FUNDS MANAGEMENT UPDATES
EPMC
Roberta Tomasini
DSMC-SPME
Bldg 226, Rm 203
(703) 805-3764
e-mail: roberta.tomasini@dau.mil
1
Topics
• FM Scope
• FM Updates
• Time Now - FM Perspective
• Responding to Higher Hqtrs
2
From Requirement to Capability
Annual
Funding
Life Cycle
Cost
Cost
Analysis
CAIV
POE
Fiscal
Environment
Funding
Full
Policies Funding
Estimate
ICE
Planning, Programming,
Budgeting and Execution
CCA
Incremental
Funding
AoA
FYDP SPG POM PDM
MFP JPG BES PBD
(Exceptions)
MBIs
Congressional
Enactment
HAC
SAC
Budget
Resolution
HASC
SASC
HBC
SBC
President’s
Budget
Authorization
&
Appropriation
Laws
Acquisition
Program
Baseline
Operational
Concept
Functional
Area
Analysis
Capability
Docs
Feedback
Commitment
Budget Authority
Obligation
Reprogramming
Expenditure
Budget
Execution
Outlay
Force Structure
Modernization
Operational Capability
Readiness
Sustainability
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
4
Life Cycle Cost Terms
A
Life
Cycle
Cost
RDT & E
Development Costs
of Prime Equipment
& Support Items
MILCON
Facilities
E
Operations &
Support
• O&M, MILPERS
F
PROCUREMENT
Prime
Equipment
B
Development
Cost
PROCUREMENT
Support
Items
Flyaway
Cost
C
Weapon
System Cost
PROCUREMENT
Initial Spares
D
Procurement
Cost
Disposal
• O&M & others
G
Program
Acquisition
Cost
5
Affordability
• Service Shares?
• Service Splits?
• Budget Shares?
6
MDAP Breach Parameters
SAR
APB
Schedule Milestones
6 Month Slip From
Previous SAR
Cost
15% Program Acquisition 15% PAUC Growth
Unit Cost (PAUC)
15% APUC Growth
Growth
RDT&E Growth
Procurement Growth
15% Avg Procurement
MilCon or O&M Growth
Unit Cost Growth
(APUC)
Quarterly SAR
Program Deviation Rpt
(PM notifies MDA)
Reports Required
6 Month Slip From
APB Objective
Unit Cost Rpt (UCR)
N/A
15% PAUC Cost
Growth
15% Avg Procurement
Unit Cost Growth
Quarterly/Exception DAES
Component notifies Congress (>=15%)
SecDef Certification (>=25%)
NOTE: There are also performance breaches which are not
included in this chart
7
SecDef Certification of Breaches
4 Parts to Certification:
1. Program is in the national interest and
it must be had for national security
2. There is no other alternative
3. Costs are under control
4. Management is in place to keep costs
under control
8
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
9
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 doesn’t exceed what’s 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 J&A
• 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
10
HAC/SAC Subcommittees (109th)
HAC Subcommittees (10)
SAC Subcommittees (12)
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
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
11
APPORTIONMENT PROCESS: “Taxes”
$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$
Congress
Concurrent Budget Resolution Authorization
Continuing Resolution
Appropriation
OMB
Apportionment
Investment -- Full amount
Expense -- Qtrly
OSD Comptroller
Allocation
Sub-Allocation
Appropriation (Budget Authority)
Service
Comptroller
Impoundment
Rescission
Deferral
Withhold
Administrative
Technical
Withhold
Taxes -- SBIR
Contingencies
MAJCOM/PEO
Comptroller
Allotment
PMO
Program
Management
Office
12
OSD/Service Goals
• Handouts provided in class
13
Below Threshold Reprogramming
APPRN
MAX
INCREASE
RDT & E
$10 M
PROC
O&M
MILPERS
MILCON
$20 M
MAX
DECREASE
* Lesser of
$10 M or
20%
LEVEL OF CONTROL
OBL AVAIL
PROGRAM ELEMENT
2 YEARS
* Lesser of
$20 M or
20%
LINE ITEM
No Limit,
BUDGET ACTIVITY
$15 M
unless
specified
$10 M
No
Congressional
restriction
No
Lesser of
$2 M or Congressional
restriction
25%
3 YEARS
( 5 YEARS SCN)
SOME BA 1 SUB-ACTIVITY
LIMITATIONS ON DECREASES
(OPERATING FORCES)
1 YEAR
BUDGET ACTIVITY
1 YEAR
PROJECT
5 YEARS
Reference Source: DoD 7000.14R, Vol 3, Ch 6, dated Aug 2000
RDT&E & 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”
14
Resource Allocation Process
CY04
CY05
CY06
J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D
Execution
FY04
2nd Yr
3rd Yr
FY04 and prior
Enactment
FY05
PB
FY06
FY07
2nd Yr
Execution
FY05
3rd Yr
FY05 and prior
Planning
Program/Budgeting
Enactment
FY06-11
SPG/JPG
FY 06-11 POM
FY 06-07 BES
FY06
PB
FY 07-11 SPG/JPG
FY08
FY06 and prior
Program/Budgeting
Planning
FY 07-11 FOL/CP
Enactment
PB
FY07
Exec
FY07 &
prior
Program/Budgeting
Planning
FY 08-13 SPG/JPG
SPG – Strategic Planning Guidance
BES – Budget Estimate Submission
2nd
Execution
JPG – Joint Programming Guidance
CP – Change Proposal
FY 08-13 POM
FY 08-09 BES
POM – Program Objective Memorandum
FOL – Fact-of-Life Changes
15
Responding to Higher Headquarters
Proposed Budget Execution Cut: Caselette
Caselette provided in class
16
PPBE
17
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
18
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
19
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
20
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
21
Planning Phase
SEP
DEC
1st Year
President
National Security Council
CIA/DIA/JCS/OSD
NSS
Notes
• SPG replaces Draft Defense
Planning Guidance (DPG)
• JPG replaces DPG
1st year of a new
administration
MAR
APR/MAY
2nd Year
COCOM – Combatant Commander
CPR – Chairman’s 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
CPR
SECDEF
JCS
COCOMs
SERVICES
NMS
JPD
Strategy
also reflected in QDR
(2nd year of new administration)
SPG
JCS, OSD,
COCOMs,
SVC HQs,
ETC.
JPG
22
Concurrent Program/Budget Review
AUG
OSD/
OMB
3-Star Group
Issue
Resolution
SECDEF
SLRG
POM
Services
PEO/PM,
SVC HQs
COCOMs
BES
NOV
OCT
JCS
CPA
JAN/FEB
BES – Budget Estimate Submission
COCOM – Combatant Commander
CPA – Chairman’s Pgm Assessment
MBI – Major Budget Issues
PB – President’s Budget
PBD – Program Budget Decision
PDM – Program Decision Memo
POM – Program Objectives Memo
SLRG – Senior Leadership Review Group
Notes
• 3-Star Group replaces Program Review Group (PRG)
• SLRG replaces Defense Resources Board (DRB)
OSD/
OMB
Adv Ques/
Hearings
PBDs
Updates
FYDP
PDM
DEC
Services / PEO / PM
Answer / Reclama
MBI
PB
Updates
FYDP
23
FY 07–11 Program/Budget Process Overview
•
Procedural changes for FY 07-11 may not be institutionalized
•
USD(C) & Dir, PA&E 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 08–
13 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 nonNIPs
24
FY 07–11 Program/Budget Schedule
•
•
•
•
May 31
Aug 1
Aug 15
Sep 6
• Sep 23
• Sep 28
• Sep 30
• Oct-Nov
• Dec 20
• Jan
Military Departments’ composite rates due
FOL budget estimate notification memos due
OSD disposition of FOL changes
Service/Agency CPs due; accepted & other OSD-directed
documentation due electronically
Hardcopy data submission complete
Detailed budget justification material due
OSD completes review of Service/Agency CPs
(accept/reject)
BRAC/QDR review & related OSD-generated CPs
Program & Budget review complete
DoD budget submitted to OMB
25
Off-Year Process 2005 (FY 07-11)
1 AUG
FOL Notification
Memo to
USD(C) &
Dir, PA&E
15 AUG
OSD Staff
Review
6 SEP
Svcs/Agencies
Accepted FOLs
Entered into
OSD Data Base
30 SEP
OCT-DEC
JAN-FEB
Budget
Lock
Pres
Bud
OSD
Completes
Services/Agencies
CP Review
SLRG Review
of
CPs
OSD FOL
Decisions
Electronic
OSD-Required
R/P Forms Due
Services
&
Agencies
PDM(s) & PBDs
Issued
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
20 DEC
OSD – Prepared
BRAC/QDR
CPs Submitted
26
BACKUP SLIDES
27
Responding to Higher HQ
Don’t
– Say program is unexecutable with a 1% cut
– Give long impact statements that say nothing
– Not respond
Do
– Discuss scope not done relative to user’s needs
– Provide user’s priority on work not done
– Address impact to program’s change in risk
and/or major program milestones
– Be prepared for 5%, 10%, 25%, and 50%
proposed cuts
28
Obligation Plan
What
·
·
·
·
Spending Plan
Monthly Prediction
All Available Years
Required for Each Program
Element / Line Item
How
· Anticipated Obligation Rate
· Don’t Show Preponderance of :
·· 1st Quarter Awards
·· 4th Quarter Awards
Deviation
Who
· Prepared by PMO
· Coordinated with PCO
· Reviewed by Comptroller
Each Budget Update
Why
· Supports Budget Enactment
· Analyze for Budget Execution
· If Not On Plan... (Maybe Not A
Firm Requirement)
· Best Prediction for Future
Performance
· Variances: Planned vs Actual
· PMO Written Explanation
· Each Month More Vulnerable:
·· Potential Billpayer
·· Report Card/Predict Trends
Decisions
·
·
·
·
Basis for BES & Pres Budget
Basis for Appropriation
Impacts on Program Reviews
Impacts on Billpayer Exercises
29
Obligation Plan
FY 99 RDT&E OBLIGATION/EXPENDITURE
A/0 Jun 99
Obligations
Plan Mth
Plan Cum
Actual Cum
Variance Cum
Var Cum %
Expenditures
Plan Mth
Plan Cum
Actual Cum
Variance Cum
Var Cum %
$M (TY)
Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep
5
5
5
25
2
2
16
15
10
5
5
5
5
10
15
40
42
44
60
75
85
90
95 100
3
4
5
6
8
12
32
34
35
2
6
10
34
34
32
28
41
50
40% 60% 67% 85% 81% 73% 47% 55% 59%
1
1
3
5
5
5
5
5
5
1
2
5
10
15
20
25
30
35
1
1
1
3
3
3
4
25
25
0
1
4
7
12
17
21
5
10
0% 50% 80% 70% 80% 85% 84% 17% 29%
5
40
10
50
5
55
30
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.
31
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
32
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
34
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
35
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
36
Working Capital Funds
Congress
Revolving
Fund
Annual
Appropriation
$$
Payment
Customer
“One-time”
Corpus
$$
Financing
Order
Goods or
Services
Provided
Business
Area
37
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
38
Working Capital Funds & Functions
Army Working Capital Fund
Depot Maintenance
Information Services
Ordnance
Supply 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
39
Working Capital Funds & Functions
Air Force Working Capital Fund
Depot Maintenance
Information Services
Supply Management
Transportation
USTRANSCOM
Defense - Wide Working Capital Fund
Defense Printing
Distribution Depots
Financial Operations
Information Services
Reutilization & Marketing
Supply Management
DAPS
DLA
DFAS
DFAS, DISA, DLA
DLA
DLA
Defense Commissary Agency Working Capital Fund
Commissary Operations
40
Life Cycle Cost Categories
Program
Cost %
Includes:
Operations
and Support
Costs
System
Ships
O&S Yrs
30
Aircraft
20
Missiles
20
Tracked
Vehicles
20
Disposal Cost
Investment
Cost
R & D
Cost
CE
PDRR
DISPOSAL
EMD
PRODUCTION, DEPLOYMENT and OPERATIONAL
SUPPORT
41