in guard requirements 1SG Barracks Initiative – recoup excess BAH; $130M savings in ten years

Defending the Budget Idea formed G8/PAE POMs for the idea with the PEG ABO documents the idea in a “stub” Army defends the idea to OSD Army briefs and defends the idea to Congress Congress appropriates budget

If my grandmother can not understand the new idea, it will probably not get funded!


Managing Your BudgetManaging Your Budget Find the Savings in Execution Find the Savings in Execution

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Why Do We Reward 100% Obligation?

Get/Keep your commander involved Live within your means—the base is the base Get everyone invested Reviews

Joint Reviews Periodic Reviews—tradition vs. actual requirements 5th Quarter analysis

Program Budget Advisory Committee Develop a requirements consideration process Accurate accounting--$$ in the details Truth in lending Cost/Benefit analysis; cost estimation Train your subordinate unit resource managers Moral courage . . . .


Managing Your BudgetManaging Your Budget Find the Savings in the Follow Through Find the Savings in the Follow Through

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After Action Reviews Do the Models Give You What You Need? Rate Adjustments for Estimation What about Overhires?

Temporary Permanent

Publish Successes – Reward Successes!

Do You Conduct AARs? Do You Follow Thru?


“I say the patriot today is the fellow who can do the job with less money.” President Dwight D. Eisenhower Take Aways:

OCO limitations/rules Status quo will not do Involve your leaders and get everyone invested Create a “cost culture” Live within your means Aim for success

Conclusion

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Building the Next Army Budget

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In Tune with Army Financial Management Managing Your Budget In a Declining Economy June 2010 Army Day COL C. A. Cruse, ChiefMr. Todd Nethery, Chief OMA.

Documents

budget idea

budget request

army funding trends

dod funding

new idea

army daycol

stub army

osd army briefs