Financial Management Guide

1. UNCLASSIFIED Financial Management Guide 9 Jan 2012 UNCLASSIFIED

2. Overview • Federal Budget Process • Types and Uses of DoD Appropriations • Key Players in Resource Management • Fiscal Year Process • Annual Major Financial Drills • 10 Commandments of Spending Public Funds • Guide to Financial Success • Common Financial Acronyms • Financial References • Glossary

3. 2 BUDGET PROCESS -ANNUAL FUNDS DISTRIBUTION PRESIDENT’S BUDGET CONGRESS UNIT LEVEL DOD/USAF PPBS BASE LEVEL MAJCOM

4. The President’s Budget Request • On or before the first Monday in February, the President submits to Congress a detailed budget requests for the coming federal fiscal year, which begins in Oct 1. This budget request, developed by the President’s Office of Management and Budget (OMB), plays three important roles: • First, it tells Congress what the President believes overall federal fiscal policy should be. • Second, the budget request lays out the President’s priorities for federal programs. • Third, it signals to Congress what spending and tax policy changes the President recommends.

5. Congressional Budget Resolution • After receiving the PBR, Congress holds hearings to question Administration officials about their request and then develops its own budget resolution. Unlike the President’s budget, which is very detail, the congressional budget resolution is a very simple document. It consists of a set of numbers stating how much Congress is supposed to spend in each of 19 broad spending categories and how much total revenue the government will collect of each of the next five or more years. • The budget resolution establishes aggregate totals with respect to revenues and spending for the entire federal budget.

6. 3 What does Congress do? The Congressional Process:Insights into Legislative Operations (Enactment Phase of PPBE)

7. 4 Constitutional Authority Power of the purse Advice and consent to the President Make all laws ARTICLE 1, SECTIONS 8 & 9: “The Congress shall have the power to provide for the common defense... ...raise and support armies, but no appropriation of money to that use shall be for a longer term than two years... ...provide and maintain a navy; ...make rules for the government and regulation of land and naval forces... ...No money shall be drawn from the Treasury, but in Consequence of Appropriations made by law...”

8. Federal Budget Process Basics Bases receive various types of funds which must be authorized and appropriated by Congress • The way in which Congress develops tax and spending legislation is guided by a set of specific procedures laid out in the Congressional Budget Act of 1974. The centerpiece of the Budget Act is the requirement that Congress each year develop a “budget resolution” setting overarching limits on spending and on tax cuts. The federal budget process includes: • The President’s Budget Request (PBR), which kicks off the budget process each year • The Congressional Budget Resolution—how it is developed and what it contains • How the terms of budget resolution enforcement are used by the House and Senate and • Budget “reconciliation,” a special procedure used in some years to facilitate the passage of spending and tax legislation

9. 5 The Players:Senators & Representatives HOUSE* SENATE • 100 Members • 19 Committees • 6 Year term of office • 1/3 of seats up for election • every two years • Two members per State • Minority rights • 435 Members • 20 Committees • 2 Year term of office • All seats up for election • every two years • One representative per district • Majority rules *All Spending Bills originate in the House of Representatives

10. 7 Congressional Enactment of The President’s Budget Time Now

11. 8 TYPICALLY TYPICALLY APPROPRIATORS Are.....More BUDGET Oriented AUTHORIZERS Are.....More POLICY Oriented Authorization Versus Appropriations • Authorization • Grant legal authority for • programs • Policy oriented • Generally permanent law • Appropriations • Grant actual funds and • provide authority to incur • obligations and make outlays • Budget oriented • Generally one-year law • On Direction, The more specific generally rules • On Funding, appropriations generally rules

12. 11 Continuing Resolution Authority (CRA) • If Appropriations bill not signed into Law by Oct 1st, a CRA is • required to continue Federal expenditures • CRA continues appropriations at level from previous fiscal year • President must sign CRA • If either House or Senate has passed an Appropriations Bill with • levels lower than last year for a given program, then the lowest • level is continued. • No New Starts under CRA (Congress has not appropriated funds yet for the • effort) • Normally under CRA, Corporate Air Force receives 80% of the lower • Auth/Appn of the prior year budget, then determines distribution . . . • Distributed at 1/12 of total amount monthly • Must specify programmatic impact if more that 1/12 is required

13. 12 How can I tell what kind of money I get and what I can use it for?Appropriated Funds

14. 13 Types of DOD Appropriations Funds for Air Force operations are made available by Congress through a variety of appropriations: I. Investment Appropriations: • Research, Development, Test, and Evaluation (RDT&E) (3600) • Aircraft Procurement (3010) • Missile Procurement (3020) • Other Procurement (3080) • Military Construction (MILCON) (3300) II. Operation and Maintenance Appropriations • Operation and Maintenance Appropriations (O&M) (3400) • Military Personnel (MILPERS) (3500)

15. 14 Uses of DOD Appropriations 3600 (RDT&E) Development of: Weapon systems, equipment, material, Application software Developmental engineering Test: Developmental Test & Evaluation (DT&E) Initial Operational Test & Evaluation (IOT&E) Mission support (PMA) 3010 (Aircraft Procurement) Procurement of: Aircraft Weapon Systems MODs Spares and Repair Parts Training devices Common Support Equipment Mission support (PMA) 3080 (Other Procurement) 3400 (O & M) Investment equipment > $250,000 Installation costs of investment equipment Mission support (PMA) for System Acquisition programs Civilian Payroll Travel Education and training Base Operations Support (BOS) Expenses of operational military forces Maintenance (Facilities and Software) Minor construction < $750,000 else use MILCON Investment equipment < $250,000 Mission support (PMA)

16. 15 KEY PLAYERS IN RESOURCE MANAGEMENT COMMANDER Financial management is a function of command. The Commander has the primary responsibility for all appropriated funds issued to the organization by virtue of the position as the first level resource manager. This includes funds sent to us by other organizations to execute. The commander has the ultimate responsibility for reviewing, validating, and balancing the budget to ensure the success of the financial management process. Of course this would be a formidable task for one person alone. Therefore, the commander delegates this authority downward through his chain of command. The Commander, along with his/her staff, sets the tone and inspires proper attitudes for the successful accomplishment of the organizational mission. BUDGET OFFICE Budget Office is the Commander’s chief financial advisor. The Budget Office oversees the financial management portion of the Resource Management System and ensures the economical and efficient use of resources are consistent with statutory and regulatory requirements. RESPONSIBILITY CENTER MANAGERS (RCM) The RCM is a commander of an organization or chief of an agency. RCMs are responsible for planning, directing, and coordinating the activities of subordinate organizations. They direct the accomplishment of work by subordinate units, who, in turn consume resources in performance of that work. The RCM is responsible for identifying causes of overages or shortages, determining alternative actions, and culminates in decisions to bring the program in line.

17. 17 KEY PLAYERS IN RESOURCE MANAGEMENT (cont) ACCOUNTING LIAISON OFFICE (ALO) The ALO is responsible for certifying funds availability on all commitment documents and managing those commitments in the accounting system. ALL expense documents created by the SIDC must be certified by the ALO before funds are spent. Other duties include, but are not limited to, managing the open document listing, administering the Automated Business Services System (ABSS), certifying travel orders, and functioning as a liaison between the base RAs and the Defense Finance and Accounting Service (DFAS). BASE CONTRACTING OFFICE (Contracting Squadron (CONS)) Duties of the contracting office include, but are not limited to, soliciting bids/proposals from businesses, administering contracts for goods/services for base units, providing government purchase card (GPC) training to approving officials/cardholders and inspecting unit GPC records. DEFENSE FINANCE AND ACCOUNTING SERVICE (DFAS) The duties of DFAS include, but are not limited to, managing obligations/expenditures within the accounting system, making payments to vendors, posting support agreement reimbursements and managing obligations on the open document listing.

18. Funding “The Big Picture” Bases receive various types of funds which must be authorized and appropriated by Congress • These appropriations have various lifespans (e.g., one-year, multi-year), where the funds are considered to be either “current” or “expired” • Current funds - may be committed, obligated, and expensed for valid requirements in accordance with the appropriation laws • Expired funds - may only be expensed (paid) for obligations which were established when the funds were “current.” Must use the proper year’s funding, if available, to make payment (i.e., a valid FY08 O&M obligation requires FY08 O&M funds). If not available within the Air Force, then current year’s funds must be used

19. FISCAL YEAR PROCESS

20. 19 FISCAL YEAR TIMELINE OF MAJOR FINANCIAL DRILLS ID Mid-Year

21. 20 ANNUAL MAJOR FINANCIAL DRILLS • INITIAL DISTRIBUTION – The fiscal year runs from 1 Oct through 30 Sep. The Continuing Resolution Authority (CRA) typically occurs the first quarter because Congress has not completed work on the annual appropriations. After MAJCOM receives its share of the Air Force budget from SAF/FM, they “distribute” funding down to the installation. • EXECUTION (SPEND PLAN) – The Spend Plan is the RAs “road map” to success and is absolutely fundamental to analyzing a program. The Spend Plan is used to project how much each unit will obligate each month until the end of the fiscal year. At FWG meetings, analysts (RAs) should explain variances (+/- 5%) between what was planned and what was actually obligated. The Spend Plan will help raise the flag if a unit is spending too much, too fast. Performing analysis of a program involves comparing obligations/expenditures against your planned program (spend plan). When there is no spend plan, there is no comparison; hence, there is no true analysis. • CLOSEOUT – Most of the funding at base-level is known as one-year money, which means that at the end of the fiscal year (30 Sep), the funding will expire and no longer be available for new obligations. Closeout begins in the Jun/Jul time-frame, and includes key players from many organizations (CONS, CPTS, Base Supply, CES, Civ Personnel, etc.). The main thrust of this drill is to “scrub” all financial accounting records, and effectively execute all current year funding to pay for un-funded requirements and end-of-year spend list items.

22. 21 MAJOR FINANCIAL DRILLS (cont) • UNFUNDED REQUIREMENTS: The unfunded requirements process used to be called the Budget Execution Review (BER). No longer will HQ AFSPC accept unfunded requirements based on the BER philosophy. Rather, HQ AFSPC believes that mission essential must pays count as unfundeds. An example of this is Civilian Pay (Civ Pay). Civ Pay is a must pay – it has to be paid. If we take money from some other mission to pay for Civ Pay, then we can ask HQ AFSPC for funds to cover the shortage generated by the Civ Pay shortage. In short, if there will be a mission failure, then the unfunded becomes critical enough to submit to HQ AFSPC.

23. Ten Commandments of Spending Public Funds • DO NOT obligate (i.e., spend) money until you get it • DO NOT obligate more funds than you have • DO NOT use funds for other than their intended use • DO NOT exceed Congressional limitations • DOspend each dollar as if it were your own • DObe sure that sufficient funds are reserved for contingencies and other potential liabilities • DOmanage your program THROUGHOUT the appropriation cycle (October through September) • DOstay attuned to the current funding climate. Carefully analyze the effect other funding programs could have on your program • DOidentify potential problem areas ASAP • DO report identified problems through chain of command, as required

24. Guide to Financial Success Be ACTIVE in Financial Management ! • Stay informed as processes change • Communicate with your resource advisor

25. Guide to Financial Success REMEMBER ! Youare your own best advocate for your organization’s financial requirements • If your requirements cannot be fully funded, know the impact on your mission • Develop alternatives

26. Guide to Financial Success Be ACTIVE in Financial Management ! • Stay informed as processes change • Communicate with your resource advisor

27. COMMON FINANCIAL ACRONYMS

28. 42 COMMON FM ACRONYMS • Like any other career field in the Air Force, FM has it’s own language. Below are some • common acronyms and terms that we use on a daily basis: • ALO-Accounting Liaison Office • ADA-Anti-Deficiency Act • AEU-Accrued Expenditures Unpaid • AEP-Accrued Expenditures Paid • BA-Budget Activity • BOS-Base Operations Support • BPA-Blanket Purchase Agreement • BPIE-Base Procured Investment Equipment • BPAC-Budget Program Activity Code • Bogey-Lump-sum dollar amount that represents the anticipated availability of funding for the • next fiscal year • Ceiling-represents a specified dollar amount which cannot be exceeded without prior • approval of the MAJCOM • CCM-Cost Center Manager • CFY-Current Fiscal Year • CRA-Continuing Resolution Authority • DFAS-Defense Finance and Accounting Service

29. 43 COMMON FM ACRONYMS (cont) • EA-Economic Analysis • EDA-Electronic Data Access • ESP-Emergency & Special Program Code • FASCAP-Fast Payback Capital Investment Program • FC-Fund Code • Floor-minimum dollar amounts which must be spent in support of a specific program. You can • spend more than the established floor but not less. • FMA-Financial Analysis Office • FMB-Financial Management Board • FSO-Financial Services Office (or Officer) • FSR-Funds Summary Record • FWG-Financial Working Group • FY-Fiscal Year • FYDP-Future Years Defense Program • MFH-Military Family Housing • MicroBAS-Micro Based Budget Accounting System • MIPR-Military Interdepartmental Purchase Request • O&M-Operations & Maintenance • OBAD-Operating Budget Authority Document • OBAN-Operating Budget Account Number • ODL-Open Document Listing • OBL-Operating Budget Ledger

30. FINANCIAL REFERENCES

31. 45 COMMON FM REFERENCES • AFI 65-601, vol 1, Budget Guidance and Procedures • AFI 65-601, vol 2, Budget Management for Operations • AFI 65-601, vol 3, The Air Force Budget Corporate Process • AFI 65-603, Official Representation Funds – Guidance and Procedures • AFMAN 65-604, Appropriation Symbols and Codes • AFI 65-106, Appropriated Fund Support of MWR • AFI 65-201, Management Control Program • AFI 25-201, Support Agreement Procedures • AFI 65-608, Anti-Deficiency Act Violations • DFAS-DE 7010.1-R, General Accounting and Finance Systems at Base Level • DFAS-DE 7010.2-R, Commercial Transactions at Base Level • DoD 7000.14-R, Department of Defense Financial Management Regulations

32. 45 COMMON FM REFERENCES • AFI 65-601, vol 1, Budget Guidance and Procedures • AFI 65-601, vol 2, Budget Management for Operations • AFI 65-601, vol 3, The Air Force Budget Corporate Process • AFI 65-603, Official Representation Funds – Guidance and Procedures • AFMAN 65-604, Appropriation Symbols and Codes • AFI 65-106, Appropriated Fund Support of MWR • AFI 65-201, Management Control Program • AFI 25-201, Support Agreement Procedures • AFI 65-608, Anti-Deficiency Act Violations • DFAS-DE 7010.1-R, General Accounting and Finance Systems at Base Level • DFAS-DE 7010.2-R, Commercial Transactions at Base Level • DoD 7000.14-R, Department of Defense Financial Management Regulations

33. DoD 7000.14-R Vol 14 • Prescribes Air Force policies and procedures designed to enforce FINANCIAL DISCIPLINE and affix INDIVIDUAL RESPONSIBILITY for violations, as required by law. • States: “Individuals ... shall use funds only for the purpose prescribed and shall not exceed funding authority, including any limitations within or on that authority.” • No member shall authorize or create an obligation to the government beyond the amount permitted under any statutory or regulatory limitation that restricts the availability of funds for a specified purpose.

34. DoD 7000.14-R Vol 14 Why all the fuss about this regulation? • Simply, all personnel who are specifically authorized to commit funds, authorize or incur obligations, or expend Air Force funds, must be aware of this regulation. • No member shall authorize/create an obligation beyond the amount permitted under any statutory or regulatory limitation that modifies or restricts the availability of funds for a specified purpose. • You must obtain certification of funds availability.