Attachment_0013_-_Sample_Storyboard.pdf

OUSD(C) Web-based Curriculum Development

Advance Principles of DoD Budget Execution

Course Storyboard

13 March 2014

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Sample Storyboard

Welcome

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.

Please click the Forward arrow to continue.

Navigation and Course Features

Three important elements of this course are the Resources, Table of Contents, and Course Index.

Resources offer additional information on the course subject. The Table of Contents provides the ability to find information quickly based on key topics. The Course Index defines key DoD and financial management terms used in this course, and identifies where in the course these terms are discussed.

Links to each are located on the bottom of the left-hand navigation menu.

Closed Captioning can be displayed in the lower bar. Closed Captioning is turned “off” by default. Click the Closed Caption button to turn it on or off based on your preference. The on/off button is located in the bottom-left menu tray.

Use the Audio Controls to adjust volume and to pause or play narration and Closed Caption text. The audio controls are also located in the bottom-left menu tray.

Use the Forward and Back arrows to navigate the course screens and the Refresh button to refresh or restart a current screen. These controls are located in the bottom-right menu tray.

Click Help, in the top right corner of the screen, to view these instructions at any time during the course.

To complete the course, please work through each module and screen, and complete each Knowledge Check.

You will not be able to advance until you have completed each screen.

At the end of the course, you must complete a final exam to obtain CPE credit. A minimum score of 70% is required to receive credit. You will have up to one year from the date you begin this course to complete the course and achieve the required score on the final exam.

If you need to leave the course and cannot complete it, the system will automatically bookmark the last page visited and will send you there when you return to the course.

Please click the Forward arrow to continue.

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Advanced Principles of DoD Budget Execution Overview

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.

Course Learning Objectives

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; and, Define Execution Performance Monitoring and how it is implemented in the budget execution process.

Module 1 Intro: Governance: Policies, Laws, and General Requirements of the Budget Execution Process

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

Module 1 Learning Objectives

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

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.

1.1.1 President’s Budget

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.

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.

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

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.

Discretionary Spending Example

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.

1.1.2 Role of Congress in Funding 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.

1.1.3 How Organizations Obtain Their Funds

Let’s 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.

1.1.4 Authorization

On the previous screen we introduced the term Authorization. Let’s 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 screen.

1.1.5 Role of Congress in Authorizing and Appropriating Funds

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).

1.1.5 Role of Congress in Authorizing and Appropriating Funds (cont.)

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 screens we will discuss some of the Congressional Subcommittees that we have mentioned in more detail.

1.1.7 Congressional Subcomittees

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.

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1.1.8 Major Committees (Authorizing & Appropriations)

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.

1.1.9 Congressional Hearings

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.

1.1.10 Structure and Calendar

Beginning in March, even without a Budget Resolution, House appropriation subcommittees begin to hold appropriation hearings. Some observers have called these hearings 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 relationships budget personnel and CFOs developed with appropriation committee staff members. 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.

1.1.11 Structure and Calendar (cont.)

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. The full committee must also vote on it, with possible amendments or changes. The bill then must be passed by the full House and Senate. After each body has passed it, usually long after October 1st, there is a Conference between the two appropriations committees who each select 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 (which is every year for DoD and a large part of Energy, for instance).

The people working with the Budget, including program staff dealing with budget issues, are 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.

1.1.12 Executive Branch Timeline

We will now look at the Federal budget process more closely. Let’s 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 and 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.

To the left of the slide, OMB issues agencies their fiscal guidance 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.

1.1.13 Enactment Timeline

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.

1.1.14 Execution Timeline

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.

1.2 Policies, Laws, and General Requirements

Let’s 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.

1.2.1 Primary Relevant Governance Documents

Here are some of the primary relevant governance documents that we will be discussing on the following screens:

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 Anti-deficiency Act Violations”.

1.2.2 OMB Circular A-11

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; and, Execution: Lasts at least five fiscal years and includes apportionment, reporting and outlays.

1.2.3 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.

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

1.2.4 Flow of the Federal Budget Cycle

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.

1.3 DoD PPBE

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 OUSD(C) 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.

1.3.1 History of the PPBE Process

PPBE has evolved considerably over time. Introduced in 1961, by the Secretary of Defense, the Planning, Programming, and 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 and 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 and off-year budgeting, and focused on one budget year only.

1.3.2 What is the purpose of the PPBE process?

First, let’s discuss the purpose of the PPBE process. PPBE provides a standard enterprise resource management framework for DoD components. In addition, it provides civilian control and strategic direction as a system used by the Defense Secretary to ensure that DoD goals--and those of the President--are implemented. PPBE is used to create a joint Defense Program, one that integrates the input of the Army, Navy, Air Force, and Marine Corps into a single defense program; ensures stakeholders have a voice; and builds consensus. The PPBE system provides financial checks and balances, promoting efficient and effective allocation of funds and ensuring the costs of defense programs are realistic and affordable. Finally, the decision making process is designed to be transparent and to provide a basis for justifying programs and budgets to the White House and Congress.

1.3.3 Objectives of PPBE

The PPBE process in DoD is the overarching system that rationalizes and ultimately integrates the submissions from the Services and Defense Agencies into one defense budget. The overarching objective of the PPBE process is to establish, justify, and acquire the fiscal and manpower resources needed to accomplish its specifically assigned missions according to the Defense Strategy.

During each phase of the PPBE process, the objectives are as follows.

During all phases of the PPBE, the objective is to provide essential focus on Departmental policy and priorities for functional activities.

Through planning, the objective is to size, structure, man, train, equip, and sustain the component to support the national military strategy.

Through programming, the objective is to distribute projected manpower, dollars, and materiel among competing requirements per resource allocation policy and priorities.

Through budgeting, the objective is to convert program decisions on dollars and manpower into requests for congressional authorization and appropriations.

Through program execution, the objective is to apply resources to achieve approved program objectives and adjust resource requirements based on execution feedback. The key document in the execution phase is the Funding Letter that is issued after the appropriation is passed that signals the start of the execution process.

Through budget execution, the objective is to manage and account for funds to carry out approved programs.

The end state of the PPBE process is to apply resources with consideration to national security objectives.

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1.3.4 PPBE Main Players

There are many players involved in the PPBE process. Some critics have noted that the PPBE process does not focus on major issues because of the influence of myriad stakeholders. Major internal stakeholders oversee PPBE phases. For example, Cost Assessment and Program Evaluation (CAPE), formerly Program Assessment and Evaluation (PA&E), oversees the programming phase of PPBE.

There are many DoD internal stakeholders that fulfill various functions. For example, the DoD Components are key to the process because they formulate the request for programs and budgets. They are also charged with executing the funding appropriated by Congress. The Joint Staff plays a strong role in influencing the process and speaking for the Combatant Commands (COCOMs) budget and program requirements. The Under Secretaries of Defense are also important players in the budget process. One of the most important is the Under Secretary of Defense (Intelligence). USD(I) plays a central role in overseeing the Military Intelligence Program (MIP) funding issues in the Intelligence PPBE process.

Finally, OMB and ODNI oversee the entire budget development and execution process. We will discuss the interaction of these players in the next few sections.

1.3.5 Yearly PPBE Process and Milestones

The PPBE process spans several years. There are several relevant budget execution leadership issues in the PPBE process. First, the planning, programming, and budgeting phases stress centralized planning and direction. Execution by DoD Components stress de-centralized and independent decision-making.

This de-centralized and independent decision-making is recognized as a strength of the U.S. military.

Second, there is noticeable overlap in several of the phases. The overlap causes problems in timeliness.

This overlap also causes phases to be concurrent. Concurrency of some phases of the process may create issues. Third, the Execution phase is disconnected from the other phases and mostly focuses on budget execution. Think for a moment about how it may or may not influence the rest of the process. Fourth, there is no connection between the end of the process and the beginning.

Finally, the process is long and complex. Many Secretaries of Defense have ignored PPBE in part or whole when they needed to make important decisions quickly. For example, Secretary Gates created a “front end assessment” to PPBE in order to jump-start consideration of an “efficiencies initiative” he wanted included in the FY 11 budget.

1.3.6 A Year at a Glance

The major point from this screen is to see that, in a given year, all phases of the PPBE process are being worked. Depending on the size of your organization it is possible that your staff is working POM to Execution issues simultaneously as you can see from the graphic. The question marks on Continuing Resolution in Budgeting FY15 indicate that it may or may not happen.

1.3.7 Budget Formulation

Components prepare and formulate their budgets from March through September. The completed Component Budget, or Budget Estimate Submission (BES), is submitted for joint OSD and OMB review.

OSD/OMB review the BES from September through December, issuing final decisions through Resource Management Decisions. OSD submits its revised BES in Jan to OMB to be included in the President’s Budget (PB). OMB submits the President's Budget (PB), in February. The next cycle begins immediately thereafter.

1.3.8 Component Budget Formulation

Once the annual approved Program and Budget Guidance is received from DoD leadership, the Components conduct their own internal analysis of the Budget Guidance to develop the Budget Estimate Submission (BES). The BES consists of all resources (operation and maintenance; research, development, test and evaluation; procurement, etc.) that support DoD activities and programs for the Services and Defense Agencies. This analysis includes ensures price and structure at the appropriation level are adequate;

meets the Budget and strategic guidance; and includes performance metrics to assess effectiveness.

Each Component Head approves the respective BES. DoD Components include the Services and Defense Agencies.

1.3.9 Budget Review

Upon submission, each BES is reviewed by the Under Secretary of Defense (Comptroller), OSD Cost Assessment and Program Evaluation (CAPE), and the Office of Management and Budget (OMB). Their review ensures programs are funded in accordance with current financial policies and are properly and reasonably priced; Combatant Commanders’ concerns are taken into consideration; Budget documentation is adequate to justify the programs presented to Congress; and DoD Components receive written questions in advance of formal hearings.

The results of these reviews are issued in the form of Resource Management Decisions.

1.3.10 DoD Component Review Outcomes

A Resource Management Decision (RMD) is used by DoD to publish decisions from the program and Budget review. An RMD consolidates program and Budget decisions into one document. The Secretary of Defense makes the final decisions. The overall DoD Budget is finalized and becomes part of the President's Budget request to Congress.

1.4 Elements of Budget Execution

Let’s transition now into some elements of Budget Execution over the next few screens. Justification Statements are used throughout the PPBE cycle and are essential to the success of your program. They are used to:

Justify the request for a disconnect or initiative, Justify the request that congressional marks be reduced or changed, and

Justify the request for a reprogramming during execution.

Good justification statements are specific, quantify dollar and schedule impact, relate to warfighter mission impact, have little-to-no technical jargon and no acronyms.

Weak justification statements are broad, highly technical, confusing, squishy and relate no real impact.

1.4.1 Budget Execution Timeline

This screen provides a very good portrayal of the events in the year of execution from CR through year-end. If the Authorization and Appropriations Bills were passed on October 1st (as in the previous screens on the Enactment Process) then the process would begin there. However, as we know, this has not happened in quite some time.

1.4.2 Continuing Resolutions

If Congress does not pass the appropriation bill by Oct 1 the Federal Government requires a “Continuing Resolution” to enable government to function. A CR:

Consists of a bill passed by both houses of the Congress that must be signed by the President, and

Can cover a brief period of time (i.e., 4 days) or go much longer (3 months or possibly even the entire year).

Some Rules of the CR Road, which can change with each CR bill, generally are:

Operate at the same “rate” as last year, No “new starts”, and

No increase in production rates.

However, we must be mindful of potential congressional action in the form of marks, rescissions or special language that may be forthcoming in the Authorization and Appropriation Bills.

1.4.3 Operating Under a Continuing Resolution

As we know from recent memory CRs are a fact of life!

Since 2000 we’ve received an on-time appropriation just four years: 2001, 2004, 2005, and 2007; that is less than 1/3 of the time!

You need to be prepared to operate under a CR

Program Managers must be forward-thinking – get your entire team together to review the contract, finances, schedule and strategies to execute in a flexible way.

A Service or Agency issues a data call each summer requesting input and impacts to your programs under a possible CR for the upcoming FY:

You must write meaningful impact statements

However, it is unlikely you will get any special language.

1.4.4 OMB Key Roles in Budget Enactment

OMB plays several key roles in budget enactment. It is worth reviewing briefly OMB’s role in communicating with Congress. During its budget formulation review, OMB will also review any proposed legislation drafted by agencies. DoD submits many legislative proposals for consideration by the authorizing committees related to matters like military pay and benefits as well as military property and other issues. OMB analyzes any proposed legislation and ensures that these proposals align with the Administration’s priorities and do not violate budget rules in Circular A-11. In addition, after the budget is submitted, OMB reviews the testimonies submitted by DoD and other agency’s officials to ensure that they support the President’s Budget. While Congress is producing bills for floor action or conference, OMB coordinates the Administration’s response and drafts a letter called a Statement of Administration Policy (SAP) to the relevant congressional leaders. These letters issue veto threats from the President if there is a conflict over legislation. Finally, once bills are signed into law by the President, OMB interprets how the Executive Branch will enforce those laws through official correspondence called Signing Statements and through rules and other guidelines. Although it may not seem readily apparent, the OMB’s attempt to influence congressional action and its role in interpreting legal enforcement give OMB another important role in shaping budgetary execution.

1.4.5 The OMB Budget Review Schedule

For most agencies, the Executive Branch formulation process begins in the spring when OMB issues top-line guidance to the agencies and revises OMB Circular A-11. OMB Circular A-11, updated annually, instructs agencies how to prepare their budget submissions. It provides detailed guidance to executive departments and establishments, by OMB, for preparing and submitting the President’s Budget and executing the budget.

Most agencies develop their budget requests based on that guidance during the summer. Agencies usually submit their budget requests to OMB for review usually in the first few weeks of September. DoD is different. OMB plays a role in DoD’s budget formulation through the Planning, Programming, Budgeting, and Execution (PPBE) process.

In the fall, OMB holds a series of meetings called Director’s Review in which the OMB Director is briefed by the OMB staff on the issues in each agency’s budget request. Because DoD’s PPBE process is not finished by this point, OMB staff usually brief the Director on their interim analysis of DoD’s budget. The OMB Director’s decisions on each agency’s budget are codified in a document called Passback. Passback is usually issued to agencies around the Thanksgiving holiday timeframe. DoD receives a Passback from OMB even though its Budget request is not complete. All agencies respond to OMB’s Passback. This response is called an appeal. OMB’s leadership adjudicates many agency appeals. However, OMB’s Director takes those budget issues he/she cannot adjudicate to the President and his chief advisors for final decision. DoD budget issues are frequently the subject of these meetings. These issues are usually not resolved until mid-January. The deadline for all decisions to be made on the President’s Budget submission to Congress is mid-January. This gives OMB and the Government Printing Office the time they need to physically assemble the budget documents.

At the same time that negotiations are ongoing, the OMB staff is writing pieces of the budget, reviewing budget justification materials, and analyzing the MAX database. The MAX Data Entry System is the tool Federal agencies use to enter the data required for the President’s Budget and Mid-Session update, as specified in the annual OMB Circular A-11, which compiles budget data from throughout the government.

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HQ0034-14-R-0104

Attachment 0013

1.5 Module 1 Key Points

The key points to take away from Module One are:

The Constitution of the United States creates a unique relationship between the Congress and America’s armed forces.

An authorization act (NDAA for DoD) is a statute, passed annually by Congress, which authorizes the appropriation of funds for programs and activities. An appropriations bill is the most common form of budget authority. 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.

PPBE provides a standard enterprise resource management framework for DoD Components. In addition, it provides civilian control and strategic direction as a system used by the Defense Secretary to ensure that DoD goals--and those of the President--are implemented.

If Congress does not pass the appropriation bill by Oct. 1 the Federal Government requires a “Continuing Resolution” to enable government to function.

Budgeting converts resource allocation decisions into financial requests in the President’s Budget.

What is the role of the Office of Management and Budget during the funding process within the Federal Government?

a) Authorizes funding

b) Appropriates funding

c) Issues warrants (allotments)

d) Apportions funds

Explanation

a) Incorrect. Congress passes authorization acts annually which authorizes the appropriation of funds for programs and activities.

b) Incorrect. Congress passes appropriation bills for agencies to incur obligations and make payments out of the Treasury for specified purposes.

c) Incorrect. The Treasury Department issues warrants, or allotments.

d) Correct! The Office of Management and Budget issues apportionments, or distributions of amounts available in an appropriation into amounts available for specified time periods, activities, projects, or programs.

The Office of Management and Budget (OMB) describes three main phases of the Federal Budget process in OMB Circular A-11. Which of the following phases is NOT one of those described in Circular A-11?

a) Judicial

b) Formulation

c) Congressional

d) Execution

a) Correct! The Judicial Branch does not play a role in the phases of the Federal Budget process described in OMB Circular A-11.

b) Incorrect. Formulation is the phase during which the Executive Branch prepares the President’s Budget (PB).

c) Incorrect. During the Congressional phase Congress considers the President’s Budget (PB), passes an overall revenue and spending plan called a budget resolution, and enacts appropriations.

d) Incorrect. The execution phase lasts at least five fiscal years and includes apportionment, reporting, and outlays.

Which of the following actions can Congress adopt to keep the Department of Defense operating if it fails to pass an appropriation bill by October 1st, the start of a new fiscal year?

a) Nothing, the Department of Defense can continue to operate despite not having an appropriation bill passed

b) Pass a continuing resolution

c) Call for sequestration

d) Pass a rescission

a) Incorrect. The Department of Defense would not be able to continue to operate without a funding source.

b) Correct! A continuing resolution is legislation in the form of a joint resolution enacted by Congress, when the new fiscal year is about to begin or has begun, to provide budget authority for Federal agencies and programs to continue to operate until the regular appropriations acts are enacted.

c) Incorrect. Under a sequestration, an amount of money equal to the difference set in a budget resolution and the amount actually appropriated is 'taken' or held by the Treasury and not given to the agency it was originally appropriated for. Portions of the Defense budget are exempt from sequestration.

d) Incorrect. A rescission is a Congressional reduction to funds already appropriated. Typically a rescission is implemented in subsequent appropriation bills and impact only multi-year appropriations.

Module 2 Intro: Fund Control Regulations and Processes in Budget Execution

In this module, we will discuss Fund Control Regulations and Processes in Budget Execution.

2.0 Module 2 Learning Objectives

Identify the relevant fund control regulations and processes in budget execution;

Identify and describe the roles and responsibilities of key components during the apportionment and funds allocation processes;

Identify and define appropriations and the lifecycle of each; and, Identify changes in budget authority and required actions.

2.1 Relevant Fund Control Regulations and Processes

Let’s begin this module with a review of the relevant fund control regulations. Three of the requirements for legal obligations and expenditures are:

The Purpose Rule (31 US Code 1301) - Funds may be obligated and expensed only for purposes authorized in appropriation acts or other laws

The Time Rule (31 US Code 1502) - A time-limited appropriation is available to incur an obligation only during the period for which it is made, and

The Amount Rule (31 US Code 1341, 1342, 1517) - Obligations and expenditures may not exceed the amounts established in law.

We will discuss the Antideficiency Act (ADA) in more detail later in this module, but below are several affects of violation of this Act:

An officer or employee violating the ADA shall be subject to a written reprimand, suspension from duty without pay, or removal from office

In addition, an officer or employee convicted of willfully violating the ADA shall be fined, imprisoned or both.

2.1.1 OMB Circular A-11

The previous screen on Federal Appropriation Law provides the source law supporting OMB Circular A-11 in the establishment of an Agency or Service fund control system. OMB Circular A-11 describes the purpose of an agency fund control system is to:

Restrict both obligations and expenditures (also known as outlays or disbursements) from each appropriation or fund account to the lower of the amount apportioned by OMB or the amount available for obligation or expenditure in the appropriation or fund account; and

Enable the agency head to identify the person responsible for any obligation or expenditure exceeding the amount available in the appropriation or fund account, the OMB apportionment or reapportionment, the allotment or sub-allotments made by the agency, any statutory limitations, and any other administrative subdivision of funds made by the agency.

2.1.2 DoD Financial Management Regulations (DoD FMR) (DoD 7000.14-R)

DoD Financial Management Regulations (DoD FMR) state that:

DoD Components are required to establish and maintain effective controls over appropriations and other funds, DoD Components must establish a reporting system for the administrative control of funds process to provide data for reviewing the efficiency (such as the obligation rate) with which funds are used. Reporting requirements must be established separately from a formal administrative subdivision of funds limitation when a need exists to accumulate data below the allotment level, and

DoD Components must design systems for the administrative control of funds so that formal administrative subdivisions of funds are placed at the highest practical organizational level consistent with effective and efficient management.

2.1.3 Anti-Deficiency Act (ADA)

As mentioned earlier, non compliance with applicable statutes regarding the execution of appropriated funds can result in serious consequences because it may violate significant legislative acts,…