WIXLIB

Color of MoneyFunding Policies and Fiscal LawDana Stewart, Macc, CDFMDefense Acquisition Universitydana.stewart@dau.mil256-922-804620 May 2015V141

From Requirement To CapabilityLife VCCAFiscalPOEEnvironment CCEAoAFundingFullPolicies abilitiesBasedAnalysisCapabilityDocsMFP FYDP amBaselinePlanning, Programming,Budgeting & Execution opriationLawsBudget Authority ReprogrammingFeedbackCommitment Contract Obligation Expenditure Outlay EVMBudgetExecutionForce StructureModernizationOperational CapabilityReadinessSustainability2

Objectives––––––––Define the DoD appropriation categoriesIllustrate the differences between DoD appropriation categoriesExplain the difference between appropriation categories and appropriationaccountsExplain the funding policy for each DoD appropriation categoryApply the proper funding policy to respective DoD appropriation categoriesExplain the exceptions to funding policiesExplain funding product improvementsDiscuss Fiscal Laws3

Major Appropriation CategoriesAPPNCATSCOPE OF WORK EFFORTFUNDINGPOLICYOBLIGATIONPERIODRDT & E RDT&E Activities & Exp, AIS E/SW@ R&D FacilitiesBothIncremental2 YearsPROC(SCN)Production Labor/HW, InitialSpares, AIS E/SW 250KFull3 Years5 Years - SCNReplenishment Spares, CivilianSalaries, Travel, Fuel, Supplies,Minor Const 750K, AIS E/SW 250KAnnual1 YearMILPERS Military Pay & Allowances, PCSExpense Moves, Retired Pay AccrualAnnual1 YearMILCONFull5 YearsInvestmentO&MExpenseMajor Construction ProjectsInvestment 750K4

Appropriation Categories vs.Appropriation Accounts Appropriation Categories Definition: Broad, generic terms pertaining to general “types” ofFederal Government funds Examples of interest to Acquisition Community: Research, Development, Test and Evaluation (RDT&E) ProcurementMilitary Construction (MILCON) Appropriation Accounts Definition: Specific designation of Federal Government funds ascontained in an Appropriations Act passed by Congress and signed intolaw by President. Each account has a unique four digit code. Examples of interest to Acquisition Community: Research, Development, Test and Evaluation (RDT&E), Army (2040) Aircraft Procurement, Navy (1506)Operations & Maintenance (O&M), Air Force (3400)5

Appropriation Numerical CodesAppropriation AccountRDT&EProcurementAircraftMissilesWeaponsW & 18041205110511063080350034003300N/A010005006

Annual Funding PolicyApplicable Appropriations:Operations && MaintenanceMaintenanceOperationsMilitaryMilitary PersonnelPersonnelBasic Budgeting Policy:Annual budget request will be limitedto obligation authority necessary tocover all expenses during the 12 monthbudget period (fiscal year).Additional Guidance (Exception): Statutory provision (PL 10585, Sec. 801 & Title 10,U.S.Code 2410a) allows funding aseverable service contract/task beginning in one FY and endingin the next FY, all in the first year, if the contract period does notexceed 12 months7

Annual Funding PolicyFY 13FY 14FY 15FY 16 5M 5M 5M 5M 50M 100M 100M 100MSupplies & PartsTask 1 20MCLS ContractTask 2 350MEnviron. Assessment12 Month EffortTask 3 10M 15MO&MBudgetAuthority 55M 120M 5M 105M 105M8

Incremental Funding PolicyApplicable Appropriation:Research, Development, Test & EvaluationBasic Budgeting Policy:Annual budget request will be limited to budget authoritynecessary to cover all costs expected to be incurred duringthat fiscal year.Incremental Funding PolicyProvides flexibility to the government in the uncertainenvironment of RDT&E9

Incremental Funding PolicyAdditional Guidance: Initial (1st year) of a “new start” program: can/shouldrepresent 9 months or less of effort 2nd and succeeding years: Service or Agency comptrollermay approve up to 3 months beyond end of FY Exception: Contracted efforts 12 months but 18months: Service or Agency comptroller may approverequest for funding in single FY if one of following is true:1) Effort not logically divisible2) Infeasible to shorten contract length3) Expect no bids if not “fully” funded10

Incremental Funding PolicyFY 13FY 14FY 15FY 16 5M 5M 5M 5M 50M 100M 100M 150M 10M 5M 105M 155MSupport KtrTASK 1 20MPrime EMD KtTASK 2 400MTASK 3 15MLab SupportRDT & EBudget 65M 110MAuthority11

Full Funding PolicyApplicable Appropriations:Procurement and Military ConstructionBasic Budgeting Policy:Annual budget request must cover the total cost to delivera given quantity of complete, militarily usable end items ina 12 month funded delivery period.Governing Concepts:- Usable End Items - No piecemeal procurement ofsystems is permitted.- Funded Delivery Period - 12 monthperiod starting with delivery offirst item.12

Funded Delivery PeriodFY13FY14FY15FY16FY17FUNDED DELIVERYSCHEDULECONTRACTAWARD2LOT 1PRODUCTION LEAD TIME2 3312 MONTHSFROM 1STDELIVERY(FUNDED DELIVERYPERIOD)5 5LOT 2PRODUCTION LEAD TIME5 512 MONTHSFROM 1STDELIVERY8 10LOT 3PRODUCTION LEAD TIME13

Full Funding PolicyFY13FY14FY152LOT 12FY163310 ITEMSStart Up Costs: 40K 0KProduction Costs: 30K 70KBudget Request: 0K 0K 140K 140K 50K 140K 140K 50K 400K14

Full Funding Policy 400 KFY13FY14FY15FY16 70K 140K 140K 50KLOT 122FY173 310 Items 600 K 120K 200KLOT 2 200K5 5 80K5 520 Items 500 K 90K 230KLOT 3 180K8 1018 ItemsBudgetRequest 400 K 600 K 500 K 0K 0K15

Advance Procurement Exception to Full Funding Policy Contained in Acquisition Strategy Approved by Milestone Decision Authority Separate initial contract Finances Long Lead (Recurring) Components To protect production schedule To maintain a critical skill in the workforce Generally, Budget Authority requested / granted oneFiscal Year in advance of the related end itemcontract Shown as a separate line item on the budget requestWhy is this an exception to full funding?No usable end item!16

Advance ProcurementFY13FY14FY15LOT 2FY165 5 520 Items 120K 200K 200KFY175 80K 600KLess AdvanceProcurement:- 50KBudget RequestSystem:Budget RequestAdv Proc: 550K 50K17

Advance Procurement (cont.)FY13FY14FY155LOT 220 ItemsFY165 5FY175 600KLess AdvanceProcurement:- 50K8 10 10 12LOT 340 Items 900KLess AdvanceProcurement:Budget RequestSystem:Budget RequestAdv Proc (PY):- 75K 550K 50K 825K 75K18

Product Improvement Funding PolicyIF . . .ModificationIncreasesPerformance?YESFUND Development & Testof Mod Kits with . . .DT or RDT&EYESNOProcurementO&MFUND Acquisition of ModKits for End Items with . . .ProcurementFUND Installation of ModKits on End Items with . . .Procurement19

Funding Rules forInformation Technology (IT) andAutomated Information Systems (AIS) RDT&E:– DT&E costs– Development of major upgrades– HW/SW for RDT&E facilities Procurement – Investment:– New equipment/SW 250K– Upgrades/replacement equipment 250K O&M – Expense:– New equipment/SW 250K– Upgrades/replacement equipment 250K– Routine maintenance, leases20

FiscalLaw

Questio Questions To Ponder ns toPonder1. For FY 2010, 2011 and 2012 what was the largest singlereported amount on the “GAO Antideficiency Actviolation report” website?A. 16KB. 1.6MC. 16MD. 160ME. 1.4B2. Of the reported fiscal law violations shown on the “GAOAntideficiency Act violation report” website for FY 2010,2011 and 2012 how many were from the Department ofDefense?A.NoneB. 11C. 21D. 37Source: cyrpts.htmlE. 61

Fiscal LawsMisappropriation Act [Title 31, US Code, Sec 1301] Requires that appropriated funds be used only forthe purposes and programs for which appropriationwas madeBona Fide Need Rule [Title 31, US Code, Sec 1502 ] Requires that appropriated funds be used only forneeds or services that arise in the year(s) of theappropriation’s obligation availability periodAntideficiency Act [Title 31, US Code, S 1341,1517 ] Prohibits making or authorizing an obligation inexcess of the amount available in the appropriationForbids obligating funds in advance of appropriationRequires regulations to ensure obligations are kept within appropriated orsub-divided amounts and tofix responsibility for violations of the ActPurposeorColorTimeorYearAmount

Availability of Appropriations:PURPOSECongress has “Power of the Purse”“No Money shall be drawn from theTreasury, but in Consequence ofAppropriations made by Law .”The Constitution of the United States,Article I, Section 9, clause 7Misappropriation Act:“Appropriations shall be appliedonly to the objects for which theappropriations were made ”31 USC § 1301(a)

Availability of Appropriations:TIMEThe “Bona Fide Need” Rule:“The balance of an appropriationor fund limited for obligation to adefinite period is available onlyfor payment of expensesproperly incurred during theperiod of availability ”31 USC §1502(a)Periods of AvailabilityRDT&EPROCO&MMILPERSMILCON2 years3 years1 year1 year5 years

Bona Fide NeedSupply Items: When are the supplies needed for use?Lead-time exception (consider normal production lead time)Stock Level exception (replace stock consumed in current year withcurrent year funds)Stock piling of supplies at end of FY is PROHIBITEDService Contracts: Bona fide need of FY the services areperformed.Nonseverable services exception (single, unified outcome,product or report: may fund entire effort with current yearfunds & execution may cross FYs.) Single effort that cannot befeasibly subdividedSeverable Service Contract (Exception): Statutory provision (PL105-85, Sec. 801 & Title 10,U.S.Code 2410a) allows funding aseverable service contract/task beginning in one FY and ending inthe next FY, all in the first year, if the contract period does notexceed 12 months

Availability of Appropriations:Appropriation LifeThe Time Rule:“On September 30th of the 5thfiscal year after the period ofavailability for obligation of afixed appropriation accountends, the account shall beclosed and any remainingbalance (whether obligated orunobligated) in the account shall Periods of Availabilitybe canceled and thereafter shall2 yearsnot be available for obligation or RDT&EPROC3 yearsO&M1 yearexpenditure for any purpose.”31 USC §1552(a)MILPERSMILCON1 year5 years

Paying Certified (Valid) Invoices(DoD FMR Volume 3, Chapter 10)If the invoice is received during the “current” status of theappropriation, pay with fiscal year funds cited for thatoriginal* obligation (e.g. contract, contract mod)If the invoice is received during the “expired” status of theappropriation, pay with fiscal year funds cited for thatoriginal* obligation (e.g. contract, contract mod)If the invoice is received during the “canceled” or “closed”status of the appropriation, pay with currently availablefunds of the same appropriation account cited for thatoriginal* obligation (e.g. contract, contract mod)*Note, originally cited appropriation retains its accounting identity through the “current” and“expired” periods; accounting identify is lost when the appropriation is “canceled” or“closed”

Appropriation Life CycleAppropriation Life by ONMILPERSCurrent Period: Available for new obligations,obligation adjustments, expenditures, and outlaysExpired Period: Available for obligation adjustments,expenditures, and outlays, but no new obligationsCanceled: Unavailable for obligations, obligationadjustments, expenditures, and outlays1011

Availability of Appropriations:AMOUNTThe Antideficiency Act (ADA) prohibitsmaking or authorizing expenditures orincurring obligations in excess orin advance of an appropriation31 USC §1341(a)The ADA prohibits “expenditures or obligationsexceeding an apportionment or the amountpermitted by regulations ”31 USC §1517(a)Heads of executive agencies shall prescribe byregulation a system of administrative controlto: (1) restrict obligations or expenditures tothe amount of apportionments orreapportionments of the appropriation; and,(2) fix responsibility for exceeding anappropriation or reappropriation