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Welcome

Advanced Principles of DoD Budget Execution Version 7.0 January 16, 2014

This is not to be displayed in course – for Storyboard layout only

Advanced Principles of DoD Budget Execution Department of Defense (DoD) Office of the Under Secretary of Defense (Comptroller) (OUSD(C))

Welcome

CC: Welcome to the Department of Defense Advanced Principles of DoD Budget Execution Course. This course is one in a series of courses designed to help create a uniform understanding of the Department’s strategy, approach and methodology to financial management. The course was designed and developed by the Office of the Under Secretary of Defense (Comptroller) (OUSD(C)) and is designed for senior Department employees and service members. There is no prerequisite for this course.

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Course features and navigation slides go here (placeholder)

Welcome

Placeholder for web-based course features and navigation instructions.

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Advanced Principles of DoD Budget Execution Course discusses:

Identification of policies, laws and general requirements of the budget execution process Identification of the relevant funds control regulations and processes in budget execution Identification of the common obligation actions in budget execution and their related processes Definition of Execution Performance Monitoring and how it is used in the budget execution process Placeholder for graphic Advanced Principles of DoD Budget Execution Curriculum Curriculum

CC: This Advanced Principles of DoD Budget Execution Course supports the DoD FM Certification Program and is aligned to the FM Analysis competency at Proficiency Level 5. This course may be taken for FM Level 3 certification or for Continuing Professional Education (CPE) credit.

Senior DoD Financial Managers must deal with a wide range of contemporary issues as the landscape is constantly changing. We will cover some of the policies, laws and general requirements of the budget execution process in the Department of Defense. We will also concentrate on identification of the relevant funds control regulations and processes in budget execution leading to proper execution performance monitoring. The only way we can provide sound financial leadership to our stakeholders is by understanding the concepts discussed in this course.

At the conclusion of this course, you will be able to:

Identify policies, laws and general requirements of the budget execution process Identify the relevant funds control regulations and processes in budget execution Identify the common obligation actions in budget execution and their related processes Define Execution Performance Monitoring and how it is implemented in the budget execution process Learning Objectives Curriculum

CC: The Learning Objectives for this course are shown on this screen. At the conclusion of this course, you will be able to:

- Identify policies, laws and general requirements of the budget execution process

- Identify the relevant funds control regulations and processes in budget execution

- Identify the common obligation actions in budget execution and their related processes

- Define Execution Performance Monitoring and how it is used in the budget execution process

Governance - Policies, Laws and General Requirements of the Budget Execution Process Module 1 Module 1 – Governance

CC: In this module, we will identify the policies, laws and general requirements of the budget execution process.

Upon completion of this module, you will be able to:

Identify policies, laws and general requirements of the budget execution process Describe the Planning, Programming, Budgeting, and Execution process Differentiate between the budget formulation, enactment and execution processes List the elements of the Budget execution

1.0 Learning Objectives

CC: Upon completion of this module, you will be able to:

- Identify policies, laws and general requirements of the budget execution process

- Describe the Planning, Programming, Budgeting, and Execution process

- Differentiate between the budget formulation, enactment and execution processes and

- List the elements of the Budget Execution

1.1 Federal Budget Process

Constitution establishes a unique relationship between the U.S. military and Congress Article I Section 8, gives Congress the powers to:

Declare war Raise and support Armies Provide and maintain a Navy Make rules to regulate land and naval forces Call forth the Militia Coin money Borrow funds Regulate commerce Article I Section 9, gives Congress the ability to appropriate funding Article II Section 2, makes the President the Commander-in-Chief

Federal Budget Process Overview

CC: The Constitution of the United States creates a unique relationship between the Congress and America’s armed forces. It is no coincidence that the Founding Fathers tied fiscal and monetary matters to military matters in the same and adjoining sections of that document. Because of this unique relationship, the reach and importance of DoD’s programs and activities, as well as DoD’s role as the largest component of the discretionary budget, Congress takes great interest in overseeing DoD’s budget. As a result, this places a unique responsibility on DoD’s financial management community. As financial managers, we should be very familiar with how Congress works.

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President’s Budget

Comprised of mandatory and discretionary spending A blueprint for the Federal Government and contains Budget message Information on President’s priorities Budget overview by agency DoD Impact on the President’s Budget DoD is the largest discretionary sector of the President’s Budget

1.1.1 Federal Budget Process

2.0 Learning Objectives

2.1 Budget Overview

2.2 Federal Budget

2.3 Budget Formulation

2.4 Component Budget

Formulation

2.5 Budget Review

2.6 President's Budget

2.7 Key Points

„Welcome to Financial Management 101, Budget

„Module 1: PPBE Review

„Module 2: Budget Process

„Module 3:

Congressional Action on the Budget

„Module 4: Budget Amendments, Supplementals, & Sequestration

„Module 6: DoD Funding

„Module 5: Budget Execution

„Module 7:

Reimbursables

Mandatory Spending Discretionary Spending Discretionary Spending Example

Screen Functionality:

Screen items will fade in according to narration. Screen diagram will be highlighted according to narration.

CC: The President’s Budget (PB) is a blueprint for the Federal Government. The Budget contains the Budget message of the President, information on the President’s Budget and management priorities, and Budget overviews organized by agency, including assessments of their performance. As stated previously, by law, the President submits his Budget to Congress by the first Monday in February. As the largest discretionary sector of the PB, DoD has significant impact on the Budget.

Please click on the three icons to learn more about Mandatory and Discretionary Spending, and to see an example of the President’s Discretionary Spending Budget for FYs 2012 and 2013.

When you are finished, please click the Forward arrow to continue.

President’s Budget Comprised of mandatory and discretionary spending A blueprint for the Federal Government and contains Budget message Information on President’s priorities Budget overview by agency

1.1.2 Federal Budget Process

2.0 Learning Objectives

2.1 Budget Overview

2.2 Federal Budget

2.3 Budget Formulation

2.4 Component Budget

Formulation

2.5 Budget Review

2.6 President's Budget

2.7 Key Points

„Welcome to Financial Management 101, Budget

„Module 1: PPBE Review

„Module 2: Budget Process

„Module 3:

Congressional Action on the Budget

„Module 4: Budget Amendments, Supplementals, & Sequestration

„Module 6: DoD Funding

„Module 5: Budget Execution

OUSD C (US) <david.p.mitolo.ctr@mail.mil>

Mandatory Spending:

Mandatory spending means Budget authority and outlays controlled by permanent laws. For example, permanent laws authorize payments for Medicare and Medicaid, unemployment insurance benefits, and farm price supports, so the Budget authority and outlays for these programs are mandatory.

Screen items will fade in according to narration. Screen diagram will be highlighted according to narration.

CC: Mandatory spending means Budget authority and outlays controlled by permanent laws. For example, permanent laws authorize payments for Medicare and Medicaid, unemployment insurance benefits, and farm price supports, so the Budget authority and outlays for these programs are mandatory.

When you are finished, please click the Forward arrow to continue.

President’s Budget Comprised of mandatory and discretionary spending A blueprint for the Federal Government and contains Budget message Information on President’s priorities Budget overview by agency

1.1.3 Federal Budget Process

2.0 Learning Objectives

2.1 Budget Overview

2.2 Federal Budget

2.3 Budget Formulation

2.4 Component Budget

Formulation

2.5 Budget Review

2.6 President's Budget

2.7 Key Points

„Welcome to Financial Management 101, Budget

„Module 1: PPBE Review

„Module 2: Budget Process

„Module 3:

Congressional Action on the Budget

„Module 4: Budget Amendments, Supplementals, & Sequestration

„Module 6: DoD Funding

„Module 5: Budget Execution

Discretionary Spending:

Discretionary spending means the Budget authority controlled by annual appropriations acts and the outlays that result from that Budget authority. For example, the Budget authority and outlays for the salaries and other operating expenses of Government agencies are usually controlled by annual appropriations acts and, therefore, are usually discretionary.

CC: Discretionary spending means the Budget authority controlled by annual appropriations acts and the outlays that result from that Budget authority. For example, the Budget authority and outlays for the salaries and other operating expenses of Government agencies are usually controlled by annual appropriations acts and, therefore, are usually discretionary.

When you are finished, please click the Forward arrow to continue.

President’s Budget Comprised of mandatory and discretionary spending A blueprint for the Federal Government and contains Budget message Information on President’s priorities Budget overview by agency

1.1.4 Federal Budget Process

2.6 President’s Budget

2.0 Learning Objectives

2.1 Budget Overview

2.2 Federal Budget

2.3 Budget Formulation

2.4 Component Budget

Formulation

2.5 Budget Review

2.6 President's Budget

2.7 Key Points

„Welcome to Financial Management 101, Budget

„Module 1: PPBE Review

„Module 2: Budget Process

„Module 3:

Congressional Action on the Budget

„Module 4: Budget Amendments, Supplementals, & Sequestration

„Module 6: DoD Funding

„Module 5: Budget Execution

CC: The chart on this screen identifies the Discretionary Spending in the President’s Budget for FY 2012 and FY 2013. Please take a moment to review the information.

Please click the “X” in the upper-right corner to close this window and continue.

President submits Budget to Congress

Federal Agencies submit program and budget estimates

Role of Congress in Funding DoD

Budget Legislation provides funding

1.1.5 Federal Budget Process

CC: As we move through the Federal Budget Process let’s discuss the role of Congress in funding Federal agencies and specifically DoD. A primary avenue for Congress to exercise its power of the purse is the authorization and appropriation of Federal spending to carry out government activities. While the power over appropriations is granted to Congress by the U.S. Constitution, the authorization-appropriation process is derived from House and Senate rules. The formal process consists of two sequential steps: (1) enactment of an authorization measure that may create or continue an agency or program as well as authorize the subsequent enactment of appropriations; and (2) enactment of appropriations to provide funds for the authorized agency or program.

The authorizing and appropriating duties in this two-step process are carried out by a division of labor within the committee system. Legislative committees, such as the House Committee on Armed Services and the Senate Committee on Commerce, Science, and Transportation are responsible for authorizing legislation related to the agencies and programs under their jurisdiction; most standing committees have authorizing responsibilities. The Appropriations Committees of the House and Senate have jurisdiction over appropriations measures. House and Senate rules generally prohibit the encroachment of these committee responsibilities by the authorizers and appropriators. Agencies and programs funded through the annual appropriations process, referred to as discretionary spending, generally follow this two-step process. Not all Federal agencies and programs, however, are funded through this authorization-appropriations process. Funding for some agencies and programs is provided by the authorizing legislation, bypassing this two-step process. Such spending, referred to as direct spending, currently constitutes over 60 percent of all Federal spending.

How Organizations Obtain Their Funds Congress Authorizes Congress Appropriates Office of Management and Budget (OMB) Apportions Treasury Issues Warrants (Allotments) Office of Under Secretary of Defense (OUSD) Comptroller Allocates Component Aligns Budget to Authorization Act Component Organizations Commit and Obligate

1.1.6 Federal Budget Process

CC: Lets discuss now how organizations obtain their funds. An authorization act is a statute, passed annually by Congress, which authorizes the appropriation of funds for programs and activities. An authorization act does not provide budget authority. That authority stems from the appropriations act. Authorization acts frequently contain restrictions or limitations on the obligation of appropriated funds. An appropriations act (National Defense Authorization Act for DoD) is the most common form of budget authority. An appropriation is a statutory authorization “to incur obligations and make payments out of the Treasury for specified purposes.” An “apportionment” is a distribution by the OMB of amounts available in an appropriation into amounts available for specified time periods, activities, projects, or programs. Formal subdivisions of funds are subdivisions of appropriations by the executive branch departments and agencies. These formal limits are referred to as apportionments (by OMB), allotments (by Treasury), and allocations by the OUSD Comptroller. Based on the allocations, the DoD Component will align its budget and further distribute the budget authority to its subordinate component organizations for commitment and obligation.

In the next few slides we will go into more detail on Authorizations and Appropriations.

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Authorization Bill The National Defense Authorization Act (NDAA) acts as the DoD Authorization Bill to spend the requested funds. Specific forms of Budget authority include:

Appropriations Borrowing authority Contract authority Spending authority from offsetting collections

NDAA

Module 1 – Governance

1.1.7 Federal Budget Process

Authorization

3.0 Learning Objectives

3.1 General Overview

3.2 Authorization

3.3 Appropriations

3.4 Reconciliation

3.5 Key Points

„Welcome to Financial Management 101, Budget

„Module 1: PPBE Review

„Module 2: Budget Process

„Module 3:

Congressional Action on the Budget

„Module 4: Budget Amendments, Supplementals, & Sequestration

„Module 6: DoD Funding

„Module 5: Budget Execution

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CC: In the previous slide we introduced the term Authorization. Lets explore it in a little more depth. Budget authority means the Department has the authority by law to spend the funds requested as approved by Congress. The National Defense Authorization Act (NDAA) acts as the DoD Authorization Bill to spend the requested funds. Specific forms of Budget authority include appropriations, borrowing authority, contract authority, and spending authority from offsetting collections. We will continue our discussion on the next slide.

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Fund Authorization The first step in the enactment process is congressional passage of the authorization bills which is a prerequisite under House and Senate rules to appropriate budget authority for programs Authorization laws provide purpose to:

Establish Federal programs Continue Federal programs Modify Federal programs Authorization laws provide spending thresholds Mandatory spending Discretionary spending House Armed Services and Senate Armed Services Committees manage the authorization process for DoD

Authorization must precede Appropriations Role of Congress in Authorizing and Appropriating Funds Module 1 – Governance

1.1.8 Federal Budget Process

‚Welcome to Financial Management 101, PPBE

„Module 1: Branches of the Federal Government

„Module 2: PPBE Overview

„Module 3: Planning Phase

„Module 4:

Programming Phase

„Module 6: Execution Phase

„Module 5: Budgeting Phase

„Module 7: Summary

1.1 Branches of the Federal

Government

1.2 Role of Congress in

Funding DoD

1.3 Role of Congress in

Authorizing and Appropriating Funds

1.4 Key Points

Screen items will fade in according to narration. Screen diagram will be highlighted according to narration.

CC: Fund authorization is the legislative act authorizing money to be spent for government programs. Authorization specifies a maximum or minimum spending level without provision for actual funds. The first step in the enactment process is congressional passage of the authorization bills. Authorization laws have three basic purposes. They establish, continue, or modify Federal programs and are a prerequisite under House and Senate rules (and sometimes under statute) for the Congress to appropriate budget authority for programs. Over half of Federal spending now goes to programs for which the authorizing legislation itself creates budget authority. Such spending is referred to as mandatory spending. It includes funding for most major entitlement programs. (Some entitlements are funded in annual appropriation acts, but the amounts provided are controlled by the authorization law that established the entitlement.) The authorization laws that provide mandatory spending are typically permanent, however, some major mandatory spending programs require periodic renewal. Discretionary spending, which is provided in the 12 appropriation acts, now makes up approximately one-third of all Federal expenditures.

For discretionary spending, the role of the authorizing committee is to enact legislation that serves as the basis for operating a program and to provide guidance to the Appropriations Committees as to an appropriate level of funding for the program. That guidance typically is expressed in terms of an authorization of appropriations. Such authorizations are provided either as specific dollar amounts (definite authorizations) or "such sums as are necessary" (indefinite authorizations).

Over half of Federal spending now goes to programs for which the authorizing legislation itself creates budget authority. Such spending is referred to as mandatory spending (or direct).

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Fund Appropriation The second step in the enactment process is congressional passage of the appropriation bills Appropriation bills are prepared each year to provide the funding to operate the government as per the authorization law DoD has two main Bills:

DoD Bill MILCON Bill The House Appropriations Committee (HAC) and the Senate Appropriations Committee (SAC) manage the appropriations process for DoD Appropriations bills should be passed by October 1st to meet the start of the new fiscal year

Role of Congress in Authorizing and Appropriating Funds Module 1 – Governance

1.1.9 Federal Budget Process

Authorization must precede Appropriations

‚Welcome to Financial Management 101, PPBE

„Module 1: Branches of the Federal Government

„Module 2: PPBE Overview

„Module 3: Planning Phase

„Module 4:

Programming Phase

„Module 6: Execution Phase

„Module 5: Budgeting

1.1 Branches of the Federal

Government

1.2 Role of Congress in

Funding DoD

1.3 Role of Congress in

Authorizing and Appropriating Funds

1.4 Key Points

CC: The second step in the enactment process is appropriation. Fund appropriation is an act of a legislature authorizing money to be paid from the Treasury for a specified use. Appropriation bills are prepared each year to provide the budget authority to operate the government. The House Appropriations Committee (HAC) and the Senate Appropriations Committee (SAC) manage the appropriation process for DoD. Appropriation bills should be passed by October 1st, the beginning of the fiscal year.

In the next few slides we will discuss some of the Congressional Subcommittees that we have mentioned in more detail.

Please click the Forward arrow to continue.

Module 1 – Governance

1.1.10 Federal Budget Process

Congressional Subcomittees John: Can you capitalize “f” in federal and ‘g’ in government?

John: Slides 18 – 25 added from Budget Execution for Leaders course.

CC: The House Appropriations Committee (HAC) and Senate Appropriations Committee (SAC) each have 12 subcommittees responsible for producing 12 annual appropriations bills covering the various agencies and activities of the Federal Government. The 12 subcommittees include:

Agriculture, Rural Development, Food and Drug Administration, and Related Agencies;

Commerce, Justice, Science, and Related Agencies;

Defense;

Energy and Water Development, and Related Agencies;

Financial Services and General Government;

Homeland Security;

Interior, Environment, and Related Agencies;

Labor, Health and Human Services, Education, and Related Agencies;

Legislative Branch;

Military Construction, Veteran Affairs, and Related Agencies;

State, Foreign Operations, and Related Programs; and, Transportation, Housing and Urban Development, and Related Agencies.

Please click the Forward arrow to continue.

Major Committees (Authorizing & Appropriations

1.1.11 Federal Budget Process

Let’s take a moment to consider DoD’s authorizing and appropriating committees. In general, the authorizing committees tend to have more Members and have larger staffs. Those Members usually come from areas where there is a large DoD presence. Because of this, these committees tend to focus on many, and sometimes smaller, issues. The staffers develop expert-level knowledge on these issues. The authorizing committees tend to focus on program issues and not budget issues.

The appropriations committees have fewer staff and Members. While the Members are typically from areas with a large DoD presence, the staffers are more experienced and have greater knowledge of the Budget. The appropriators tend to focus their attention on issues of broader impact.

Please click on each Major Committee for more information.

When you have finished reviewing each Committee, please click the Forward arrow to continue.

1.1.12 Federal Budget Process

House Armed Services Committee (HASC) CC: The House Armed Services Committee (HASC) retains jurisdiction of all subjects and retains exclusive jurisdiction for defense policy, ongoing military operations, the organization and reform of the Department of Defense and Department of Energy, counter-drug programs, acquisition and industrial base policy, technology transfer and export controls, joint interoperability, the Cooperative Threat Reduction program, Department of Energy nonproliferation programs, and detainee affairs and policy.

Each of the HASC subcommittees has jurisdiction over a specific area of defense under the oversight of the HASC. For example, the Tactical Air and Land Forces Subcommittee conducts oversight of ammunition programs, Army and Air Force acquisition programs, all Navy and Marine Corps aviation programs, and National Guard and Army and Air Force National Guard and Reserve. This subcommittee authorizes procurement and Research and Development (R&D) programs to ensure that America’s soldiers and airmen are fully equipped to carry out their mission and keep our nation safe.

House Appropriations Committee (HAC)

Module 1 – Governance

1.1.13 Federal Budget Process

John: Can you capitalize “f” in federal?

House Appropriations Committee (HAC) CC: The House Appropriations Committee (HAC) is accountable for responsible, limited levels of Federal discretionary spending. Its twelve subcommittees engage in comprehensive oversight – including in-depth public hearings - to find waste and abuse. Each subcommittee has jurisdiction over specific areas of the government. For example, the Defense Subcommittee has jurisdiction over the Departments of the Army, Navy (including Marine Corps), Air Force, Office of Secretary of Defense, and Defense Agencies (except Defense-related accounts and programs under the Subcommittee on Military Construction and Veterans Affairs and the Office of the Assistant Secretary of the Army (Civil Works). They also have jurisdiction over the Central Intelligence Agency and the Intelligence Community Staff.

House Permanent Select Committee on Intelligence (HP SCI)

1.1.14 Federal Budget Process

House Permanent Select Committee on Intelligence (HP SCI) CC: The House Permanent Select Committee on Intelligence (HP SCI) is the House’s primary panel responsible for authorizing the funding for, and overseeing the execution of, the intelligence activities of the United States government.

Senate Armed Services Committee (SASC)

1.1.15 Federal Budget Process

Senate Armed Services Committee (SASC) CC: The Senate Armed Services Committee (SASC) has six subcommittees, including a subcommittee on Emerging Threats. The SASC has jurisdiction over many areas in Defense, to include:

aeronautical and space activities particular to, or primarily associated with, the development of weapons systems or military operations;

The Department of Defense, the Department of the Army, the Department of the Navy, and the Department of the Air Force;

Military research and development;

The National security aspects of nuclear energy; and, Pay, promotion, retirement, and other benefits and privileges of members of the Armed Forces, including overseas education of civilian and military dependents.

The Senate has also given the committee the authority to study and review, on a comprehensive basis, matters relating to the common defense policy of the United States.

Senate Appropriations Committee (SAC

1.1.16 Federal Budget Process

Senate Appropriations Committee (SAC) CC: The Senate Appropriations Committee (SAC) is the largest committee in the U.S. Senate. Its role is defined by the U.S. Constitution, which requires "appropriations made by law" prior to the expenditure of any money from the Federal Treasury. The Committee writes the legislation that allocates Federal funds to the numerous government agencies, departments, and organizations on an annual basis. Appropriations are limited to the levels set by a Budget Resolution, drafted by the Senate Budget Committee.

12 subcommittees are tasked with drafting legislation to allocate funds to government agencies within their jurisdictions. These subcommittees are responsible for reviewing the President's Budget request, hearing testimony from government officials, and drafting the spending plans for the coming fiscal year. Their work is passed on to the full Senate Appropriations Committee which may review and modify the bills and forward them to the full Senate for consideration.

The Committee is also responsible for supplemental spending bills which are sometimes needed in the middle of a fiscal year to compensate for emergency expenses.

Please click the “X” in the upper-right corner to close this window and continue.

Senate Permanent Select Committee on Intelligence (SSCI)

1.1.17 Federal Budget Process

Senate Permanent Select Committee on Intelligence (SSCI) John-The bottom verbiage on this slide was cut off on transfer-It’s also at the bottom of these notes.

CC: The Senate Permanent Select Committee on Intelligence (SSCI) was created by the Senate to “oversee and make continuing studies of the intelligence activities and programs of the United States Government,” to “submit to the Senate appropriate proposals for legislation and report to the Senate concerning such intelligence activities and programs,” and to “provide vigilant legislative oversight over the intelligence activities of the United States, to assure that such activities are in conformity with the Constitution and laws of the United States.”

By resolution, the members include two members from the Appropriations, Armed Services, Foreign Relations, and Judiciary Committees to ensure appropriate coordination with those Committees. The Senate Majority and Minority Leaders and the Chairman and Ranking Member of the Armed Services Committee serve as ex officio SSCI members.

The Committee’s staff reviews intelligence reports, budgets, and activities; investigates matters on behalf of the Committee; prepares legislation; and receives briefings.

The Committee meets roughly twice a week for 1.5 to 2 hours, generally in closed session. Most hearings involve appearances by senior Intelligence Community officials—heads of agencies, senior program managers, and senior intelligence analysts—who present testimony and answer Senators’ questions.

The Committee writes an annual intelligence authorization bill that authorizes funding levels for intelligence activities (these set caps for agency funding) and provides legislative provisions that limit or allow intelligence conduct.

The Committee conducts reviews of intelligence programs or events, ranging from routine and continuing study to formal inquiries.

The Committee also considers and makes recommendations to the Senate for the President’s nominees to serve in intelligence positions requiring the Senate’s confirmation.

Please click the “X” in the upper-right corner to close this window and continue.

Congress – Hearings

1.1.18 Federal Budget Process

CC: Since we have discussed the Congressional Subcommittees in the last several slides it’s a good time to bring up the hearing. There are two schools of thought on approaches to answering difficult questions to which the testifier does not know the answer. One is to set the right visual approach by giving the ‘I do not know but will get back to you…’ answer. The other is to have support people behind the testifier hand the answer to the testifier or someone beside the testifier. That way, the testifier can stall, look down at a piece of paper and then provide the answer if they are comfortable. While not as visually appealing it definitely results in more questions being answered at the actual hearing. Neither way is incorrect. It really depends on those testifying and those doing the preparation as to which method is chosen. A good performance at a House hearing is not only satisfying but also avoids many problems as the appropriation process roles on.

After the House hearing is over, the subcommittee with a short turn-around provides hundreds of written questions. Many are provided each year just to get them on the record while others are new or come up from the hearing. Again, a poor performance can engender more questions as can a less than excellent relationship with staffers.

After the House hearing, there may be one in the Senate, but this is not always the case. Because of the size of the Senate they hold fewer hearings and those they do hold are much easier because of the nicer political tone in the upper body of Congress. While still requiring preparation because of the particular issues of members of the Senate subcommittee members and political or media issues that have arisen since the House hearing, the Senate hearing will seem to be a ‘cake walk’ in comparison to the House in almost all cases.

Congress – Structure and Calendar During congressional Committee hearings, DoD actively defends and justifies the President’s Budget with:

Testimony Briefings Answers to inquiries

1.1.19 Federal Budget Process

CC: Beginning in March, even without a Budget Resolution, House appropriation subcommittees begin to hold appropriation hearings. Some observers have called these political theater because they are public and often televised on CSPAN. The House hearings especially can be difficult because of this ‘theater’ and because they can cover any subject even though it would not seem to be related to the Budget. The hot topic of the day or week the hearing occurs can dominate. Questions for related agencies or programs can come up in a hearing and must be dealt with diplomatically and with some degree of knowledge even though the testifier cannot specifically be responsible for answering. While the task is daunting it is an opportunity to bring senior program officials and financial personnel who must prepare them closer together and help program people become more knowledgeable about the numbers. It is also a chance to use the strong relationship budget personnel and CFOs need with appropriation committee staff members to be successful. Behind the scenes, information related to hearing questions often are provided by staffers where good relationships exist. This makes a major difference at the hearing. Knowing a good number of questions beforehand is obviously a major advantage. Even with this advantage the hearing is difficult because of the multitude of issues that can be questioned and the opposing political party members from the Executive Branch party testifying wanting to ask those tough or embarrassing questions.

Congress – Structure and Calendar

President’s Budget Congress House Senate Authorization

HASC

Appropriations

HAC

Authorization

SASC

Appropriations

SAC

Conference Committee House Approval Senate Approval President Approval President signs bill into law Budget Resolution

SBC

Budget Resolution

HBC

JR

Jan Mar Sep-Aug-July

1.1.20 Federal Budget Process

CC: Each appropriations committee in the House and Senate must ‘mark-up’ the bill (decide on the numbers, report language and law language), vote on it and provide it to the ‘full’ appropriations committee of their house of Congress who must also vote it out with possible amendments or changes. Then it must be passed by the full House and Senate. After each body has passed it, usually long after October 1st (continuing resolution until passed), there is a Conference between the two appropriations committees which each selects a limited amount of members who ‘conference’ and work out differences between the two bills. After conference each house of Congress must pass the bill again. This is the same process for all legislation passed by Congress so it applies to the authorizing committees as well who must pass a bill if the program in the Budget is up for authorization that year (every year for DoD and a large part of Energy, for instance).

The work of people working with the Budget, including program staff dealing with budget issues, is directly involved in political and policy issues. They work for political appointees who are by definition the ‘policy’ officials. Still, as the appropriations process is worked on, it is the responsibility of civil servants involved to thoroughly understand the ‘politics’ of issues so that they can adequately serve political officials who do not have time to understand the ‘politics’ of every issue. They are expecting you to know the issues and provide sound advice and counsel regardless of the political party that has the reins of the Executive Branch. By concentrating a good bit on the appropriation hearing process in this lesson it helps provide an understanding of that important responsibility.

Budget Submissions

Departments/ Agencies

President

OMB

Budget & Justification

Budget Review/ Negotiations Passback

Planning Guidance & Instructions Federal Budget Lifecycle Executive Branch Timeline!

April - July

September October - November January Module 1 – Governance

1.1.21 Federal Budget Process

CC: Let’s look at the Federal budget process more closely. We’ll start with the Executive Branch. The Executive Branch budget process is overseen by the Office of Management and Budget (OMB). The Executive Branch process for formulating then executing the Budget is the same in most Federal agencies. The Department of Defense (DoD) has certain unique exceptions that we will explore in more detail in the slides that follow. First, let’s review the general Executive Branch process.

To the left of the slide, OMB issues fiscal guidance to agencies in the spring. This guidance is typically in the form of budget topline targets for the budget year for each agency. Soon after this guidance has been issued, OMB updates Circular A-11 with inputs from agencies. OMB Circular A-11 sets requirements all agencies need to follow in the preparation, justification, and execution of the Budget.

Most agencies spend the summer months developing their budgets for submission to OMB for review by early September. Most agencies will exceed their guidance or have other issues that require negotiation with OMB. These negotiations consume much of the fall. By early January most of these issues need to be resolved so OMB can put final numbers into the proper accounts in the President’s Budget. The President’s Budget is normally submitted to Congress on the first Monday in February.

Federal Budget Lifecycle Enactment Timeline!

April Winter

Appropriation Bills

Appropriation Committees

Bills

Resolution

October

Public Laws

President’s

May - September February Module 2 – Governance

1.1.22 Federal Budget Process

CC: As noted earlier, once the President’s Budget has been submitted to Congress on the first Monday in February, the Executive Branch begins providing justification, backup, and testimony to the Congress. The House and Senate Budget Committees are supposed to produce budget resolutions for each chamber. These individual resolutions are supposed to be melded into a joint resolution that gives the authorization and appropriation committees their ceilings for mandatory and discretionary spending. Based on the Budget committee guidance, authorization and appropriation bills flow out of subcommittee, full committee, and floor action. During this process, Executive Branch officials testify, answer congressional inquiries, provide backup data and briefings. At the same time, OMB is leading the Administration’s responses to congressional action and reviewing major agency communication with Congress. This legislative process is supposed to consume most of the summer and fall. By October 1st, Congress is supposed to have submitted all appropriation and any relevant authorization bills to the President for signature or veto. In practice due to some of the political considerations we will examine later, this does not happen.

Obligations Outlays Reporting

Agencies/ Departments

Expiration Cancellation

Apportionments

Federal Budget Lifecycle Execution Timeline!

October October Oct - Sep September +?

Departments/

OMB/

Treasury

Congress/

Authorizations/ Appropriations

Warrants

Treasury October Module 2 – Governance

1.1.23 Federal Budget Process

CC: Now let’s quickly review the main steps in budget execution. We will delve into these in more detail later. Once Congress has enacted and the President has signed appropriations, the machinery of budget execution begins. The Treasury Department issues warrants, and OMB issues apportionments to give agencies the authority to begin obligating their appropriated funds. Agencies use their established procedures for control, allotment, and monitoring to begin executing funds. Funds are committed, obligated, outlayed and reported. After this process is completed, funds go into an expired status until they are finally cancelled.

Legal Framework of Budgeting Primary Purpose of Federal Budgeting – Satisfy legal submission requirements U.S. Constitution - Article 1 Section 8: “The Congress shall have power to… provide for the Common Defense… and general welfare...”

Section 9: “No money shall be drawn from Treasury, but in consequence of Appropriations made by law...”

Federal Budget System Budget and Accounting Act of 1921 (as amended) Budget and Impoundment Control Act of 1974 Balanced Budget and Emergency Deficit Control Act of 1985 The Balanced Budget and Emergency Deficit Control Reaffirmation Act of 1987, as Amended by the Budget Enforcement Act of 1990 Goldwater-Nichols

1.2 Policies, Laws and General Requirements

CC: Lets now have a discussion on policies, laws and general requirements in this section. The primary purpose for Budgeting is to satisfy legal submission requirements.

Article 1, Section 8 of the U.S. Constitution states, “The Congress shall have power to… provide for the Common Defense… and general welfare...” Section 9 states, “No money shall be drawn from Treasury, but in consequence of Appropriations made by law...”

The framework of the Federal Budget System Budget and Accounting Act of 1921, as amended, encompasses the Budget and Impoundment Control Act of 1974, the Balanced Budget and Emergency Deficit Control Act of 1985, the Balanced Budget and Emergency Deficit Control Reaffirmation Act of 1987, as amended by the Budget Enforcement Act of 1990, and Goldwater-Nichols.

1.2.2 Policies, Laws and General Requirements

Primary Relevant Governance Documents OMB Circular A-11 - Preparation, Submission and Execution of the Budget DoD FMR, DoD 7000.14-R, Volume 2A (Budget Formulation and Presentation), Volume 2B (Budget Formulation and Presentation), and Volume 3, “Administrative Control of Funds and Antideficiency Act Violations” Other Relevant Governance Documents

CC: Here are three of the primary relevant governance documents that we will be discussing in the following slides:

OMB Circular A-11 DoD Financial Management Regulation (FMR), DoD 7000.14-R, Volume 2A and 2B – Budget Formulation and Presentation

- And DoD Financial Management Regulation (FMR), DoD 7000.14-R, Volume 3, “Administrative Control of Funds and Antideficiency Act Violations”

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OMB Circular A-11

Describes three main phases of the Federal Budget process Formulation: during this phase, the Executive Branch prepares the President’s Budget (PB) Congressional: Congress considers the PB, passes overall revenue and spending plan called a “budget resolution”, and enacts appropriations Execution: lasts at least five fiscal years and includes apportionment, reporting and outlays

1.2.3 Policies, Laws and General Requirements

CC: OMB Circular A-11 describes three main phases of the Federal Budget process:

Formulation: During this phase, the Executive Branch prepares the President’s Budget (PB) Congressional: Congress considers the President’s Budget (PB), passes overall revenue and spending plan called a budget resolution, and enacts appropriations Execution: Lasts at least five fiscal years and includes apportionment, reporting and outlays

DoD Budget Formulation

Volume 2A of the DoD Financial Management Regulation (FMR) provides general guidance on the formulation and submission of the budget requests to the Office of the Secretary of Defense for the program and budget review submission and the presentation and justification of the budget requests to the Congress.

Volume 2B is organized into 19 chapters that provide specific guidance, required budget exhibits and formats along with instructions for their preparation and automated submission requirements.

1.2.4 Policies, Laws and General Requirements

CC: Volume 2A of the DoD Financial Management Regulation (FMR) provides general guidance on the formulation and submission of the budget requests to the Office of the Secretary of Defense for the program and budget review submission and the presentation and justification of the budget requests to the Congress.

Volume 2B is organized into 19 chapters that provide specific guidance, required budget exhibits and formats along with instructions for their preparation and automated submission requirements.

These volumes are established under the authority of DoD Instruction 7000.14.

1.2.5 Policies, Laws and General Requirements

Flow of the Federal Budget Cycle

2.0 Learning Objectives

2.1 Budget Overview

2.2 Federal Budget

2.3 Budget Formulation

2.4 Component Budget

Formulation

2.5 Budget Review

2.6 President's Budget

2.7 Key Points

„Welcome to Financial Management 101, Budget

„Module 1: PPBE Review

„Module 2: Budget Process

„Module 3:

Congressional Action on the Budget

„Module 4: Budget Amendments, Supplementals, & Sequestration

„Module 6: DoD Funding

„Module 5: Budget Execution

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CC: The Federal Budget cycle is initiated in the Executive Branch with budget formulation. Then, no later than the first Monday in February, by law, the President submits the Budget (President’s Budget (“PB”)) to Congress. Congress reviews the President's plan and then adopts a budget resolution, setting forth its own guidelines for spending and revenues that it plans to follow. Authorization bills set policies and funding limits for agencies/programs. Appropriation bills provide the legal authority to obligate and spend funds. Once these bills are passed by Congress, the President must sign them to become law.

The appropriations laws and the laws establishing entitlement programs provide the legal authority for the Federal Government and its agencies to obligate and spend funds. Each appropriations law creates legally binding spending ceilings for the Federal programs it covers, and each law setting up an entitlement program, such as Medicare, establishes and mandates the reasons for, and extent of, Government spending.

In the next section we will begin our discussion of the DoD Planning, Programming, Budgeting, and Execution (PPBE) process.

PB Formulation

Congressional Reviews

Congressional Budget Resolution

Authorization Bills

PB Submission to Congress

Appropriation Bills

Bills pass into Law

1.3 DoD PPBE

DoD Budget Process

3.0 Learning Objectives

3.1 General Overview

3.2 Authorization

3.3 Appropriations

3.4 Reconciliation

3.5 Key Points

„Welcome to Financial Management 101, Budget

„Module 1: PPBE Review

„Module 2: Budget Process

„Module 3:

Congressional Action on the Budget

„Module 4: Budget Amendments, Supplementals, & Sequestration

„Module 6: DoD Funding

„Module 5: Budget Execution

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CC: For the remainder of this course we will transition from the Federal Budget Process and Policy and Laws and General Requirements to a DoD Budget Process focus and PPBE. Each DoD Component submits its proposed Budget estimate simultaneously with its Program Objective Memorandum, also known as the POM. The Budget projects resources into the future but with considerably more financial details than the POM. Each Budget Estimate is reviewed by the Office of the Under Secretary of Defense (Comptroller) and the OMB.

Congress provides DoD Components written questions in advance of formal hearings where the analysts review and discuss the Budget details. After the hearings, a decision document is prepared for the programs and/or appropriations in each area of responsibility. The decision documents are staffed for comment and forwarded to the Deputy Secretary of Defense for decisions. These decisions are then reflected in an updated Budget submission provided to the OMB. The overall DoD Budget is provided as part of the President's Budget request to Congress.

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PPBE’s Evolution Over Time:

1961: PPBS was introduced by Secretary of Defense 1986: Congress authorized biennial budgeting 2003: Management Initiative Document (MID) 913 established PPBE (the modern process) 2010: OSD trimmed Future Years Defense Program (FYDP) to five years and returned to annual budgeting

PPBE continues to evolve Module 1 – Governance

1.3.1 DoD PPBE

History of the PPBE Process

‚Welcome to Financial Management 101, PPBE

„Module 1: Branches of the Federal Government

„Module 2: PPBE Overview

„Module 3: Planning Phase

„Module 4:

Programming Phase

„Module 6: Execution Phase

„Module 5: Budgeting

2.1 Phases of PPBE Process

2.2 History of the PPBE

Process

CC: PPBE has evolved considerably over time. Introduced in 1961, by the Secretary of Defense, the Planning, Programming, Budgeting System (PPBS) was built in six months and used to prepare the FY63 Budget (for submission in January 1962).

In 1986, Congress authorized biennial budgeting, with two budget years in the President’s Budget; however, Congress continued one-year appropriations. DoD implemented an on-year (rigorous)/off-year (on-margins) PPBS. That said, in-practice, rigorous process continued annually.

In 2003, Management Initiative Document (MID) 913 established PPBE (vice PPBS), and budget execution became a formal process phase, with concurrent OSD/OMB program and budget reviews. The Quadrennial Defense Review was the planning centerpiece.

In 2010, OSD trimmed the Future Years Defense Program (FYDP) from 6 to 5 years, eliminated on-year/off-year budgeting, and focused on one budget year only.

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Provide a standard enterprise resource management framework for DoD Provide civilian control and strategic direction Centralize decision-making in the Office of the Secretary of Defense Manage allocation of resources to meet the Secretary’s goals Create a joint (DoD-wide) program Integrate individual components’ inputs into a single defense program Ensure stakeholders have a voice Build consensus Provide financial “checks and balances” Promote efficient and effective allocation of funds Ensure the costs of defense programs are realistic / affordable Provide basis for justifying programs and budgets to the White House and Congress PPBE is the principal DoD resource management system What is the purpose of the PPBE process?

1.3.2 DoD PPBE

1.1 Phases of PPBE Process

1.2 Key Points

„Welcome to Financial Management 101, Budget

„Module 1: PPBE Review

„Module 2: Budget Process

„Module 3:

Congressio…