Air Force Institute of Technology Educating the World s

Air Force Institute of Technology Educating the World’s Best Air Force Budget Basics for Logisticians-Operations Strength Through Education

Budget Basics Topics • About the DCo. L series and this “Budget Basics” course • Fiscal Law: Civics, concepts, statutes • Execution in the Executive Branch • Squadron Commander issues • Wrap-up 2

Budget Basics-DCOL Series • Short, non-mandatory “blended learning” courses • Intent: provide convenient overview of topics relevant to particular positions • Target: field graders “in transit” 3

Budget Basics-This Course • No animals were harmed in the production of this course. • Equipment used in creation of this course may also have been used to process nuts and milk products. 4

Budget Basics the stage play based on the movie This course: • Rapid look at financial world • Help the new student efficiently scope and plan additional self study • NOT the DCo. L version • Assuming new / narrow student 5

Budget Basics--Intro Your Web Instructor: 6

Budget Basics-Intro Your instructor: 7

Budget Basics—Fiscal Law Terms 8

Budget Basics—Fiscal Law Termites 9

Budget Basics—Fiscal Law Terms Team Trivia! • Move forward if you haven’t done so already • Congregate into groups of 3 -5 • Elect a spokesman • Fill in the blank for each question 10

Budget Basics—Fiscal Law • Congress’s permission for the Executive Branch to take specified actions and set up agencies with respect to some area of policy. 11

Budget Basics—Fiscal Law Authorization • Congress’s permission for the Executive Branch to take specified actions and set up agencies with respect to some area of policy. 12

Budget Basics—Fiscal Law • Congress’s permission for Federal agencies to obligate federal funds, usually with specific limitations on purpose, time and amount. 13

Budget Basics—Fiscal Law Appropriation • Congress’s permission for Federal agencies to obligate federal funds, usually with specific limitations on purpose, time and amount. 14

Budget Basics—Fiscal Law • The legal right to spend money (within restrictions) granted by Congress to a Federal agency; also often used to refer to the amount of funds associated with that permission. 15

Budget Basics—Fiscal Law Budget Authority (BA) • The legal right to spend money (within restrictions) granted by Congress to a Federal agency; also often used to refer to the amount of funds associated with that permission. 16

Budget Basics—Fiscal Law • A promise by the government to pay. 17

Budget Basics—Fiscal Law Obligation • A promise by the government to pay. 18

Budget Basics—Fiscal Law • The total amount that is in an agency's "checkbook, " which may include amounts appropriated or otherwise permitted in different years and by different acts of Congress, with different periods of availability. 19

Budget Basics—Fiscal Law Obligation Authority (OA) • The total amount that is in an agency's "checkbook, " which may include amounts appropriated or otherwise permitted in different years and by different acts of Congress, with different periods of availability. 20

Budget Basics—Fiscal Law • Time limits set by Congress on how long money can be used. 21

Budget Basics—Fiscal Law Period of Availability • Time limits set by Congress on how long money can be used. 22

Budget Basics—Fiscal Law • Money (obligation authority) made available to (distributed to) an agency by the Office of Management and Budget. 23

Budget Basics—Fiscal Law Apportionment • Money (obligation authority) made available to (distributed to) an agency by the Office of Management and Budget. 24

Budget Basics—Fiscal Law • “Satisfaction of an obligation”— payment of a bill in which money passes from the government to a recipient. 25

Budget Basics—Fiscal Law Outlay / disbursement / expenditure • “Satisfaction of an obligation”— payment of a bill in which money passes from the government to a recipient. 26

Budget Basics—Fiscal Law • Head of the Government Accountability Office (GAO) and *authoritative* Federal funds accountancy rule maker. 27

Budget Basics—Fiscal Law Comptroller General • Head of the Government Accountability Office (GAO) and authoritative Federal funds accountancy rule maker. 28

Budget Basics—Fiscal Law And the winners are… 29

Budget Basics—Fiscal Law ? 30

Common Thought… “Public money ought to be touched with the most scrupulous conscientiousness of honor. It is not the produce of riches only, but of the hard earnings of labor and poverty. It is drawn even from the bitterness of want and misery. Not a beggar passes or perishes in the streets, whose mite is not in that mass. ” Thomas Paine, 1737 -1809 31

Budget Basics—Fiscal Law 32

Budget Basics—Fiscal Law 33

Budget Basics—Fiscal Law Civics 101 34

Foundations of Fiscal Law §To guarantee freedom, government must be limited; to achieve limitation: §Powers of government need to be specifically listed and assigned §Powers of government must be separated §The people must have some direct voice 35

Foundations of Fiscal Law §To guarantee freedom, government must be limited; to achieve limitation: §Powers listed and assigned: CONSTITUTION §Powers separated: three clearly demarcated branches §People’s direct voice: CONGRESS, especially the House 36

Foundations of Fiscal Law “Three branches, working together in harmony to achieve balanced, limited government. ” (? ) 37

Foundations of Fiscal Law Three branches, working together… 38

Sources of Fiscal Law • • • US Constitution US Code Authorization Acts Appropriation Acts Comptroller General & Court Decisions 39

Budget Basics—Fiscal Law Civics 102 §Slip Law vs Statutes at Large vs United States Code 40

A pleasant intermission… 41

Basic Rule of Fiscal Law “No money shall be drawn from the Treasury, but in consequence of appropriations made by law. ” Article I, Section 9, Clause 7, the “Appropriations Clause” U. S. Constitution “The established rule is that the expenditure of public funds is proper only when authorized by Congress, not that public funds may be expended unless prohibited by Congress. ” (emphasis added) U. S. vs. Mac. Collum (1976) 42

Basic Rule of Fiscal Law “Practical” consequence of that basic rule: Executive Branch agencies (and agents) must have ? ? ? ? ? ? to spend public money! 43

Basic Rule of Fiscal Law “Practical” consequence: Executive Branch agencies (and agents) must have AFFIRMATIVE AUTHORITY to spend public money ! 44

The Result: Fiscal Controls! Disclaimer: real Fiscal Law • • Legislated Regulated Adjudicated Audited …and therefore • Contentious • Complicated • “Criminalized” 45

Congressional “Power of the Purse” • Congress appropriates money for the purposes it chooses • Congress may specify: • The purpose for which funds may be used • The length of time the funds are available • The amount that may be spent 46

Restrictions on Spending Purpose Statute “Appropriations shall be applied only to the objects for which the appropriations were made except as otherwise provided by law. ” 31 USC Section 1301 47

Restrictions on Spending Purpose Statute Necessary Expense Doctrine: legal test for “proper purpose” • Logically connected to the appropriation • Not prohibited by another law • Not otherwise provided for in another appropriation 48

Restrictions on Spending Time Statute • “An appropriation is available only for a certain time, after which the authority to obligate expires. ” 31 USC Section 1502 “Congress has the right to limit its appropriations to particular times as well as particular objects, and when it has done so, its will expressed in the law shall be implicitly followed. ” 13 Op. Att’y Gen 288, 292 (1870) 49

Life Cycle of Appropriations 1 1 Year 2 Year 3 Year 5 Year 2 3 4 5 6 7 8 9 10 ü X ü X X ü Active: Available for new budget authority Expired: Available to adjust budget authority already incurred Canceled: Accounts canceled. Budget Authority or adjustments that would otherwise be chargeable to these years must be charged to active funds 50 ü = Canceling Year X = Expiring Year

Bona Fide Needs Rule • Agencies may obligate appropriated funds only for properly incurred expenses during the period of availability of those funds • Agencies may only purchase an item when it is actually needed • The proper fiscal year funds must be used for obligation and payment 51

Restrictions on Spending Amount • Do not make payments or obligate the United States to make payments at some future time, for goods or services, unless there is enough money in the appropriation to cover the cost in full. 31 USC Sections 1341, 1342, and 1517 (paraphrased) 52

What is the Antideficiency Act? The law requiring that federal agencies use legally available funds and only legally available funds to conduct their official business. 53

Antideficiency Act Augmentation (and “volunteer help”) —Can’t do it /accept it! 54

Legally Available Funds “Legally available” funds are funds: • From an appropriation act • To be used for an objective authorized by statute • Which have not expired • To be used to meet a current requirement 55

What is the Antideficiency Act? The law requiring that federal agencies use legally available funds and only legally available funds to conduct their official business. 56

Antideficiency Act • Principal law protecting Congressional “power of the purse” • Established in response to Executive branch abuses • Incorporates criminal penalties • Found in: • 31 USC 1341(a) Limitations on Expending and Obligations Amounts • 31 USC 1342 Limitation on Voluntary Services • 31 USC 1517(a) Prohibited Obligations and Expenditures 57

Antideficiency Act Major Provisions: • You can’t spend (obligate) money you don’t legally have, or for purposes other than those for which it is intended • You can’t contract/promise to provide money until you legally get it • You can’t receive services without paying for them • You can’t spend more money than you “legally” have 58

Antideficiency Act Violations Why do we care? • Law was broken, intentionally or not • Creates perception by Congress and the people that the Air Force does not manage its money • Leads to increased Congressional oversight • Leads to future funding reductions • Overshadows our efforts to achieve economy and efficiency in operations 59

Antideficiency Act Violations Why do we really care? • Criminal penalties for knowing and willful violation • Politically painful reporting of any violation, regardless of intent 60

Antideficiency Act ADA violation reporting chain CONGRESS PRESIDENT SECDEF SAF MAJCOM CC CENTER/BASE CC VIOLATING OFFICE 61

Types of Do. D Appropriations MILITARY PERSONNEL 3500 Funds MILPERS O&M Proc RDT&E MILCON ACTIVE FORCES RESERVE FORCES OPERATION AND MAINTENANCE 3400 Funds CIVILIAN SALARIES SUPPLIES SPARES FUELS TDY PROCUREMENT 3080, 3011, 3020 Funds AIRCRAFT MISSILES WEAPONS AND TRACKED COMBAT VEHICLES PROCUREMENT OF AMMUNITION OTHER PROCUREMENT CHEMICAL AGENTS MUNITIONS DESTRUCTION WEAPONS RESEARCH, DEVELOPMENT, TEST, AND EVALUATION 3600 Funds BASIC RESEARCH EXPLORATORY DEVELOPMENT ADVANCED DEVELOPMENT DEMONSTRATION & VALIDATION ENGINEERING & MANUFACTURING DEVELOPMENT RDT&E MANAGEMENT SUPPORT OP SYSTEMS DEVELOPMENT MILITARY CONSTRUCTION 3300 Funds FACILITIES HOUSING HANGARS 62

Appropriation Categories APPN CAT RDT & E PROC O&M SCOPE LABOR H/W R&D DEDICATED FUNDING POLICY OBLIGATION PERIOD INCREMENTAL 2 YEARS H/W LABOR FULL INITIAL SPARES 3 YEARS O&M CIV SALARIES MINOR CONST ANNUAL 1 YEAR MILPERS MIL SALARIES MIL RET ANNUAL 1 YEAR MILCON FULL 5 YEARS FACILITIES 63

Life Cycle of Appropriations 1 1 Year 3400, 3500 2 Year 3600 3 Year 3010, 3011, 3020, 3080 5 Year 3300 2 3 4 5 6 7 8 9 10 ü X ü X X ü Active: Available for new budget authority Expired: Available to adjust budget authority already incurred Canceled: Accounts canceled. Budget Authority or adjustments that would otherwise be chargeable to these years must be charged to active funds 64 ü = Canceling Year X = Expiring Year

Fiscal Law “Final” Group Question: If you could give a soon-to-be squadron commander two and only two rules to avoid fiscal problems, what would they be? 65

School solution 1) If there is any doubt, consult with a financial management professional before obligating money 66

School solution 2) Don’t cross the streams! 67

A pleasant intermission… 68

Budget Basics Topics • About the series and this course • Fiscal Law: Civics, concepts, statutes • Execution in the Executive Branch • Squadron Commander issues • Wrap-up 69

Budget Basics--Execution Topics • About the series and this course • Fiscal Law: Civics, concepts, statutes • Execution in the Executive Branch • Squadron Commander issues • Wrap-up 70

Budget Basics Execution Motivation Themes Basic Scheme 71

Execution Motivation 72

Execution Motivation 73

Budget Basics Execution Motivation Themes Basic Scheme 74

Execution Themes Traceability Management 75

Execution Themes Traceability Maintenance of specific enough records to demonstrate to successive echelons of Executive Branch leadership, and eventually Congress, that money was spent in the way it was legislated to be spent. 76

Types of Do. D Appropriations MILITARY PERSONNEL 3500 Funds MILPERS O&M Proc RDT&E MILCON ACTIVE FORCES RESERVE FORCES OPERATION AND MAINTENANCE 3400 Funds CIVILIAN SALARIES SUPPLIES SPARES FUELS TDY PROCUREMENT 3080, 3011, 3020 Funds AIRCRAFT MISSILES WEAPONS AND TRACKED COMBAT VEHICLES PROCUREMENT OF AMMUNITION OTHER PROCUREMENT CHEMICAL AGENTS MUNITIONS DESTRUCTION WEAPONS RESEARCH, DEVELOPMENT, TEST, AND EVALUATION 3600 Funds BASIC RESEARCH EXPLORATORY DEVELOPMENT ADVANCED DEVELOPMENT DEMONSTRATION & VALIDATION ENGINEERING & MANUFACTURING DEVELOPMENT RDT&E MANAGEMENT SUPPORT OP SYSTEMS DEVELOPMENT MILITARY CONSTRUCTION 3300 Funds FACILITIES HOUSING HANGARS 77

Life Cycle of Appropriations 1 1 Year 3400, 3500 2 Year 3600 3 Year 3010, 3011, 3020, 3080 5 Year 3300 2 3 4 5 6 7 8 9 10 ü X ü X X ü Active: Available for new budget authority Expired: Available to adjust budget authority already incurred Canceled: Accounts canceled. Budget Authority or adjustments that would otherwise be chargeable to these years must be charged to active funds 78 ü = Canceling Year X = Expiring Year

Execution Themes Management Influencing actual expenditure in terms of amount, rate, and (permissible) transfer between accounts to enhance mission accomplishment. 79

Execution Motivation Themes Basic Scheme 80

Execution 81

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Execution-OMB -Assists the President in overseeing the preparation of the budget (PB). -Supervises its administration agencies. by -Evaluates the effectiveness of agency programs/sets funding priorities. -Ensures agency rules, proposed legislation etc. , are consistent with President’s policy. -Oversees procurement, financial management, and regulatory policies. 83

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Execution Apportionment • Money (obligation authority) made available to (distributed to) an agency by the Office of Management and Budget. 91

Execution Apportionments Allocations Sub-allocations Allotments Sub-allotments 92

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Budget Basics Topics • About the series and this course • Fiscal Law: Civics, concepts, statutes • Execution in the Executive Branch • Squadron Commander issues • Wrap-up 95

Squadron CC Issues Read the book! Resource Advisor hints Smattering of terms Some programs to be aware of Some other sources of money 96

Squadron CC Issues READINGS AND ASSIGNMENTS : Readings get the student into AFI 65 -601, BUDGET GUIDANCE AND PROCEDURES Hints send them to AFI 34 -223, PRIVATE ORGANIZATIONS (PO) PROGRAM and 36 -3101, FUNDRAISING WITHIN THE AIR FORCE Links take them to sites such as the GOVERNMENT CHARGE CARD GUIDEBOOK 97

Squadron CC Issues RESOURCE ADVISOR HINTS • Talk to the outgoing CC on RA’s abilities • Get to know him or her early • Review and ensure RA training has taken place • Have the RA give you a briefing on unit financial status/issues 98

Squadron CC Issues SMATTERING OF TERMS Reimbursable Budget Authority Funding Document Fund Cite New Start 99

Squadron CC Issues Some Programs to be aware of: GPC BBP EDC / MEDC 100

Squadron CC Issues Some other sources of money: • Working Capital Funds • AAFES MWR monies 101

Wrap-up Knowing what you know about budget issues, and the Budget Basics course, what suggestions would you make on material to include? To Exclude? 102

Wrap-up wrap-up THANKS FOR YOUR TIME! 103