NCMA BOSTON MARCH WORKSHOP
March 16, 2011
FISCAL LAW –
POTENTIALLY YOUR
WORSE NIGHTMARE
AWARD
Presented by:
Maj Frank Hollifield, ESC/JAS
Mr. Peter Camp, ESC/JAS
1
DISCLAIMER
THE VIEWS EXPRESSED IN THIS PRESENTATION ARE THOSE
OF THE PRESENTERS AND MAY NOT REFLECT THE OFFICIAL
POLICY OR POSITION OF THE DEPARTMENT OF DEFENSE
OR THE UNITED STATES AIR FORCE
2
AGENDA
• WHY DOES IT MATTER TO YOU?
• WHAT’S THE LAW?
– AUTHORIZATIONS VS. APPROPRIATIONS
• WHAT ABOUT THE COLORS OF MONEY?
– THE BASIC RULES
• THE PITFALLS OF FISCAL LAW
– PURPOSE, TIME, AND AMOUNT (PTA)
– THE ANTI-DEFICIENCY ACT (ADA)
• SUMMARY
• BACK-UP CHARTS
3
4
Anti-Deficiency Act (ADA) Violations are
reported to the President. Responsible parties
are identified by name.
This is enough to ruin anyone’s day.
5
DoD Inspector General Reports on Potential Antideficiency Act
Violations Resulting from DoD Purchases Made Through NonDoD Agencies (FY 2004-09)
•
•
•
•
•
Over the last 6 years, the DoD Office of Inspector General issued
16 reports addressing FY 2004 through FY 2009 DoD purchases
through non-DoD agencies.
These reports address whether the funding policies, procedures,
and internal controls of each activity selected for review were in
place, compliant, and properly administered.
Overall, the DoD IG reviewed seven non-DoD agencies
purchasing goods and services on behalf of DoD.
The non-DoD agencies processed approximately 98,750
purchases from FY 2004 through FY 2007, valued at
approximately $15.6 billion.
At these agencies, the DoD IG reviewed 869 purchases valued at
approximately $1.9 billion.
(DoD IG Memorandum for Under Secretaries of the Navy, Army, and Air Force, September
28, 2010; DoD IG Report No D-2008-082, April 25, 2008, Executive Summary,
Background, p. i)
6
7
THE POWER OF THE PURSE
• “No money shall
be drawn from
the Treasury,
but in
Consequence of
Appropriations
made by law . . .
“
–
Constitution, Article I,
section 9, clause 7
8
FISCAL LAW IS COMPRISED OF
•
THE LAWS AND POLICY GOVERNING THE
EXECUTION OF APPROPRIATIONS
•
•
•
•
•
US CONSTITUTION
UNITED STATES CODE
PUBLIC LAWS
REGULATIONS
–
DOD POLICY (DOD 7000.14-R)
–
SERVICE POLICY (i.e., AFI 65-601)
–
FAR, DFARS AND SERVICE SUPPLEMENTS
(i.e., 32.7, 37.106, 204.7107, 232.7, e.g., AF
FARS 5332.7)
OPINIONS (COMPTROLLER GENERAL AND
FEDERAL COURTS)
9
FAR 32.702 POLICY
BEFORE EXECUTING ANY CONTRACT, THE
CONTRACTING OFFICER SHALL OBTAIN WRITTEN
ASSURANCE FROM RESPONSIBLE FISCAL AUTHORITY
THAT ADEQUATE FUNDS ARE AVAILABLE (FORM 9, AFMC
36)
NO OFFICER OR EMPLOYEE OF THE GOVERNMENT MAY
CREATE OR AUTHORIZE AN OBLIGATION IN EXCESS OF
THE FUNDS AVAILABLE, OR IN ADVANCE OF
APPROPRIATIONS (ANTI-DEFICIENCY ACT 31 USC 1341),
UNLESS OTHERWISE AUTHORIZED BY LAW.
10
11
CONGRESSIONAL AUTHORIZATION
•
Authorization is the legal authority to carry out a
program.
– Authorizations generally start with the Congressional
Committee with cognizance over the subject matter,
e.g. House Armed Services Committee, Senate Armed
Services Committee (HASC, SASC). These are
standing Committees.
• An authorization does not provide budget authority
12
WHAT IS BUDGET AUTHORITY?
“. . . [A]uthority provided by law to
enter into obligations which will
result in immediate or future
outlay involving government
funds. . . .” (2 USC Section 622(2))
13
CONGRESSIONAL APPROPRIATION
•
An act of Congress that permits a federal agency to incur
obligations and to make payments out of the Treasury for
a specified purpose.
– House Appropriations Committee, Senate
Appropriations Committee (HAC, SAC). These are
standing committees and they are “Spending
Committees”
• An Appropriation Act is the most common form of
budget authority
14
Budget Committees:
• Sets overall budget ceilings
Authorization Committees:
• Provide Authority to Accomplish Certain Programs
•Specifies Program Levels
•Manpower Programs
•Number of Aircraft, etc.
• Handles Policy Matters
Opens the checking account
Appropriations Committee:
• Authorizes use of funds to Accomplish
Programs.
•Provides Funding (Budget Authority)
Puts money into the checking account
15
A COMPARISON
Appropriations
Authorizations
•
Provides permission
and direction on how
•
or permission to draw
funds from the US
to spend funds
•
Policy oriented
•
Separate bills written
in House and Senate
•
Generally permanent
law
Provides budget authority
Treasury
•
Budget oriented
•
Bill traditionally originates
in House
•
•
Senate modifies House bill
Generally one-year law
• The Authorization Act
does not provide
budget authority
16
THE PROCESS OF ENACTMENT
FEB
CBO
Report
Congress
MAR
APR
MAY
JUN
Department
Of Defense
authorizations process
National
Budget
DoD
Budget
AUG
Concurrent Budget
Resolution
appropriations process
President
(OMB)
JUL
joint
conference
joint
conference
SEPT
OCT
National Defense
Authorization
Act
DoD
Appropriations
Act
Apportionment
Testimony & Appeals
Allotment
Military
Departments
Service
Budgets
Budget
Execution
17
Treasury
Dept
Budget Authority
Authorization
Appropriation
OMB
OSD
Service
(Air Force)
PEO/MAJCOM (AFMC)
Program Managers/Units
18
THE OFFICE OF MANAGEMENT AND BUDGET
APPORTIONS
• OMB apportions amounts available for
obligation, including budgetary reserves
established pursuant to law, in an
appropriation or fund account.
– An Apportionment divides amounts available
for obligations by specific time periods
(quarters or years), activities, projects,
objects, or a combination of these.
(Definitions extracted from A Glossary of Terms Used in the Federal Budget Process, GAO, Revised January, 1993 and
Cornelius E. Tierney, Federal Accounting Handbook: Policies, Standards, Procedures, Practices, Wiley (2000).)
19
OSD ALLOCATES
• An allocation is the amount of
budget authority transferred from
one agency, bureau, or account
that is set aside in a transfer
appropriation account to carry
out the purpose of the parent
appropriation or fund.
– DOD
funds the Services through the Office of
Secretary of Defense’s Comptroller Office
20
SERVICES ALLOT
• The Services and their MAJCOMs generally allot funds,
following specific procedures that each Agency
establishes within the general requirements stated in
applicable OMB Circulars
• An authorization by either the agency head or another
authorized employee to his/her subordinates to incur
obligations within a specified amount.
• The amount allotted by an agency cannot exceed the
amount apportioned by the OMB.
21
REMEMBER!
• THE ESTABLISHED RULE IS
– EXPENDITURES OF PUBLIC FUNDS IS
PROPER ONLY WHEN AUTHORIZED BY
CONGRESS
– NOT THAT PUBLIC FUNDS MAY BE
EXPENDED UNLESS PROHIBITED BY
CONGRESS
• VERY DIFFERENT FROM INTERPRETING THE
FAR
22
23
The
Appropriation
Description
Time allowed to
obligate (get a contract)
Time allowed to expend
after period of
availability for
obligation
Total time
of Money
3400
3600
3080/3010/3020
Operations &
Maintenance
Research &
Development
Other
Procurement
1yr
2yrs
3yrs
5yrs
5yrs
5yrs
6 yrs
7 yrs
8 yrs
24
25
26
27
PURPOSE, TIME, AMOUNT
• APPROPRIATIONS PROVIDE
AUTHORITY TO INCUR OBLIGATIONS
AND TO MAKE DISBURSEMENTS FOR
THE PURPOSES, DURING THE TIME
LIMITS AND UP TO THE AMOUNT
LIMITATIONS SPECIFIED IN THE
APPROPRIATION ACT.
(TITLE 31 OF THE UNITED STATES CODE (USC))
28
LIMITATIONS ON THE USE OF
APPROPRIATED FUNDS
•
THE THREE MAIN ELEMENTS OF FISCAL LAW:
– AN AGENCY MAY OBLIGATE AND EXPEND
APPROPRIATIONS ONLY FOR A PROPER PURPOSE
– AN AGENCY MAY OBLIGATE ONLY WITHIN THE TIME
LIMITS APPLICABLE TO THE APPROPRIATION
– AN AGENCY MUST OBLIGATE FUNDS ONLY WITHN THE
AMOUNTS APPROPRIATED BY CONGRESS AND
FORMALLY DISTRIBUTED TO THE AGENCY.
(Title 31 of the United States Code
(USC)
29
PURPOSE
• USMC (Albany, GA)
contracts to build/install
prefabricated building
using procurement funds.
•Improper use of procurement funds
•Value exceeded Unspecified Minor MilCon (UMMC) threshold
(10 USC 2805)
•Should have used MilCon, Navy (MCN)—USMC lacked
authority to obligate this fund.
•ADA violation: improperly exceeded administrative
subdivision
ADA Report 10-09
30
TIME
• FUNDS ARE ONLY AVAILABLE FOR OBLIGATION
DURING THE AVAILABILITY OF THE
APPROPRIATION
(10 USC 2306c)
• DON’T OBLIGATE
– BEFORE THE PRESIDENT SIGNS THE
APPROPRIATIONS BILL, OR
– AFTER THE AVAILABILITY PERIOD OF THE
FUNDS
31
APPROPRIATIONS ARE TIME BOUND
FY '06
O&M
3400
RDT&E
3600
FY '07
FY 08
FY '09
FY '10
FY '11 FY '12
FY '13
FY '14
FY '14
FY-15
PROCUREMENT
3080
MILPERS
3300
MILCON
3500
Current. Available for obligation.
Expired. It is available only for recording, adjusting, and .
liquidating obligations properly chargeable to that appropriation
Cancelled. Closed Appropriation. Not available for any purpose.
32
PRIOR YEAR(S), CURRENT YEAR, BUDGET
YEAR(S)
AT ANY GIVEN TIME, SEVERAL FISCAL YEARS MAY
BE UNDER CONSIDERATION:
…
FY '09
Prior Year
-1
FY '10
Prior
Year
FY '11
Current
Year
FY '12
Budget
Year
FY '13
Budget Year
+1
…
33
TIME
BONA FIDE NEEDS RULE
• RULE: A FISCAL YEAR APPROPRIATION
MAY BE OBLIGATED ONLY TO MEET
– A LEGITIMATE, OR BONA FIDE,
– NEED ARISING IN, OR IN SOME CASES
ARISING PRIOR TO BUT CONTINUING TO
EXIST IN, THE FISCAL YEAR
– FOR WHICH THE APPROPRIATION WAS
MADE.
(31 U.S.C. 1502(A))
• ARE YOU OBLIGATING CURRENT
DOLLARS FOR CURRENT NEEDS?
– IF NOT, YOU MIGHT BE IN THE MIDDLE OF
A NIGHTMARE
34
TIME
BONA FIDE NEEDS RULE
• Late FY 05 & 07: USMC Logistics Command C4
Division (Albany, GA!) contracts for IT training
with establishing content, dates, or students.
• Training provided in subsequent FY—violation
of Bona Fide Needs Rule
»ADA Violation: No proper funds available
at time of obligation
ADA Report 10-15
35
BONA FIDE NEEDS RULE
Letter Contracts
• Letter Contract entered into force: FY1
• Definitized in FY1: obligate FY1 funds
• Definitized in FY2: obligate FY2 funds
• Obligating Letter Contracts, B-197274 (Sep. 23, 1983)
36
TIME
BONA FIDE NEEDS RULE
• Lease termination clauses
• “The real effect of termination liability is to obligate the
Commission to purchase a certain quantity . . . During each of
five successive years or to pay damages for its failure to do so.
In other words, the termination charges represent a part of
the future, as distinguished from current, deliveries and needs
under the contract, and for that reason such charges are not
based on a current fiscal year need.”
36 Comp. Gen. 683, 685 (1957)
37
BONA FIDE NEEDS RULE
Overuns/Underruns
•Cost reimbursement
contract/funding overruns: If the
ceiling must be raised, it does not
relate back and current funds must
be used. B-219829 (Jul. 22, 1986)
•Underruns after expiration of
appropriation’s period of
availability: using money resulting
from the contract to order
additional quantity exceeds the
scope of the original contract. Only
chargeable to funds current at the
time of modification. B-207433
(Sep. 16, 1983)
38
BONA FIDE NEEDS RULE
•B-317413, National
Science Foundation
(Apr. 24, 2009)
•Cost Reimb. K w/
LOF Clause
•FY1: Sr. Scientist “directs” change in order of deliverables,
resulting in cost overrun
•FY2: Claim settled
•GAO: Year of settlement (FY2) is proper appropriation—no
obligation arose until US entered into settlement
•But, a ratification of unauthorized commitment would have
“related back” to the FY1 commitment
39
AMOUNT
•
DON’T SPEND IN EXCESS OR IN ADVANCE OF AN
APPROPRIATION
–
•
DON’T OBLIGATE IN EXCESS OF AN APPORTIONMENT
OR ALLOCATION.
–
•
31 USC 1517
DON’T AUGMENT FROM OTHER SOURCES MISCELLANEOUS RECEIPTS
–
•
31 USC 1341(a)(1)(a)
31 USC 3302(b)
DON’T ACCEPT VOLUNTARY/FREE SERVICES
–
31 USC 1342
40
AMOUNT
Now for
Something
Really
Scary!
41
AMOUNT
• Dep’t of Army, FY08 Mil Personnel, Appropriation,
and the ADA, B-318724 (Jun. 22, 2010)
• Budget Office: “3500” responsibility
• Relied on estimates of PM obligations
– Short by $200M
– Transferred $ from Working Capital
• GAO: exceeding “3500” appropriation by $87M =
ADA Violation
– “Lack of Budget Office-PM Communication”
• DOD Comptroller Report (?)
42
•
B-319349, USCP (Jun. 4, 2010)
• FY07: SWO
rescinded; for
future costs,
USCP advances
$6.8M expired FY
03 annual funds
to a DOT “noyear” WCF
The Working Capital Fund
is not a Time Machine*
KO
•FY09: DOT obligates the funds. GAO: the advanced
funds don’t become “no-year”
*Unless otherwise specifically provided by law
43
44
EXPENSE VS. INVESTMENT
•
EXPENSE (O&M) VERSUS INVESTMENTS
(PROCUREMENT)
•
BASIC DISTINCTION BETWEEN EXPENSE AND
INVESTMENT COSTS:
– EXPENSES ARE COSTS INCURRED TO OPERATE &
MAINTAIN THE ORGANIZATION, SUCH AS PERSONAL
SERVICES, SUPPLIES, AND UTILITIES
– INVESTMENTS ARE COSTS RESULTING IN THE
ACQUISITION OF, OR AN ADDITION TO, END ITEMS
See DOD Financial Management Regulation, Vol. 2A, Ch. 1, para. 010201
45
EXPENSE VS. INVESTMENT
•
BASIC EXPENSE COST DETERMINATION GUIDELINES/CRITERIA:
– COSTS OF RESOURCES CONSUMED IN OPERATING AND
MAINTAINING.
• WHEN COSTS GENERALLY CONSIDERED EXPENSES ARE
INCLUDED IN THE PRODUCTION OR CONSTRUCTION OF AN
INVESTMENT ITEM, THEY SHALL BE CLASSIFIED AS
INVESTMENT COSTS
•
EXPENSE EXAMPLES:
LABOR OF CIVILIAN, MILITARY, OR CONTRACTOR PERSONNEL
RENTAL CHARGES FOR EQUIPMENT AND FACILITIES
FOOD, CLOTHING, AND FUEL
SUPPLIES AND MATERIALS DESIGNATED FOR SUPPLY
MANAGEMENT OF THE DEFENSE WORKING CAPITAL FUNDS
– MAINTENANCE, REPAIR, OVERHAUL, REWORK OF EQUIPMENT
–
–
–
–
46
EXPENSE VS. INVESTMENT (Cont’d)
•
BASIC INVESTMENT COST DETERMINATION
GUIDELINES/CRITERIA:
– COSTS TO ACQUIRE CAPITAL ASSETS, SUCH AS REAL PROPERTY
AND EQUIPMENT
•
INVESTMENT EXAMPLES:
– ITEMS OF EQUIPMENT, INCLUDING ASSEMBLIES, AMMUNITION AND
EXPLOSIVES, MODIFICATION KITS, SPARES AND REPAIR PARTS NOT
MANAGED BY THE DEFENSE WORKING CAPITAL FUNDS
– EQUIPMENT ITEMS NOT SUBJECT TO CENTRALIZED ITEM
MANAGEMENT AND ASSET CONTROL, AND HAVING A SYSTEM UNIT
COST EQUAL TO OR GREATER THAN THE CURRENTLY APPROVED
EXPENSE AND INVESTMENT DOLLAR THRESHOLD
• FOR DoD: THRESHOLD IS CURRENTLY $250,000; FOR
EVERYONE ELSE IT IS $100,000
– CONSTRUCTION TO INCLUDE THE COST OF LAND AND RIGHTS
THEREIN; INCLUDES REAL PROPERTY EQUIPMENT INSTALLED AND
MADE AN INTEGRAL PART OF SUCH FACILITIES, RELATED SITE
PREPARATION, AND OTHER LAND IMPROVEMENTS
47
EXPENSE VS. INVESTMENT (Cont’d)
• KNOWING THE DIFFERENCE IS CRITICAL TO THE
PROPER EXECUTION OF INVESTMENT
APPROPRIATIONS, BECAUSE –– IT ENSURES COMPLIANCE WITH REGULATORY AND
POLICY DIRECTION, AS DISCHARGED BY
CONGRESSIONAL, GAO, OMB, AND OSD
COMPTROLLER GUIDANCE INSTRUMENTS, AND
– AVOIDS INFRACTIONS, WHICH ARE REPORTABLE TO
OSD, CONGRESS, AND THE PRESIDENT
(GOVERNING POLICY - DOD FMR, VOLUME 2A, CHAPTER 1)
48
EXPENSE VS. INVESTMENT
It’s Not Just for Buildings!
• NGA MIPR to fund recapitalization of netenabled portal.
• Budget analyst certifies $8.6 M FY’03 O&M
funds available for project.
– Hardware; software; commercial imagery
– A classic Investment
– Correct funds were Procurement
– DOD IG Audit uncovers; No proper funds remain
to correct—ADA Violation
ADA Report 10-04
49
A Few Words About
Project Splitting
• 10-03 DISA (SAFB)
• 10-05 USA O&M for
MILCON
• 10-07 USA O&M for
MILCON
• 10-10 USA O&M for
MILCON
50
A Few Words About
Project Splitting
51
CROSSING FISCAL YEARS . . .
•
ORDINARILY O&M FUNDS ARE NOT ALLOWED TO
CROSS FISCAL YEARS
–
•
A SERVICE CONTRACT THAT IS FUNDED WITH ANNUAL
APPROPRIATIONS MAY NOT CROSS FISCAL YEARS (FAR 32.703-3)
DoD HAS AN EXCEPTION BY STATUTE THAT
ALLOWS A CONTRACTING OFFICER TO
–
ENTER INTO A CONTRACT, EXERCISE AN OPTION, OR PLACE AN
ORDER UNDER A CONTRACT FOR SEVERABLE SERVICES
–
FOR A PERIOD THAT BEGINS IN ONE FISCAL YEAR AND ENDS IN THE
NEXT FISCAL YEAR, IF THE PERIOD OF THE CONTRACT AWARDED,
OPTION EXERCISED, OR ORDER PLACED
–
DOES NOT EXCEED 1 YEAR, AND
–
CURRENT YEAR FUNDS ARE USED TO FULLY FUND THE SEVERABLE
SERVICES ACROSS FISCAL YEARS.
(See 10 USC 2410A, DFARS 232.703-3)
ADA Report 10-02
52
Severable or Non-Severable?
Services? Severable? Non-Severable?
e.g., Non-personal services, Advisory and Assistance Services (A&AS), Base
Services
Can the service be
Yes.  The service is
As a general rule,
separated into
“severable” 
severable services are
components that
the bona fide needs of
independently meet a
the fiscal year in which
separate need of the
performed. (Matter of
Government?
Incremental Funding of
Multiyear Contracts, B241415, 71 Comp. Gen
428 (1992)). Therefore,
funding of severable
service contracts
generally may not
cross fiscal years and
the Service should fund
the services with
current year dollars.
Does the service
Yes.  The service is
In consequence, the
produce a single or
“non-severable”.
Service must fund the
unified outcome,
entire effort with dollars
product or report that
that are current
cannot be subdivided
(available) for
for separate
obligation at the time
performance in
the contract is
different fiscal years?
executed. (DFAS-IN 371, tbl. 8-1)
53
RDT&E
APPROPRIATION SPECIFIC POLICY
•
•
INCREMENTAL FUNDING
–
FUND ONLY WHAT CAN BE EXECUTED IN THE FIRST
YEAR
• INCLUDE ONLY THOSE COSTS IN THE BUDGET
REQUEST EXPECTED TO BE INCURRED/
PERFORMED FOR THAT FISCAL YEAR OR 12
MONTH PERIOD FOR SEVERABLE SERVICES
CLAUSES TO BE USED
• COST CONTRACTS – LIMITATION OF FUNDS
(LOF)(FAR 52.232.22)
• FFP CONTRACTS – LIMITATION OF GOVERNMENT’S
OBLIGATION (LOGO)(DFARS 252.232-7007)
ADA Report 10-12
54
PROCUREMENT APPROPRIATION
SPECIFIC POLICY
•
FULL FUNDING
AN END ITEM IS FULLY FUNDED WHEN IT MEETS THE
FOLLOWING CRITERIA:
–
–
–
–
FUNDS ARE PROGRAMMED, BUDGETED AND APPROVED TO
COVER THE TOTAL ESTIMATED COST OF THE CONTRACT
QUANITY OF END ITEMS AT THE TIME OF CONTRACT
AWARD
THE ITEM MUST BE A COMPLETE, USABLE END ITEM
NO FUTURE-YEAR APPROPRIATION IS REQUIRED FOR
DELIVERY OF THE END ITEM AUTHORIZED AND APPROVED
BY CONGRESS
YOU CAN’T BUY AN END ITEM WITH TWO (OR MORE)
DIFFERENT YEARS OF MONEY
55
FULL FUNDING EXCEPTIONS
–
–
ADVANCE PROCUREMENT
• ALLOWS PROGRAMS TO ORDER ITEMS THAT HAVE A
LONG LEAD IN ADVANCE OF ORDERING THE
COMPLETE, USABLE END ITEM.
ADVANCE ECONOMIC ORDER QUANTITY (EOQ)
PROCUREMENT
• THIS APPLIES TO MULTI-YEAR PROCUREMENTS WHEN
IT IS ADVANTAGEOUS TO THE GOVERNMENT TO BUY A
LARGE QUANTITIES OF ITEMS UP-FRONT.
CONGRESSIONAL AUTHORIZATION IS REQUIRED
PRIOR TO EXECUTING ONE OF THESE EXCEPTIONS
56
57
WHAT IS THE ADA?
• THE PRIMARY “ENFORCEMENT DEVICE” TO
ENSURE CONGRESS’ POWER TO DETERMINE
HOW MUCH MONEY CAN BE SPENT BY A
GIVEN AGENCY OR PROGRAM
• CODIFIED IN THREE MAJOR STATUTES
– 31 U.S.C. § 1341 LIMITATIONS ON EXPENDING AND
OBLIGATING AMOUNTS [“ANTI-DEFICIENCY ACT”]
– 31 U.S.C. § 1342 LIMITATION ON VOLUNTARY SERVICES
– 31 USC § 1517 PROHIBITED OBLIGATIONS AND
EXPENDITURES
(AFI 65-608, Chapter “Antideficiency Act Violations”)
58
WHAT CONSTITUTES AN ADA VIOLATION?
•
VIOLATION OF THE BONA-FIDE NEED RULE
•
VIOLATION OF THE PURPOSE STATUTE
•
OBLIGATE/EXPEND IN EXCESS OF OR IN ADVANCE OF AN
APPROPRIATION – 31 U.S.C. 1341(a)
– WRONG FISCAL YEAR VIOLATED – 31 U.S.C. 1502(a)
– MAY LEAD TO AN ADA VIOLATION
– OBLIGATION CHARGED AGAINST INAPPROPRIATE ACCOUNT
– 31 U.S.C. 1301
– MAY LEAD TO AN ADA VIOLATION
– AUTOMATIC ADA VIOLATION
– E.g., DFARS Clause….
•
OBLIGATE/EXPEND IN EXCESS OF AN APPORTIONMENT OR
AN ADMINISTRATIVE SUBDIVISION – 31 U.S.C. 1517 (a)
– AUTOMATIC ADA VIOLATION
59
DFARS Clauses
• E.g., FY10 Appropriations Act/DFARS 252.222-7006
– Prohibits use of funds FY’10 appropriations >$1M
if contractor restricts employee’s to arbitration for
certain civil claims
– Remains in effect during CRA!
60
Indemnification
Agreements
•10-08; GAO-10-399, Financial Audit: Am. Battle Monument Commission’s Financial
Statements for FY 2009 and 2008 (Mar. 2010);
•The Analysis Group, B-401726; B-401726.2 (Nov. 13, 2009) (Task order quote
containing open-ended indemnification clause is contrary to ADA and per se
unawardable; in allowing offeror to remove quote, AF/A5’s action amounted to
permitting a material revision—i.e., “discussions.”
•See also CSHIB-Interagency Agreement with GSA, B-318425 (Dec. 8, 2009), (openended CAC services violate ADA)
61
Indemnification
Agreements
ADA Report 10-08
62
RAMIFICATIONS OF ADA VIOLATION
•
CRIMINAL PENALTIES (MONETARY FINE AND
IMPRISONMENT)
•
DISCIPLINARY SANCTIONS THAT ATTACH TO GOVERNMENT
CIVILIAN AND MILITARY PERSONNEL WHO VIOLATE THE
ADA
•
A DOD CIVILIAN OR MILITARY MEMBER MAY BE HELD
PERSONALLY LIABLE FOR THE RECOUPMENT OF FUNDS
DEPENDING ON THE SERVICE – THERE MIGHT BE AN
EXPANSIVE VIEW OF THE RANGE OF RESPONSIBILITY FOR
ADA VIOLATIONS
63
TOP ADA CAUSES
• MAJOR CATEGORIES OF VIOLATIONS:
– USE FUNDS FOR OTHER THAN THEIR
INTENDED PURPOSE
– EXCEED MINOR CONSTRUCTION
ADMINISTRATIVE LIMIT
– EXCEED FUNDS AVAILABLE
– USE O&M TO ACQUIRE EQUIPMENT ITEMS
THAT EXCEED THE DESIGNATED AMOUNT
FOR MANDATORY USE OF PROCUREMENT
FUNDS (EXPENSE VERSUS INVESTMENT
THRESHOLD)
– OBLIGATE IN ADVANCE OF FUNDS BEING
AVAILABLE
64
65
Too New to Fail???
66
Light Refreshments
Leading to Air War
College’s
ADA Violation
ADA Report 09-03
67
The Emergency
Exception to the ADA
Be sure it’s a real emergency
before you use it!
B-310108, 6 Feb 08, Forest Service—Apportionment Limitation for Aviation Resources
See also, B-319009 (Apr. 27, 2010), US Secret Service—Statutory Restriction on
Availability of Funds Involving Presidential Candidate Nominee Protection
68
IT MIPRS to NIH and DOI leading to
ADA Violations due to failure to
return unused 3400 funds—funds
were rolled over and reused by the
purchasing agency the next year
ADA Report 09-04
ADA Report 09-05
69
Review of 7 Non-DOD Agencies’ MIPR
purchases, FY04-09
Total: 99K Purchases, $15.6B
Total Reviewed: 869, $1.9B
Findings:
•608 Potential ADA Violations (70%)
•$518.5M (40%)
•Bona Fide Needs Rule
•Prior Year Funds for Current
Needs
•Advance Payments
•Purpose Statute
•Use of Entirely Wrong Funds
DOD IG Report No. D-2008-082
DOD IG Report No. D-2008-066
70
71
A FOUR PRONG TEST TO AVOID
AN ADA NIGHTMARE
(1) IDENTIFY THE APPROPRIATION PROPOSED FOR
OBLIGATION AND EXPENDITURE
(2) DETERMINE WHETHER THE APPROPRIATION IS
AVAILABLE FOR THE PURPOSE SERVED BY THE
OBLIGATION AND EXPENDITURE
(3) DETERMINE WHETHER THE APPROPRIATION IS
AVAILABLE AT THE TIME OF THE OBLIGATION AND
EXPENDITURE
(4) DETERMINE WHETHER THE APPROPRIATION IS
AVAILABLE IN THE AMOUNT OF THE OBLIGATION
AND EXPENDITURE
72
THE BOTTOM LINE
• YOU CAN’T SPEND
–
–
–
MORE MONEY THAN YOU LEGALLY HAVE
MONEY ON AN EFFORT THAT WASN’T APPROVED BY
CONGRESS, OR
IN ADVANCE OF AN APPROPRIATION
• YOU CANNOT RECEIVE SERVICES WITHOUT
PAYING FOR THEM
• WHEN THERE HAS BEEN A VIOLATION, IT HAS
TO BE REPORTED
73
CONTACT INFORMATION
Maj Frank Hollifield, ESC/JAS
Phone: (781) 377-7127
E-mail: frank.hollifield@hanscom.af.mil
Mr. Peter Camp, ESC/JAS
Phone: (781) 377-4077
E-mail: peter.camp@us.af.mil
74
75
DEFENSE COMMITTEES
• Authorization
• House Armed Services Committee (HASC)
•
Five Subcommittees
• Senate Armed Services Committee (SASC)
•
Six Subcommittees
• House Permanent Select Committee on Intelligence (HPSCI)
• Senate Select Committee on Intelligence (SSCI)
• Appropriations
• House Appropriations Committee (HAC)
•
Defense Subcommittee (HAC-D)
• Senate Appropriations Committee (SAC)
•
Defense Subcommittee (SAC-D)
76
FY99 C-5 Program
Budget Justification (P-Doc)
BUDGET ITEM JUSTIFICATION
(EXHIBIT P-40)
Date
February 1998
APPROPRIATION/BUDGET ACTIVITY
AIRCRAFT PROCUREMENT-AIR FORCE/Aircraft Modifications
P-1 ITEM NOMENCLATURE: C-5
This line item funds modifications to the C-5 aircraft. The four engine C-5 carries outsized and heavy cargo (tanks, helicopters,
etc.) between main operating bases. The primary modification budgeted in FY99 is the TF-39 High pressure Turbine (HPT). Other
modifications enhance operational capability while improving flight safety, reliability and maintainability. The specific
modifications budgeted and programmed are below.
MOD
NR
3150
4252
6032
6037
6038
96001
96004
99999X
Z88888
MODIFICATION
TITLE
NAVSTAR GLOBAL POSITIONING
AIRLIFT DEFENSIVE SYSTEMS
COMPARTMENT FLOOR CORROS
TF39 ENGINE HIGH PRESSURE
AVIONICS MODERN PROGRAM
STATION KEEPING EQUIPMENT
SINCGARS
LOW COST MODIFICATI
REPROGRAMMINGS
TOTAL FOR C-5
FY-97
11.9
1.3
FY-98
8.3
4.3
19.7
34.2
10.8
61.6
2.4
7.9
0.9
1.7
81.2
P-1 SHOPP LIST
ITEM NO. 035
FY-99
6.7
2.7
0.4
33.1
13.1
63.6
FY-00
5.3
2.8
0.3
37.0
113.4
13.6
13.2
193.0
FY-01
FY-02
FY-03
COST
TO GO
24.9
123.2
0.4
107.0
200.6
0.1
0.1
154.4
107.5
5.1
41.1
53.7
10.2
121.0
TOTAL
PROG.
88.5
30.8
0.7
190.0
597.9
37.5
34.3
2.8
1.7
200.6
PAGE NO.
214
77
OPERATION & MAINTENANCE
ANNUAL APPROPRIATION
• OPERATION, MAINTENANCE AND ADMINISTRATION
OF THE ACTIVITIES NOT COVERED BY OTHER
APPROPRIATIONS
-
CIVILIAN PAY
O&M OF AIRCRAFT AND MISSILES
REPAIR AND MAINTENANCE OF FACILITIES
CONTRACTOR LOGISTICS SUPPORT
MISSION PROGRAM SUSTAINMENT
BASE OPERATIONS
– AVAILABLE FOR OBLIGATION FOR UP TO ONE YEAR
78
ANNUAL & MULTI-YEAR APPROPRIATIONS
• ANNUAL APPROPRIATIONS
–
ACTIVE/AVAILABLE FOR OBLIGATION FOR A SINGLE
YEAR
•
•
OPERATIONS & MAINTENANCE (AF: 3400)
MILITARY PERSONNEL (AF: 3500))
• MULTI-YEAR APPROPRIATIONS
–
ACTIVE/AVAILABLE FOR OBLIGATION FOR MORE
THAN ONE YEAR
•
•
•
•
•
–
MILITARY CONSTRUCTION (AF: 3300)
RDT&E (AF: 3600)
AVIONICS & AIRCRAFT (AF: 3010)
MISSILE PROCUREMENT (AF: 3020)
OTHER PROCUREMENT (AF: 3080)
EACH SERVICE HAS IT OWN FUND
DESIGNATORS AS PREVIOUSLY SHOWN
79
RESEARCH, DEVELOPMENT, TEST & EVALUATION
MULTI-YEAR APPROPRIATION
•
CONTRACTUAL SERVICES AND ASSOCIATED COSTS
–
–
–
–
–
–
–
–
–
–
•
STUDIES AND ADVANCED DEVELOPMENT
PROTOTYPE ARTICLES
RE-DESIGN DURING DEVELOPMENT
DT&E AND IOT&E
DEVELOPMENT/DESIGN/PURCHASE INSTALLATION AND
ACCEPTANCE TESTING OF EQUIPMENT/INSTRUMENTATION
REQUIRED FOR RDT&E
COMMERCIAL COMPONENT CONFIGURATION CHANGES
ONE-OF-A-KIND ARTICLES, INCLUDING SUPPORT EQUIPMENT
SPECIALIZED EQUIPMENT, INSTRUMENTATION AND FACILITIES IN
SUPPORT OF AN RDT&E CONTRACTOR AT GOVERNMENT-OWNED
AND COMPANY-OPERATED ACTIVITIES
END ITEMS, WEAPONS, EQUIPMENT COMPONENTS, MATERIEL, AND
SERVICES REQUIRED FOR RDT&E ACTIVITIES.
TDY IN DIRECT SUPPORT OF AN RDT&E MISSION PROGRAM
AVAILABLE FOR OBLIGATION FOR UP TO TWO YEARS
80
MILITARY PERSONNEL ANNUAL APPROPRIATION
• PAY AND ALLOWANCES OF MILITARY
PERSONNEL
• PERMANENT CHANGE OF STATION COSTS
• OTHER MILITARY PERSONNEL COSTS
– AVAILABLE FOR OBLIGATION FOR UP TO ONE
YEAR
81
MILITARY CONSTRUCTION
MULTI-YEAR APPROPRIATION
• LAND ACQUISITIONS
• CONSTRUCTION & ACQUISITION OF FACILITIES
• ALTERATIONS OF EXISTING FACILITIES
– AVAILABLE FOR OBLIGATION FOR UP TO FIVE YEARS
82
PROCUREMENT
MULTI-YEAR APPROPRIATION
• ELECTRONIC AND TELECOMMUNICATIONS
EQUIPMENT
• MUNITIONS AND ASSOCIATED EQUIPMENT
• VEHICULAR EQUIPMENT
• OTHER BASE MAINTENANCE AND SUPPORT
EQUIPMENT
– AVAILABLE FOR OBLIGATION FOR UP TO THREE YEARS
83
AIRCRAFT PROCUREMENT
MULTI-YEAR APPROPRIATION
AIRCRAFT WEAPON SYSTEMS
MODIFICATIONS
DIRECT GROUND SUPPORT EQUIPMENT
SPARES AND REPAIR PARTS
WAR CONSUMABLES
SPECIAL PURPOSE AUTOMATIC DATA PROCESSING
EQUIPMENT
• PRE-DELIVERY FUEL
• SIMULATORS AND TRAINING DEVICES
•
•
•
•
•
•
– AVAILABLE FOR OBLIGATION FOR UP TO THREE YEARS
84
MISSILE PROCUREMENT
MULTI-YEAR APPROPRIATION
• MISSILE WEAPON SYSTEMS
• MODIFICATIONS,
MODERNIZATIONS, RETROFIT
AND UPDATE
• SPARES AND REPAIR PARTS WAR
CONSUMABLES SITE ACTIVATION
• SPECIAL PURPOSE ADPE
• LAUNCH VEHICLES
– AVAILABLE FOR OBLIGATION FOR THREE YEARS
85
THE ANTI-DEFICIENCY ACT (ADA) IS A SERIES OF IMPORTANT
STATUTES
•
•
•
•
•
•
•
•
•
•
•
•
31 U.S.C. § 1341 LIMITATIONS ON EXPENDING AND OBLIGATING AMOUNTS
[“ANTI-DEFICIENCY ACT”]
31 U.S.C. § 1342 LIMITATION ON VOLUNTARY SERVICES
31 U.S.C. § 1350 CRIMINAL PENALTY
31 U.S.C. § 1351 REPORTS ON VIOLATIONS
31 U.S.C. § 1511 DEFINITION AND APPLICATION
31 U.S.C. §.1512 APPORTIONMENT AND RESERVES
31 U.S.C. § 1513 OFFICIALS CONTROLLING APPORTIONMENTS
31 U.S.C. § 1514 ADMINISTRATIVE DIVISION OF APPORTIONMENTS
31 U.S.C. § 1515 AUTHORIZED APPORTIONMENTS NECESSITATING
DEFICIENCY OR SUPPLEMENTAL APPROPRIATIONS
31 U.S.C. § 1516 EXEMPTIONS
31 U.S.C. § 1517 PROHIBITED OBLIGATIONS AND EXPENDITURES
31 U.S.C. § 1518 ADVERSE PERSONNEL ACTIONS
86