Propriety of Funds/ Fiscal Law

General Limitations Purpose Time Amount Fiscal rules start with the authority to obligate monies. There are three restrictions that are placed on that obligation authority: purpose, time, & amount.

Purpose Article 1 of the Constitution grants Congress the power of the purse “No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law…” The Purpose Statute (31 USC section1301) “Appropriations shall be applied only for the objects for which the appropriations were made except as otherwise provided by law.” Comptroller General Decisions Principles of Federal Appropriations Law “The Red Books” www.GAO.gov More than 90% of the violations of fiscal law occur in the area of spending monies for a purpose other than what they were intended. It is easier to understand the purpose of an appropriation when it is enacted for something specific, for example, aircraft procurement – you know what to buy. However, for lump sum appropriations such as Operations & Maintenance the purpose may not be as cut and dry. That’s why it is necessary to refer to other sources such as Authorization Acts, Congressional reports, Comp Gen decisions, and agency regulations for further guidance.

Three-Part Test For Purpose 34 Comp. Gen. 195 (1954), “Necessary Expense Rule” The expenditure of an appropriation must be for a particular statutory purpose, or necessary and incident to proper execution of the general purpose of the appropriation The expenditure must not be prohibited by law The expenditure must not be otherwise provided for; it must not fall within the scope of some other appropriation In 1954, the Comp Gen proposed a three part test to make it easier to determine whether an expenditure is proper under the Purpose Statute. Part 1, The Necessary Expense Rule: An expenditure is permissible if it is reasonably necessary to accomplish the object of an appropriation, or will contribute materially to the accomplishment of that objective and is not based solely upon personal desire. Caution: “Necessary” is a point of view. What is necessary to one may seem a luxury to another. For example, clothing is generally considered to be a personal expense, although military personnel receive a clothing allowance for the purchase and upkeep of their uniforms. What about using appropriated dollars to purchase civilian clothing? In almost all cases, it will not be permitted. Exceptions may be made if the purchase meets three requirements: 1) the clothing is something an individual would not ordinarily purchase, 2) the purchase benefits the government (and is essential to the safe and successful completion of work), and 3) the employee is engaged in hazardous duty. Part II, Be sure to review the legislation for prohibitive language. If the law specifically prohibits the expenditure we should know that we cannot use the funds for that particular purpose. Part III, We need to decide if the expenditure is one that has been budgeted for, or has typically been made from another appropriation. Even though there may be two or more appropriations that may be available for the expenditure we do not have unfettered discretion to use whichever one we choose. For example, the current expense/investment threshold stands at $250,000. Any end items which cost less than $250,000 may be purchased with O&M while items exceeding the threshold must be purchased with procurement dollars. We must avoid augmenting one appropriation with another by spending the wrong type of funds for something that should have been paid for by another. You’ll note that no where in this decision chain does it mention such things as: logical, fair, saves money, good idea, quicker, common practice or a host of other reasons people have attempted to use to justify violating the Purpose Statute.

Time The Time Rule “Bona Fide Need Rule” (31 USC section 1502) An appropriation is available only for a certain time, after which the authority to obligate expires “Bona Fide Need Rule” (31 USC section 1502) “The balance of a fixed-term appropriation is available only for payment of expenses properly incurred during the period of availability or to complete contracts properly made within that period.” National Defense Authorization Act for FY1998 (10 USC section 2410a) Allowed DoD agencies to obligate funds in the current year to finance any severable service contract with a period of performance that does not exceed one year Congress has the right to limit its appropriations to particular times as well as to particular objects. The placing of time limits on the availability of appropriations is the primary means by which Congress maintains oversight of government activities. Up until the early 1990s any remaining balances on DOD appropriations were placed into what were called merged accounts. Over time the balances in these M accounts ballooned into the billions of dollars. The DOD agencies used these funds to pay for prior year bills and to augment their current year appropriations. In addition, they also began to use them to pay for programs and weapon systems that had not been justified before Congress. As a result, in the National Defense Authorization Act for FY1991 Congress mandated the elimination of the M accounts. Under current policy any bills that generate against an appropriation that has canceled must be paid for with current year authority. Bona Fide Need: It is ok to order in one year and take delivery in the next year if: -time is required for production -time is required for delivery -stock is being replaced -legal authority is available to exempt the department from the general rule Distinguishing between services: Severable vs. Non-severable Severable: task can be separated into components, each of which can be independently performed to meet a separate need of the government – charge to the fiscal year in which the services are rendered. Non-severable: cannot be separated into components, but instead must be performed as a single task to meet a need of the government – charge to the fiscal year in which the obligation occurs (as determined by the bona fide need rule).

Time Maintenance & Repair Contracts The government may obligate current funds for one-time maintenance and repair contracts near the end of the fiscal year, even if performance does not begin until he next fiscal year Two conditions apply: The requirement must represent a bona fide need of the current fiscal year The contract should contain a specific provision requiring that the work actually start on or before January 1 of the following fiscal year

Amount Congressional Power of the Purse Congress determines how much the government may spend through the enactment of: Appropriations Which establish ceilings on spending, or Earmarking Which sets aside a part of a more general lump-sum appropriation for a particular purpose, as either a maximum, minimum, or both Congressional language “not to exceed” “shall be available only” “not less than” “shall be available exclusively”

Amount Anti-Deficiency Act (31 USC sections 1341, 1342, & 1517) An officer or employee of the United States may not: make or authorize an expenditure or obligation that exceeds an appropriation or an apportionment make or authorize an expenditure or obligation in advance of an appropriation, unless authorized by law accept voluntary services except to save human life or prevent property damage make or authorize an expenditure or obligation that exceeds an apportionment or reapportionment, or in excess of the amount specified in a formal subdivision of funds in accordance with agency regulations Congress passed the first Anti-deficiency Act in 1906. Up until that time the departments of the executive branch became accustomed to obligating and spending funds in excess of their budget estimates. They did so in the expectation that Congress would appropriate more funding for them. As a result, Congress became increasingly irritated and took measures to reign in this practice. Later Congress stiffened sanctions and reporting requirements in the Budget and Accounting Act of 1921 and again in 1933. The agency can’t spend more than has been appropriated by Congress or apportioned by OMB. You can’t spend money until you legally get it. You cannot receive services without paying for them. You can’t spend more money than has been identified for your command in a funding authorization document. If an ADA violation is suspected a preliminary investigation is performed to determine if in fact an ADA violation has occurred. If the preliminary investigation finds creditable evidence a formal investigation is begun. All ADA violations must be reported to the President and Congress. Violators will be named in the investigative report along with a description of the disciplinary action to be taken. Disciplinary Actions may include: Administrative reprimand or admonition Removal from service $5,000 fine and imprisonment

Colors of Money

Types of Obligation Authority Two different types Appropriated Central Procurement Research, Development, Test & Evaluation Operations & Maintenance Working Capital Funds – “Revolving Funds” Supply Management Activity Group (SMAG) Materiel Support Division (MSD) Buy, Repair & Operating General Support Division (GSD) Depot Maintenance Activity Group (DMAG) Transportation Working Capital Fund (TWCF)

Types of Air Force Appropriations Time Limits for Appropriations: Single-year appropriations expire for the purposes of obligation on 30 September in the year in which they were authorized. Some examples of single-year appropriations include: Air Force Operations & Maintenance (3400), Air Force Reserve O&M (3740), Air National Guard O&M (3840). NOTE: Material Support Division (MSD) & Depot Maintenance Activity Group (DMAG) (4930) distribute annual Cost Authority Two-year appropriations expire for the purposes of obligation on 30 September in the year following their authorization. An example of a two-year appropriation would be Air Force Research, Development, Test & Evaluation (3600). Three-year appropriations expire on 30 September in the third year following their authorization. Examples include: Air Force Aircraft Procurement (3010), Air Force Procurement of Ammunition (3011), Air Force Missile Procurement (3020), Other Procurement (3080). No-year appropriations are available for new obligations without fiscal year limitation. Working Capital Funds such as MSD, DMAG & Transportation Working Capital Fund (TWCF) are examples of no-year appropriations.

Availability of Appropriations During FY10 09 08 07 06 05 04 03 02 01 00 1 Year 3400 2 Year 3600 3 Year 3010, 3020 3080 5 Year 3300 All upward obligation adjustments citing expired appropriations must be processed in the Obligation Adjustment Reporting System (OARS) prior to recording in any accounting system. OARS is also used to report the recording of an adjustment using current year funds to pay bills that were applicable to a cancelled appropriation. Only 1% of a current year appropriation may be used to satisfy prior year bills. Exceeding the 1% threshold is an automatic Anti-Deficiency Act violation. Current/Active: Available for new obligations Expired: Available to adjust obligations already incurred Canceled: Accounts canceled. Obligations or adjustments that would otherwise be chargeable to these years must be charged to active funds

3010 Budget Program Activity Codes (BPACs) 100000 – Aircraft Weapon System 110000 – Modifications 120000 – Aircraft Common Support Equipment * 130000 – Post Production Charges 150000 – Aircraft Replenishment Spares ** 160000 – Aircraft Initial Spares & Repair Parts *** 190000 – Miscellaneous Production Charges * BP12 requirements costing less than $250K per unit were transferred to the O&M appropriation in FY06 (Will be revised in FY11) ** BP15 requirements are now submitted through the MSD Initial Spares Budget *** There are two types of BP16, Reimbursable & Exempt BPACs are subdivisions below the appropriation level in appropriations other than 3400. The BPAC replaces the RC/CC after the OAC/OBAN in the accounting classification citation. The BPAC is completed by substituting the appropriate Program Code or Systems Management Code for the 0000s. For example, 10400C, 11400Z, 11400C BP10: Provides for aircraft procurement, initial common support equipment, spares, training devices, technical data, program management administration (PMA) requirements. BP11: Provides for permanent modifications to aircraft, peculiar support equipment, initial & peculiar depot support equipment, engineering data, technical data & handbooks, software, and PMA. BP12: Provided for replacement peculiar & common support equipment. BP13: Provides for production line closedown, deferred support equipment, interim contractor support, initial procurement or replacement of out of production aircraft flight simulators and flight crew or maintenance training devices, and PMA. BP16: Provides for initial spares and repair parts for new aircraft being procured, additional end items to the inventory, modifications, simulators & training devices, spare engines and engine modules. BP19: Provides for items not directly related to other procurement line items within the 3010 appropriation or items that can be managed as separate end items, or contain certain classified programs (i.e. electronic countermeasures & reconnaissance).

3011 Budget Program Activity Codes (BPACs) 350000 – Procurement of Ammunition, Air Force 360000 - Reimbursement BP35: Provides for direct and indirect munitions, small arms and related equipment (except guided missile warheads) munitions. Also includes rockets, cartridges, practice bombs, general purpose bombs, spares & repair parts, flares, and other related miscellaneous items.

3020 Budget Program Activity Codes (BPACs) 200000 – Missile Weapon System 210000 – Modification 220000 – Missile Support Equipment 230000 – Space Programs 240000 – Missile Industrial Responsiveness 250000 – Missile Replenishment Spares & Repair Parts 260000 – Missile Initial Spares & Repair Parts 280000 – Procurement Other Than Air Force 290000 – Other Support BP20: Provides for procurement of missiles, depot tools & test equipment, remote vehicles, direct ground support equipment, training equipment & devices, technical data, and PMA. BP21: Provides for missile systems and remotely piloted vehicles, modifications, special tools, engineering data, technical data & handbooks, and PMA. BP22: Provides for initial common missile support equipment and replacement peculiar & common missile support equipment. BP23: Provides for procuring, retrofit, or modification of standard space launch vehicles, stage vehicles and spacecraft. BP24: Provides for capital type rehabilitation, necessary real property maintenance and improvements, and compliance with environmental and energy requirements for Government owned, contractor operated missile industrial facilities. BP25: Provides for procuring stock fund exempt replenishment spares and repair parts for missiles, remotely piloted vehicles, guided rockets, direct ground support equipment, training devices, depot tools and test equipment. BP26: Provides for procuring initial spares and repair parts for missiles and guided rockets, modifications, related ground support equipment, training devices, depot tools & test equipment. BP29: Provides for SAF-approved classified projects.

3080 Budget Program Activity Codes (BPACs) 820000 – Vehicular Equipment 830000 – Electronics & Telecommunications Equipment 840000 – Other Base Maintenance & Support Equipment 850000 – Air Force Forest Management Program 860000 – Spares & Repair Parts 870000 – Procurement Other Than Air Force BP82: Provides for procuring wheeled & other ground vehicular equipment including railroad vehicles. BP83: Provides for procuring ground (non-airborne) cryptologic, electronics, telecommunications, general purpose ADPE and associated equipment. BP84: Provides for procuring test, personal safety & rescue, base industrial, electrical, and base equipment. BP85: Provides for procurement of investment items used solely for Forestry Management or support. BP86: Funds reparable components, assemblies, and subassemblies as initial stockage in support of newly fielded vehicles; other base maintenance & support items, and electronics and telecommunications equipment. BP87: Provides for procurement that requires the Air Force to make by designation or agreement on a reimbursable basis.

3600 Budget Program Activity Codes (BPACs) 610000 – Basic Research 620000 – Applied Research 630000 – Advanced Technology Development 640000 – Demonstration & Validation 650000 – Engineering & Manufacturing Development 660000 – Management & Support 670000 – Operational System Development 690000 – Reimbursement Transactions 610000 – This activity includes all effort of scientific study & experimentation directed toward increasing knowledge & understanding in those fields of the physical, engineering, environmental & life sciences related to long-term national security needs. 620000 – This activity translates promising research into solutions for broadly defined military needs, short of major development projects. 630000 – This activity includes all efforts that have moved into the development & integration of hardware for field experiments & tests. 640000 – This activity, the demonstration & validation (DEM/VAL) phase, includes all efforts necessary to evaluate integrated technologies in as realistic an operating environment as possible to assess the performance or cost reduction potential advanced technology. 650000 – This activity includes those projects in engineering & manufacturing development for Service use but which have not received approval for full-rate production. 660000 – This activity includes research & development effort directed toward support of installations or operations required for general research & development use. 670000 – This activity includes those development projects, in support of development acquisition programs or upgrades, still in engineering & manufacturing development but which have received approval for production through DAB or other action, or production funds have been included in the DOD budget submission for the budget or subsequent fiscal year. 690000 – This program provides for collecting refunds properly creditable to this appropriation but not identifiable to the subsidiary classification, or repaying of refunds collected in error.

3400 O&M Coding Structure Budget Activity (BA) Replaced Major Force Programs Broad categories grouping similar capabilities & missions Program Element Code (PEC) Each BA is subdivided into more specific mission breakdowns called Program Elements DoD Element of Expense (DODEE) Groups specific Air Force Element of Expense Investment Codes Element of Expense & Investment Code (EEIC) Common element to base level activities Used to identify the type of resources consumed The Budget Activities are the first subdivision of funds below the appropriation level for the 3400 appropriation. Budget Activities are broad categories used to group similar capabilities and missions. They identify the purpose, project or type of activity being financed. The Budget Activities are further subdivided into mission areas. Grouped within these Mission Areas are Program Elements.

3400 O&M Budget Activities BA 01 – Operating Forces 3 Mission Areas Air Operations: Overall support for all fighter/bomber forces, intercontinental ballistic missiles, air launched strategic/tactical missiles, support ranges, command/base support personnel/activities Combat Related Operations: Support element for combat forces and employs a wide range of assets to accomplish many missions Space Operations: Assets/force structure to provide the capability to launch payloads into earth orbits, communicate with space based platforms, & worldwide network of sites/terminals to relay data gathered by satellite constellations BA 01: Primarily supports offensive and defensive forces. Consists of a force containing combat aircraft, intercontinental ballistic missiles, command, control and communications systems as well as support related to JCS exercises, chemical/biological defense activities, and tactical intelligence and special activities. Includes F-15 Squadrons

3400 O&M Budget Activities BA 02 – Mobilization 6 Mission Areas Airlift Operations: Supports day to day activities such as tactical airlift, air refueling, operational airlift for movement of personnel/cargo Airlift Operations Command: Supports HQ Air Mobility Command including administrative support, training & preparing airlift forces to meet wartime objectives Control, Communications & Intelligence: Provides the capability to direct/control airlift/aircrews for worldwide deployment, provides intransit visibility of cargo/passengers BA 02: This BA provides support mainly for mobilization preparedness such as war readiness equipment and secondary items. Consists of forces containing tactical and operational airlift, test and training fighter, tactical air control and air refueling aircraft. Also includes support for base infrastructure and personnel needed to support mobilization mission readiness. Includes C-130, KC-135, C-5, and C-17 Squadrons

3400 O&M Budget Activities BA 02 – Mobilization 6 Mission Areas Mobilization Preparedness: Provides capability to sustain crisis situations through the provision/prepositioning of war readiness materials, includes manpower, support equipment, facilities, supports medical wartime mission Payment to Transportation Business Area: Funding to meet transportation costs not covered in rate structure Base Support: Provides personnel support functions, base infrastructure, other essential needs to sustain mission capability, quality of life, preservation of physical plant structure

3400 O&M Budget Activities BA 03 – Training & Recruiting 3 Mission Areas Accession Training: Produces enlisted/officer personnel needed to meet total force requirements, provides a military indoctrination program to facilitate a smooth transition from civilian life to military environment Basic Skill & Advanced Training: Provides training & education essential to operate, maintain, manage complex Air Force weapon systems/support structure Recruiting & Other Training & Education: Supports personnel acquisition operations, voluntary education programs & Air Force Junior Reserve Officer Training Corps (ROTC) BA 03: Provides funds for quality trained and knowledgeable personnel in sufficient quantities to effectively and efficiently operate, maintain and manage complex Air Force weapon systems and the associated support structures. At Robins funds are primarily utilized for support equipment.

3400 O&M Budget Activities BA 04 – Administration & Servicewide Activities 4 Mission Areas Logistics Operations: Includes depot maintenance, engineering & installation support, acquisition & combat support, personnel support Servicewide Activities: Ensures combat capability & maintain readiness, support to units/personnel in diverse geographic locations Security Program: Supports Air Force Office of Special Investigations & Classified Programs Support to other Nations: Includes security assistance, humanitarian assistance, participation in international & multinational activities, NATO, etc. BA 04: Provides centralized supply and maintenance system logistical support for the Air Force. Consists of essential logistical support of the operating forces both for peacetime and wartime environments. The mission involves computing essential material requirements, establishing repair schedules, acquiring essential material and services and administering contracts. Civilian Pay is in this BA.

Centrally Managed Programs Managed by the Centralized Asset Management (CAM) Office (AFMC/FMB & A4F) Depot Purchased Equipment Maintenance (DPEM) Contractor Logistics Support (CLS) Sustaining Engineering (SE) Technical Orders Support Equipment (with the exception of Vehicles) CAM Process Guide Budget authority for these programs is centrally managed within AFMC by the Centralized Asset Management (CAM) Office. At WR-ALC these funds are executed within OAC/OBAN 87RO.

Depot Purchased Equipment Maintenance DPEM Process Guide, Chapter 92 AFMC Financial Management Reference (FMR) Handbook DPEM buys: Program Depot Maintenance (PDM) aircraft & missiles Unprogrammed work (107 requests) Engine overhauls and 2LM Depot Field Team (DFT) & Contract Field Team (CFT) Software Maintenance (Process Guide, Chapter 97 AFMC FMR Handbook) Other Major End Items (OMEI) Area/Base/Maintenance (ABM) Exchangeables (Stock Fund Exempt) Storage (AMARC & other sources) Disclaimer: The Financial Management Reference Handbook is no longer being updated or maintained. It is a good starting point when looking for information but you’ll need to check when the FMRS Chapter was last updated and then verify that regulatory or policy changes have not superseded the information in the handbook.

Contractor Logistics Support (EEIC 578) CLS Process Guide, Chapter 101 AFMC FMR Handbook Uses: O&M tasks normally performed by an organic support activity for a system, equipment, or item for extended periods of time or for the life of the system, to include the following logistics support elements: Item Management Configuration Management Data Management Supply & Distribution Repair & Depot Maintenance Operating Command Organizational Maintenance Other maintenance levels as negotiated CLS can range from a single logistics support element to all logistics support elements Disclaimer: The Financial Management Reference Handbook is no longer being updated or maintained. It is a good starting point when looking for information but you’ll need to check when the FMRS Chapter was last updated and then verify that regulatory or policy changes have not superseded the information in the handbook.

Sustaining Engineering (EEIC 583) SE Process Guide, Chapter 96 AFMC FMR Handbook Engineering effort required to define the problem & identify the corrective action Uses: Aircraft Structural Integrity Program (ASIP) Mishap/Safety Investigations Failure Analysis Resolution of deficiencies Feasibility studies Does not pay for developmental engineering

Technical Data Sustainment (EEIC 594) Technical Order (T.O.) Process Guide, Chapter 85 AFMC FMR Handbook Uses: Sustainment of Tech Data Digitization of Tech Data Viewing Equipment to use data digitally Does not pay for Tech Data: During program acquisition Related to modifications On CLS programs Does not pay for AFMC management costs

4930 Industrial Fund Cost Authority Managed by AFMC Allocated to the ALCs Two different types Depot Maintenance Activity Group (DMAG) Supply Management Activity Group (SMAG) Materiel Support Division (MSD) General Support Division (GSD) Provided to the MAJCOMs MAJCOMs issue to their units Managed by USTRANSCOM & AMC Transportation Working Capital Fund (TWCF)

How A Revolving Fund Works CREATES OBLIGATION AUTHORITY TO PROVIDE PAYMENTS TO: DIRECT APPROPRIATION DEPOT OR SUPPLIER—FOR PRODUCTION, MAINTENANCE OR PURCHASE OF: SURCHARGES—TO FINANCE PURCHASE OF REPLACEMENT ITEMS & COVER OVERHEAD WHICH: MAINTENANCE OR INVENTORY — AT BASES & DEPOTS, WHO ISSUE ITEMS OR PROVIDE SERVICE TO: CUSTOMERS—WHO PAY FOR INVENTORY OR MAINTENANCE WITH O&M $, PLUS: