Terry Gerton 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?

Greg Koval So we’re employing some basic tenants of AI and I think really we’re still just scratching the surface. So we are looking at automating the mundane tasks in a lot of ways. But really we’re kind of at that automation phase and a lot 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 that needs to go through. So, we’re using what we can at this point. But I think there’s a lot more that can be done to really get it out there and get it to the masses.

Terry Gerton When you talk about mundane tasks in financial management, be a little bit more specific with me. Is that basic accounting or cutting checks? What are you talking about?

Greg Koval Really basic accounting. So at this point, because of the way that our system environment is and a complexity, we have a lot of systems in play. A lot of system from various periods of time that don’t have the same data structure. So 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 correcting a mistake and a mistake that doesn’t require additional funding or bring funding back or impact somebody in a way that wouldn’t be helpful. So, you know, those are the initial use cases and I’ve been challenging industry for the last 18 to 24 months really to show me a technology where you 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 is wrong. It’s wrong for this reason. I’m going to fix it. So we’re not really there yet with that level of technology, but I’d love to get there.

Terry Gerton What are some of the challenges about taking an industry standard financial management tool, an AI tool, for example, and trying to deploy it in a defense financial management environment?

Greg Koval So there’s a lot of additional security protocols, obviously, that the software has to go through, the vendor has to through. And like I mentioned early on, I think what’s available to the private sector, there’s 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 to 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 two, impact level four, impact level five. 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 wanna support it or don’t they?

Terry Gerton That’s a really interesting challenge then, because as you’re trying to integrate and maybe simplify decades of 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?

Greg Koval 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 between 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 in the 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 sailors and our Marines in the mission.

Terry Gerton It feels like we’ve been deploying enterprise resource management systems in DoD for at least 30 years, probably as 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?

Greg Koval 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 nine, 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 software 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. They’re 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 use ERPs like an ERP, that’s what industry does, that’s not what government does.

Terry Gerton Going to rip the Band-Aid off on that conversion.

Greg Koval Exactly.

Terry Gerton 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?

Greg Koval So it’s really, it’s figuring out what we need from a data perspective. I think from, to a large degree, we are data hoarders, and we have so much data that we don’t know what to do with it. And in a lot of cases, even if we knew what to do with that, 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, in a lot of cases, you can’t do it because 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 we need. Because there’s a lot 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. But then we’re stuck with it. And we’ve gone through this in some forums where we’re sitting there looking at data elements and whether we need them 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.

Terry Gerton Do you find that a big culture jump to get people disconnected from that data security blanket?

Greg Koval 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 technology 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.

Terry Gerton 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 has 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?

Greg Koval So today we’re actually pushing for a 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 we’re on track to get an opinion. The game’s not over. We’ve got to finish strong. We’ve gotta 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 Corp’s effort three years ago. So it’s never over till it’s over, but we’re track and doing everything humanly possible with our partners. And what’s also interesting about this, and 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 and Navy another one.

Terry Gerton 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 transfer to the other services as they will eventually have to go through this?

Greg Koval Yes, the biggest thing we learned is to use the technology available to you and focus on data and analytics by Sanifar’s internal controls and material weaknesses.

Terry Gerton That’s really interesting that and a little surprising.

Greg Koval 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 identified 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, their 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 have 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 the 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.

Terry Gerton So you were talking about having to convince the people in this system that that was the right approach?

Greg Koval Yes.

Terry Gerton As you’re moving down the audit ability path Are there other lessons that have been challenging for the workforce?

Greg Koval 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, we’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’s 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 sphere 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 those operating units and having them understand that somebody is going to come out and count stuff. It sounds mundane, but it’s not the culture. We’re not a fortune 50 company that gets audited every year that expects 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 yet from an audit opinion perspective, it’s just pulling off the bandaid and moving forward.

Terry Gerton 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?

Greg Koval 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 your shelves 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 to order a replacement. I’m so there’s a lot of that. Also on the financial side, what we’ve done is 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 the activities you need to keep your shelves accurate. You need to document and record timely your expenditures. But when it comes to valuation, we’ve got it at the headquarters level. We are able to use Jupiter, which is our enclave of the war data platform to do valuation for them and really take it out of their hands. And then 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 and their stock and keeping that in a good spot. And on the financial side, we own the evaluation 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 that paradigm, it ended working out really, really well because again the outcome is the same. We want to have a clean, efficient experience for the war fighter and for the operator, and an audit shouldn’t get in the way of that.

Terry Gerton 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 debits and credits balanced?

Greg Koval I think we’re getting there. And again, there’s a target rich environment that we have, again, due to the way that we’re currently set 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, you know, again, with the number of civilians and 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, you know, we are on a track where basically, on average, we save about 250,000 labor hours per year in 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.