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FUNDS MANAGEMENT UPDATES. EPMC Roberta Tomasini DSMC-SPME Bldg 226, Rm 203 (703) 805-3764 e-mail: [email protected] Topics. FM Scope FM Updates Time Now - FM Perspective Responding to Higher Hqtrs. From Requirement to Capability. Planning, Programming,

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funds management updates

FUNDS MANAGEMENT UPDATES

EPMC

Roberta Tomasini

DSMC-SPME

Bldg 226, Rm 203

(703) 805-3764

e-mail: [email protected]

topics
Topics
  • FM Scope
  • FM Updates
  • Time Now - FM Perspective
  • Responding to Higher Hqtrs
slide3

From Requirement to Capability

Planning, Programming,

Budgeting and Execution

Annual

Funding

Life Cycle

Cost

Funding

Policies

Estimate

Cost

Analysis

FYDPSPG POM PDM

ICE

Full

Funding (Exceptions)

MFP JPG BES PBD

CCA

MBIs

CAIV

Fiscal

Environment

Incremental

Funding

POE

AoA

Congressional

Enactment

HAC HASC HBC

SAC SASC SBC

President’s

Budget

Budget

Resolution

Authorization

&

Appropriation

Laws

Acquisition Program Baseline

Operational

Concept

Force Structure

Modernization

Operational Capability

Readiness

Sustainability

Feedback

Commitment Reprogramming

Capability Docs

Functional

Area

Analysis

Budget Authority Obligation Expenditure Outlay

Budget

Execution

fm updates overview
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

life cycle cost terms

Program

Acquisition

Cost

Weapon

System Cost

Procurement

Cost

Development

Cost

Flyaway

Cost

Life Cycle Cost Terms

Life

Cycle

Cost

RDT & E

Development Costs of Prime Equipment & Support Items

A

MILCON Facilities

E

Operations & Support

• O&M, MILPERS

F

PROCUREMENT

Support

Items

PROCUREMENT

Prime

Equipment

PROCUREMENT

Initial Spares

G

Disposal

• O&M & others

C

B

D

affordability
Affordability
  • Service Shares?
  • Service Splits?
  • Budget Shares?
slide7

MDAP Breach Parameters

NOTE: There are also performance breaches which are not included in this chart

secdef certification of breaches
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
most probable cost mpc
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
buy to budget for acquisition of end items
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
hac sac subcommittees 109 th
HAC/SAC Subcommittees (109th)
  • 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

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

slide12

APPORTIONMENT PROCESS: “Taxes”

$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$

Congress

Concurrent Budget Resolution Authorization Appropriation (Budget Authority)

Continuing Resolution

Appropriation

Investment -- Full amount

Expense -- Qtrly

Impoundment

Rescission

Deferral

OMB

Apportionment

OSD Comptroller

Withhold

Administrative

Technical

Allocation

Withhold

Taxes -- SBIR

Contingencies

Service

Comptroller

Sub-Allocation

MAJCOM/PEO

Comptroller

Allotment

PMO

Program

Management

Office

osd service goals
OSD/Service Goals
  • Handouts provided in class
below threshold reprogramming

* Lesser of

$20 M or

20%

$20 M

No Limit, unless specified

$15 M

No

Congressional

restriction

$10 M

No

Congressional

restriction

Lesser of

$2 M or

25%

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)

O & M

1 YEAR

MILPERS

BUDGET ACTIVITY

1 YEAR

PROJECT

MILCON

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”

resource allocation process
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

2nd Yr

3rd Yr

FY04

FY04 and prior

2nd Yr

FY05

Enactment

Execution

3rd Yr

FY05

FY05 and prior

PB

FY06

Program/Budgeting

2nd

Execution

Planning

Enactment

FY06-11

SPG/JPG

FY06

FY06 and prior

FY 06-11 POM

PB

FY 06-07 BES

FY07

Program/Budgeting

Enactment

Exec

Planning

FY07 & prior

FY 07-11 SPG/JPG

FY 07-11 FOL/CP

FY07

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

responding to higher headquarters proposed budget execution cut caselette
Responding to Higher HeadquartersProposed Budget Execution Cut: Caselette

Caselette provided in class

management initiative decision mid 913 may 2003
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
mid 913
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
ppbe phases
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
four years in the biennial cycle corresponding to four year presidential terms
Four Years in the Biennial CycleCorresponding 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

slide22

President

National Security Council

CIA/DIA/JCS/OSD

Planning Phase

SEP

DEC

MAR

APR/MAY

1st Year

2nd Year

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

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

1st year of a new administration

NSS

CPR

SECDEF

JCS

COCOMs

SERVICES

JPD

NMS

SPG

JPG

JCS, OSD,

COCOMs,

SVC HQs,

ETC.

Strategy

also reflected in QDR

(2nd year of new administration)

slide23

Concurrent Program/Budget Review

NOV

JAN/FEB

AUG

OCT

DEC

3-Star Group

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

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

fy 07 11 program budget process overview
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 non-NIPs
fy 07 11 program budget schedule
FY 07–11 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 ofService/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
off year process 2005 fy 07 11

OSD

Completes

Services/Agencies

CP Review

OSD FOL

Decisions

PDM(s) & PBDs

Issued

Off-Year Process 2005 (FY 07-11)

30 SEP

OCT-DEC

1 AUG

15 AUG

6 SEP

20 DEC

JAN-FEB

FOL Notification

Memo to

USD(C) &

Dir, PA&E

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

responding to higher hq
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
obligation plan
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

Why

· Supports Budget Enactment

· Analyze for Budget Execution

· If Not On Plan... (Maybe Not A Firm Requirement)

· Best Prediction for Future Performance

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

Decisions

· Basis for BES & Pres Budget

· Basis for Appropriation

· Impacts on Program Reviews

· Impacts on Billpayer Exercises

execution laws
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.
slide32

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
working capital funds
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
defense business operations fund dbof
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
dbof to working capital funds
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
working capital funds1

Customer

Working Capital Funds

Congress

“One-time” Corpus

Revolving

Fund

Annual Appropriation

$$

Payment

$$

Financing

Order

Goods or

Services

Provided

Business

Area

how do working capital funds work
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
working capital funds functions
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

working capital funds functions1
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

Financial Operations DFAS

Information Services DFAS, DISA, DLA

Reutilization & Marketing DLA

Supply Management DLA

Defense Commissary Agency Working Capital Fund

Commissary Operations

life cycle cost categories

R & D Cost

DISPOSAL

CE

PDRR

EMD

PRODUCTION, DEPLOYMENT and OPERATIONAL

SUPPORT

Life Cycle Cost Categories

Program Cost %

SystemO&S Yrs

Ships 30

Aircraft 20

Missiles 20

Tracked 20

Vehicles

  • Includes:

Operations and Support Costs

Disposal Cost

Investment

Cost

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