DOE PM Workshop

Owen F BarwellDeputy CFOApril 2012

Agenda

• Role of the CFO• Audit risks• Assets/Liabilities/Balances• Current challenges• FY13 budget• FY14 and beyond• Question and answers

Role of the CFO

• Culture• Operational responsibilities

– Policy– Internal controls– Financial management– Budget– Business and information systems

• Stakeholder relationships– DOE/BQR– OMB– Hill

Audit risks

FY 2012 AUDIT RISKS March 2012

Audit Risk Chart

1 2 3 4 5

Like

lihoo

d

High

Low

1 5

2 4 3 4

5, 6, 7 3

2

8 1

Low High

Consequence

High Audit Risk Moderate Audit Risk Low Audit Risk

The audit risk chart ranks the risk by consequence and likelihood. Issues with higher consequence and likelihood will result in greater audit risk. To date, our highest risk pertains to environmental liabilities. A brief description of each risk is listed below.

Risk Description

1. Environmental Liabilities

Large complex liability estimates are inherently at risk. DOE offices must continue to improve audit reliance for the new risk assessment process used to estimate contingency, and the budgetary impacts to lifecycle estimates and legal/ regulatory agreements. OCFO actively works with EM, field, and KPMG to mitigate risks.

2. Information Technology Significant Deficiency

There was no central POC to oversee the progress of corrective actions because each program office is responsible for resolving their own IT audit findings. This year, however, the new CIO team is focusing their effort to mitigate the significant deficiency.

3. Change from No-Year to Multi-year Funding

The Department, in general, is not accustomed to dealing with time-limited appropriations. Additional training and monitoring may be needed to ensure that the funds are spent appropriately. There could be negative impacts to financial reporting both in accuracy and timeliness due to an increased number of Treasury Account Fund Symbols.

4. Loans and Loan Guarantees

High audit risks due to complexity and political sensitivity of loan awards. Increased visibility and scrutiny as a result of bankruptcies, restructurings and re-estimations.

5. Pensions and Post-Retirement Benefits Plans Liabilities

Inherent risk due to complexity and materiality. For FY12, there are accounting standard changes to reporting. It is not clear how this change will impact the Department. To mitigate the risk, OCFO is actively working with the actuaries and the auditors on the implementation of changes.

6. High-level Waste and Spent Nuclear Fuel Disposition

The defense share of the last geologic repository estimate is being carried in the financial statements as a placeholder until recommendations are made by the Blue Ribbon Commission (BRC) and management direction.

7. SNF Litigation Liability Estimation assumptions related to acceptance and disposition of commercial SNF will need to be updated and any changes needed to estimation methodology made that result from BRC recommendations and management direction.

8. Property, Plant and Equipment

While the risk of repeat or multiple audit findings appears to be low, we are introducing a change this year, i.e., the capitalization threshold level will increase to $500K in FY12.

Assets

Source: http://www.mbe.doe.gov/cf12/2011PARafr.pdf

Liabilities

Source: http://www.mbe.doe.gov/cf12/2011PARafr.pdf

Balances

DOE Management Priorities

• Contract and Project Administration

• Acquisition Process Management

• Security• Environmental Cleanup• Nuclear Waste Disposal • Cyber Security• Human Capital

Management• Safety & Health• Recovery Act

OIG Management Challenges

• Operational Efficiency and Cost Savings

• Contract and Financial Assistance Award Management

• Cyber Security • Energy Supply • Environmental Cleanup • Human Capital

Management • Nuclear Waste Disposal • Stockpile Stewardship

GAO High Risk

• Protecting energy R&D and key assets

• Security of nuclear weapons stockpile and IP

• Nuclear nonproliferation• Contract administration

and project management for large and complex projects

• Human Capital Management

Current challenges

Both internal and external stakeholders continue to recognize the challenges of procuring and managing our large and complex projects

$ %

Energy 3,563 3,752 4,368 616 +16.4%Applied Energy 3,288 3,372 3,901 529 +15.7%EERE 1,772 1,810 2,337 527 +29.1%OE 138 139 143 4 +2.8%FE 573 564 651 86 +15.3%NE 806 859 770 - 88 -10.3%

ARPA-E 180 275 350 75 +27.3%EIA 95 105 116 11 +10.8%

Science 4,897 4,874 4,992 118 +2.4%NNSA 10,526 11,000 11,536 536 +4.9%WA 6,866 7,214 7,577 363 +5.0%NN 2,281 2,296 2,459 163 +7.1%NR 986 1,080 1,089 9 +0.8%OA 393 410 411 1 +0.3%

Nuclear Cleanup 5,836 5,880 5,828 - 52 -0.9%EM 5,668 5,710 5,650 - 60 -1.1%LM 171 170 178 8 +4.9%

Provision & Regulation 63 60 59Mission Support 630 728 724 - 5 -0.6%Other balances - 2LPO/CEFA 180 6 9 3 +50.0%Subtotal, NNSA 10,526 11,000 11,536 536 +4.9%Subtotal, Non-NNSA 15,167 15,300 15,980 680 +4.4%Subtotal, DOE 25,693 26,300 27,516 1,216 +4.6%

Rescission of Balances ---- - 361Total, DOE 25,693 26,300 27,155 855 +3.2%

FY 2013

Request

FY13 % ∆ / FY12 Enacted

(Discretionary $ in millions)

FY 2011

Current

FY 2012

Enacted

FY13 Submission

FY13 from FY12

FY14 and beyond

• Environment• FY14 budget– Strategy– Process

• Out years– Multi-year budgets• Credible cost estimates• Project/funding profiles• Project prioritization• Financing

• Management challenges