FUNDS MANAGEMENT UPDATES

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FUNDS MANAGEMENT UPDATES

• EPMC
• Roberta Tomasini
• DSMC-SPME
• Bldg 226, Rm 203
• [phone]
• e-mail roberta.tomasini_at_dau.mil

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Topics

• FM Scope
• FM Updates
• Time Now - FM Perspective
• Responding to Higher Hqtrs

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From Requirement to Capability
Planning, Programming, Budgeting and Execution
Annual Funding
Life Cycle Cost
Funding Policies
Estimate
Cost Analysis
ICE
FYDP SPG POM PDM
Full Funding (Exceptions)
MFP JPG BES PBD
CCA
CAIV
MBIs
Fiscal Environment
Incremental Funding
POE
AoA
Congressional Enactment
HAC HASC HBC
SAC SASC SBC
Presidents Budget
Budget Resolution Authorization Appropriation
Laws
Acquisition Program Baseline
Operational Concept
Force Structure Modernization Operational
Capability Readiness Sustainability
Feedback
Commitment Reprogramming
Capability Docs
Budget Authority Obligation
Expenditure Outlay
Functional Area Analysis
Budget Execution
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FM Updates Overview

• Cost Analysis Cost Terms, Affordability,
  Breaches,
• Most Probable Cost
• Funding Policies Buy-to-Budget
• PPBE MID 913, OSD Budget Analysts
• (Separate Session After Lunch)
• Congressional Enactment Appn Subcommittees
• Budget Execution Taxes, OSD/Service Goals,
• 
  Reprogramming Rules

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Life Cycle Cost Terms

Life Cycle Cost
RDT E Development Costs of Prime Equipment
Support Items
A
MILCON Facilities
E
Operations Support OM, MILPERS
F
PROCUREMENT Support Items
PROCUREMENT Prime Equipment
PROCUREMENT Initial Spares
G
Disposal OM others
C
B
D
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Affordability

• Service Shares?
• Service Splits?
• Budget Shares?

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MDAP Breach Parameters
NOTE There are also performance breaches which
are not included in this chart
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SecDef Certification of Breaches

• 4 Parts to Certification
• Program is in the national interest and it must
  be had for national security
• There is no other alternative
• Costs are under control
• Management is in place to keep costs under control

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Most Probable Cost (MPC)

• AKA Most Likely Cost
• OSD( C ) expects it to be at 50 chance of
  overrunning or underrunning
• The Fin Mgt Reg (DoD 7000.14R) says you should
  budget to MPC

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Buy-to-Budget for Acquisition of End Items

• US Code Title 10, Section 2308
• Can buy more end items than specified in the
  Appropriations Act, if 4 conditions are met
• Requirement exists and is expected to remain
  unchanged
• NO additional funding needed
• Funding needed doesnt exceed whats in law
• The amount appropriated is sufficient for the end
  item to be fully funded
• Noncompetitive acquisitions are limited to
  increases of not more than 10 of the quantity
  approved in the JA
• Congressional defense committees must be notified
  NLT 30 days after the date of the decision
• Source DoD 7000.14-R, Vol 2A, Chapter 1, Para
  010204

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HAC/SAC Subcommittees (109th)

• SAC Subcommittees (12)
• Agriculture/Rural Dev/Related Agencies
• Defense
• Energy Water Dev
• State, Foreign Ops Related Programs
• Homeland Security
• Interior Related Agencies
• Labor/HHS/Education Related Agencies
• Transportation/Treasury/Judiciary/HUD
• Military Construction VA
• Commerce/Justice/Science
• Legislative Branch
• District of Columbia

• HAC Subcommittees (10)
• Agriculture/Rural Dev/FDA/Related Agencies
• Defense
• Energy Water Dev/Related Agencies
• Foreign Ops/Export Financing/Related Programs
• Homeland Security
• Interior/Environment/Related Agencies
• Labor/HHS/Education/Related Agencies
• Transportation/Treasury/HUD/Judiciary/DC
• Military Quality of Life/VA/Related Agencies
• Science/State/Justice/Commerce/Related Agencies

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APPORTIONMENT PROCESS Taxes





Congress
Concurrent Budget Resolution Authorization
Appropriation (Budget Authority)
Continuing Resolution
Appropriation
Impoundment Rescission Deferral
Investment -- Full amount Expense -- Qtrly
OMB
Apportionment
OSD Comptroller
Withhold Administrative Technical
Allocation
Withhold Taxes -- SBIR Contingencies
Service Comptroller
Sub-Allocation
MAJCOM/PEO Comptroller
Allotment
PMO Program Management Office
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OSD/Service Goals

• Handouts provided in class

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Below Threshold Reprogramming
MAX DECREASE
MAX INCREASE
APPRN
LEVEL OF CONTROL
OBL AVAIL
Lesser of 10 M or 20
PROGRAM ELEMENT
10 M
RDT E
2 YEARS
3 YEARS ( 5 YEARS SCN)
LINE ITEM
PROC
BUDGET ACTIVITY SOME BA 1 SUB-ACTIVITY
LIMITATIONS ON DECREASES (OPERATING FORCES)
1 YEAR
O M
BUDGET ACTIVITY
1 YEAR
MILPERS

PROJECT
5 YEARS
MILCON
Reference Source DoD 7000.14R, Vol 3, Ch 6,
dated Aug 2000 RDTE Proc thresholds increased
from 4M 10M to 10M 20M per USD (C) Memo,
15 May 03 (valid for FY03 and FY04) MAX
DECREASE for FY04 changed to LESSER of threshold
amt or 20 of appropriation amt per USD (C)
Memo, 4 Nov 03 -- For FY03 and prior, MAX
DECREASE is GREATER of threshold amt or 20 of
appropriation amt
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Resource Allocation Process
CY04
CY05
CY06
D
J
J
F
M
A
M
J
A
S
O
N
J
J
F
M
A
M
J
A
S
O
N
D
J
J
F
M
A
M
J
A
S
O
N
D

Execution
2nd Yr
3rd Yr
FY04
FY04 and prior

2nd Yr
FY05
Enactment
Execution
3rd Yr
FY05
FY05 and prior
PB
FY06
Program/Budgeting
Execution
Enactment
2nd
Planning
FY06

FY06 and prior
FY06-11 SPG/JPG
FY 06-11 POM
PB
FY 06-07 BES
FY07
Program/Budgeting
Planning
Enactment
Exec
FY07 prior
FY07
FY 07-11 SPG/JPG
FY 07-11 FOL/CP
PB
FY08
Program/Budgeting
Planning
FY 08-13 POM
FY 08-13 SPG/JPG
FY 08-09 BES
SPG Strategic Planning Guidance
JPG Joint Programming Guidance
POM Program Objective Memorandum
BES Budget Estimate
Submission CP Change
Proposal FOL
Fact-of-Life Changes
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Responding to Higher HeadquartersProposed Budget
Execution Cut Caselette

• Caselette provided in class

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PPBE
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Management Initiative Decision (MID) 913 (May
2003)

• Major Initiatives
• Quadrennial Defense Review (QDR) shifted from the
  first to the second year of a new administration
• Move to a two-year cycle
• Off-year Strategic Planning Guidance (SPG)/Joint
  Programming Guidance (JPG) is optional (at the
  discretion of SECDEF) will not introduce major
  changes in off-year
• Off-year review focus on execution and
  performance
• Create a single standardized programming and
  budgeting system for data collection and
  management

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MID 913

• Changes to Program/Budget/Execution Review
• Transition to a true biennial process
• Incorporate metrics and cost models
• Focus on outputs what are we getting for our
  money?
• Over time, metrics will become the analytical
  underpinning to ascertain whether the appropriate
  allocation of resources exists

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PPBE Phases

• Planning
• Assess capabilities / review threat
• Develop guidance
• Programming
• Turn guidance into achievable, affordable
  packages
• Six-year program (Future Years Defense Program)
• Budgeting
• Test for efficient funds execution
• Scrub budget years
• Prepare defensible budget
• Execution Review (concurrent with program/budget
  review)
• Develop performance metrics
• Assess actual output against planned performance
• Adjust resources to achieve desired performance
  goals

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Four Years in the Biennial Cycle Corresponding
to Four-Year Presidential Terms
Year 1 (Review and Refinement) Early National
Security Strategy (NSS) Off-year SPG/JPG as
required (at discretion of SECDEF) Limited
Changes to Baseline Program Year 2 (Formalize the
Agenda) Quadrennial Defense Review (QDR)
Aligned with PB submission in second year of an
administration Fiscal Guidance Issued On-year
SPG/JPG (implementing QDR) POM/BES
Submissions Year 3 (Execution of
Guidance) Off-year SPG/JPG as required (at
discretion of SECDEF) Limited Changes to
Baseline Program Year 4 (Ensuring the
Legacy) Fiscal Guidance Issued On-year SPG/JPG
(refining alignment of strategy and
programs) POM/BES Submissions
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Planning Phase
APR/MAY
SEP
DEC
MAR
1st Year
2nd Year

• Notes
• SPG replaces Draft Defense Planning Guidance
  (DPG)
• JPG replaces DPG

COCOM Combatant Commander CPR Chairmans Pgm
Recommendation JPD Joint Planning Document JPG
Joint Programming Guidance NSS National
Security Strategy NMS National Military
Strategy QDR Quadrennial Defense Review SPG
Strategic Planning Guidance
1st year of a new administration
NSS
CPR
SECDEF
JCS COCOMs SERVICES
NMS
JPD
SPG
JPG
JCS, OSD, COCOMs, SVC HQs, ETC.
Strategy also reflected in QDR (2nd year of new
administration)
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Concurrent Program/Budget Review
JAN/FEB
NOV
AUG
OCT
DEC
3-Star Group
BES Budget Estimate Submission COCOM
Combatant Commander CPA Chairmans Pgm
Assessment MBI Major Budget Issues PB
Presidents Budget PBD Program Budget
Decision PDM Program Decision Memo POM
Program Objectives Memo SLRG Senior Leadership
Review Group
OSD/ OMB
Issue Resolution
POM
SECDEF SLRG
PDM
CPA
JCS
Services PEO/PM, SVC HQs COCOMs

• Notes
• 3-Star Group replaces Program Review Group (PRG)
• SLRG replaces Defense Resources Board (DRB)

OSD/ OMB
Adv Ques/ Hearings
BES
PB
MBI
PBDs
Updates FYDP
Updates FYDP
Services / PEO / PM Answer / Reclama
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FY 0711 Program/Budget Process Overview

• Procedural changes for FY 07-11 may not be
  institutionalized
• USD(C) Dir, PAE co-leads for process
• OSD emphasis is keeping biennial budget process
  minimizing off-year changes FY 06 Pres Bud is
  baseline
• Fact-of-Life (FOL) changes for FY07 allow
  Services/Agencies to fix FY 07 due to PBD 753
  other defined issues programmatic decisions will
  NOT be revisited
• Out-years impacted by PBD 753 should be deferred,
  to the extent possible, to the FY 0813 cycle
• Services/Agencies will prepare Change Proposals
  (CPs) to implement very limited, defined
  adjustments
• OSD will prepare CPs required to implement
  BRAC/QDR decisions
• Senior Leadership Review Group (SLRG) will meet
  periodically to review/decide issues
• Services/Agencies not to propose offsets to
  National Intelligence Program (NIP) for non-NIPs

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FY 0711 Program/Budget Schedule

• May 31 Military Departments composite rates due
• Aug 1 FOL budget estimate notification memos due
• Aug 15 OSD disposition of FOL changes
• Sep 6 Service/Agency CPs due accepted other
  OSD-directed documentation due electronically
• Sep 23 Hardcopy data submission complete
• Sep 28 Detailed budget justification material due
• Sep 30 OSD completes review of Service/Agency CPs
  (accept/reject)
• Oct-Nov BRAC/QDR review related OSD-generated
  CPs
• Dec 20 Program Budget review complete
• Jan DoD budget submitted to OMB

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Off-Year Process 2005 (FY 07-11)
OCT-DEC
30 SEP
15 AUG
6 SEP
20 DEC
1 AUG
JAN-FEB
FOL Notification Memo to USD(C) Dir, PAE
Svcs/Agencies Accepted FOLs Entered into OSD
Data Base
OSD Staff Review
SLRG Review of CPs
Electronic OSD-Required R/P Forms Due
Services Agencies
Pres Bud
Budget Lock
Services/Agencies CPs Due to OSD
FOL - Fact -of- Life CP - Change Proposal SLRG -
Senior Leadership Review Group QDR - Quadrennial
Defense Review BRAC - Base Realignment
Closure PDM - Program Decision Memorandum PBD -
Program Budget Decision R-Forms - Research
Development Forms P-Forms - Procurement Forms
OSD Prepared BRAC/QDR CPs Submitted
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BACKUP SLIDES
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Responding to Higher HQ

• Dont
• Say program is unexecutable with a 1 cut
• Give long impact statements that say nothing
• Not respond
• Do
• Discuss scope not done relative to users needs
• Provide users priority on work not done
• Address impact to programs change in risk and/or
  major program milestones
• Be prepared for 5, 10, 25, and 50 proposed
  cuts

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Obligation Plan
What Spending Plan Monthly Prediction
All Available Years Required for Each Program
Element / Line Item
How Anticipated Obligation Rate Dont
Show Preponderance of 1st Quarter
Awards 4th Quarter Awards
Who Prepared by PMO Coordinated with PCO
Reviewed by Comptroller Each Budget Update
Deviation Variances Planned vs Actual PMO
Written Explanation Each Month More
Vulnerable Potential Billpayer Report
Card/Predict Trends

• Why
• Supports Budget Enactment
• Analyze for Budget Execution
• If Not On Plan... (Maybe Not A Firm
  Requirement)
• Best Prediction for Future Performance

Decisions Basis for BES Pres Budget
Basis for Appropriation Impacts on Program
Reviews Impacts on Billpayer Exercises
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Obligation Plan
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Execution Laws

• Misappropriation Act Title 31, U.S. Code, Sec
  1301
• Requires funds to be used only for the purposes
  and programs for which the appropriation was
  made.
• AKA The Purpose Statute

• Anti-Deficiency Act Title 31, U.S. Code, Sec
  1341 1517
• Prohibits making or authorizing an obligation in
  excess of the amount available.
• Forbids obligation to pay money from the US
  Treasury in advance of an appropriation.
• Requires agency to fix responsibility for
  violations of the Act.

• Bona Fide Need Rule
• Requires funds to be used only for needs or
  services in the year of the appropriations
  obligation period.

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CONTRACT FUNDS STATUS REPORT (DD Fm 1586)

• Formerly required by DoD 5000.2-R to obtain
  funding
• data on contracts over six months in duration
• Purpose of CFSR is to assist Components in
• Updating and forecasting contract fund
  requirements
• Planning and decision making on funding changes
• Developing fund requirements and budget
  estimates in support of approved programs
• Determining funds in excess of contract needs
  and available for deobligation
• Obtaining rough estimates for termination costs
• No specific dollar threshold specified but
  generally applicable to non- firm fixed priced
  contracts in excess
• of 1.2 Million (in FY 96 constant
  dollars)
• As an exception, applicable to unpriced
  portions of firm fixed price contracts estimated
  to be in excess of 20
• of initial contract value

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Contract Funds Status Report
34
Working Capital Funds

• DEFINITION Revolving funds or Working Capital
  Funds are used to finance operations from the
  time that specific work is begun until payment is
  received from the customer
• STATUTORY BASIS Title 10, U.S. Code (Section
  2208), the SECDEF may direct establishment of
  working capital funds within DoD
• PURPOSES
• Finance inventories of such supplies as SECDEF
  may designate
• Provide working capital for industrial-type
  activities and commercial-type activities that
  provide common services within or among military
  departments and DoD agencies

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Defense Business Operations Fund (DBOF)

• Congress established DBOF as a revolving fund
  in 1991
• DBOF was initially created to consolidate nine
  stock and industrial funds
• Reasons
• - Improvements in business practices
• - Full cost visibility
• - Stabilized rates
• - Application of standard policies across
  business functions

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DBOF to Working Capital Funds

• FY 1997 Defense Authorization Act directed DoD to
  conduct comprehensive study of DBOF and present
  study findings and proposed improvement plan to
  Congress for approval.
• DoD initiated some of the needed changes,
  creating these working capital funds
• Army Working Capital Fund
• Navy Working Capital Fund
• Air Force Working Capital Fund
• Defense-Wide Working Capital Fund
• Defense Commissary Agency Working Capital Fund

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Working Capital Funds
Congress
One-time Corpus
Revolving Fund
Annual Appropriation
Payment
Financing
Order
Goods or Services Provided
Business Area
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How Do Working Capital Funds Work?

• Individual Business Areas operate as a business
  with break even budgets
• Stabilized rates and prices established to cover
  full cost of operating and overhead costs
• Rates remain unchanged in year of execution
• Rates adjusted in following year to account for
  any shortfalls or profits

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Working Capital Funds Functions
Army Working Capital Fund Depot
Maintenance Information Services Ordnance Suppl
y Management Navy Working Capital Fund Base
Support Depot Maintenance - Aircraft Depot
Maintenance - Marine Corps Depot Maintenance -
Ships Information Services Ordnance Research
and Development Supply Management Transportation
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Working Capital Funds Functions
Air Force Working Capital Fund Depot
Maintenance Information Services Supply
Management Transportation USTRANSCOM
Defense - Wide Working Capital Fund Defense
Printing DAPS Distribution Depots DLA Finan
cial Operations DFAS Information
Services DFAS, DISA, DLA Reutilization
Marketing DLA Supply Management DLA Defense
Commissary Agency Working Capital Fund
Commissary Operations
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Life Cycle Cost Categories
Program Cost
System OS Yrs Ships
30 Aircraft 20 Missiles
20 Tracked 20 Vehicles

• Includes

Operations and Support Costs
Disposal Cost
Investment Cost