Artificial intelligence may help the Navy's financial managers someday, after untangling decades of systems

0:00Print servers and federal environments create risk and unnecessary complexity. Every new printer, location, or policy adds strain to infrastructure that was never built for today's demands. FedRAMP High authorized printer logic eliminates print servers with a secure cloud native, zero-trust solution designed for federal IT. With advanced security, centralized control, and simplified management, agencies can modernize print without added burden. See what secure serverless printing looks like. Visit VAsian.com to learn more. Federal Drive is presented by GEHA, Government Employees Health Association, proudly providing health and dental benefits to federal employees and their families. Visit GEHA.com. Welcome back to the Federal Drive with Terry Gerton, on Federal News Network. Financial systems may run on technology, but they are built on data and business processes. As the Department of the Navy consolidate systems and modernizes its financial environment,

1:00officials are discovering that some of the biggest obstacles are habits and assumptions inherited from earlier generations of technology. Joining me now is Greg Kovall, the Deputy Assistant Secretary of the Navy for Financial Management Systems. Mr. Kovall, thanks so much for joining us here on the floor at NDIA. Really great to have you. Thanks for having me. You are working financial management systems for the Navy. Within that, everybody seems to have an AI pilot these days. Where is AI intersecting with what you're doing? We're employing some basic tenants of AI, and I think really we're still just scratching the surface. We're looking at automating the mundane tasks in a lot of ways, but really we're still at that automation phase. A lot of the tools and methods that are available to the private sector, per se, aren't really available to us yet on the government side. There's a whole process it needs to go through. We're using what we can at this point,

2:02but I think there's a lot more that can be done to really get it out there and get it to the masses. When you talk about mundane tasks and financial management, be a little bit more specific with me. Is that basic accounting or cutting checks? What do you talk about? Really basic accounting. At this point, because of the way that our system environment is in a complexity, we have a lot of systems in play, a lot of systems from various periods of time that don't have the same data structure. We might have the same error coming in from the same system repeatedly. That's a good test case there for AI and a good use case for AI. Basically, take this transaction from point A to point B. We don't need a human in the loop to certify it because it's essentially a correcting a mistake. Animistic that doesn't require additional funding or bring funding back or impact somebody in a way that wouldn't be helpful. Those are the initial use cases. I've been challenging industry for the last 18 to 24 months, really, to show me a technology where

3:07you can go into my general ledger and make a correction for me based on AI going through a process, thinking like a human, and being able to say, this transaction's wrong, it's wrong for this reason, I'm going to fix it. We're not really there yet with that level of technology, but I'd love to get there. What are some of the challenges about taking an industry standard financial management tool and AI tool, for example, and trying to deploy it in a defense financial management environment? So there's a lot of additional security protocols, obviously, that the software has to go through, the vendor has to go through. And like I mentioned early on, I think what's available to the private sector, there's a curve there where it's not available to us because in some cases, the vendor might not see the same market because of all the investment they need to make to make it meet our security and governance requirements. So again, I think people and companies are starting

4:10to see that opportunity. We're seeing a lot of those tools available to us, but again, there's time, you have to go IL2, impact level 2, impact level 4, impact level 5, that all takes investment in a lot of cases by the particular software vendor. And again, it's a business decision on their side, do they want to support it or don't they? That's a really interesting challenge then because as you're trying to integrate and maybe simplify decades of a variety of formats in your financial management system, you're not going to be able to find a new tool that's going to deploy seamlessly across all of that. How do you make the decision about where to prioritize? So there are the tools available out there today that are helping us. So for example, we're big users of war data platform, there's some other software products out there that we're using that really kind of help us see ourselves in a better way and pull that data together and allow us to really connect the dots

5:12between those legacy systems and those legacy environments. But I think we have a long way to go. And frankly, a lot of the decisions that we made over the last 10, 20, 30 years really put us into position where we are now. And as we're upgrading and modernizing our enterprise resource planning system, we're looking to really bring a lot of those functions and legacy systems perform into that system back in house. So we really have that cradle to grave view of our transactions from start to finish. And that's really going to be key for us moving forward, not just to improve auditability and accounting, but really to improve operations because every time something goes unmatched, every time something shows up on a loading dock that's not expected that might be needed for the mission, that has an impact to the war fighter. And I think we need to really close that gap from factory floor to warehouse to ship to support our our sailors and our Marines in

6:12the mission. It feels like we've been deploying enterprise resource management systems in DOD for least 30 years, at least far back as I can think, as we're thinking about continuing the consolidation under enterprise resource management, how are you adjusting so that the deployment is keeping pace with the new technology? So that's really one of the things that we've looked at very hard. And for example, the Department of the Navy is finally in one ERP really too. So the Marine Corps has DAI, the Navy has Navy ERP. It took us 25 years to get into two systems. We went from 9, 10, 11, depending on how you count them, down to two. That just happened this year with the fleets when we brought them online at the start of 26. So the first key lesson learned is we can't take 25 years to upgrade technology because the technology we upgraded to is now obsolete and end of life in 2030. So now as we move to the next system, really the upgraded system, the new

7:17software that's available to us, we really need to look at efficiency, standardization, standard architecture, and again, bringing a lot of that inside the box. There are conscious decisions we've made inside the Department of War and the Department of Navy to keep legacy systems connected. We need to shut down those legacy systems and really move forward in one ERP. We need to use the ERP like an ERP. That's what industry does. That's not what government does. I'm going to rip the band data off on that conversion of exactly part of the ERP deployment challenge is technology, but the other part of it is data because all of those legacy systems have their own data repositories. As you're consolidating from a dozen to two, what did you find was the biggest challenge in normalizing the data that makes the system operate? So it's really, it's figuring out what we need from a data perspective. I think from a to a large degree, we are data hoarders and we have so much data that we don't know what to do with it.

8:20And in a lot of cases, even if we knew what to do with it, you don't always have the same data picture in each of those legacy systems. So the data looks different, feels different, is different. And when you try to make a connection of data for the same business event between a legacy system and our ERP and in a lot of cases, you can't do it because you're you're almost speaking two different languages, two different data structures. So the biggest lesson learned is having that common data structure, common data picture and using the data that we need and only the data that we need. Because there's a lot of great ideas out there about, hey, this community needs this data, that community needs that data, it was really kind of a bright, shiny object out there and people end up not really using it. So, but then we're stuck with it, you know, and we've gone through this in some forums where we're sitting there looking at data elements and whether we need

9:21them or not. And some people can't even justify why they're there and why we use it. Other than that's what we always did, so keep doing it. And that thinking needs to change. Do you find that a big culture jump to get people disconnected from that data security blanket? Yes, it's huge because everybody works in their own silo. Everybody wants to protect what they have in their current process instead of taking a step back and saying, how do I fit into the bigger picture? And we see this all the time, you know, if you take budget systems, acquisition systems, log IT systems, they should be working together seamlessly. Today, data falls off the cliff, somebody picks it up, they start all over, take it to the next cliff, drop it, somebody picks it up, starts all over again. We can't continue to do this. And while a lot of the, you know, kind of automation and AI tools have been helpful in connecting those dots and building bridges there, it's still expensive because instead of having a person be the bridge, now you're paying for

10:26technology to be the bridge, but you're still paying for something and that money's not going back to war fighting. And that's really where we need to have our focus. Well, between war fighting and you're sitting right in the middle of one of DOD's priority projects, which is auditability. Defense has yet to get a clean audit, although the Marine Corps has done so. So as part of the Navy, one of the values of a clean audit is a common data picture of the enterprise. How are you seeing this play out in the work that you're doing in Navy financial management systems? So today, we're actually pushing for working capital fund. Unmodified opinion for fiscal year 26. So, you know, here we are in September. We're 11 months in in the prep that we did last year to really position us. You know, we move forward. We made a lot of adjustments in FY 25 at the end of the year. So when we rolled in our opening balance, it was pretty good. That's been under audit, along with all the current year activity. And,

11:28you know, we're on track to get an opinion. The game's not over. You know, we've got to finish strong. We've got to finish hard. There's a lot of complexities there trying to get a first clean audit opinion. And I remember that working on the Marine Corps and leading the Marine Corps's effort three years ago. So it's never over till it's over. But we're on track and doing everything humanly possible with our partners. And what's also interesting about this and, you know, similar to the Marine Corps experience, we had a big dependency on Army who holds a lot of ammunition for the Marine Corps for the Navy working capital fund. We have a big dependence on DLA. And we've been working closely with them. We've also been working closely with our industry partners who also hold a significant amount of inventory. So they've been great in supporting us. And it's really kind of making sure that we finish strong and win the audit game and give the department an even other one. Working capital fund is probably the most complicated part of defense financial management. Are there lessons that you've learned in preparing for the audit that you can

12:32transfer to the other services as they will eventually have to go through this? Yes. The biggest thing we learned is to use the technology available to you and focus on data and analytics by Santa Fars internal controls and material weaknesses. That's really interesting. That is surprising. In some ways, yes, but in some ways, no, because you have to clean up your books if you're going to pass an audit. And the analytics that we ran identify transactions that were open since 2007, 2010, 2015. They're all invalid. And we knew that because once we ran the analytics on the customer side, the people we were selling to, there are appropriations expired a decade ago. So why do we keep this on the books? And I think that's where there is a culture change because people said, well, I need a key supporting document to take it off the books. And we flipped the script on them and we said, you need a key supporting document to keep it on the books. You don't

13:34have one. The data is telling the story. Let's get rid of it. So multiply that by thousands. And that was part of the big cleanup we did. And again, you can't have a human do this. It was really leveraging technology, running it through to general ledger, identifying things with certain criteria that didn't look right. And then chasing them down to say, all right, is this valid or not? And in most cases, it wasn't. So you were talking about having to convince the people in this system that that that was the right approach. Yes. As you're moving down the auditability path, are there other lessons that have been challenging for the workforce? There have been. I think it's the sheer magnitude of it and the sheer level of effort it takes. Because and it doesn't, it's not just the FM community. The biggest burden of all really falls on the supply community for the working capital fund because if you look at the Navy's balance sheet,

14:36we've got almost $70 billion in inventory. Our FM workforce doesn't touch that $70 billion except to place a value on it to put it on the financial statements. It's everything that stowed, received, managed in warehouses at Navy installations, DLA locations, vendor locations, on ships. That inventory was subject to audit. So when you kind of look at the scope and spear and complexity of all this, it's a workforce issue and it's a workforce challenge for people that are not anything associated with FM. So you're actually getting down to how well does your warehouse floor perform to help pass this audit? And we saw that with the Marine Corps too. And just getting down to those operating units and having them understand it's somebody's going to come out and count stuff. It sounds mundane, but it's not the culture. We're not a fortune 50

15:36company to get audited every year to expect an inventory to happen. So once you get through that initial change management though, I think it rolls a lot smoother and it's better to just, you know, for those who aren't there, yeah, from an audit opinion perspective, it's just pulling off the band-aid and moving forward. Have you found any tension between trying to optimize your financial management systems to pass an audit and optimizing your financial management systems for mission support? No, because I think we're really doing different sides of the same thing. So accountability is key to war fighting. Accountability is key to supporting the mission and supporting mission outcomes. And accountability means keeping yourselves up to date when you expend something going into the system and showing it's expended because then it has to go into the supply chain order replacement. I'm sitting there's a lot of that also on the financial side what we've done

16:41is really try to take the burden of some things like valuation out of the hands of the operator. So one of the other key efficiencies and really outcomes that we had with the Working Capital Fund audit was we centralized how we did valuation of that $70 billion of inventory to the point where we're not even really relying on the field activities. We're telling the field activities you need to keep your shelves accurate, you need to document and record timely expenditures. But when it comes to valuation, we've got it at the headquarters level. We're able to use Jupiter, which is our enclave of the word data platform to do valuation for them and really take it out at our hands. And then it's it's helpful to us too because now we own it, we manage it, we see it. And the operators have their role, which is timely and accurate recording of expenditures

17:42in their stock and keeping that in a good spot. And on the financial side, we own a valuation piece. So it ended up working out really well. Instead of in the past, I think there is a lot of everybody has to do everything all of the time and we never got there. So once we're able to change out paradigm, it ended up working out really well because again, the outcome is the same. We want to have a clean, efficient experience for the law fighter and for the operator and audit shouldn't get in the way of that. All right. So as you continue to march down the auditability path, and you're deploying more automation in your financial management tools, are you beginning to see a shift in the role that your financial management workforce is playing? Are they moving more into decision support, data analytics, leadership guidance as opposed to just, yep, I've got my Davidson credits balanced. I think we're getting there. And again, it's target. There's a target rich environment that we have again due to the way that we're currently

18:48set up with all of our legacy systems and processes. And there is so much to automate that you're basically working through each customer. What do you need to improve your workforce's experience? So again, with the number of civilians in uniform folks we have across the entire department of the Navy. We're never going to get to everyone, but we're trying to do the best we can with what we have from a resource perspective. And again, we're on a track where basically on average, we save about 250,000 labor hours per year and the FM workforce alone, cumulatively, we're around 2.4, 2.5 million hours saved since we got started. So it's effective, but we could probably continue to scale it and move out. It all costs money though. So it always does. Mr. Greg Koval currently serves as

19:50the Deputy Assistant Secretary of the Navy for Financial Management Systems. Thank you so much for joining me today. Thank you. We'll post this interview at federalnewsnetwork.com slash federal drive. Listen to the federal drive on your schedule. Subscribe wherever you get your podcasts. This is the Federal Drive with Terry Gertan on Federal News Network. What does it take to drive transformational change in large mission-driven organizations in this episode of Lessons in Leadership. Former Treasury Fiscal Assistant Secretary David Librick sits down with WAPA CEO Shane Canfield to explore the answer to that question. Drawing on nearly four decades of public service, Librick shares insights on how to maintain employee trust and accountability while striving for strategic leadership and operational excellence. He discusses his biggest lessons learned from modernizing major government systems and how he worked to break down silos and build high-performing teams all while staying rooted in character and integrity. Hello and welcome to the Lessons in Leadership podcast. I'm your host Shane Canfield

20:52CEO of WAPA. Today I'm joined by David Librick, former Fiscal Assistant Secretary of the Treasury, the department's most senior career position, where he spent nearly four decades help oversee and modernize the federal government's financial infrastructure, including payments collecting, debt financing and cash management. David, welcome and thank you for being here. It's a real pleasure to be here. So let's jump right in. What does it actually take to drive transformational change inside the federal government and related, Treasury is obviously a huge organization. What did that teach you about leadership as you drove these changes? Sure, I think one of the things that you realize at time is that change and transformational change is very difficult, but it is doable. And I think sometimes we don't think that we can do big things in government and yet we can. I think over the course of my career, I was enormously fortunate to

21:54do work with some of the really really wonderful people, some of the most preeminent people in government over the course of the last 35 years. And from them you learn a lot of really important lessons about leadership. I think early in my career what I would tell you is that I was very much new and my interacted with political appointees as a civil servant. You're really an advisor. And I had some really wonderful experiences advising some of really great people. My second job at Treasury, for example, was as a special assistant to J. Powell. I knew I was not going to be the most the smartest person in the room or the expert on many things that were going on. But what I did know is that I had a very good understanding about what it meant to navigate in government. Also what it meant to advise and provide options and analysis to decision makers. As you move up in your career and you actually take on more operational responsibility, you find out that you are a decision maker. And when you are a decision maker, I had a very good framework that I used

22:56throughout my career, which is you as a well-edged organization, the leadership had to think about three very distinct things. One was thinking strategically about where the organization was going, not just about where it was going tomorrow and the next day, but actually into the future. The second area was that you really had to be able to deliver in the operational excellence. So if you're responsible for providing a service or a product, you can do that well. And you need to think very purposefully about that. And the third area is really about people and about how you attract good people, how you retain good people, how you incent good people, and how you really treat people. And so throughout my career, I had an opportunity to see people be very effective in all three of those areas. So when it came time to do transformational change, that model worked very well. And would also say that what you learn very early on is that regardless, is that you as an individual, it takes the ability to work collectively and collaboratively with a lot of

23:56people. And so some of the things that I did, for example, which were cross-government, you realize that you really didn't have authority over many of the people that you were asking to do something different. But if you had character and competence, you could actually have trust. And so I think when people looked and said, this is someone who has capability and they have character, they will actually go and reduce the friction and actually making change. And so those collaborative relationships that those that ability to sort of lead with purpose, I think was very important with respect to really driving transformational change. Yeah, that's an amazing perspective. I just had a chance to listen in a small room to the CEO and the chairman of the board for Mariah Corporation. And they're celebrating their 100th birthday next year. And many, most US companies don't make it to 100. And so

24:59it was, it was fascinating. Both of them were asked to what do you attribute this? And they said both of them, with energy, it was about their people. They focused on their people and everything came back to the employees, the people that worked there, the people that they have to motivate. Do you find something similar in government? I do. I actually take, you know, oftentimes you'll hear people say people the most important asset in an organization. And there's an element of truth to that. But I also think that leadership is probably the most important aspect attribute in an organization. Because if you have the right leaders and you're using a framework, like I mentioned, you're going to be really focused on getting good people in the organization. And those people will thrive. I think the thing that you find certainly in government is that federal employees are very mission driven. And they are committed. And they, you know, there's a lot of discussion about, you know, what really motivates people, intrinsic versus extrinsic, you know, motivators. And I really

26:02do believe that, you know, when you really get a high performing organization, regardless of as private sector or public sector, it's going to be those intrinsic things which are going to actually drive employees to do great things. And so setting up those right working conditions to remind people how important they are to actually invest in their development to actually give them good feedback. You know, one of the things that is really important in an organization is if you really care about an employee and you really want to see them develop, you have to tell them not only good things, you have to tell them things they have to work on. And I think you need to set up an environment and we add a saying which is feedback as a gift and and and assume noble intent in intent so that when someone gives you feedback, your first reaction shouldn't be defensive. It should be, let me let me make sure I can really understand why I'm getting feedback and what I can do about that. You know, I think of a story from a book called Radical Candor which the author had

27:04gone out and spent a lot of time recruiting a new executive in the organization and thought they had a perfect match. They got to six months and the executive was struggling and they ultimately fired the executive. And at the Exeter view, she had turned to the executive and he said, well, I really was someone who had told me earlier on what I wasn't doing well. And I tell that story because I think it sort of says that if you're not giving good feedback to people, you've spent all this money on recruiting someone, all this time and we know it takes a lot of time to bring people on board. And if you're not giving them the benefit of that, you're not giving regular feedback to someone about what they can do better, then you potentially have a failure and you have another vacancy that you have to fill which is very costly and expensive. So I think you need to have another element of that which is in a high performing organization. If people are comfortable raising their hand when something's not going right. And in my world, large scale operations and what we did every day, something doesn't go right. It's just inevitable. And the issue within a

28:10well performing, high performing organization is that people will raise their hand and say we have a problem and we need to fix it. And the leadership is receptive to that and says, okay, what do we need to do? And then after the problem is solved, you have an obligation to go back and do lessons learned, do action learning to see, hey, what could we have done differently? How could we have avoided that problem so that you have a learning organization? It's not just that you're comfortable communicating and have trust in the organization that you can communicate openly, but also that you're learning as you go along every day to improve your operations. The very first podcast we had was Cutler Dawson, who was Admiral and Navy, charge of the Enterprise Carrier and the Fleet in the beginning of Desert Storm. And then he went on to run Navy Federal, the World's Largest Credit Union. And it was fascinating to hear you because he talked, he used an example of a problem they had on deck with airplanes on the carrier.

29:17And it was pretty serious accident that happened. His culture was exactly what you said. You've got to talk whether you're at fault or not, whether you're partly at fault. It doesn't matter. We have to have an honest conversation about this. And that doesn't mean there weren't consequences, but at the same time that honesty has to be front and center. It really is true. And I think that you raised an interesting point, which I think sometimes the word accountability has a negative connotation. You're going to be held accountable. But also, but I would have it in a different way, which is we're accountable for high performance and we're accountable to each other to make sure that we can deliver on our mission. And that's a positive attribute along the way. And I think when organizations take that seriously, the collaboration, the teamwork, the openness, the feedback, but they also have a culture of accountability that says we do things well. We're going to actually be successful of what we do. And we all have a commitment to doing that. I think you're really a high performing organization. You've been listening to a preview edition of Lessons in Leadership.

30:20To hear the rest of this conversation and all past episodes, subscribe to Lessons in Leadership wherever you get your podcasts.