FRCSW Comptroller Department’s Plan Improves Fiscal Health
An economic plan dubbed the “Get Well Plan” was developed and implemented by the Fleet Readiness Center Southwest (FRCSW) Comptroller Department in 2019. The goal of this 3-year plan was to provide “financial wholeness” at FRCSW. The plan, in conjunction with the recently implemented Navy Enterprise Resource Planning (N-ERP) resource management system, is now paying dividends not only at the command, but also throughout the FRC enterprise.
Like its sister commands, FRCSW operates under the Navy Working Capital Fund (NWCF), a financial model where income is created through the sale of services to the Defense Department and its private sector partners. You can think of a NWCF organization as one that “acts” like a for profit business without the goal of making a profit. Ideally, a NWCF organization will post a “break-even” operations cost annually.
To better achieve NWCF goals and overcome ongoing financial issues stemming from various external factors, FRCSW created this “Get-Well Plan” in 2019.
“The plan was established to close the gap between the Fiscal Year 2020 President’s Budget (PB20) FY19 Net Operation Results (NOR) of $95.8 million, and an initial execution projection of approximately $58 million to the negative,” said Ji Kim, comptroller of FRCSW.
He said that at the time the command had hard choices to make in order to meet its operational requirements. The financial challenges were mainly driven by unfunded initiatives the command needed to follow and to cover the cost of ever rising facilities maintenance and upkeep as well as hiring, training and support for approximately 500 entry-level new hires that required a large degree of aviation maintenance technical and hands on training.
One example of an initiative that was necessary but unfunded was the Naval Sustainment System (NSS). NSS was integrated into the command’s North Island hub and all of its satellite locations and was hugely successful. Despite NSS’s success, its unfunded status was a drain on command resources and required FRCSW to take action to reduce spending and improve the commands overall financial health.
By the end of FY19, FRCSW NOR improved by $19 million from the initial projection, a 33% improvement” Kim said. “Additionally, the `Get-Well Plan’ helped to return the command’s Accumulated Operating Results (AOR) to a healthy state by Calendar Year (CY) 2022.
“The AOR is a measure that gauges the financial health of a Working Capital Fund and whether it is meeting the break-even goal over time.” Kim said.
The plan was comprised of three primary actions: the execution of all budgeted direct labor hours (DLH) annually; keeping indirect spending within or below budget; and ensuring Work Load Standards (WLS) and Component Unit Price (CUP) pricing reflected actual repair requirements.
During FY20 and 21, FRCSW achieved a number of milestones including sustainment of DLH at or above the planned level. DLHs actually increased approximately 11 percent from FY19 to more than 4 million hours during FY20 and 21.
Indirect spending was reduced by more than 13 percent from FY19 through FY21. The move was achieved by managed attritions in indirect labor, and through zero-based budgets in indirect non-labor as well as accountability throughout the command.
“This was truly an all-hands-on-deck type effort where everyone in the command was aligned with the same goal and each took ownership of and pride in our actions toward success,” said Kim.
The command is well on track to meet the $0 AOR by the end of FY22.
Adding to the impact of the “Get Well Plan” was the introduction of the Navy Enterprise Resource Planning (N-ERP) program.
“N-ERP is a software-based resource management system used to align and integrate crucial business functions. It modernizes and standardizes Navy business operations, provides unprecedented management visibility across the enterprise, and increases effectiveness and efficiency.” Kim said.
Major N-ERP capabilities within accounting modules include general ledger postings and cost accounting analysis; accounts receivable and payable; and direct authorization payments to vendors. The program is also applicable to funds distribution, and budget updates, execution and control.
“N-ERP provides the flexibility to accommodate different reporting strategies and supports sound management decision making at all levels. The effort also allows FRCSW to be more ‘audit ready’ and puts FRCSW one step closer to obtaining an unqualified opinion from an Independent Public Accountant.” Kim said.
“This effort required the command to embark on a full systems conversion and to engage in extensive data cleansing and mapping in our legacy system; the Defense Industrial Financial Management System (DIFMS).” Said Kim.
“Following the data cleansing and mapping work, FRCSW coordinated with the NAVAIR Business Office (NBO) on establishing employee access, activity type rates, crosswalks, Overhead Project Work Breakdown Structures and End Item Price Structures in N-ERP.” Caroline Thomas, FRCSW Deputy Comptroller said. Thomas also credited the local N-ERP weekly newsletters published by the FRCSW ERP conversion team as well as other communication efforts utilized during the conversion period as being an excellent source of information for the command.
The FRCSW comptroller department successfully created its own N-ERP curriculum, oversaw all N-ERP training for appropriate personnel and completed the data conversion validation phase, which was a crucial step in the command’s declaration of Full Operating Tempo (FOT) by the end of CY21.
The department continues its work by identifying and analyzing data transactions to locate root causes of error fallouts.
“An example of the team’s cleanup effort was their initiative to decrease the command's total undistributed hour population by 73 percent, generating roughly $13 million in revenue and positively improving the NOR. Through this analytical approach, the command was able to identify and rectify underlying issues and to clear temporarily suspended labor records,” Thomas said.
During an August 24, 2022 visit to FRCSW, Roy Harris, executive director for Commander, Fleet Readiness Centers (COMFRC) acknowledged the work of the command’s comptroller department:
“You set the pace across the FRCs and had the `secret sauce.’ You worked through the anomalies and I think we’re now to the point where the data that’s coming out reflects clean financial ledgers and that’s phenomenal,” he said.
“Sharing what you did and the best business practices with the other FRCs is so much of what we’re trying to do across the enterprise, and I both thank and applaud you for that.”
The FRCSW Comptroller Department is staffed by more than 50 financial professionals including financial management analysts, accountants and business financial managers. In FY21, the department managed over $900 million in revenue, $925 million in incoming customer orders and $314 million in overhead budget.
“FRCSW is on track to end FY22 with continued financial soundness as the month of July closed NOR at positive $23.4 million --- $3 million over the FY22 NOR target,” Kim said.
The entire Naval Aviation Enterprise (NAE) is in the process of adopting the CNO’s “Get Real, Get Better” call to action. The FRCSW Comptroller team has already demonstrated their ability to adapt to the Get Real, Get Better standards to meet the needs of the NAE now and well into the future.