HEALTH AFFAIRS

1. TRICARE Management Activity HEALTH AFFAIRS Appropriations and How They Can Be Used

2. Agenda • Availability of Appropriations • Limiting Factors • Amount • Purpose • Time • Bona Fide Need

3. Key Questions • Do I have the authority to make this purchase? • Do I have the right kind of money to make the purchase? • Do I have enough money to make the purchase? • Is the money still available for me to use?

4. Penalties • Consequences of spending money for a purpose for which it was not intended, exceeding amounts available, or exceeding an appropriation’s period of availability • Antideficiency Act (31 USC sections 1341, 1349, 1350) • Up to $5,000 fine, imprisonment for up to 2 years, or both • Suspension from duty without pay or removal from office • Named in ADA Violation Report to President and Congress • Other disciplinary action per DoD Directive 7200.1 • The Antideficiency Act Prohibits: • Making or authorizing an expenditure or obligation in excess of the amount available in an appropriation or in excess of formal subdivisions of funds • Involve the government in a contract or obligation for the payment of money before an appropriation is made

5. Appropriations Supporting the MHS • The Defense Health Program has a single appropriation account 97_0130, with O&M, Procurement and RDT&E programs defined by Limit Code • Operations & Maintenance (O&M) .185_, .186_, or .188_ • Procurement .187_ • Research, Development, Test and Evaluation (RDT&E) .183_ Legislative Note: At the beginning of the 109th Congress, the appropriations committees changed the jurisdictional responsibility of various subcommittees. Funding for Defense Health is included in Military Construction bill in the House and in the Defense Appropriations bill in the Senate. The appropriators follow the House rules in odd years (i.e. FY2009) and the Senate rules in even years (i.e. FY2010).

6. Expired Closed O&M – 1 year * RDT&E – 2 years Procurement – 3 years MILCON – 5 years Obligation Availability Period Expenditure Availability Period (5 years for all) Open Appropriation (varies by appropriation) New Obligations Adjust Obligations Make Payments Appropriations Supporting the MHS * TMA has special legislative authority whereby up to 1% of its O&M funds may carry over into a second year.

7. Background - Purpose • Concept of “Color of Money” • Money must be spent as Congress directs • Funding is often inconsistent with function • Statutory Framework • Purpose Statute • Appropriation and Authorization Bills • Consequences of Using the Wrong Appropriation • Antideficiency Act • Up to $5,000 fine, imprisonment for up to 2 years, or both • Named in ADA Violation Report to President and Congress • Other disciplinary action per DoD Directive 7200.1

8. Purpose Rule To meet the Purpose Rule, an expenditure must be: • Necessary to carry out an authorized function • Or will contribute materially to the accomplishment of the function • Logically connected to the appropriation • Not prohibited by another law • Not otherwise provided for

9. Irrelevant Factors • Saves Money • Fair • Good Idea • Common Practice • Implied Elsewhere • Approved by the Boss • Ignorance

10. Determining Purpose • Legislation • Organic Legislation • 5 USC – Government Employees • 10 USC – Armed Forces • 31 USC – Money and Finance • Appropriation Acts • Authorization Acts • Legislative History • Committee and Conference Reports • Floor Debates and Hearings • President’s Budget

11. Special Issues • Minor Construction • O&M may only be used for unspecified minor construction up to $750,000 (10 USC section 2805 (c) • $1.5 million if intended solely to correct life, health, or safety deficiencies • Legitimate maintenance and repair is not considered construction • Thou Shalt Not… • Split Projects • Phase Projects • Sound Project Definition is Crucial

12. Special Issues • Equipment Investment/Expense Threshold use Procurement for: • Items of equipment which have a system unit cost more than $250,000 • Equipment subject to centralized item management • Capital leases • Thou Shalt Not… • Split Procurements • System Definition is Crucial

13. Background – Time Limits • Congressional Control of Appropriations • Money must be spent as Congress directs • Time limits are a primary means of Congressional control • Types of Appropriations • Annual • Multiple year • No year • If an agency fails to obligate its annual funds by the end of the fiscal year for which they were appropriated, they cease to be available for new obligations

14. Before Appropriations Take Effect • Subject to Availability of Funds (STAF) • Recurring O&M services funded on an annual basis • Special projects requiring advance notice to contractor • May have an effective date after 1 October • At-Risk performance • Interim Legislation (Continuing Resolution) • Provides interim budget authority • Limited Government operations during CRA • No new starts • Actions during funding gaps (absence of a CRA) • Exempt and non-exempt activities • Orderly shut-down of non-exempt activities

15. Concept of Bona Fide Need 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. • Bona Fide Need deals with timing, not purpose • Continuing Need • Statutory Basis • 31 USC 1502(a) – Bona Fide Need Statute: The balance of a fixed term appropriation “is available only for payment of expenses properly incurred during the period of availability or to complete contracts properly made within that period…" • 31 USC 1341(a) – Antideficiency Act

16. Determining Bona Fide Need • Applies to Multiple Year as well as Annual Appropriations • Simplest Form – All actions occur in the same FY • Applies even if funds are not to be disbursed and the exact amount owed cannot be determined until the subsequent FY • Depends Largely on the Facts and Circumstances of the Particular Case, Such As: • Nature of the obligation and transaction • Supply, service, training • Specified delivery date • Normal rate of consumption and inventory levels • Degree of Government control over start of work • When Government will make facilities, sites, or tools available • Accepted planning factors • Delivery or production lead time

17. Bona Fide NeedServices • Depends Upon Whether the Services Are: • “Severable” – continuing or recurring in nature • “Nonseverable” – represent a single undertaking • Generally service contracts which are "severable" may not cross fiscal year lines unless authorized by statute • DoD has been granted a statutory exception • DOD agencies may obligate funds current at the time of contract award to finance any severable service contract with a period of performance that does not exceed one year (10 U.S.C. § 2410a.) • Training that begins on or after 1 Oct may be a bona fide need of the prior FY if: • Scheduling is beyond the control of the agency • Time between contract award and performance is not excessive

18. Bona Fide NeedReplacement Contracts/Contract MODs • Funds May Be Obligated After Their Period of Availability for: • Bid Protests • Available for 100 days after final ruling • Terminations for Default • Originally obligated funds remain available for a re-procurement • Agency must act without delay to re-procure the same item or service • Terminations for Convenience • Pursuant to a court order, or • Contracting Officer determines original award was erroneous • Contract Modifications • Attributable to “antecedent liability” • Does not exceed the scope of the original contract

19. Bona Fide Need Year-End Spending General Rule – An appropriation for a given fiscal year is not available for the needs of a future fiscal year • An appropriation is just as much available to supply the needs of the last day of a particular year as any other day or time in the year however… • Where an obligation is made toward the end of a fiscal year and it is clear from the facts and circumstances that the need relates to the following fiscal year, the bona fide needs rule has been violated

20. Bona Fide Need andIntragovernmental Orders • Economy Act • Must award contract by end of period of availability • Must return excess funds at expiration • Other Statutory Authority (Franchise Funds & GSA IT Fund) • Need not automatically return funds when they expire • Do not have to award contract by the end of the fiscal year • May retain funds and apply to contracts when they are awarded • Validating Bona Fide Need is Ultimately a Requiring Activity Responsibility • Closing the Non-Economy Act loop-hole • As provided in the latest update of DoD Financial Management Regulations, Vol. 11a, Chapter, 18 dated Aug 2008, DoD activities must withdraw all funds for Non-Economy Act assisted acquisitions once those funds are past their expiration date if the non-DoD contracting office has not awarded a contract prior to funds expiration • Essentially the same obligation rules now apply for both Economy Act and Non-Economy Act orders