DoD Is Saving Millions With BAM; Your Agency Can, Too

By: Patrick Taylor, President & CEO, Oversight Systems

Whether the Government Accountability Office (GAO) or the media are asking questions about your controls, practices and audits, it’s never a pleasant process.  Transaction monitoring software for the public sector can oversee the accounting demands of your government agency—and then some. Instead of sampling a small percent of the transactions in an audit, 100-percent are reviewed, exceptions are highlighted and process for resolution started. The ability to nip problems in the bud, before they go out the door, is not only a best practice, but also a business value found in continuous transaction monitoring (CTM).

Over the past year, some agencies within the U.S. Department of Defense (DoD) have instituted Business Activity Monitoring (BAM). The results have been staggering with more than $600 million in potential improper payments thwarted. From shovel-ready to operational in just four months, the funds transparency and accountability program saved taxpayers, in the first year, more than $300 million in potential improper payments. The best part is that the mistakes were discovered before the checks were cut. It’s much easier to recover dollars that never left your account.

The DoD’s BAM program is driven by Oversight Systems’ technology making it possible to efficiently inspect 100-percent of its transactions. Oversight’s Integrity Checks™ incorporate a rich library of accounting operations and budget execution principles to substantiate and legitimize each individual financial transaction associated with each specific government program. These continuously monitored transactions and controls are then cross-referenced against agency metrics ensuring progress towards recovery goals.

By aligning performance data with budget execution data, agencies can now effectively conduct real-time program assessments. Oversight facilitates performance resolution and process improvement through workflow-enabled investigation, reconciliation and compliance. The management dashboard empowers managers to effectively use available resources to improve results. Luckily, this is the answer to the Improper Payments Information Act of 2002 (IPIA) and Recovery Auditing Act requiring federal agencies to review programs and activities that might be susceptible to erroneous payments.

In addition to preventing improper payments, CTM identifies waste, fraud and abuse. As prescribed by laws implemented through the Office of Management and Budget (OMB), Oversight identifies real-time fraud, misuse and abuse in transactions for some of the most complex business processes including: grants management oversight and reconciliation; vendor, payroll, purchase card and travel payments; and accounts payable management. 

As agencies are called upon to be more transparent, it’s a challenge when different systems look at data in different ways. Most agencies have to match data that crosses a wide variety of financial systems to reconcile Fund Balance with Treasury (FBwT). Each of these systems looks at data differently with different definitions and ways of presenting Line of Accounting (LOA), fund, control and activity information, among other data elements. Normalizing these data points from the various systems is the key to efficient reconciliation.

Transaction monitoring software automates this process, extracting data from the various source systems, normalizing the data definitions and deriving missing fields by aggregating available data. Disbursement and collection transactions are compared, and any unmatched items are automatically assigned to specific problem categories determining and addressing the root causes. Reconciliation reports of unmatched transactions are immediately available.

For one agency, this automated process decreased the amount of time spent on unmatched disbursements from an entire month to two days—saving 19 work years per month in labor.  The return on one’s investment is immediately seen impacting the number of manual resources to manage FBwT and in reducing the amount of time adhering to the Treasury’s Financial Management Service requirements. 

As transparency is touted by everyone from President Obama to Aneesh Chopra to Neil Barofsky, CTM is the now, not just the future, in accounting.  If you’re looking at your budget and trying to cut costs, Oversight ensures savings with a money-back guarantee on top of headline-making success stories like the DoD’s.   

Comments

[ahrainey]

Very informative and there are a few clarifications that would be helpful.

First, WHAT IS BUSINESS ACTIVITY MONITORING (BAM)? This is the first that I have heard of it. How is BAM distinguished from Activity Based Management (ABM) and Activity Based Costing (ABC)? Has BAM reconfigured the Chart of Accounts into "activity codes" that can record and report all activities in the enterprise on a monthly basis?

Second, HOW DO YOU DISTINGUISH COST SAVINGS FROM COST AVOIDANCE"? I see a $600 "savings" figure quoted from "potential improper payments" however this sounds more like "cost avoidance. At the end of the Fiscal Year what was the amount of cost savings that were reflected in the Ending Fund Balance as a result of this effort?

Third, WHERE ARE THESE "REAL-TIME PROGRAM ASSESSMENTS" POSTED ON A DOD WEBSITE? Can the public get the hyperlink to this source (transparency). In FY 2008 and FY 2009 what decisions was DoD management able to make as a direct result of these real time program assessments?

Fourth, WHAT CYCLE-TIME STANDARDS (PURCHASE REQUEST TO OBLIGATION TO PAYMENT TO CLOSE-OUT) ARE USED TO ASSESS "CONTINUOUS TRANSACTION MONITORING"? In other words, if there is a repository of such data than can one see "cycle-time" improvements for transactions?

Fifth, IF CONTINUOUS TRANSACTION MONITORING, REAL-TIME ASSESSMENT, AND BAM WORK SO WELL, THEN HOW WILL IT BE USED TO ENABLE DOD TO PRODUCE AN AUDITED FINANCIAL STATEMENT? Can these tools result in the production of an audited financial statement for all of DoD or its component units?

[Chezaray Conley]

This is a very good question. With the current climate of the federal market, a number of agencies have already begun to move if not contract a new EA or/and ERP system and because of this, have not taken the time to consider a software such as Oversight. True at some point these agencies would ultimately want to transform their financial environments to a central and standard EA and/or ERP system but as for now to implement Oversight and transfer a "clean" system of data would not only become the quick fix, but also the step towards best business practices, and ultimately the best utilization of a software such as Oversight before going to a new EA or/and ERP system. It could be compared to going out and purchasing a great new car and then transferring all the old parts from your old car into the body of the new one and trying to understand why you still have the same problems. Oversight alleviates that. In reference to the second part of your question: our product has had a direct positive effect on the EA and ERP efforts. We have not only helped to clean the vendor master giving them a cleaner line of accounting and data warehouse but also have improved on business processes of the previous systems that have been identified as out dated and susceptible to misuse, misappropriations and errors.

[Christopher Hanks]

I'm wondering if you have a view on "enterprise architectures" (EA) and "enterprise resource planning" (ERP) systems for federal agencies?
I'm asking because your pitch makes it sound like the technology your company has developed makes it possible for federal agencies, at least in some cases, to avoid having to spend time and money on developing and implementing EAs and ERPs - both of which are aimed at standardizing disparate financial- and business-management systems. Has your company's experience with DoD had any effect on the EA and ERP efforts at the agencies you've worked with?