CHAPTER. Planning, Programming, Budgeting and Execution Procedures

Transcription

1 CHAPTER 4 Planning, Programming, Budgeting and Execution Procedures The ultimate objective is to provide commanders with the best mix of forces, equipment and support attainable within fiscal constraints.

2 4.0. The Budget. The term budget refers to the President's Budget The Budget of the United States Government. The budget consists of several volumes that set forth the President's financial proposal with recommended priorities for allocating resources. The main Budget volume contains the President's Budget message and other broad statements of policy. The Appendix contains detailed information by agency, bureau or program group, budget accounts, programs, and activities. Other volumes, such as Analytical Perspectives and Historical Tables, provide complementary views of the budget. Most of the information contained in the budget is, or is based on, information submitted by agencies. The term "budget" can mean other things in other contexts. It often refers to the full receipt and outlay proposals rather than the volumes in which these amounts are published. Some people refer collectively to the budget resolution and revenue and spending bills that the Congress passes as the "congressional budget." Ultimately, the Congress and the President enact many laws that control the Government's receipts and spending, which are sometimes referred to collectively as the budget, as in "enacting the budget." This section provides a broad overview of the budget process. There are four broad principles for a budget process. A process should: Provide information about the long-term impact of decisions, both macro -- linking fiscal policy to the long-term economic outlook -- and micro -- providing recognition of the long-term spending implications of government commitments; Provide information and be structured to focus on important macro trade-offs -- e.g., between investment and consumption; Provide information necessary to make informed trade-offs between missions (or national needs) and between the different policy tools of government (such as tax provisions, grants, and credit programs); and Be enforceable, provide for control and accountability, and be transparent, using clear, consistent definitions Why Prepare a Budget. A law requires the President to submit a budget. The President formally transmits his proposals for allocating resources to the Congress through the budget. The Congress considers the recommendations and uses the information included in the budget as it drafts and passes laws that affect spending and receipts. Through this process the Government decides how much money to spend, what to spend it on, and how to raise the money it has decided to spend.

3 Information Provided in the Budget. The budget focuses primarily on the budget year - the upcoming fiscal year for which the Congress needs to make appropriations. However, it includes data for the most recently completed year, the current year, and at least the four years following the budget year (out-years) in order to reflect the effect of budget decisions over the longer term. In addition to proposed appropriations for the budget year, the budget may include proposed changes to appropriations for the current year (supplementals and rescissions), and legislative proposals that would affect the current year, the budget year, or the out-years. The budget provides actual or estimated data for each of the following. The amount by account that each agency may obligate the Government to pay (budget authority) and estimates of payments (outlays) by agency and account. The amount of receipts each agency collects from various sources. Budget authority, outlays, and receipts by major function of Government, such as national defense (This is why we assign each budget account a functional classification code(s)). Total budget authority, outlays, and receipts for the Government. The actual or estimated surplus (when receipts exceed outlays) or deficit (when outlays exceed receipts). The budget divides the Government totals for budget authority, outlays, and receipts into "on-budget" amounts and "off-budget" amounts. The offbudget amounts include the transactions of the Social Security trust funds and the Postal Service, which are excluded by law from the on-budget totals. The budget arrays data in many different ways. For example, one section of the budget focuses solely on Federal investment spending. Also, while the budget focuses primarily on dollars, it also includes data on other resources, such as Federal employment levels.

4 Agencies Covered by the Budget. The budget covers the agencies of all three branches of Government, Executive, Legislative, and Judicial, and provides information on Governmentsponsored enterprises. In accordance with law or established practice, the Office of Management and Budget (OMB), includes information on agencies of the Legislative Branch, the Judicial Branch, and certain Executive Branch agencies as submitted by those agencies without change. By longstanding practice, the budget presents information about the Board of Governors of the Federal Reserve System but does not include amounts for the Board in the budget totals, even though it is a Government agency, because of the independent status of the System. The budget includes information about the Government-sponsored enterprises, such as the Federal National Mortgage Association (Fannie Mae), but does not include them in the budget totals because they are privately owned. below Federal Budget Process and Timeline. The budget process occurs in three main phases as described Formulation Phase. During this phase, the Executive Branch prepares the President's Budget. OMB and the Federal agencies begin preparing the next budget almost as soon as the President has sent the last one to the Congress. OMB officially starts the process by sending planning guidance to Executive Branch agencies sometime in the Spring. The President completes this phase by sending the budget to the Congress on the first Monday in February, as specified in law. Congressional Phase. This phase starts in late January or February when the Congress receives the President's Budget. The Congress does not vote on the President's Budget itself, and it does not enact a budget of its own, as such. It considers the President's Budget proposals, passes an overall revenue and spending plan called a "budget resolution," and enacts the thirteen regular appropriations acts and other laws that control spending and receipts. Execution Phase. This phase lasts for at least five fiscal years and includes two parts. The apportionment part pertains to funds appropriated for that fiscal year and to balances of appropriations made in prior years that remain available for obligation. At the beginning of the fiscal year, and at such other times as necessary, OMB apportions funds. That is, OMB specifies the amount of funds that an agency may use by time period, program, project, or activity to Executive Branch agencies. Throughout the year, agencies hire people, enter into contracts, and enter into grant agreements, etc., in order to carry out their programs, projects, and activities. These actions use up the available funds by obligating the Federal Government to make outlays, immediately or in the future.

5 The reporting and outlay part lasts until funds are canceled (oneand multiple-year funds are canceled at the end of the fifth year after the funds expire for new obligations) or until funds are totally disbursed (for no-year funds). The actual timing may vary from the plan. For example, the Congress frequently does not enact all appropriation acts by the start of the fiscal year, and on several occasions a President has submitted the budget later than specified for various reasons, including late enactment of appropriations for the previous fiscal year or a change in Administrations. Since budget cycles overlap, we must begin the next cycle before completing the last one Major Steps in the Formulation Phase. OMB issues Spring planning guidance to Executive Branch agencies for the upcoming budget. The OMB Director issues a letter to the head of each agency providing policy guidance for the agency's budget request. In the absence of more specific guidance, the out-year estimates included in the previous budget serve as a starting point for the next budget. This begins the process of formulating the budget the President will submit the following February Spring. OMB and the Executive Branch agencies discuss budget issues and options. OMB works with the agencies to: Identify major issues for the upcoming budget; Develop and analyze options for the upcoming Fall review; and Plan for the analysis of issues that will need decisions in the future Spring and Summer. OMB issues Circular No. A - 11 to all Federal agencies. This Circular provides detailed instructions for submitting budget data and materials July. Executive Branch agencies (except those not subject to Executive Branch review) make budget submissions Fall. Fiscal year begins October 1. The just completed budget cycle focused on this fiscal year. It was the "budget year" in that cycle and is the "current year" in this cycle. OMB conducts its fall review. OMB staff analyzes agency budget proposals in light of presidential priorities, program performance, and budget constraints. They raise issues and present options to the Director and other OMB policy officials for their decisions.

6 October November. OMB briefs the President and senior advisors on proposed budget policies. The OMB Director recommends a complete set of budget proposals to the President after OMB has reviewed all agency requests and considered overall budget policies Late November Passback. OMB usually informs all Executive Branch agencies at the same time about the decisions on their budget requests. All agencies, including Legislative and Judicial Branch agencies enter computer data and submit print materials and additional data. This process begins immediately after passback and continues until OMB must "lock" agencies out of the database in order to meet the printing deadline Late November to Early January. Executive Branch agencies may appeal to OMB and the President. An agency head may ask OMB to reverse or modify certain decisions. In most cases, OMB and the agency head resolve such issues and work together to present them to the President for a decision December. Agencies prepare and OMB reviews congressional budget justification materials. Agencies prepare the budget justification materials to explain their budget requests to the responsible congressional subcommittees January. President transmits the budget to the Congress.

7 Major Steps in the Congressional Phase. Congressional Budget Office (CBO) reports to Budget Committees on the economic and budget outlook January. CBO re-estimates the President's Budget based on their economic and technical assumptions February. Other committees submit "views and estimates" to the House and Senate Budget Committees. Committees indicate their preferences regarding budgetary matters for which they are responsible Within 6 weeks of budget transmittal. The Congress completes action on the concurrent resolution on the budget. The Congress commits itself to broad spending and revenue levels by passing a budget resolution April 15. The Congress needs to complete action on appropriations bill for the upcoming fiscal year. The Congress completes action on regular appropriations bills or provides a "continuing resolution" (a stop-gap appropriation law).

8 Major Steps in the Execution Phase Fiscal year begins October 1. OMB apportions funds made available in the budget process and other available funds. Agencies submit apportionment requests to OMB for each budget account by August 21 or within 10 calendar days after the approval of the appropriation, whichever is later Apportionment. OMB approves or modifies the apportionment specifying the amount of funds agencies may use by time period, program, project, or activity. Agencies incur obligations and make outlays to carry out the funded programs, projects, and activities. Agencies record obligations and outlays pursuant to administrative control of funds procedures, report to Treasury and prepare financial statements Fiscal year ends September 30. Expired phase (no-year funds do not have an expired phase). Agencies disburse against obligated balances and adjust obligated balances to reflect actual obligations during the period of availability. Agencies continue to record obligations and outlays pursuant to administrative control of funds procedures, report to Treasury, and prepare financial statements Mid-Session Review. The law requires the President to send a report to the Congress updating budget estimates on or before July 15th. This report contains revised budget estimates resulting from changes in economic assumptions, technical estimates, Presidential initiatives, and completed congressional actions that have occurred since transmittal of the budget. OMB representatives provide guidance on the development of these estimates.

9 Central Financial Agencies. The central financial agencies include the following. The Office of Management and Budget (OMB), in the Executive Office of the President. The Department of the Treasury, Financial Management Service (FMS). The Congressional Budget Office (CBO), in the Legislative Branch. The Government Accountability Office (GAO), in the Legislative Branch Responsibilities and Functions of OMB. OMB's predominant mission is to assist the President in overseeing the preparation of the Federal budget and to supervise its administration by the Executive Branch agencies. OMB evaluates the effectiveness of agency programs, policies, and procedures, assesses competing funding demands among agencies, and sets funding priorities. OMB ensures that agency reports, rules, testimony, and proposed legislation are consistent with the President's Budget and with Administration policies. In addition, OMB oversees and coordinates the Administration's procurement, financial management, information, and regulatory policies. In each of these areas, OMB's primary role is to improve administrative management, develop better performance measures and coordinating mechanisms, and reduce unnecessary burdens on the public Responsibilities and Functions of the Treasury. The Treasury, acting through the Financial Management Service (FMS), does each of the following. Disburses 950 million Federal payments like Social Security, veterans' benefits, and income tax refunds to more than 100 million people. Collects more than $2 trillion in Federal revenues. Oversees daily cash flow of $10 billion. Provides centralized debt collection services to most Federal agencies. Provides Government-wide accounting and reporting.

10 FMS gathers and publishes Government-wide financial information that is used by the public and private sectors to monitor the Government's financial status and establish fiscal and monetary policies. These publications include: the Daily Treasury Statement; the Monthly Treasury Statement; the Treasury Bulletin; the Combined Statement; and the Financial Report of the U.S. Government, which is the Federal Government's first set of audited financial statements, a requirement of the Government Management and Reform Act of disburse its funds. NOTE: The Department of Defense does not use FMS to Responsibilities and Functions of CBO. The CBO was created by the Congressional Budget and Impoundment Control Act of The CBO's mission is to provide the Congress with the objective, timely, non-partisan analyses needed for economic and budget decisions and with the information and estimates required for the congressional budget process. CBO prepares, analyses, and estimates relating to the budget and the economy and presents options and alternatives for the Congress to consider but does not make recommendations on policy. CBO s services can be grouped into four categories: 1. helping the Congress formulate a budget plan, 2. helping it stay within that plan, 3. helping it assess the impact of Federal mandates, and 4. helping it consider issues related to the budget and economic policy Responsibilities and Functions of GAO. The GAO is the investigative arm of the Congress. GAO helps the Congress meet its constitutional responsibilities and improve the performance and accountability of the Federal Government for the American people. GAO examines the use of public funds, evaluates Federal programs and activities, and provides analyses, options, recommendations, and other assistance to help the Congress make effective oversight, policy, and funding decisions. In this context, GAO works to continuously improve the economy, efficiency, and effectiveness of the Federal Government through financial audits, program reviews and evaluations, analyses, legal opinions, investigations, and other services. GAO's activities are designed to ensure the executive branch's accountability to the Congress under the Constitution and the government's accountability to the American people. GAO is dedicated to good government through its commitment to the core values of accountability, integrity, and reliability.

11 OMB, CBO, FMS, and GAO Overlapping Responsibilities. After OMB submits the President's Budget, the CBO is responsible for re-estimating the budget. Both OMB and CBO score the costs of legislation (both appropriations and direct spending included in authorization bills). The Congress uses the CBO estimates during congressional consideration of individual bills to ensure that they are consistent with the budget resolution totals. The President uses OMB estimates to determine whether budget-related legislation exceeds the limits set by the Budget Enforcement Act. OMB reconciles or explains differences between the two sets of estimates. OMB and FMS work together to establish new Treasury accounts, both during the preparation of the Budget and after bills become laws. OMB provides its scoring to FMS to assist in FMS' responsibility to prepare warrants. OMB and FMS work together to estimate actual outlays during the course of a year. FMS gathers financial information through FACTS II (Federal Agencies' Centralized Trial-Balance System) that allows agencies to submit one set of accounting data that fulfills the needs of the SF 133 Report on Budget Execution. OMB definitions. FMS develops U.S. Standard General Ledger guidance to comply with Both FMS and GAO provide guidelines used by financial managers as they account for Federal finances. programs. OMB uses GAO audits and evaluations as part of its review of agency

12 4.2. Performance Budgeting Initiative. Senior officials at the Office of Management and Budget have described Performance-Based Budgeting as being the top management priority. The OMB has outlined specific requirements for the initial phases of this reform, both as part of the President's Management Agenda and as key elements in the Program Assessment Rating Tool (PART) Performance Budget. Performance-based budgeting is not simply using program performance information in developing a budget. It is the process by which a particular type of budget is developed. A Performance Budget provides a format linking dollars to results by showing the underlying activities and their costs. A Performance Budget differs significantly from an Object Class budget in a fundamental way. An Object Class budget provides information on what each dollar will be spent on (salaries, benefits, office supplies, travel, utilities, equipment, etc.). A Performance Budget provides information on what each dollar will accomplish. Every program should be able to show its budget in both formats with the total dollar amounts being exactly the same for each Program Assessment Rating Tool (PART) Overview. The Program Assessment Rating tool (PART) is a component of the President s Management Agenda that focuses on Budget and Performance Integration. The PART: Builds on the Government Performance and Results Act Strategic Goal Framework; Promotes efforts to achieve immediate, concrete, and measurable results; Assesses performance using evidence; and Provides a consistent approach to evaluating programs across the Federal government.

13 Background. In July of 2002, the Director of the Office of Management and Budget announced development of the PART, a tool for formally evaluating the effectiveness of Federal programs. OMB s guidance contains this description of the PART: "The Program Assessment Rating Tool (PART) is a systematic method of assessing the performance of program activities across the Federal government. The PART is a diagnostic tool; the main objective of the PART review is to improve program performance. The PART assessments help link performance to budget decisions and provide a basis for making recommendations to improve results. The PART is composed of a series of questions designed to provide a consistent approach to rating programs across the Federal government, relying on objective data to assess programs across a range of issues related to performance." The PART questionnaire is divided into four sections: 1. Program Purpose & Design, 2. Strategic Planning, 3. Program Management, and 4. Program Results. Points are awarded to a program based on the answer to each question, and an overall rating of effectiveness is then assigned. There are 5 categories of possible ratings: Effective, Moderately Effective, Adequate, Ineffective, and Results Not Demonstrated. OMB intends to subject all Federal programs to PART evaluations. Its effort began with assessments and ratings of 234 programs covering approximately 20% of the Federal budget, followed by publication of the results in the President s FY 2004 Budget. OMB is expanding PART evaluations to an additional 20% of Federal programs (or budget coverage) each year, along with selected reevaluations of previously PARTed programs when there is reason to believe the rating might be changed. OMB s plan is to bring 100% coverage to Federal programs within 5 years How the PART Works. The PART evaluation proceeds through four critical areas of assessment to include purpose and design, strategic planning, management, and results and accountability. The first set of questions gauges whether the programs design and purpose are clear and defensible. The second section involves strategic planning, and weighs whether the agency sets valid annual and long-term goals for programs. The third section rates agency management of programs, including financial oversight and program improvement efforts. The fourth set of questions focuses on results that programs can report with accuracy and consistency.

14 The answers to questions in each of the four sections result in a numeric score for each section from 0 to 100 (100 being the best). These scores are then combined to achieve an overall qualitative rating that ranges from Effective to Moderately Effective to Adequate to Ineffective. Programs that do not have acceptable performance measures or have not yet collected performance data generally receive a rating of Results Not Demonstrated. This obviates the need for establishing and monitoring metrics at all levels within an organization. The PART can be useful in establishing a constructive dialogue between program managers, budget analysts, and policy officials General Information. Navy Medicine must submit two POMs - one through Navy to OSD (operational requirements) and one through ASD (HA) (peacetime requirements). The guidance provided in this desk guide pertains primarily to the Navy s peacetime budget. The funding authority for the peacetime budget is received via the Defense Health Program (DHP). The DHP budget is the final product of the Planning, Programming, Budgeting, and Execution process (PPBE) and is a statement of policy based on the Medical Program Guidance developed to accomplish objectives. A simple definition of a budget is a plan for accomplishing an organization s objectives through the management of its resources. The budget is more than a plan for distributing dollars, it is a means of two-way communication between the submitter and reviewer Background. PPBE is designed to assist the Secretary of Defense in making choices about the allocation of resources among a number of competing programs and alternatives to accomplish specific objectives in our national defense. The ultimate objective of PPBE is to provide operational commanders with the best mix of forces, equipment and support attainable within fiscal constraints. PPBE can be summarized in a few words. Based on anticipated threat, strategy is developed, requirements are estimated and programs are developed to package and execute that strategy. Finally, a budget is developed to pay for the programs. PPBE translates national security interests developed by strategic planners into military requirements and budgetary requirements which are presented to Congress for funding consideration. The comptroller and other field level personnel should be familiar with the PPBE process, since it drives the annual budget process. The PPBE process operates on a continuous basis. Each of the four phases of the process (planning, programming, budgeting, and execution) overlap, throughout the fiscal year. The process moves from broad planning considerations to more definitive program objectives and specific budget estimates are prepared to price out the programs.

15 The PPBE differs from the traditional budgeting process that preceded it in two significant ways. First, the focus is on objectives, purposes, and the long-term alternative means for achieving them. As a result of this emphasis, planning has been elevated to a level equivalent to budgetary management and control. Second, PPBE brings together planning and budgeting by means of programming, a process which essentially defines a procedure for distributing available resources equitably among the many competing programs. NOTE: With the passing of Management Initiative Decision (MID) 913 in May 2003, the PPBE process transitioned from an annual programming and budget cycle to a biennial cycle. This transformation has altered the PPBE process and requirements based on the calendar year with even (On-Year) and odd (Off-Year) years. Even years will require the development of Joint Planning Guidance (JPG) and the submission of the Program Objective Memorandum (POM)/Budget Estimate Submission. During odd years, the JPG will be developed to incorporate required factof-life changes and congressional initiatives. Additionally, during the off-year a new POM will not be submitted. Any required changes to the existing POM will be modified by the submission of Budget Change Proposals (BCP). This process will be discussed in more detail in later sections Phases of PPBE. The PPBE consists of the following four phases. 1. A planning phase where global threat and strategy are assessed and defined. 2. A programming phase where the strategic plans are translated into programs in terms of forces, manpower, and dollars. 3. A budgeting phase that expresses programs in terms of biennial funding requirements. 4. An execution phase where programs are actually executed and funds are spent. The budgetary and financial management processes at BUMED are comparable to other Major Navy Commands with one exception. With the creation of the Defense Health Program appropriation, the Navy Medicine budget is reviewed by the Office of Assistant Secretary of Defense, Health Affairs (OASD, HA) as part of a triservice health care budget. Activities may receive funding from various appropriations (i.e., O&M DHP; O&M, N; RDT&E, N; RP N, etc.) and must have an understanding of the budget process and requirements for each appropriation.

16 NOTE: OPNAVNOTE 3111 DNS RMC2 of 29 Oct 02 changed the Titles of Officials in Command for Commander In Chief, U. S. Atlantic Fleet (CINCLANTFLT), Commander In Chief, U. S. Pacific Fleet (CINCPACFLT), and Commander In Chief, U. S. Naval Forces, Europe (CINCUSNAVEUR). The new titles in their respective order are as follows. Commander, U. S. Atlantic Fleet, VA COMLANTFLT NORFOLK VA Commander U S Pacific Fleet COMPACFLT PEARL HARBOR HI Commander, U S Naval Forces Europe COMUSNAVEUR LONDON UK The complete PPBE process is summarized in Chart 1. The chart illustrates how the Services, Agencies, and COMLANTFLT, COMPACFLT, and COMUSNAVEUR (COCOMs), evaluate the national security strategy and the world situation in the Joint Strategy Review to produce a national military strategy. During the planning phase, JPG is issued. Using the JPG as the starting point of the POM process, and with the issuance of control figures, the services (Resource Sponsors) and the agencies assess the guidance and submit their POM to OSD. The JPG also includes the Medical Planning Guidance (MPG) for the development of the DHP. The services medical departments use the MPG to develop their service medical POM for submission to the Tri-Care Management Activity (TMA). The TMA then combines the POMs to submit the service POM to OSD for review. An OSD review leads to a Program Decision Memorandum (PDM), which ends the POM phase of the process. The services and agencies use the PDM as the initiation of the medical department budget process. The submissions are sent to TMA for consolidation and are reviewed by OSD and OMB to form the Program Budget Decision (PBD). The PBD submission is incorporated into the President s Budget. Congress passes legislation (i.e. appropriation acts) based on the President s Budget resulting in the issuance of budget authority for the Department, which is then executed.

17 Chart 1. PPBE.

18 4.4. Planning and Programming. The Planning and Programming phases of the PPBE deal with the longrange strategic and tactical plans of the DoD. The Future Years Defense Program (FYDP) covers a six-year span. The Planning phase is the out-years of the process. The Programming phase follows and covers the mid-years followed by the budget phase, which covers the upcoming two years. The Navy Programming phase consists of reviews of strategy, warfare areas, and support tasks. These reviews define the funding needed to accomplish program levels or capabilities. The Resource Sponsors use the reviews in preparing their program proposals Planning. DoD provides policies, guidelines, and schedules for budget preparation. Service components determine service policy, direct preparation, review, and approve service objectives. OASD (HA), in coordination with the Assistant Secretary of the Navy for Manpower and Reserve Affairs (ASN/MRA) and the other service secretaries, determine Defense Health Program policies. The first phase of PPBE involves a review of the state of U.S. national security objectives, consideration of broad strategies for dealing with the threats to national security and development of force structures and levels that will support those strategies. Based on the objectives presented in the National Security Strategy (NSS) and National Military Strategy (NMS), the Strategic Planning Guidance (SPG) is issued by OSD to assist in the development of the Defense program. The SPG provides planning guidance but does not impose financial controls. Those steps are followed by development of defense-wide policies with respect to manpower, logistics, acquisition, and other functional areas. Planning elements are brought together under the general direction of the Under Secretary of Defense for Policy (USD/P). They represent the views of all the senior defense staff offices, including elements of the Office of the Secretary of Defense (OSD), the Joint Chiefs of Staff (JCS), the unified and specified commanders, and staff elements of the military services and defense agencies. Elements of the national security policy guidance are also developed in coordination with the National Security Council and the Office of Management and Budget. The planning guidance derived from this process, is reviewed by the Senior Level Review Group (SLRG) to ensure realistic and executable direction. Upon completion of review, the JPG is signed and released by the Secretary of Defense. During the on-year, the JPG provides the military departments and defense agencies with instructions to prepare and submit their POM and Budget Estimates consistent with that guidance. In the off-years, the JPG presents SECDEF initiated or directed changes to the defense program.

19 Major Steps in the Planning Phase. 1. Identify national interests. Determined by the President after receiving information from the State Department, the National Security Council, the Congress, and other executive agencies. 2. Examine world security environment. This is the collection and evaluation of strategic intelligence, threats to national interests, international defense policy objectives, and current defense status. Foreign policy objectives include our international treaty commitments (e.g., NATO) and the access to various parts of the world (e.g., Middle East oil). An evaluation of the threat provides the basis for our defense needs. The Central Intelligence Agency (CIA) and the Defense Intelligence Agency (DIA) are responsible for assessing the current environment. 3. Define national military strategy. The next step is to determine the military strategy and the force levels needed to counter threats and to ensure that defense policy objectives will be achieved. 4. Plan force structure. The guidance developed during the planning phase will enable Navy commands to develop programs that will achieve goals and objectives. Planning decisions documented in the form of guidance serve as policy and resource direction for the programming phase.

20 The JPG is the primary output of the planning phase of PPBE. The JPG is developed by the OSD and JCS, based on input from the JCS, the services, the National Security Council, and the State Department. The JPG, perhaps the most important document in the PPBE processes, incorporates information from two other important planning documents. 1. National Security Strategy of the United States. Authored by the President, provides information on national interests, global and regional trends, states political and economic assumptions, and outlines defense strategies. 2. National Military Strategy Document (NMSD). Authored by the Chairman of the JCS, contains JCS and Unified and Specified Commanders advice to the President, the National Security Council, and the SECDEF. It recommends national military strategy and fiscally constrained force structure that is required to support the attainment of the national security objectives during the defense planning period covered by the next JPG. Naval components of the NMSD are co-authored by SECNAV, CNO, and CMC. The JPG provides force and fiscal guidance to the services necessary to construct their respective POM and ultimately, their budgets. JPG provides fiscal guidance at the Total Obligation Authority (TOA) level for each of the services and defense agencies for the next six years. The JPG is the first PPBE document that brings in fiscal and resource constraints. The fiscal guidance provides the overall constraint within which the services must construct their POMs. It does not limit funding for specific programs. As issues arise during the development of the JPG, they are brought forward and discussed with members of the SLRG. The draft JPG is presented to the Secretary of Defense and to the Unified and Specified Commanders. The Commanders of the Unified and Specified commands have an opportunity to comment on the draft JPG and personally meet with the SECDEF and the SLRG to discuss their views and recommendations. The JCS and OSD will utilize Major Issue Analysis to address and resolve and programmatic issues presented. After considering the advice of the SLRG and the Commanders of the Unified and Specified Commands, the SECDEF makes the needed changes and signs the document. The signed JPG becomes the final product of the planning phase and the basis for the programming phase. Inputs are obtained from the President s National Security Strategy, Two Major Theatres of War (2MTW), the Joint Staff s strategy and the services strategy and policy documents. Inputs are used to generate the plans, programs, strategies, goals, and objectives. The inputs are integrated into the JPG and the service POMs. Chart 2 illustrates the general process for planning and programming within DoD.

21 Chart 2. Planning & Programming Process Overview.

22 Programming Process. Programming is the process by which information in the JPG is translated into a financial plan of effective and achievable packages (programs). The process starts with the last four years of the program developed in the previous PPBE cycle. It produces a six-year program for each component through development of a POM and updates a DoD database called the Future Years Defense Program (FYDP). The POM is each Service's annual recommendation to SECDEF for the planned application of their resources over a six-year period. It covers the objectives, planned activities, and cost of each program. The first two years of the POM will later be translated into the budget that is submitted to Congress as a biennial budget. During the programming phase, information on current and proposed programs is compiled in the POM and reviewed thoroughly. Part of this review is an assessment of risks and an evaluation of the military advantages and disadvantages of each alternative proposed to meet the risk. Commands and field installations update their program plans to reflect changing international and national situations, OSD guidance, and technological developments. The Navy programs are often re-balanced or changed. The POM has fiscal constraints, but programs can be re-balanced within the total available resources to create a more balanced program. The POM highlights the first two years of the six years of new data it contains. For example, the information in POM (referred to as POM 04) is used as the basis for the Fiscal Year (FY) 2008/2009 biennial budget submission. POM 08, developed in the winter of 2005 and spring months of 2006 (FY 06), covers the following years (PY is the prior year or last completed FY, CY is the current year of execution and immediately precedes the Budget Year (BY), BY is the next FY for estimates if NOT a biennial budget submission year (odd year), and BY1 and BY2 are the budget years for a biennial submission). Table 1. POM/PR Schedule. YEAR POM/PR FISCAL YEARS COVERED 2002 POM PR POM PR POM (The view from this date is March 2002)

23 A group of senior Navy officers comprise the Integrated Resources and Requirements Review Board (IR 3 B). The IR 3 B drives the programming process within the DoN. The IR 3 B is chaired by N8, and membership includes N80, N81, N82, N83, N84, N85, N86, N87, N88, N096, the Systems Commands (SYSCOMs) and the Center for Naval Analysis (CNA). The IR 3 B function is to make macro decisions that will be presented to the Department of the Navy Program Strategy Board (DPSB), which is chaired by SECNAV. Chart 3 represents the CNO organization involved in the process.

24 Chart 3. Office of The Chief Of Naval Operations And Deputy Chief Of Naval Operations (Resources, Requirements And Assessments).

25 Charts 4 and 4A outline the Navy POM process. The Resource Sponsor (N4) interacts with various offices in BUMED to develop issues and programs necessary to meet the guidance contained in the JPG. During this phase fiscal constraints are issued, offsets are identified, and programs are prioritized to stay within the control figures. The Sponsor Program Proposal (SPP) submits N4 s program on how to best meet the guidance in the JPG within the control figures assigned. Chart 4. The Navy POM Development Process.

26 Chart 4A. DHP Appropriation POM/Budget Process Major Steps in the Programming Phase. The major steps within the programming phase are POM development and POM review. During the POM development phase each Service develops a six-year plan for allocating their financial resources. NOTE: In even-numbered years, a POM is developed, and in odd-numbered years, a Program Review (PR) is performed. PRs cover a period of five years. During the POM review, the OSD makes changes as needed. A brief description of the products resulting from these processes follows The POM Development Phase. Numerous inputs and processes are used in the development of the POM. They include each of the following. COCOM Integrated Priority Lists (IPLs). Provide the Unified Commanders (COMLANTFLT, COMPACFLT and COMUSNAVEUR) with a process to submit prioritized issues to the programming phase. COMLANTFLT, COMPACFLT, and COMUSNAVEUR are not limited as to the number of issues that can be submitted and are not required to identify offsets. Concerns addressed by the COMLANTFLT, COMPACFLT, and COMUSNAVEUR must be answered in the POM and sponsors must identify action taken on each issue. Component Commanders submit their issues via Component Issue Papers,

27 or CIPs, and address any major issues in detail, which were submitted by the Commanders IPLs. Assessments. Serves to appraise mission and support areas and to assess the state of the Navy. This is an integrated concept using Integrated Process Teams (IPT) with an in-depth look at warfare areas. This assessment process for the Navy is called Integrated Warfare Architecture (IWAR). "Integrated" means a capability-based, end-to-end analysis of Navy warfighting and support capabilities and answers "how much is enough. Priorities are developed during these assessments and are presented to the IR 3 B and to the DPSB, chaired by the Secretary of the Navy. These priorities are presented via the CNO's Program Assessment Memorandum, or CPAM. BAM. The Baseline Assessment Memorandum (BAM) provides Resource Sponsors with baseline costs for projected force levels. They address programs that cut across several Resource Sponsors. Designated assessment sponsors are assigned the task of developing BAMs for specific areas. These memoranda contain an evaluation of the total cost and resources required to achieve or maintain some stated level of capability. The BAMs provide balance between current fleet readiness and future force capabilities. The BAMs assess the extent to which the Navy is fulfilling its responsibilities toward our National defense. Sponsors list baseline funding levels in the BAM that are derived from realistically projected force levels and approved support structures. SECNAV Fiscal Guidance. The Navy programming process begins with the issuance of POM Serial One. The POM Serial is a series of memos from CNO N-80 (Director of Navy Program Planning) to all offices participating in the development of the POM. POM Serial One provides structure and fiscal estimates for the POM development process. The DoN allocation is suballocated into a "blue-green" split, providing the Navy and Marine Corps with resources for programming. POM Serial One also assigns responsibilities to various offices and provides instructions and a schedule for the phase, beginning with program appraisal. POM Serials are issued throughout the programming phase as situations change. Each one is numbered consecutively.

28 Component Issue Papers (CIPs). Provide Component Commanders (COMLANTFLT, COMPACFLT, etc.) the opportunity to submit issues relevant to day-to-day operations. These are issues that are beyond the capability of the Component Commander to resolve, have implications for many Navy programs, or are of such magnitude that they will have a significant effect on the total Navy program. Each Component Commander may normally submit up to five prioritized issues to CNO N-83, who distributes them to the appropriate Resource Sponsor. Issues must be accompanied by program offsets and financial offsets. For each issue, they assign a priority and identify the offsets from lower priority programs and/or economies (cost savings) associated with their recommendations. Resource Sponsors must address the top five issues of each Component Commander later in the phase. To identify and develop these issues, some Budget Submitting Offices (BSO) solicit issues from their field activities. Each issue is evaluated and ranked in priority order. Activity involvement in the development of the POM Issue Papers improves the content and quality of the issues. Sponsor Program Proposals (SPPs). Represent the Resource Sponsor's major initial proposals for the Navy's POM. Resource Sponsors use the latest guidance and information on program changes (addressed in the BAM) to adjust and update their programs. These adjustments result in SPPs and a series of presentations in which Resource Sponsors present their programs. The SPPs must accommodate fiscal and manpower controls, required fact-of-life changes, pricing changes and fiscal, planning and programming guidance. SPPs must also address the needs and priorities of the assessment sponsors, the Unified Commanders IPLs, and the component issues. Sponsor Program Proposal Documents (SPPDs) are developed which reply to component POM issue papers. After the SPPDs are released, Component Commanders review them to make sure that their top five issues have been addressed. If not addressed, they will get their changes made during the End Game discussed below.

29 The CNO "End Game" and Program Approval. The Navy staff reviews the POM and the CNO is presented with staff versions of the SPPs with recommendations from the overall POM reviewers. On the basis of this final review, the Navy POM is assembled for presentation to SECNAV for review and approval. The final review is done by the DoN Program Strategy Board (DPSB), which is chaired by the SECNAV, with participation by CNO, CMC, and the Assistant SECNAV. This is also when appropriation "lock-up" takes place and POM documentation is prepared.

30 The POM Review Phase. The submission of the POM to OSD signals the beginning of the defense program review by OSD under the purview of the SLRG. The review is constructed using questions, issues, and analyses provided principally by the Assistant SECDEF, Program Analysis and Evaluation (PA&E). PA&E reviews the POM and focuses on differences between the OSD staff and the service POM submissions. Issue Books. Differences between the PA&E staff and the Service POM submissions are developed as issue books for review and evaluation by the SLRG. They reflect the service position (reclama), Component Commander input, the PA&E position, and include a recommendation to the SLRG. SLRG Deliberations. The SLRG considers each issue book and makes recommendations to SECDEF. COMMANDERS Inputs. Another opportunity is provided for the Unified Commanders (COMLANTFLT, COMPACFLT and COMUSNAVEUR) to address their concerns to the SLRG. Service Reclama. Services have the chance to reclama tentative decisions made by PA&E and the SLRG. Program Change Proposals (PCPs). During the off-year cycle, emergent change requests to currently funded programs must be submitted as a PCP. Each requested program increase must have a corresponding offsetting program decrease yielding a net zero effect on the services baseline. Program Decision Memoranda (PDMs) to Services. After reviewing the recommendations of the SLRG, the SECDEF forwards his decisions on the Service POMs to each service and defense agency in the form of Program Decision Memoranda (PDMs). The PDMs provide instructions to the Services to prepare their budgets in accordance with those decisions. This step represents the completion of the programming phase of PPBE.

31 Navy Medicine POM. Navy POM issue development is driven by the CNO's echelon 1 staff offices (i.e. Resource Sponsors). As noted in the Navy POM definitions, COMLANTFLT, COMPACFLT, COMUSNAVEUR, and other Component Commanders are allowed to provide a limited number (five or less) of their highest visibility issues to each Resource Sponsor. The resource overlap between the Surgeon General's two "hats" (Surgeon General of the Navy and Chief, BUMED) is more than 95%. As part of that process and to continue the Surgeon General's commitment to a POM to the Deck Plates philosophy, BUMED also issues a modified POM call to all of its activities via the Navy Medicine Regional Commands and other Expense Limitation Holders. These initiatives are shared with the Program Champions and, if supported by them, are submitted to N4. Chart 5 contains the organization of the Navy Surgeon General. realignment initiatives. NOTE: Subject to change as a result of functional

32 Chart 5. Surgeon General of the Navy/Chief, Bureau of Medicine and Surgery. The Navy Medicine process begins when the Surgeon General (SG) and N4 outline the rules in the POM assessment letters for the DHP and the DoN. Following this initial step, N4 briefs the BUMED Program Champions who request input from the field as necessary. The Champions use this input to develop issues and address assessments. Issues are submitted to N4 at the same time that the fleet Commanders submit their medical issues to N4. Following these submissions N4 conducts hearings on these POM issues. After the hearings, N4 briefs the R 3 B which submits its recommendations to the SG. Once approved, the POM is forwarded and briefed to the senior leadership. It is then presented to OASD (HA) for the DHP portion of the budget and to the Navy programmers (N80) for the Navy budget.

33 The terms listed below are defined to assist in understanding the programming process for Navy Medicine. POM: The Secretary of Defense s estimate of the financial and manpower resources required to support the DoD mission two to seven years in the future. It is the Programming component within the Planning, Programming, Budgeting, and Execution process (PPBE). A POM is developed every even year. For example, in FY00, POM-02 was developed, detailing resource requirements for FY02-FY07. Resource Requirements Review Board (R 3 B): The R 3 B is a senior level board that reviews program proposals and makes recommendations on resource requirements to the Surgeon General. The R 3 B is chaired by the Deputy Chief, BUMED. Program Change Proposal (PCP): The PCP is an Off-Year updated estimate of the POM year s requirements that includes only changes to the previous year s submission. All changes have a zero net effect. A PCP is based on the Resource Sponsor s last POM submit. Program Decision Memorandum (PDM): The staff offices of the SECDEF review the service inputs for programs to support the guidance. When the review is complete, the SECDEF issues the approved programs in the form of Program Decision Memoranda (PDMs). These then form the programmatic basis for the military departments to develop their budget requests. Program Champion: The Program Champion is the BUMED code responsible for developing issues/programs and bringing them forward to the Resource Sponsor for consideration of funding in future years. The Resource Sponsor provides the Program Champions issues from the R 3 B for funding prioritization. Resource Sponsor (N4): The Resource Sponsor develops program proposals and resource requirements needed to meet the mission as expressed in the Joint Planning Guidance (and other higher guidance documents). The Director, Medical Resources, Plans, and Policy (N4) on the staff of the Chief of Naval Operations, is the Resource Sponsor for all Navy Medicine programs, including those funded with both Navy appropriations and the Defense Health Program (DHP) appropriation.

34 Defense Health Program (DHP): The Defense Health Program was established in 1992 to combine resources of the three military medical departments. The DHP includes most shore based fixed military treatment facilities which provide care to military medical beneficiaries. The assistant Secretary of Defense (Health Affairs) directs the DHP and is responsible for managing the DHP appropriation. TRICARE Management Activity (TMA): The TRICARE Management Activity is an organization outside of the OSD staff, reporting directly the ASD (HA). The Director, TMA, is responsible for submitting a unified military medical POM to OSD on behalf of the services. This office also budgets for and executes the TRICARE managed care support contracts. Chart 6 defines the process for all BUMED activities to identify and integrate mission requirements into the budget.

35 Chart 6. POM Process Flowchart.

36 4.5. Budget Formulation Process. The submission process for the DoD budget involves multiple reviews at all levels and by all the services and agencies involved. This is required to support the legal requirement of the President to submit an annual budget for the Federal government to the Congress. Budgeting is the third phase in the PPBE cycle. The budget expresses the financial requirements necessary to support approved programs that were developed during the preceding phases of planning and programming. It is through the budget that planning and programming are translated into annual funding requirements. During this phase a Budget Estimate Submission (BES) is prepared using the first two years of the POM. The BES translates the programs into funding requirements and eventually, appropriations from Congress. These estimates are consolidated and reviewed by OSD and OMB, where adjustments are then made and documented in Program Budget Decisions (PBDs). Once these final adjustments are made and Major Budget Issue (MBI) meetings are held, the budget becomes a part of the President's Budget (PB). The budgeting phase is completed when the President sends his budget (with DoD input) to Congress no later than the first Monday in February, per the Budget and Accounting Act of Chart 6a defines the formulation, development and approval process for the BUMED budget. This process applies to all organizations within BUMED.

37 Chart 6a. Budget Formulation Process.

38 Overview Process. A budget is a plan for accomplishing an organization's objectives through the management of its resources. The Navy budget is an instrument of planning, decision-making, and management control. The budget is a means of two-way communication between the submitter and reviewer. The Budget (or President's Budget, PB) is the final product of the Planning, Programming, Budgeting, and Execution (PPBE) process and is a statement of policy based on the military strategy developed to accomplish national interests and objectives. Budget formulation includes an analysis and forecast of the level of activity which can be maintained subject to the dollar and civilian personnel constraints, which are specified in the budget call. Just as important as what can be done is the estimate of what can not be done and what the budget preparer feels should be accomplished in order to carry out the mission. This is expressed in a prioritized list of unfunded requirements which are submitted with full justification along with the budget. Unfunded requirements, or UFRs, are submitted with the BES and at the midyear review. The budget formulation process provides the warfighters or "operators" an opportunity to identify and prioritize the financial resources needed to carry out mission operations within the constraints of the resource environment. Budget formulation is based on the first two years of the POM. While the POM is considered a "roughly right" six-year plan, the budget is a much more detailed two-year plan. A key difference between the POM and the budget is the level of accuracy associated with resource estimates. During POM development, many different program alternatives are considered and a high level of precision in estimates is not required. More definitive estimates are needed during budget formulation. Other differences between the POM and the budget are the structure in which programs are presented for review and the amount of justification needed. Financial data is structured primarily by appropriation during budget formulation. More detailed financial information is needed during budget formulation, supported by numerous budget exhibits. There is more emphasis on whether a program is properly scheduled and priced than whether the program properly addresses the threat. Chart 7 illustrates the parallel process of POM development and budget formulation. The processes are carried out at different levels in some cases. The field activities are active in the budget process but not in the POM process. BUMED is an active participant in both processes and can be working on both simultaneously.

39 Chart 7. POM Development and Budget Formulation: A Parallel Process.

40 With the PDM as the baseline for the OSD/OMB budget review, the Navy issues control figures, which incorporate the PDM decisions. The Budget Submitting Offices prepare detailed exhibits for incorporation into the Navy submission. OSD and OMB conduct further reviews of the Navy s submission. When the reviews are completed the Navy budget is incorporated into the DoD budget. The purpose of these estimates is to allow the SECDEF and the President to make final resource allocations prior to the submission of the President s budget to Congress. These reviews are to ensure that the submissions are consistent with program, policy and budgetary guidance. The Navy budget process consists of four phases. 1. Submission of budget estimates to the Comptroller of the Navy, Financial Management, Budget, and Comptroller (FMB&C). This includes submission of budget estimates by Budget Submitting Offices throughout the department to the Comptroller of the Navy (NAVCOMPT). It also involves levels in the chain of command below the budget submitting offices (i.e., field activities). 2. The Budget Submission to OSD/OMB. This involves the submission of the DoN budget to OSD/OMB. A subsequent joint review of the budget is performed which transforms the DoN budget into the SECDEF's budget and subsequently, the President's Budget. 3. Submission of the President's Budget and Congressional Review. This includes transmission of the President's Budget via the President's Budget Message. By the time the budget is ready for Congressional review; it has been reworked and revised many times to make it accurately reflect the Navy's needs while staying within DoD budgetary constraints. 4. Enactment of Appropriations by Congress. This includes the authorization and appropriation processes. After Congress passes the DoD Appropriations Bill (as well as a Military Construction Bill), it is signed by the President and the budget becomes law. process. Chart 7a illustrates the four phases of the Navy Medicine budget

41 Chart 7a. Four Phases of Navy Medicine Budget Process DoN Submission. The Navy begins its process with the publication of the control figures. The control figures are the basis for the preparation of the detailed and summary exhibits that comprise the budget. These control figures ensure that the Budget Submitting Offices maintain consistency with the guidance. After the mid September submission, OSD allows the services to amend the initial estimates when specific changes in circumstances warrant a change in the budget estimates. The final update to the submission occurs after the Navy gets the official year-end accounting reports, normally in November.

42 DHP Submission. OASD (HA) is responsible for the submission of the Defense Health Program budget covering US Code, Title 10, Chapter 55, Section 1100, Medical and Dental Care benefits, for the services. OASD (HA) is responsible for all exhibits required for the budget submission. The services medical departments submit budget exhibits to OASD (HA) via TMA for incorporation into the overall DHP program. BUMED develops the Navy Medicine submission to OASD (HA) in the same fashion as the submission to Navy. Budget input is received from the field activities and consolidated to develop the final submission. Reviews are held to ensure compliance with the guidance issued along with the control figures that BUMED has issued. OASD (HA) holds reviews to balance the services submissions if necessary President s Budget. The President is legally required to submit an annual budget request to Congress. Congress is the only body in the Federal government which can authorize and appropriate monies to be spent by the government. As such, the President submits a budget request for all Federal agencies. OMB establishes top line controls for the agencies to use in preparing budget documents and justification necessary to support the President s budget. These must support the President s budget down to the individual program and line item level Congressional Process. With the submission of the President s budget to Congress, the legislative process begins. Technically, the house has authority to propose legislation, which funds government operations. However, both houses of the Congress get deeply involved in the funding of government operations. Various committees and subcommittees in both houses are very much involved in holding hearings that deal with the President s budget. Both houses of Congress will pass legislation on the budget. If the legislation is not the same from each house, a conference committee must meet and propose a compromise. At some point the houses agree and pass an act. Two separate and distinct laws need to be passed and signed for the budget to become law. These are the Authorization Act and the Appropriation Act. Within each act, there are separate and distinct sections dealing with the various appropriations. For example, the DoD Authorization Act will specifically identify programs authorized for Navy aircraft procurement and also for Air Force aircraft procurement. The same applies to the Appropriation Act.

43 Authorization. Each appropriation within the DoD budget requires an annual authorization. This authorization establishes individual programs, how they will operate, and often establishes dollar ceilings for these programs. An authorization does not provide funding for a program; it merely states that if funds are appropriated, the department may carry out the program. Authorization legislation also contains general provisions, placing requirements on the department to do certain things such as special reports, limit procurement to American providers, set aside a percentage for minority business etc. Both the House and the Senate Armed Services Committees and their sub-committees are the key committees involved in the Authorization Act. They hold hearings, gather other information, report to the floor, and eventually pass a Bill in each house, followed by a conference Bill and finally a Bill (law) for the President s signature. It should be noted that the Authorization Act frequently contains new provisions, programs, benefits that are not supported by funding in the Act. The Act may levy new requirements which must be funded from within available resources Appropriation. The Congress handles appropriation legislation in the same fashion. Each house of Congress has an Appropriation Committee (HAC) and the Senate Appropriation Committee (SAC). Congress passes two appropriation acts, which impact DoD; the Department of Defense Appropriation Act, and the other, the Military Construction Appropriation Act. The DoD Appropriation Act will normally have separate titles for appropriations, (i.e. Military Personnel, Operations and Maintenance, Procurement, etc.) and may impose restrictions on them. The Appropriation Acts specify dollar amounts, the purpose of the appropriation, and general provisions. The Appropriation committees hold hearings, receive testimony, and gather information as needed to carry out their responsibility. Chart 8 illustrates the Congressional Budget Process (CBP), the participants, and their roles. DoD provides budget estimates, testifies, and appeals on behalf of those estimates to OMB in developing the President s budget and to Congress in defense of that budget. Congress passes a budget resolution and the authorization and appropriation acts. OMB apportions the appropriations and the services execute the budget.

44 Chart 8. Congressional Budget Process.

45 4.7. Apportionment. Apportionment occurs when the Department of the Treasury issues warrants for authorized funding and forwards them to OMB, OSD, and Navy as notification that the appropriation is available for obligation and expenditure. The warrant provides the authority for OMB to grant obligation authority to OSD. OSD (C) in turn, issues a warrant to Service Components Execution. The Assistant Secretary of Defense (Comptroller) issues a Program/Fund Authorization to OASD (HA) TMA for the DHP appropriation. The Responsible Office (TMA) issues an Operating Budget Allocation to the Administering Office (BUMED) through the Program Budget Accounting System (PBAS). BUMED issues Operating Budgets via PBAS to designated field activities authorized as Expense Limitation Holders (ELHs). The BUMED Accounting Division (M8C2) records the budget allocation in the Standard Accounting and Reporting System (STARS). Navy Medicine Regional Commands/ELH activities distribute Operating Budgets (OBs) to field activities authorized as Expense Operating Budget (EOB) activities and records the Resource Authorization in the Standard Accounting and Reporting System. The EOB activities assign Operating Targets (OPTARs) to customer departments, record the target into FASTDATA, and commence execution. Chart 9 depicts the flow of resources from budget submission to the cost center during budget execution. A budget submission becomes an appropriation act, apportioned by OMB to the DoD where it is allocated to the services. These allocations are distributed as budget authority to commands which can distribute the budget authority to cost centers in the form of OPTARs.

46 Chart 9. Resources Flow. Chart 9a provides a view of the process beginning with when the appropriation allocation is received at BUMED. It further illustrates the review processes throughout the fiscal year. It is important to note that execution reviews occur regularly with the Surgeon General and BUMED single digits.

47 Chart 9a. Process Flowchart.

48 Timeline. Table 2 provides a perspective of the general timeline for the planning, programming, budgeting and execution process within the DoD. Table 2. Planning, Programming, Budgeting and Execution Process Timeline. Budget Process Timeline Action POM Budget Apportion Execution DoN DHP DoN DHP DoN DHP DoN DHP CNO/CMC Iniatiates POM Development NOV OCT OSD Issues Draft Defense Guidance JAN DEC JAN DEC POM submitted by SECNAV to OSD MAY APR Budget Submitted to FMB JUL JUN OSD issues Program Decisions/Mark-Up AUG JUL FMB Issues Program Decisions/Mark-Up AUG JUL Budget Submitted to Congress JAN DEC BUMED Execution Budget Call / Controls Issued JUN MAY BUMED Execution Budget Submitted JUL JUN Apportionment Request Submitted to OSD JUL JUN JUL JUN OSD and Navy Apportionment For Pending FY SEP AUG Warrant Issued / Final Fund Allocation OCT SEP NAVY MEDICINE MAJOR BUDGET PROGRAM PACKAGES DEFENSE HEALTH PROGRAM IN HOUSE CARE PRIVATE SECTOR CARE RESEARCH, DEVELOPMENT OPERATIONS & RESERVE PERSONNEL, TECHNOLOGY AND MAINTAINENCE, NAVY NAVY EVALUATION, NAVY FLEET HOSPITAL PROGRAM NAVY DRUG LABS ARMED FORCES HEALTH PROFESSIONALS SCHOLARSHIP PROGRAM MEDICAL RESEARCH BASE OPERATIONS SUPPORT EDUCATION AND TRAINING CONSOLIDATED HEALTHCARE MANAGEMENT HEADQUARTERS TMA FMB/COMPTROLLER

49 4.8. BUMED DHP Annual Budget Call to Field Activities Overview. Budget formulation begins when TMA issues a call for budget estimates. The budget call is based on the budget guidance issued by the Under Secretary of Defense (Comptroller). The budget call contains instructions, guidance for the content of budget estimates, the submission schedule, differences in requirements, and the rates to use for inflation and foreign currency. The budget submission consists of detailed and summary exhibits for each appropriation, management and revolving funds, civilian personnel, procurement accounts, and military personnel. Data from the prior year, as well as estimates for current year (CY), and the budget years (BY1, BY2) is submitted for review. Sometimes budget estimates for the out years (beyond the budget years) are also required. As a result of the budget call, Budget Submitting Offices (major commands) receive and consolidate activity budget estimates into their submission, changing its format and updating the contents. The BSOs include the latest pricing and scheduling information Guidance Issuance. Guidance is issued to BUMED for the preparation and submission of budget materials for the three budget submissions; the initial DoD POM or Program Review (PR) budget estimates, the submission of DoD budget estimates to the Office of the Secretary of Defense and the Office of Management and Budget (OSD/OMB), and the annual President s Budget submission to Congress. Budget exhibits and backup material are prepared at various levels throughout the Department. Offices and commands perform the task of preparing exhibits using input from the operating forces, shore activities, systems commands, and project managers. Funding Controls are provided to BSOs electronically. BSOs ensure consistency and accuracy of all related budget data and schedules. These controls are used in preparing all summary budget data as well as all detailed budget materials.

50 M8C1 initiates the Annual DHP Budget Call during Spring of each year by forwarding the DHP Budget Call package with program controls to the Expense Limitation Holder (ELH) activities. ELH activities issue a Budget Call requesting budget submissions from Expense Operating Budget (EOB) activities within their area of responsibility (AOR). EOB activities request budget submissions from all chargeable activities and prepare a consolidated budget submission for their command. The consolidated budget submission, as well as the chargeable activity submissions is forwarded to M8C1, via the respective ELH. All budget submission packages must be reviewed and approved by the Commanding Officer (CO), Officer in Charge (OIC), and the Comptroller. An activity budget call is locally generated by the activity comptroller and distributed to the activity's cost center managers. The activity budget call should be in the form of a command notice (signed by the CO) and should include as much information as possible to assist the cost center managers in preparing their budget estimates. The activity budget call will include the following information: 1. The Commanding Officer's guidance and priorities; 2. Budget guidance from higher authority (i.e., control numbers, budget fences, inflation and budgeted foreign exchange rates, etc.); 3. Sample forms/exhibits with detailed instructions for completion; 4. Historical data (i.e., copies of prior years' cost center budget submissions); 5. Due dates; and 6. A point of contact in the Comptroller Department. Because the time between receipt of the BUMED budget call and the due date is so short (maybe three to five weeks), activity comptrollers should issue the activity budget call prior to receipt of the budget call from BUMED. Even though the BUMED or ELH budget call might not yet be officially released, a phone call to the ELH will usually provide enough information to begin work. Although the activity call may lack the specific guidance and control numbers which accompany the budget call from higher authority, it does allow cost center managers more lead time for thorough budget preparation. If the official control numbers differ significantly from the ones used in the activity budget call, the budget estimates can be revised. The comptroller s staff can usually accomplish this, without having the cost centers rework their entire input.

51 M8C1 coordinates a review of the DHP budget submissions with the appropriate BUMED Champions who provide program manager recommendations. When M8 approves, along with the Surgeon General, M8C1 finalizes the submission for BUMED. appropriation. Chart 10 illustrates the BUMED budget call process for the DHP

52 Chart 10. Budget Call Process.

53 Budget Submission Format Requirements. ELH activities submit their consolidated activity Budget submissions to M8C1 during the annual Budget Call during Spring of each year for the upcoming fiscal year. M8C1 consolidates and reviews the budget submissions. Table 3 depicts the budget exhibits associated with the DHP program.

54 Table 3. DHP Program Budget Exhibits. DHP PROGRAM BUDGET EXHIBITS Exhibit Number Exhibit Title BUMED Area of Responsibility Activity Area of Responsibility OP-05 Detail by Activity Group OP-05 In-House Care X OP-05 Private Sector Care X OP-05 Consolidated Health Care X OP-05 Management Activities X OP-05 Information Management X OP-05 Education and Training X OP-05 Base Operations/Communications X OP-08 Civilian Personnel Costs X OP-09 Analysis of Change in Work year Cost X PB-11 Cost of Medical Activities - Funding by SAG X PB-11A Cost of Medical Activities - Personnel Details X PB-11B Cost of Medical Activities - Medical Workload Data X OP-14A/B Individual Training Data X PB-14 Functional Transfers X PB-15 Schedule of Consulting Services X X PB-17 Employee Relocation Costs X PB-18 Foreign Currency Exchange Data X X PB-22 Headquarters Operation and Administration X OP-26A-C POL Consumption and Costs X X OP-27 Real Property Maintenance Activities X OP-27H Historic Building Costs X X OP-27P RPM & Minor Construction Projects <$500K X OP-28 Summary of Major Repair Projects X PB-28 Budgeted Environmental Projects X OP-32 Summary of Price and Program Changes by BAG X X OP-34 Appropriated Fund Support for MWR Activities X X OP-37 Estimated Reimbursable Program by Source X X PB-41 Administrative Motor Vehicles Operations X X PB-50 Child Development, Family Centers, and Family X X Advocacy Programs Exhibit 52 Report of Financial Activities X OP-53 O&M Overseas Funding X PB-53 Budgeted Military & Civilian Pay Raise Amounts X PB-56 International Travel Exhibit X X 300B Information Technology X BOD-1 Beneficial Occupancy X X CBT- 1/CbT-2 Combating Terrorism Funding Summary/Personnel X X Procurement Navy Workbook X Civilian Manpower PE Distribution X Military Manpower PE Distribution X Selected Diseases Report X Lead Agent X CBT Consequential Management X Unfunded Requirements/Issue Papers X X OP-32 Line 9 Navy X USUSH X X

55 Budget Exhibits. While a budget call is defined as budget guidance from the top down the chain of command, a budget request is the compilation of budget estimates that are submitted up the chain of command. At the activity level, budget estimates are prepared on the following two levels. Cost center estimates. Most cost center budget estimates are submitted on local forms specified by the comptroller. Budget estimates from cost centers are normally done at the expense element level. Input by cost account code (CAC) is left to the comptroller's discretion based on internal control and management requirements. Activity estimates. Activity budgets are submitted electronically to BUMED via the ELH. The input is provided on spreadsheets representing the budget exhibits required by TMA. The amount of supporting detail is prescribed by higher authority and the format is provided in the BUMED budget call. Budget exhibits contain supporting and back-up data for budget estimates. The purpose of these exhibits is to show higher-level management how the activity plans to spend the requested funds. There are numerous budget exhibits required for different appropriations. The next two sections will review the two most important budget exhibits in the O&M submission. The OP-32 (Summary of Price and Program Changes), combined with the OP-5, comprise the basis for all other budget exhibits in the O&M submission. NOTE: The OP-5 is prepared at BUMED. ELH and EOB submissions do not include the OP-5. It is important to note that a Civilian Personnel Budget call should be completed prior to the BUMED financial budget call. The budget submission for Civilian Personnel is different than most budget submission requirements because of the numerous areas that will be impacted by the data contained in the submission. Since labor is the largest cost in the delivery of health care, it becomes increasingly important that accurate data be provided by contributors from all levels of the organization. The data provided will help identify shortfalls in total end-strength, work years, U.S. vs. Non- U. S. distributions and total dollars being spent and required in the years to follow. The data can also validate the need for certain controls. The tool BUMED uses to gather this information and roll up the data for submission and analysis to various authorities is gathered in BAERSFL. The data resides on the BUMED server and allows input from BUMED activities. Chart 11 provides an overview of how the data is collected.

56 Chart 11. BAERSFL-CIVPERS Remote Data Services (RDS) Architecture. The impact of the data collected can be both beneficial to the activities and BUMED. Regardless of what the data provides and whom it values, it must be accurate and traceable to source records. The BAERSFL data system provides an auditable record. Exhibit 1 contains an example of CIVPERS Report displaying multiple years data.

57 Exhibit 1. CIVPERS Report BUMED Business Planning Tool. The BUMED Business Planning Tool (BBPT) was developed to assist activities in preparing and submitting business plans. Ultimately, the business plan is a plan to accomplish the mission of the organization while achieving the corporate vision. The BBPT will assist activities in the review of their mission and vision Statements in the context of the BUMED mission and vision. MTFs must be aligned with the BUMED priorities in order to achieve corporate alignment. The BBPT will also help identify those key structural and functional elements that define your business. Activity personnel are encouraged to become totally familiar with the features of the BBPT. The BBPT can be accessed at the following web address:

58 Civilian Personnel Overview. Inasmuch as labor is typically the largest cost at any activity, it is imperative that financial managers understand the behavior of costs in order to manage them. This expanded section covers essential information on the categories of civil service personnel and cost elements such as retirement benefits, leave, disability payments, and healthcare benefits. The focus of this section is on the management of labor as a cost and budget category, not on the management or leadership of people Categories of Civilian Personnel. Civil Service is the term used to describe service performed for the Federal Government by employed civilians who have competitively attained their position and who may gain tenure by continuing satisfactory performance. The Civil Service system is divided into three categories to include General Schedule (GS), Federal Wage System (FWS), and the Executive Service (ES). General Schedule. General Schedule (GS) salaries are based on an annual pay scale with 15 salary levels (based on grade) and 10 steps within each level. Entry into the GS system can be at any grade but will usually begin at the first step in the applicable grade. Step increases, which are also known as within-grade increases come at specified time frames, assuming satisfactory performance has been demonstrated. For steps 2 through 4, the period is 52 weeks; for steps 5 through 7, the period is 104 weeks; and, for steps 8 through 10, the period is 156 weeks. GS personnel can be categorized as either full time (greater than 32 hours per week), part time (16 to 32 hours per week), temporary (appointment less than one year) or intermittent (for seasonal work). It is important to note that temporary personnel (less than one year of employment without any break in service of greater than 5 days) are not eligible for benefits such as health insurance, life insurance, or retirement benefits. Broad Banding. Some activities, particularly in the Working Capital Fund, are conducting trials with the Broad Banding Classification System. Commonly known as pay banding, this system combines the pay and classification of the 15 levels within the GS system into five or six bands. Generic descriptions for each level are applied to each broad band, depending on the career path (scientific, administrative/ technical, general support). An example would be having GS 1-4 in Band I; GS 5-8 in Band II; GS 9-11 in Band III; GS in Band IV; GS in Band V; and, ES in band VI.

59 The OPM occupational series are still used and personnel are classified into bands that require the same level of effort and skill. Level descriptions are written for each level as opposed to having individual position descriptions. Satisfactory performance within each band will affect the employees salary and earnings potential; his/her salary may increase or could be reduced. Federal Wage System. Federal Wage System (FWS) personnel are paid on an hourly basis vice receiving an annual salary. The FWS is comprised of individuals in trades or skilled crafts, and the positions are commonly referred to as blue collar, wage grade, or wage board. Within the FWS, 15 grades exist and 5 steps exist within each grade. Similar to GS personnel, FWS personnel may enter at any grade but will normally begin at step 1 within that grade. FWS within-grade increases come at specified time frames, assuming satisfactory performance has been demonstrated. For step 2, 6 months; for step 3, 18 months; for steps 4 and 5, a 2-year waiting period is imposed. The FWS pay scale is divided into five classes; WG (wage grade); WL (wage leader); WS (wage supervisor); WD (nonsupervisory employees under the production facilitating pay plan); and, WN (WD (supervisory employees under the production facilitating pay plan). FWS employees receive annual wage adjustments based on a review of pay against the private sector by wage area. Therefore, no single pay scale exists for FWS personnel. Executive Service. Executive Service (ES) personnel serve in senior management and executive positions, and are flag/general officer equivalent. The ES has six rates of basic pay from ES-1 through ES-6. ES personnel are eligible for all benefits, excluding locality pay.

60 Benefits for Civil Service Personnel: Costs to Consider. This section identifies some of the benefits for which civil service personnel are eligible. Locality Pay. The Federal Employee s Pay Comparability Act (FEPCA) of 1990 authorized locality pay for GS and SES employees (not FWS employees, as they are covered under an annual wage survey). It established 32 pay areas (not in Alaska, Hawaii or overseas) and the goal of the FEPCA was to bring the civil service salaries to within 5% of the private sector over a nine-year period. There is a standard GS pay scale and 32 pay scales that show the addition of locality pay. The locality pay is based on the location of the duty station, not where the employee resides. Locality pay is considered basic pay for retirement, life insurance, severance pay, worker s compensation, and any premium pay. NOTE: Locality pay for Executive Service personnel was discontinued in Paid Holidays. Full-time personnel receive ten paid holidays per year. In the event the holiday is on a Saturday, the employee can take off the preceding Friday; if the holiday is on a Sunday, the employee can take off the following Monday. This policy does not apply to part-time personnel. Retirement benefits. Two retirement plans exist for civil servants employed by the Federal Government: the Civil Service Retirement System (CSRS) and the Federal Employee Retirement System (FERS). CSRS applies to personnel hired prior to Benefits are based on the number of years of service and the employee s salary. Personnel covered under CSRS may participate in the Thrift Savings Plan (TSP) and can contribute up to a maximum of 5% of their annual salary. FERS applies to personnel hired in 1984 or later. FERS personnel may participate in the TSP and can contribute up to 10% of their basic pay. The FERS is a three-tiered benefit plan consisting of Social Security, Thrift Savings Plan and the FERS basic annuity. Annuity benefits are based on the employee s salary (high three years of consecutive service) and the number of years of service.

61 Thrift Savings Plan (TSP). The TSP is a voluntary retirement contribution plan similar to a 401(k) plan and was established in TSP is a tax-deferred plan that allows employees to contribute a percentage of their pay, and if enrolled under the FERS retirement system, the government will contribute matching funds. FERS employees may contribute up to 10% of their basic pay per pay period. Agencies will contribute up to 5% of the basic pay contributed each pay period; the agency will match the first 3% dollar for dollar, and at fifty cents on the dollar for the next 2 percent. The agencies will automatically contribute 1% of basic pay whether the FERS employee participates in the TSP or not. CSRS personnel are not eligible for the matching funds provided by the agency or activity. Temporary or intermittent personnel not covered under FERS are not eligible to participate in the TSP. Health Insurance. Most Civil Service personnel are eligible to participate in the Federal Employee Health Benefits (FEHB) program. Employees pay approximately one-third of the cost of the premiums, while the activity pays for the remaining twothirds of the cost. Temporary employees may be eligible for FEHB coverage, assuming they have completed one year of service without any breaks of five days or more. However, they are required to pay the full cost of the premiums. Life Insurance. Most Civil Service personnel are eligible for low-cost life insurance, called the Federal Employees Group Life Insurance (FEGLI). The activity will contribute one-third of the cost of the premiums, while the employee will pay for the other two-thirds of the cost. Benefits equal approximately the annual rate of pay plus an additional $2,000. Employees may purchase additional, optional insurance, but they must pay the entire cost. Again, temporary and intermittent personnel are not eligible unless employed for one year. Disability Payments (FECA). The Federal Employees Compensation Act (FECA) provides up to seventy-five percent of an employee s salary, tax free, if an employee is injured onthe-job. For employees without dependents, the payout is twothirds of the employee s salary. Costs for FECA must be budgeted using historical data. Payments are made by the Department of Labor and are then billed back to the agencies for reimbursement.

62 Leave. Civil Service personnel are eligible for paid annual leave. Depending on the length of government service, employees earn leave at the rate of four hours per pay period (26 pay periods), up to eight hours per pay period. A maximum of 240 hours may be earned, and any hours in excess are considered use-or-lose leave. It is important to monitor leave usage, especially if the employee has accumulated any compensatory time. Sick Leave. Sick leave is earned at the rate of four hours per pay period. The number of sick leave hours that may be accrued is not limited. Premium Pay. Premium pay covers overtime pay, night pay, holiday pay, Sunday pay, environmental pay for FWS personnel, and hazard pay for GS personnel. ES personnel are excluded from premium pay. Overtime and overtime pay must be controlled. Overtime should be approved, in advance, and in writing. Overtime may be regularly scheduled or irregular. Regularly scheduled overtime is scheduled prior to the beginning of the work week. For each employee whose rate of basic pay exceeds the minimum rate for GS 10, the overtime hourly rate is equal to the greater of one and one-half times the applicable minimum hourly rate of basic pay for GS 10; or the employee s hourly rate of basic pay, except as provided in 5 U.S.C. 5542(a)(3) and (5). Compensatory C Time. May be offered in lieu of overtime pay. If an employee s pay exceeds the minimum pay of a GS-10, the activity can require the employee to take compensatory time off. FWS and FLSA-nonexempt employees may not be required to take compensatory time off unless they request compensatory time. As with overtime, compensatory time worked should be approved in advance in writing. Compensatory time should be granted to an employee within a reasonable amount of time after being earned, and must be balanced with the employee s annual leave. Compensatory time should be used before annual leave, unless the employee is in a use-or-lose situation. Otherwise, any used compensatory time beyond the end of the 26th pay period in which it was earned will be paid at the overtime rate at which it was earned.

63 Cash Awards. Government-wide awards are covered under Title 5 of the United States Code, Chapter 45 and DoD awards are governed under DoD M. Cash awards are not mandatory in the DoD, but are traditional in nature. Cash awards are usually done as on-the-spot awards, special act awards, or performance awards. Cash awards can range from $25 up to $10,000 for a special act award. Due to the varying ranges of awards, commands should consult their Human Resources Office (HRO) for guidance. Awards are for your top performers. With the use of the acceptable and unacceptable two-tier rating system, most personnel will normally be rated as acceptable. Therefore, it may be difficult to differentiate between those who are truly outstanding and those who are performing to standards. Time-Off Awards. Time off granted as an incentive award must be used within one year from the effective date and can not be converted to a cash award. The maximum time off that can be granted for a single achievement should not exceed 40 hours, and the maximum that can be granted to an individual during a leave year is 80 hours. Quality Step Increase (QSI). For top-notch performers, QSIs are a way to recognize superior performance. A QSI involves granting a step increase for an employee. A QSI is not a one-time cost or cash award. Keep in mind that normal within-grade increases will occur, as per the timeframes discussed earlier; therefore, you must budget for the associated increase in payroll costs. Lastly, Federal Wage System personnel are not authorized Quality Step Increases, as the Title 5 provisions of the U.S. Code do not apply.

64 Other Costs to Consider. Some other costs to consider are pay raises, Voluntary Separation Incentive Pay (VSIP), and Voluntary Early Retirement Authority (VERA). The Congress and the President often authorize pay raises. The funds are normally appropriated for the first year of the effective pay raise, but after the first year each activity must then fund the dollar amount of the raises. VSIP is a program that enables employees to voluntarily leave government service early without being involuntarily separated. Eligible personnel can receive up to $25,000. In addition to the separation incentive, the separating activity is also liable for other expenses associated with the departing employee such as paid out accrued leave. The actual cost can easily rise to over $40,000 per employee. Thus, depending on the employee s salary, after about the first quarter of the year, it is often less expensive to keep the employee on the payroll for the remainder of the year than it is to pay the separation costs. VERA is a program that enables employees to voluntarily leave government service prior to their normal retirement date. The Office of Personnel Management (OPM) authorizes VERA and lowers the retirement age to 50 with 20 years of service, or 25 years of service without any age restriction. Like the VSIP, the separating activity is also liable for other expenses associated with the departing employee such as paid out accrued leave and contributions to retirement funds.

65 Managing the Workforce. The Federal Workforce Restructuring Act of 1994 placed work-year ceilings on the number of Full Time Equivalents (FTEs) that could be executed during the year. NOTE: The Act expired on 30 September 1999 and work-year ceilings on the number of FTEs are no longer permitted. One FTE is equivalent to a work-year, normally 2,080 hours. The work-year usually consists of 260 compensable days times eight hours per day, i.e., 2,080 hours. The Office of Management and Budget (OMB) delineates the number of hours in each work year via OMB Circular A-11. However, some years, such as 1999, 2000 and 2002 had 261 compensable days (2,088 hours). The FTE computation includes straight time, annual leave, and sick leave hours for; full time, part time, temporary and intermittent personnel, stay-in-school, summer hire, junior fellowship, foreign national direct hire and foreign national indirect hire personnel. It does not include overtime, compensatory time, or leave without pay. Labor Acceleration Rate. The labor acceleration rate is used to recognize the true cost to the government for labor expended. The cost of direct labor will be reimbursed to the providing activity, unless that activity has been mission funded to provide such support. Otherwise, the provider would be penalized to the extent that they would be providing services using their own resources, and would be augmenting the receiver s appropriated funds. A leave and holiday rate of 18 percent of basic pay will be added to the cost (hourly or annual salary) of personnel performing work for other DoD components or Federal agencies. Note that hourly rates are computed by dividing the salary by 2,087 hours. Fringe benefit rates will be determined per Volume 11A, Chapter 6 (Appendix C) of the DoD FMR. Simply stated, Object Class 12.1 (civilian benefits) is divided by Object Class 11 (civilian compensation) to yield the fringe acceleration rate. For billing to public and private parties, the rate will be fully burdened and will include an unfunded retirement factor, which is provided by the Office of Personnel Management (OPM). Each activity will calculate each employee s labor acceleration rate and it will be recomputed after each pay period. This ensures that the activity has sufficient funding available to cover all civilian personnel costs. A general formula for computing the labor acceleration rate is to take the costs of leave (annual, holiday and sick leave) plus the costs of fringe benefits (retirement, health, life insurance) and divide by the employee s total pay.

66 It is important to understand why it is necessary to be concerned with acceleration. The activity's O&M funds pay for leave and fringe benefits. If the activity has only direct O&M funding and no reimbursable funding, then the acceleration technique is not of great concern because the budget is sufficient to cover full salaries plus the government s contribution to fringe benefits. But, if the activity has reimbursable work to perform through funded reimbursable work orders, then the acceleration rate is important to ensure recovery of all the costs associated with the reimbursable work. Without this process, the activity performing the work would be paying the full costs of the worker, but only charging for the hourly rate. This would cause the activity to lose compensation for the fringe and leave costs of that worker Other Labor Budget Considerations. There are several other important considerations concerning civilian labor costs and their relation to budget formulation and execution. Because of their significant impact on the budget, each is discussed below. Reduction-in-Force (RIF). Technically, this is a "furlough" of greater than 30 calendar days or 22 work days, and is authorized under 5 CFR Part 351 (reduction in force). The OPM must approve all RIFs. Even if approved, this process will result in increased costs to the activity in the near term. Many substantial one-time costs can result from a RIF. These include severance pay, lump-sum leave payments, and moving costs. In determining any savings, indirect and non-budgetary costs should also be considered. These costs include the expense of staff time in processing and administering a RIF, placement activities, and the handling of appeals and grievances. A RIF is a last resort action. Commands should consult with their Human Resources Office for the latest policy guidance regarding RIFs. Lump Sum Leave Payments. A possible source of trouble with an established budget is unforeseen expenditures for lump sum leave. This is even more likely during periods of fiscal constraint. The Federal government often initiates early retirement programs (VSIP), where employees choose to retire rather than be subject to a RIF. In these cases the employee can be entitled to up to thirty days of lump sum leave. If the costs for lump sum leave have not been considered during the budget formulation phase, this will present some challenges for the organization. Leave Without Pay. Through this process an employee volunteers to take leave without pay. If offered to employees and accepted, this process can be used effectively by the activity to achieve short-term savings and is a valuable tool to help meet budgetary restrictions.

67 Moving Expenses. This category can result in the payout of tens of thousands of dollars to a single employee, depending on the circumstances of the hiring (such as hiring off the register) and the grade of the employee. These costs can include real estate expenses, transportation of the employee and his/her dependents, temporary quarters allowance, the movement of household goods, and non-temporary storage of household effects. Commands should contact their servicing Human Resources Office for the latest rules and entitlements. Furlough. A furlough is defined as "the placing of an employee in a temporary non-duty, non-pay status (for up to 30 calendar days, or 21 work days) because of lack of work or funds, or other non-disciplinary reason. Furloughs can be imposed individually across the command; however, commands should consult with their Human Resources Office for information Methods to Control Labor Costs. The following methods reflect ways to reduce civilian labor costs. Recruit at the entry level vice the journeyman level. This is a good strategy though is often difficult to implement. Competition for personnel and wages in the private sector may make this plan unrealistic in some geographical locations. Use awards judiciously. Truly outstanding performance should always be recognized, however, cash awards and QSIs directly affect payroll costs. "Time Off" awards can be used where funds are restricted. Use temporary help for periodic workload peaks. This requires establishing a temporary work pool in advance, but the benefits derived from greater flexibility, the ability to be proactive, and the lower costs associated with temps (generally, you do not have to pay for their fringe benefits) is worth the effort. Depending on the type of work performed at the activity, this may not be a viable alternative. Minimize the use of deputies and assistants. Care should be exercised when eliminating deputy positions, especially when the senior is military. The civilian deputy to a military superior is often a critical element for continuity.

68 Reassess the size of staff support functions. Can some staff support functions be transferred to the line organization? Reorganization of some staff functions can save money and maximize productivity. Hiring freezes and gapping billets through attrition. This is one of the best methods to reduce the work force and save money. Through attrition, the organization can achieve true long-term savings by not filling positions deemed unnecessary. Leave without pay (LWOP). Through this process an employee volunteers to take leave without pay. Voluntary leave without pay probably has the least long-term impact on the organization while achieving some short-term savings. Extended amounts of LWOP can affect an employee s retirement computation, however. If less stringent means fail to provide the necessary budgetary savings, it may be necessary to consider the use of furloughs (up to 30 calendar days or 21 workdays). This is equivalent to leave without pay, but is an involuntary action imposed on the employee(s). Furloughs are authorized under 5 CFR Part 752 (Adverse Actions). Under this regulation the employing activity must provide an employee with 30 days advance notice of its intent to furlough. Through advanced planning an activity can reduce the impact of a furlough on the work force. This could be accomplished through the use of discontinuous furlough or intermittent days furlough, such as one workday per week for 15 weeks. Alternately the activity may elect to use the consecutive furlough. Activities should weigh the effect on employee morale before deciding on a furlough to solve budgetary shortfalls.

69 Reduction-in-force (RIF). The most extreme action is the RIF, which is a last resort option. As discussed earlier, a RIF is a furlough of greater than 30 calendar days. The short-term cost savings are not realized due to the costs of terminating someone's employment and the disruption to the organization. The only hope of saving any money with a RIF is in long-term savings and even these may not be realized. The organization may be smaller but you may have to pay for severance pay, lump-sum leave, and moving costs. Additionally, costs include overpayment to downgraded employees who continue to receive their higher pre-rif salaries while occupying jobs at lower grades. Employees who have lost employment through a RIF are also entitled to preferential hiring, such as the Priority Placement Program (stopper list), and moving expenses. This could increase your costs of hiring if you needed to grow again after the RIF. NOTE: An A76 study must be performed prior to converting from contractor to civil service or vice versa The OP-32 Budget Exhibit. The OP-32 details how your activity plans to spend funds by type of purchase (object class) from the current year through the budget years. It is submitted for all sub-activity groups (SAGs) related to your activity. The total of the individual OP-32 exhibits for each SAG should not exceed the assigned budget control numbers. The OP-32 is composed of four years (prior year, current year, budget year 1 and budget year 2) and tracks the changes in funds between these years. The column titled "Price Growth" represents the effect of changes in pricing assumptions on the prior year's program. These pricing assumptions reflect projected inflation rates for the different types of purchases contained in the OP-32 and are provided each year along with the budgetary control figures. It is very rare that no changes occur to your program (whether voluntarily, as in the case of functional transfers, or involuntarily, as in the case of budget cuts necessitating changes in program). The "Program Growth" column accommodates this requirement. Any changes to your program, whether an increase or decrease, will fall into this column and will also be broken down by OP-32 line item. The amounts entered in this column will reflect a net of all increases and decreases. Once the "current year" data has been entered, the same process of entering data for Program Growth and Price Growth is used to arrive at the data for the budget years. Any changes in the Program Growth column must be explained in the OP-5 exhibit.

70 The OP-32 is the cornerstone for all other budget exhibits that follow. It must match the OP-5 exhibit (discussed in the next section) regarding the pricing and program adjustments between the current year and budget years. Exhibit 2 is a sample of the OP-32 exhibit data screen from BAERSFL. Exhibit 2. BAERSFL ICC OP32. Table 4 provides a crosswalk of Inflation Category Codes (ICC) to Object Class Codes (OCC).

71 Table 4. ICC Crosswalk to OCC. ICC AIC BOCS/Inflation Category Title % % % OCC FY 2005 FY 2006 FY 2007 Civilian Personnel Compensation 101 FA Full-time perm: Executive, General, & Special Scheds 1/ 1/ 1/ FB Other than full-time perm: Executive, General, & Special Scheds 1/ 1/ 1/ FC Other personnel comp: Executive, General, & Special Scheds 1/ 1/ 1/ FD Special personal svcs paymts: Executive, General, & Special Scheds 1/ 1/ 1/ FE Pers benefits (Civ pers): Executive, General, & Special Scheds 1/ 1/ 1/ GA Full-time perm: Wage Board 1/ 1/ 1/ GB Other than full-time perm: Wage Board 1/ 1/ 1/ GC Other personnel comp: Wage Board 1/ 1/ 1/ GD Special personal svcs paymts: Wage Board 1/ 1/ 1/ GE Pers benefits (Civ pers): Wage Board 1/ 1/ 1/ HA Full-time perm: Foreign Nat'l Direct Hire (FNDH) 1/ 1/ 1/ HB Other than full-time perm: Foreign Nat'l Direct Hire (FNDH) 1/ 1/ 1/ HC Other personnel comp: Foreign Nat'l Direct Hire (FNDH) 1/ 1/ 1/ HE Pers benefits (Civ pers): Foreign Nat'l Direct Hire (FNDH) 1/ 1/ 1/ HF FNDH Separation Liability 1/ 1/ 1/ IF Benefits to Former Employees 1/ 1/ 1/ IG Vol Sep & Incentive Payments N.A N.A N.A IH Unemployment Compensation N.A N.A N.A IJ Pers benefits (Civ pers): Disability Compensation N.A N.A N.A 1211 Travel Travel of Persons WCF Supplies and Materials Purchases 401 ** DFSC Fuel 2/ 2/ 2/ ** Service WCF Fuel 2/ 2/ 2/ CB Army Managed Purchases CA Aviation Consumables CS Shipboard Consumables CM MarCorps Consumables CO Other Consumables CD Air Force Managed Purchases CE DLA Managed Purchases CF GSA Managed Supplies and Materials CG Local Proc DoD Managed Supp & Mat CH WCF Passthroughs : Fuel NA NA NA CI WCF Passthroughs : Non Fuel NA NA NA 2601 WCF Equipment Purchases 502 RB Army WCF Equipment

72 FY 2005 FY FY ICC AIC BOCS/Inflation Category Title % % % OCC 503 RA Navy WCF Equipment - Aviation Repairables RS Navy WCF Equipment - Shipboard Repairables RM Navy WCF Equipment - MarCorps Repairables RO Navy WCF Equipment - Other Repairables RD Air Force WCF Equipment RE DLA WCF Equipment RF GSA Managed Equipment Other WCF Fund Purchases (excl Transportation) 601 BA Army Armament Command BB Army Depot System Command - Maintenance N1 Naval Air Warfare Center N2 Naval Surface Warfare Center N3 Naval Undersea Warfare Center NA Naval Aviation Depots - Airframes NB Naval Aviation Depots - Engines ND Naval Aviation Depots - Mods NF Naval Aviation Depots - Product Support/Engineering NE Naval Aviation Depots - Other SP Naval Aviation Depots - Supply Components NO Naval Aviation Depots - Other Components NG SPAWAR Systems Centers SO Navy Information Services - FMSO NA NA NA TC Navy Information Services - NCTC NA NA NA TR Navy Information Services - NRISO NA NA NA NH Military Sealift Cmd - Fleet Aux Ships 3/ 3/ 3/ NI Military Sealift Cmd - AP/FSS/MPS/TAH/T-AVB 3/ 3/ 3/ NJ Military Sealift Cmd - Special Mission Support 3/ 3/ 3/ NK Naval Research Lab NL Naval Facilities Engineering Service Center DA Defense Automated Printing Service EU Naval Public Works Centers East Coast - Utilities WU Naval Public Works Centers West Coast - Utilities EO Naval Public Works Centers East Coast - Other WO Naval Public Works Centers West Coast - Other NP Naval Shipyards NQ Depot Maintenance Marine Corps NR DISA Information Services X1 NMCI DISN (SPAWAR only) NA NA NA NS Army Information Services NA NA NA NT Air Force Information Services 27.8 NA NA NU DLA Information Services NA NA NA NX Depot Maintenance Air Force - Organic NY Depot Maintenance Air Force - Contract NA NA NA 2533 CHAPTER 4: GENERAL BUDGET PROCEDURES

73 FY 2005 FY FY ICC AIC BOCS/Inflation Category Title % % % OCC 671 DV Communications Svcs - Voice & Non-Reimbursable DR Communications Svcs - Data Routers DT Communications Svcs - Transmission Adjustment DM Communications Svcs - Messaging (AUTODIN) NZ Pentagon Reservtn Maint Rev Fnd - Rents NA NA NA PF Pentagon Reservtn Maint Rev Fnd - Furniture Renovation NA NA NA PR Pentagon Reservtn Maint Rev Fnd - Above Std Svcs NA NA NA N4 Defense Finance and Accounting Service Defense Commissary Agency (DeCA) NA NA NA Defense Security Service NA NA NA N5 Cost Reimbursable Purchases Transportation 703 MD AMC SAAM./JCS Exercise Program MA AMC Channel Cargo MT AMC Channel Passenger NW AMC Training ML MSC Chartered Cargo MI MSC POL Tanker ship MF MSC APF (Army, DLA & Air Force Prepo) NA NA NA AR MSC APF (Prepo) - Army AF MSC APF (Prepo) Air Force DL MSC APF (Prepo) - DLA MG MSC Surge Sealift (FSS & LMSR) NA NA NA MR MSC Surge Sealift Reduced Operating Status (ROS) MS MSC Surge Sealift Full Operating Status (FOS) MM MTMC Global POV MN MTMC Liner Ocean Transportation MP MTMC Cargo Operations (Port Handling) ME Defense Courier Service (DCS) Pounds Delivered Commercial Transportation Other Purchases 901 JE Foreign National Indirect Hire (FNIH) Varies Varies Varies JF FNIH Separation Liability Varies Varies Varies Stdrd Level User Chrgs (GSA Leases) Varies Varies Varies Purchased Utilities (Non WCF) Purchased Communications (Non WCF) X1 NMCI Incentives (SPAWAR only) NA NA NA Rents Postal Services (U.S.P.S.) Varies Varies Varies Supplies and Materials (Non WCF) Printing and Reproduction Equipment Maintenance by Contract CHAPTER 4: GENERAL BUDGET PROCEDURES

74 FY 2005 FY FY ICC AIC BOCS/Inflation Category Title % % % OCC Facility Maintenance by Contract UX Equipment Purchases (Multiyear Contract) Varies Varies Varies UY Equipment Purchases (Firm Fixed Price/Option) Varies Varies Varies UZ Equipment Purchases (Other Procurement Contracts) Other Overseas Purchases Varies Varies Varies Ship Maintenance by Contract Aircraft Rework By Contract Other Depot Maintenance (Non WCF) XY Mgt & Prof Support Services (FFRDC) XN Mgt & Prof Support Services (Non FFRDC) X1 NMCI Program Management (SPAWAR only) NA NA NA YY Studies, Analysis, & Evaluation (FFRDC) YN Studies, Analysis, & Evaluation (Non FFRDC) ZY Engineering and Technical Services (FFRDC) ZN Engineering and Technical Services (Non FFRDC) ** Locally Purchased Fuel 2/ 2/ 2/ Other Intragovernmental Purchases X1 NMCI Seats All BSOs NA NA NA UB Grants UA R & D Contracts Other Contracts Foreign Currency Variance NA NA NA UH Military Personnel Varies Varies Varies UI Military Personnel: Accrued Retirement Varies Varies Varies UJ Military Personnel: Other Personnel Benefits Varies Varies Varies DH DHP Accrual Varies Varies Varies UK Medical Care Varies Varies Varies UL Subsistence and support of persons Varies Varies Varies UC Lands and structures UD Investments and loans Varies Varies Varies UE Insurance claims and indemnities Varies Varies Varies UF Interest and dividends Varies Varies Varies UG Refunds Varies Varies Varies UM Unvouchered Varies Varies Varies UN Undistributed Varies Varies Varies UO Administrative or Nonadministrative Expenses Varies Varies Varies Other Costs / Compute costs based upon pay rates in effect 30 September 2004 with pay raise in Jan 2005 for classified employees. Wage Board increases will be effective on the first pay period beginning 90 days after the normal effective date for each wage survey area. Foreign national increases vary by country. 2/ Use specific barrel prices for fuel 3/ Use Individual Hull Rates When Possible CHAPTER 4: GENERAL BUDGET PROCEDURES

75 The OP-5 Budget Exhibit. This exhibit is completed by Headquarters (BUMED) only, using the OP-32s submitted by the field. The OP-5 provides detailed financial information for each budget activity group (BAG), activity group (AG), and sub-activity group (SAG). Any activity group that appears in a different budget activity must be presented separately. The exhibit contains six sections: 1. Description of Operations Financed 2. Force Structure Summary 3. Financial Summary BAG Breakout Reconciliation of Increases and Decreases 4. Performance Criteria and Evaluation 5. Personnel Summary End-Strength Work-years Reconciliation of Increases and Decreases 6. Out-year Summary A brief description of each of these sections follows. 1. Description of Operations Financed: Describes the nature of each effort funded under this activity group. The descriptions should include the goals or benefits of the program and the mission requirements that are satisfied through its performance. They may also describe the means by which O&M resources contribute to the performance or satisfaction of the requirements. These descriptions may be copied from the prior year's OP-5 but should be updated as required to reflect program changes. 2. Force Structure Summary: Describes what is supported by the activity group. 3. Financial Summary: Broken out into two subsections. Budget activity Group Breakout: Displays budget totals from the prior year through the budget years for the SAG, and should match the figures from the OP-32 exhibit for that particular SAG. Reconciliation of Increases and Decreases: Reconciles program increases and decreases and pricing adjustments starting with the current year President s budget request through the budget year estimates. The increases and decreases must reconcile with the figures in the OP-32 exhibit.

76 4. Performance Criteria and Evaluation: Criteria should be used as necessary to justify the funded program properly. Performance criteria should be easy to understand, be consistent with the program dollars, and be consistent from fiscal year to fiscal year. Criteria are usually expressed as quantity accomplishments or workload, such as students graduated, transactions processed, etc. 5. Personnel Summary: End-Strength: List U.S. Direct Hire (USDH), Foreign National Direct Hire (FNDH), and Foreign National Indirect Hire (FNIH) for the prior year through the budget years. Work-Years: Same as above except reflected by work-years. Reconciliation of Increases and Decreases: Reconciles increases and decreases in end strength starting with the current year President s budget request through the budget year estimates. 6. Out year Summary: This section provides a summary of personnel numbers through the "out-years" of the FYDP. A sample template of the OP-5 exhibit is provided below.

77 Sample Template of the OP-5 Exhibit. COMPONENT NAME I/ Operation and Maintenance, Budget Activity Activity Group Detail by Subactivity Group I. Description of Operations Financed: Provide a narrative explanation characterizing the mission and major functions funded in the subactivity group. Include a separate explanation for each subactivity shown in Section IIIA below. These explanations should address significant program initiatives/actions included in the budget. II. Force Structure Summary: Provide a narrative explanation and identification of force structure supported by funding in this subactivity group. III. Financial Summary (O&M: $ See note): 2/ FY CY FY PY Budget Current FY BY1 FY BY2 A. Subactivity Grow Actuals Request Appropriation Estimate Estimate Estimate 1. Subactivity 2. Subactivity 3. Etc. Total B. Reconciliation Summary: Change Change Change FY CY/FY CY FY CY/FY BY1 FY BYI/FY BY2 Baseline Funding Congressional Adjustments NA Supplemental Request Price Change Functional Transfer Program Changes Current Estimate Instructions: For the changes in the Current Fiscal Year (FY CY), provide information from the President's budget request for that fiscal year to the current estimate in this submission for that same fiscal year. For the changes from the FY CY to the FY BY1 and from the FY BY I to the FY BY2, use the current estimate. 1/ The O&M budget is generally stratified into three levels: Level 1, Budget Activity (BA); Level 2, Budget Activity Group (BAG); and Level 3, Subactivity Group (SAG). The O&M budget structure for some Defense Agencies/Activities stops at the BA or BAG level. The Defense Agencies/Activities are required to submit this exhibit at the lowest level of their budget structure. 2/ Services: $ in Tenths of Millions; Defense Agencies/Activities: $ in Thousands. Exhibit OP-5 Detail by Subactivity Group CHAPTER 4: PLANNING, PROGRAMMING, BUDGETING AND EXECUTION PROCEDURES

78 Unfunded Requirements (UFR) Budget Exhibit. The detail of Unfunded Requirement (UFR) reflects those programs which cannot be performed within the constraints of the control numbers assigned to an activity. Normally, there are two critical parts to this exhibit. First, the narrative statement which describes the unfunded requirement. Second, the impact statement which explains what will happen if funds are not forthcoming to satisfy the requirement. In any event, careful documentation of UFRs is a very important part of budget preparation. Each UFR should have full justification including what the impact of not executing the particular program would have on the command's ability to carry out its mission. Each UFR must also be prioritized and accurately priced. As a practical matter, UFR lists should be limited to the most important items, but inclusive enough to provide several options to the CO and to those external to the command who will review the list Other Budget Exhibits. In addition to the OP-32 and OP-5 exhibits, there are numerous other budget exhibits that are required for the O&M OSD/OMB budget submission. These exhibits are not discussed in detail here due to the sheer volume of information. The DoD Financial Management Regulation (DoD R), Volumes 2A and 2B provide standard guidance and procedures for the DoD components for the OSD/OMB budget submission. The DoN Budget Guidance Manual supplements the FMR with DoN-specific guidance and procedures, including the above list of budget exhibits Budget Execution. Throughout the year of execution, it is important to monitor budget execution. A budget is a plan, and when appropriated, becomes the legal basis for the purpose, time, and amount aspects of the installation, program, or activity that submitted the budget. It is the Navy s obligation to execute that budget as presented and as enacted Annual Planning Figure (APF). The Annual Planning Figure (APF) is issued at the beginning of each fiscal year. It establishes the baseline operating budget for the year for each activity at the EOB level. Any distribution below that level will be in the form of an Operating Target (OPTAR). Once the APF is issued, a quarterly cash allocation will be made in the Program Budget and Accounting System (PBAS). Since the DHP is very dynamic, there are many funding changes that will occur throughout the year. Consequently, the APF is updated frequently to reflect those changes and to revise the funding levels to the EOB.

79 Annual Financial Plans Overview. BUMED is the Responsible Office for the Navy Defense Health Program. The Deputy Chief for Resource Management and Comptroller, BUMED, is responsible for budgeting, accounting, and reporting for programs Annual Financial Plan. M8C1 is responsible for developing an annual obligation plan for BUMED at the beginning of each fiscal year. This is a monthly obligation phasing plan down to the EOB level. The activities use the BAPF Application to enter data which is then rolled up into an overall BUMED plan. The following general information pertains to the system developed to assist BUMED in the preparation of Annual Financial Plans BUMED Annual Planning Figure (BAPF) Application. The BUMED Annual Planning Figure is a web-based application designed by SPAWAR Systems Center, Charleston, to collect BUMED spending plans based on published annual planning figure controls. Dollars are distributed by ELH, Expense Operating Budget (EOB), and Chargeable UIC levels. Plans are entered into both Sub-Activity Group (SAG) and Expense Element (EE) categories by month to create a complete and executable spending plan that will be reviewed by Headquarters Management. This data is collected and uploaded to the Summarized Management Analysis Resource Tool (SMART) so that obligation data can be measured against it. Execution rates are analyzed based on this data. In addition to measuring execution, the BAPF also provides administrative safeguards to ensure that the SAG Pharmaceutical and EE 4 data match and that all plans have been created within controls provided. Configuration. This process requires a desktop computer with Microsoft Internet Explorer Version 4.0 or later. It is best viewed using a minimum desktop resolution of 800 X 600 pixels. It also helps to use the F11 button to toggle the browser into full-screen mode. Internet Explorer (IE) must be explicitly configured to allow this application to use VBscript and ActiveX data objects. IE provides this capability without exposing the desktop to unwarranted security risks using Trusted Sites. To set security settings: Select Tools ( View on IE version 4), then Internet Options from the internet explorer Menu Bar. Click on the Security Tab, and click on the Trusted Sites Web Content Zone icon. For IE Versions without an icon, use the Zone Pulldown to select Trusted Sites. Click the Sites Button ( Add Sites in IE version 4). In the Add this Web site to the Zone textbox, enter:

80 Press the Add button to move the entry into the Web Sites list box. Click the OK button to leave the Trusted Sites page and return to Internet Options. Click on the Custom Level.button (for IE version 4 select the Low option and press OK and skip to the next step). Under the Reset custom settings heading select Low in the pulldown box and press Reset. Answer Yes to the Are you sure. Warning, as this is only setting security for Trusted Web Sites. Select OK from the Security Setting page and OK from the Internet Options page. BAPF SAG/EE Entry. The BUMED Annual Planning Figure SAG/EE entry screen provides the capability for activities to enter their financial plans by SAG and EE based on controls received from higher authority. Modifications to data are only allowed at the chargeable UIC level, therefore the Update, SAG Delete, EE Delete and Force Balance Pharmacy buttons are only enabled at the CUIC level. Exhibit 3 contains the SAG/EE Screen Components. Exhibit 3. SAG/EE Screen Components.

81 Points of contact for technical assistance for the BAPF program is Mr. David Russell, SSC Charleston, Norfolk Office, (757) , DSN , or Deborah Hunt, SSC Charleston, Norfolk Office, (757) , DSN , Plan Updates. The financial plans will be updated on a periodic basis. When updates are requested, prior months will also be updated to reflect actual obligations of what was once a previous month s projection. Additional updates may be requested during the mid-year review and under special circumstances Submission Requirements. M8C1 strives to provide budget controls in the form of annual planning figures prior to the beginning of each year. COs develop and submit their Annual Financial Plan, via their supporting ELH, to M8C1 by September of each fiscal year for the next fiscal year. This information is used to submit to higher authority for the upcoming apportionment and initial Budget Activity Group controls Fund Execution Reviews. M8C1 will provide the Deputy Chief for Resource Management/Comptroller (M8) with a monthly briefing regarding the actual fund execution compared to the plan and provide recommendations for fund redistribution. This will include a review of the current fund status for all ELH/EOB activities and cover all unlapsed appropriations. Additionally, quarterly reviews will be provided to TMA and to the Deputy Surgeon General (DSG)/SG. There are several metrics used in managing the execution of a budget. Each program, activity or installation is a little different, but the following are key examples. Funding Architecture. Funding floors, ceilings, and fences are established in many categories. The activity comptroller must ensure that those targets are met. Recall, that funding earmarks are tools Congress uses to set the level of effort for a particular function. During execution, areas of spending such as child development centers, appropriated fund support to MWR, travel, and advisory and assistance services require additional monitoring. Congressional Interest Items. Some budget line items are designated as special interest items. These receive higher levels of scrutiny within DoD and Congress. If you manage funds related to one of these programs, it demands increased vigilance.

82 Funds Allocation Process Acceptance and Receipt. BUMED receives funding for general operations from several appropriations and sources due to defense management review initiatives involving business consolidation, base realignment and closure, and the implementation of the DHP. As a result of these initiatives, BUMED maintains a large number of appropriation accounts until they close. various fiscal years. BUMED currently manages the following appropriations for Operation and Maintenance, Defense Health Program (O&M, DHP) Other Procurement, Defense Health Program (OP, DHP) Operation and Maintenance, Navy (O&M, N) Operation and Maintenance, Navy Reserve (O&M, NR) Other Procurement, Navy (OP, N) Reserve Personnel, Navy (RP, N) Research, Development, Test & Evaluation, Navy (RDT&E, N) Base Realignment and Closure (BRAC) (Multiple PY accounts) Defense Emergency Response Fund (DERF) Many of these appropriations only apply to specific BUMED activities and some were only available during specific fiscal years. Table 5 depicts the primary activities involved in managing various appropriations.

83 Table 5. BUMED Activities and Applicable Appropriations. ACTIVITY O&M, O&M, OP, OP, RP, RDT&E, DER GIFT BRAC TYPE DHP N DHP N N DHP F FUND Medical Treatment Facilities X X X Medical Research and Development Facilities Special Medical Mission Facilities X X X X X X X Navy Medicine Regional Commands X X X X Navy Medical Logistics Command X X X X X X Navy Medicine Manpower, Personnel, Training, and Education X X X X Navy Drug Labs X X USUHS BUMED/BUM ED CMA X X X X X X X X X Financial accounting support for all of these appropriations is provided by DFAS San Diego with the exception of the RDTE, N appropriation which is serviced by DFAS Charleston, and the RP, N appropriation which is serviced by DFAS Pensacola.

84 Receipt and Transfer of Budget Authority. BUMED receives and distributes funding authority using the DoD PBAS system. The system automatically provides an audit trail and documentation required by DoD Financial Management Regulations. Funding authority documents are submitted to the Fund Administrator, Deputy Chief for Resource Management/Comptroller, BUMED for approval and signature. In his absence, alternate approval authorities have been designated in writing. Directorate organization. Chart 12 illustrates the BUMED Resource Management Chart 12. BUMED Resource Management Directorate.

85 Approved funding authority documents are provided to M8C2 where the changes are entered into PBAS and STARS. The fund distribution process is driven by funds reported available on PBAS vice the official accounting system. Therefore, M8C1 assigns all unallocated authority to the Centrally Managed Account (CMA) until funding distribution decisions have been finalized. This will result in general ledger compliance with guidance from higher authority (DoD FMR Vol. 3 and 14 Chap 1). The function and documentation of transactions and decisions should be separated using the management control concept. Transactions and decisions should be clearly visible and followed. Documents explaining the decision rationale and verifying the approval authorization are to be maintained and easily accessible within M8C1 and M8C Issuance of Allotments. In general, BUMED issues fund authorizations to intermediate commands designated as ELHs, permitting them to further delegate fund authority to subordinate field activities designated as Expense Operating Budgets (EOBs). The ELH and EOB authorization structure is unique to the Navy. Both the ELH and EOB are subject to the legal ramifications of 31 USC 1517 with the CO positions carrying the additional responsibilities for command and control as specified in Navy Regulations. Activities granted an EOB may issue OPTARs to subdivisions within the activity. An OPTAR is administrative in nature and does not carry legal responsibility under 31 USC The use of OPTARs allows the EOB activities to fund small commands in remote areas. The funds provided by an ELH or EOB are issued in the name of the field activity and authority over the funds is exercised by the CO. This authority is, in turn, normally delegated to the activity comptroller who acts as the Fund Administrator. Every level of the BUMED organization involved in fund delegation, from BUMED to the field activity comptroller, is subject to certain statutes governing the use of appropriated funds. The following is a synopsis of the legal aspects governing the use of appropriated funds.

86 Legal Aspects of Appropriations. Title 31 United States Code contains the provisions governing the use of appropriated funds. These are purpose, dollar amount, and time. There are several sections within that title that are pertinent to all levels in the BUMED organization. Section 1301a Application. Prohibits the use of funds for any purpose other than which they were appropriated (i.e., O&M funds cannot be used to purchase items that require OP funds or to fund new construction). Section Limitation on Expending and Obligating Amounts. Forbids any officer or employee of the United States from obligating, expending, or authorizing the use of funds exceeding the amount available in an appropriation or fund; prohibits involving the Government in any contract or obligation for the payment of monies before an appropriation is made available; and forbids exceeding funding limitations imposed by law. Section Limitation on Voluntary Services. Forbids the acceptance of voluntary services on behalf of the Government except as specifically authorized in law. Section Obligation and Expenditure Limits. Forbids the over obligation and over expenditure of an apportionment or an amount permitted by regulation prescribed for the administrative control of appropriations. Within the Navy, this limitation applies to the fund allocations and allotments issued to an operating budget activity. Exhibit 4 contains a sample PBAS screen.

87 Exhibit 4. PBAS Screen.

88 Return of Authority. The need to return authority and or recoup funds periodically becomes necessary due to a variety of situations including contingency operations, urgent or emergent conditions, and military requirements. The process for return of authority is managed using the same procedures as those used when issuing funds. The process is as follows. Higher Authority (TMA) will notify BUMED when it is necessary to recoup funds citing the reason. BUMED will notify the appropriate ELH when it is necessary to recoup funds. M8C1 will normally contact the ELH by phone and or through electronic mail requesting concurrence prior to initiating the funding document through the PBAS system. The reason for recoupment must be stated on the document. M8C2 will record the change in the STARS. ELH will notify the appropriate EOB when it is necessary to recoup funds Recommendations on Distribution. M8C1 will provide M8 with recommendations on the use of undistributed funds to meet activity and program requirements. M8 will approve the initial distribution of funds for each fiscal year based on the Annual Financial Plan. Subsequent recommendations for distribution changes will be provided to M8 for approval prior to implementation Annual Supplemental Financial Guidance. M8C2 will release the Annual Supplemental Financial Guidance during July/Aug of each year. The Supplemental Financial Guidance provides advance notice of pending changes and interim accounting procedures. The contents of the Supplemental Financial Guidance are mandatory procedures until such time as revised procedures are incorporated into this standard.

89 Management of Allotment Authority. allotment authority General Policies. The two following policies govern the management of 1. All funding authority granted to BUMED will be recorded in the official STARS accounting system within one working day of the receipt of funds. 2. The authority to approve and authorize fund allocations to BUMED activities rests solely with M8 or designated alternate Process Overview. BUMED will accept new funding authority and distribute funds to the ELH and activity Operating Budgets as depicted in Chart 13. Chart 13. Fund Authorization Process.

90 Receipt and Recording of Allotment. Upon receipt of a funding allocation it will be immediately forwarded to M8C2 for recording in the STARS accounting system Distribution of Allotment Authority. Allotment authority is distributed among the different divisions under M8 per the following guidelines: a. M8C1 will forward a list of fund distribution recommendations to M8 prior to the commencement of each FY based on the approved Annual Financial Plan. Fund controls will be issued at the Budget Activity Group (BAG) level. Prepared documents will be submitted to M8 for approval. Approved allocation documents will be forwarded to M8C2. b. Funds not distributed to BUMED field activities within one working day of receipt by BUMED will be placed in the DHP CMA until M8C1 recommendations for distribution are approved by M8. Undistributed funds placed in the DHP CMA will be identified as Undistributed Funds on all internal management reports and retain that designation until M8 has issued specific distribution approval. c. M8C2 will record the allocation changes in STARS/FL using applications LXT16S1 (Resource Authorization). A copy of all completed fund allocations will be maintained on file within M8C2 for a minimum of five fiscal years after the initial year of execution. Operating Budget Allocation. PBAS is a budget allocation tool that is used by the DHP to allocate funding authorization to its components. PBAS provides the mechanism for recording acceptance of the initial fund allocation provided by TMA. Funds are further allocated to BUMED activities by Budget Activity Groups (BAGS) utilizing this same system. Once allocations are received by PBAS they are then entered into STARSFL. Exhibit 5 provides a sample of the PBAS screen. Exhibit 6 is a sample STARS-FL screen: Resource Authorizations, LXT16S1 data entry screen.

91 Exhibit 5. PBAS Screen.

92 Exhibit 6. STARS-FL Screen: Resource Authorizations, LXT16S Instructions for Accounting for Operating Budget Allocations (Resource Authorizations) in STARS-FL. The following instructions pertain to the process used to account for an operating budget allocation or resource authorization within the system. Mandatory/Optional Fields for Accounting for Operating Budget Allocation (Resource Authorization) a. Doc No Optional for appropriations b. Effective Date Mandatory The effective date cannot be greater than the current date and cannot be greater than 40 days earlier c. EXEC: (Execution Code) Mandatory for transaction code 110 d. C/D: Credit or Debit Mandatory C: Credit will decrease the authorization D: Debit will increase the authorization