1. Color of Money 101 PEO SYSCOM COMMANDERS’ CONFERENCE Siobhan Tack DAU
BCEFM Department Chair, C&NE Region

2. The Budget Process #1 Identify the Requirement #2
Develop A Cost Estimate #3
Apply Appropriations and Funding Policies #4
Budget using PPBS #5
Congress Appropriates through the
Enactment Process #6
Get to Work during the Execution Process

3. Lesson Overview Appropriation Categories Funding Policies
Congressional Budget Enactment Process
Budget Execution Process

4. Major Appropriation Categories
APPN CAT
FUNDING POLICY
SCOPE
Incremental years
Full years
(5 years)
Annual year
RDT & E
PROC (SCN)
O & M
MILPER
MILCON
RDT&E Activities & Expenses
End items >= $100K system unit cost, All Centrally managed items, Initial Spares, Labor for certain production-related functions (e.g., item assembly, quality assurance)
Replenishment Spares, Fuel, Civilian Salaries, Construction Projects < $750K, Travel, Non-centrally managed end items < $100K system unit cost
Military Personnel Expenses
Construction Projects >= $750K
INCREMENTAL
FULL
Full years
*Funding policies as they relate to Appropriations is ELO
An appropriation is “provision of legal authority by an act of the Congress that permits Federal Agencies to incur obligations and to make payments out of the Treasury for specified purposes.” -- provides Budget Authority
Congress annually approves numerous appropriations (about 60) for Defense. Each category at left is a roll-up of all similar appropriations of a specific type (e.g, RDT&E for all components & agencies).
The scope of each appropriation category is shown in the second column. Tie appropriations to program phases (CE, PDRR, EMD, Prod/Fielding/O&S) Note LRIP can be funded with either R&D or Procurement depending on use for testing.
- Have students provide some examples of appropriation use.
- Current Minor Construction threshold is $500K; Current Investment/Expense criteria threshold is $100K for purchase of things
- PMs don’t directly manage MILPERS & MILCON
- Refs: AR , Navcompt Vol 7, AFR 65 series
- DoD R states (para D.3) that “cost of civilian personnel compensation and other direct expenses incurred in support of procurement and/or production programs by departmental HQ staff, contracting offices, contract audit offices, system project offices, and acquisition managers are EXPENSES. Procurement and/or production direct support costs such as production testing, quality assurance, production engineering, and equipment assembly, whether performed under contract or by in-house personnel funded on a reimbursable basis are INVESTMENTS.”
TRANSITION: Let’s now look at each of the funding policies.
ANNUAL
ANNUAL
FULL

5. Multiyear Procurement (MYP)
Exception to Full Funding Policy
Commitment to buy a specific quantity of useable end items of a weapon system over a specified number of years (normally, maximum of five years)
Annual Appropriation by Congress for same specified number of years
Purpose:
- Reduce program cost growth
- Counteract adverse effects of the annual budget and procurement process
- Bring stability to acquisition process

6. Advance Procurement Long Lead Items
Exception to Full Funding Policy
Contained in Acquisition Strategy
Approved in Milestone Decision
Separate initial contract
Finances Long Lead (Recurring) Components
To protect production schedule
To maintain a critical skill in the workforce
Generally, Budget Authority requested / granted one Fiscal Year in advance of the related end item contract
Shown as a separate line
item on the budget request.

7. Congressional Budget Process
Enactment Process
Budget Resolution
Authorization Bill
Appropriations Bill

8. Congressional Enactment Timetable
JAN FEB MAR APR MAY JUN JUL AUG SEP OCT 1 15 15 10 30
PRES BUDGET
“TARGET” FISCAL YEAR
CBO REPORT
COMMITTEE INPUTS
HRNGS Marks FLOOR
HOUSE
Budget
Resolution
BUDGET RESOLUTION
Conf ^
SENATE
HRNGS Marks FLOOR
Authorization Act
HASC HRNGS MARK-UP FLOOR FLOOR
HOUSE
AUTHORIZATIONS
Conf
SENATE
SASC HRNGS MARK-UP FLOOR FLOOR ^
HOUSE
HAC HRNGS MARK-UP FLOOR FLOOR
Appropriations
Act
APPROPRIATIONS
Conf
SENATE
SAC HRNGS MARK-UP FLOOR FLOOR ^

9. Appeals To Congressional Marks General Rules Between Congress And DoD
Each phase (i.e., Authorization and Appropriation) is separate
Appeal to next Committee of that phase considering the budget request (e.g., appeal to the SASC, SAC and/or the appropriate conference committee)
Appeal to amount closest to President’s Budget
Acceptable to appeal language and production quantities as well as dollar amounts

10. Continuing Resolution
If Congress fails to pass appropriations bills prior to 1 October, it may pass a joint Continuing Resolution which must be signed by the President
Continuing Resolution Authority is stopgap spending authority allowing the federal government to continue operating
Allows obligation of funds at the “current rate of operations” usually based on one of these levels:
____________________________________
New Start programs and expansion of current program scope NOT PERMITTED
Normal rate based on last year’s appropriation
Normal rate based on lowest Congressional mark

11. Apportionment Process
Provides Budget Authority
Congress
CRA
Fully Fund
Quarterly Fund
Impoundment:
Deferral
Rescission
Apportionment
OMB
Withhold
General Reductions
Release
OSD Comptroller
Allocation
Service
Comptroller
Sub-Allocation/
Allotment
MAJCOM/PEO
Comptroller
PMO
Program
Management
Office

12. Taxes Reduction = 12.1 % of Amount Appropriated
Impact of General Reductions on An Acquisition Program Joint Direct Attack Munition (JDAM) Program
FY 98 Appropriation (RDT&E) $24.70 M
FFRDC $ 0.00 M
Consultant M
Budget Cap M
National Missile Defense M
Small Business Innovative Research M
ASK: How many work on programs with RDT&E funding?
JDAM is an air launched missile -- our example deals with its RDT&E funding
They started with 24.7M
FFRDCs: (e.g. MITRE, Aerospace, Center for Naval Analysis) Congress wanted to reduce money going to FFRDCs, so directed DoD to cut $71.8 M from programs getting assistance from Centers -- but can see that JDAM didn’t get hit
Consultants: Congress wanted to reduce consultants as well, so directed a reduction to O&M, RDT&E and Procurement accounts for programs using consultants.
Budget Cap: To meet defense budget cap, Congress directed DoD to reduce all RDT&E and Procurement funds in programs by 1.5 percent. This is called a pro-rata cut -- by law, every program takes a hit. May hear it called “peanut butter spread”
National Missile Defense: Congress wanted to increase NMD funding by $474 M so it had to come from other RDT&E programs.
Inflation: CBO said that OMB’s assumed rate of inflation during the fiscal year was too high, so chop
Even with all that, the cut’s not too bad, less than $1M -- but what’s missing? What tax does every RDT&E program have to pay every year?
Small Business Innovative Research (SBIR): WHAM! Congress told us to fund SBIR but didn’t appropriate funds; In FY98 it was a $550M bill, so OSD took 1.4% from most RD (Remedy by using SBIR -- get more than your money’s worth.)
ASK: Who initiated all these taxes -- was it OSD? Congress wrote it into the approp
MORAL: Don’t count on getting your whole amt -- Plan on taxes every year (10%)
Inflation Reduction M
Total General Reductions $ M
Remainder $21.72 M
Taxes Reduction = 12.1 % of Amount Appropriated

13. Apportionment Process
Provides Budget Authority
Congress
CRA
Fully Fund
Quarterly Fund
Impoundment:
Deferral
Rescission
Apportionment
OMB
OSD Comptroller
Withhold GR
Release
Allocation
Service
Comptroller
Withhold
GR/Corporate Bills
Sub-Allocation/
Allotment
MAJCOM/PEO
Comptroller
Withhold
GR/CB
PMO
Program
Management
Office
Execution
GR=General Reductions

14. Budget Execution Commitment Congress US Treasury OMB DFAS
DFAS Region
Finance Center
US Treasury
OMB
DFAS
Disbursing /
Finance Office
OSD Comptroller
Service
Comptroller
PCO
Procuring
Contract
Officer
ACO
Administrative
Contract
Officer
MAJCOM/PEO
Comptroller
Commitment
C-Color
Y-Year
A-Amount
PMO
Program
Management
Office
Contractor

15. Budget Execution Obligation Congress US Treasury OMB DFAS
DFAS Region
Finance Center
US Treasury
OMB
DFAS
Disbursing /
Finance Office
OSD Comptroller
Service
Comptroller
PCO
Procuring
Contract
Officer
ACO
Administrative
Contract
Officer
MAJCOM/PEO
Comptroller
Obligation
PMO
Program
Management
Office
Contractor

16. Budget Execution Invoice Invoice Congress US Treasury OMB DFAS
DFAS Region
Finance Center
US Treasury
OMB
DFAS
Disbursing /
Finance Office
OSD Comptroller
Service
Comptroller
Invoice
PCO
Procuring
Contract
Officer
ACO
Administrative
Contract
Officer
MAJCOM/PEO
Comptroller
Invoice
PMO
Program
Management
Office
Contractor
Starts work
Incurs cost

17. Budget Execution Check Expenditure Congress US Treasury OMB DFAS
DFAS Region
Finance Center
US Treasury
OMB
DFAS
Disbursing /
Finance Office
OSD Comptroller
Service
Comptroller
Check
PCO
Procuring
Contract
Officer
ACO
Administrative
Contract
Officer
MAJCOM/PEO
Comptroller
Expenditure
PMO
Program
Management
Office
Contractor

18. Budget Execution Expenditure Reporting System Congress US Treasury OMB
DFAS Region
Finance Center
US Treasury
OMB
Expenditure
Reporting
System
DFAS
Disbursing /
Finance Office
OSD Comptroller
Service
Comptroller
PCO
Procuring
Contract
Officer
ACO
Administrative
Contract
Officer
MAJCOM/PEO
Comptroller
PMO
Program
Management
Office
Contractor

19. Budget Execution Cash Outlay Congress US Treasury OMB DFAS
DFAS Region
Finance Center
US Treasury
OMB
DFAS
Disbursing /
Finance Office
OSD Comptroller
Cash
Service
Comptroller
Outlay
PCO
Procuring
Contract
Officer
ACO
Administrative
Contract
Officer
MAJCOM/PEO
Comptroller
PMO
Program
Management
Office
Contractor

20. Budget Execution Congress OMB OSD Comptroller Service Comptroller
1115
Voucher
Summary
Congress
DFAS Region
Finance Center 14
Treasury
Cash
(Outlay)
Check
Voucher
OMB
Expenditure
Reporting
System 13 12 16
OSD Comptroller
DFAS
Disbursing /
Finance Office
Certification
Service
Comptroller
Color
Year
Amount
Certified
Invoice / DD 250
Check / EFT
(Expenditure) 3 10 2
Commitment
Certified PR
PCO
Procuring
Contract
Officer
Contract
ACO
Administrative
Contract
Officer
MAJCOM/PEO
Comptroller 4 7
Left Side is the Apportionment Process we just went over. Let’s look at how the PMO executes funds
Funding Document (1) -- Remember we said commitment is in response to formal request from PMO
- Could be PR, PO, MIPR (Direct Cite obl when on contract; Reimbursable obl immediately, but less control)
- Example of Engineering Change Proposal (ECP) that will modify an existing contract
Commitment (2, 3, 4) -- Comptroller above PMO level (MACOM, SYSCOM, MAJCOM or an intermediate level, e.g. Product Ctr) certifies that funds are available by checking three things: (ASK: Does anyone remember what they are? (FM-2)) Correct Appn (color), work is identified for the right fiscal year, and that there are enough funds (amount) to cover the anticipated obligation. Then commits the funds (ADMIN res of funds) and issues a certification to the PCO that funds are available.
Obligation (5, 6, 7, 8) -- PCO signs the contract mod, obligating the funds. (LEGAL res of funds) Passes info on to DFAS and to the ACO, who exercises surveillance over the contractor (often at the plant). Also provides record of obligation back to the Comptroller.
Invoice (9, 10) -- Contractor does the work and incurs cost. Then submits Invoice or other payment request (e.g. DD250) to the ACO. ACO certifies that the work was done and passes the invoice to DFAS.
Check (11, 12) -- DFAS then sends a check to the contractor (ASK: this is called what?) Expenditure -- then reports expenditure to DFAS Regional.
Expenditure Reporting (13, 14) -- DFAS Regional passes the expenditure info on to Treasury and back to the Comptrollers
Cash (15, 16) -- After Treasury receives confirmation of the expenditure and the Contractor cashes the check (ASK: What’s it called when the check is cashed?) Outlay -- the first time real money changes hands -- up ‘til here it’s all been only promises, no cash.
Comptrollers -- this is how they get their obl/exp info. They measure this info against each program’s spend plan to check performance. We’ll talk more about those spend plans later.
ASK: How many have experienced delays in this system? Where can delays occur?
TRANSITION: Because of the complexity of the process, mistakes are inevitable. Next we’ll talk about some laws which address some of the possible mistakes. 11 6
Record of Obligation
Surveillance
Invoice
DD 250
Procurement Request
Project Order
MIPR
- Reimbursable
- Direct Cite 1
Negotiation
Contract
(Obligation) 8 9 15
PMO
Program
Management
Office 5
Contractor

21. How can we get in TROUBLE?
Budget Execution
Apportionment
Process
Congress
DFAS Region
Finance Center
US Treasury
OMB
DFAS
Disbursing /
Finance Office
OSD Comptroller
How can we get in TROUBLE?
Service
Comptroller
PCO
Procuring
Contract
Officer
ACO
Administrative
Contract
Officer
MAJCOM/PEO
Comptroller
PMO
Program
Management
Office
Contractor
Laws:
- Misappropriation - Anti-Deficiency Bona Fide Need

22. Execution Laws
Misappropriation Act [Title 31, U.S. Code, S1301]
Requires funds to be used only for the purposes and programs for which the appropriation was made.
Anti-Deficiency Act [Title 31, U.S. Code, Sec 1341 & 1517 ]
Prohibits making or authorizing an obligation in excess of the amount available.
Forbids obligation to pay money from the US Treasury in advance of an appropriation.
Requires agency to fix responsibility for violations of the Act.
Bona Fide Need Rule:
Requires funds to be used only for needs or services in the year of the appropriations obligation period.

23. Reprogramming
Process of redirecting funds for purposes other than those contemplated at the time of appropriation.
Reprogramming rules are based on agreements between DoD and Congress.
DoD informs Congress of all Reprogramming via a semi-annual report.
Types of Reprogramming actions:
Internal
Below Threshold
Congressional Prior Approval

24. DoD Appropriation Structure Level of Control for “Below Threshold” Reprogramming Purposes
Projects
RDT&E
Budget
Activity
Program
Elements
Procurement
Budget
Activity
Line Item
Sub Activity
O&M
Activity
Group
Budget
Sub Activity
MILPER
Budget
Activity
Group
Project
MILCON
Budget
Activity
Group
For Below Threshold Reprogrammings, this chart shows you the level of control for the different approps
Each appropriation is sudivided into Budget Activities, but they are defined somewhat differently in each approp
You can see some examples of Budget Activities in the different appropriations in the next chart in your book
The boxes show the level of control for below threshold reprogramming
Use GPS BTR example
ASK: Any idea why MILCON BTRs are controlled at such a low level?
TRANSITION: Let’s look at the BTR thresholds
_____________________________________________
RDT&E
Appropriation: 3600F (RDT&E Air Force)
Budget Activity: Advanced Technology Development
Program Element: F- Flight Vehicle Technology Integration
Procurement
Appropriation: 2032A (Missile Procurement, Army)
Budget Activity: Other Missiles
Line Item: Hellfire System
O&M
Appropriation: 1804N (Operations & Maintenance, Navy)
Budget Activity: Operating Forces
Activity Group/Sub Activity Group: Air Operations / Base Support

25. Below Threshold Reprogramming
APPRN MAX INTO MAX OUT LEVEL OF CONTROL OBL AVAIL
Greater of -4M or -20%
+ 4M
RDT & E
PROGRAM ELEMENT
2 YEARS
Greater
of -10M
or -20%
+10M
3 YEARS
( 5 YEARS SCN)
PROC
LINE ITEM
BUDGET ACTIVITY
SOME BA 1 SUB-ACTIVITY LIMITATIONS ON DECREASES
(OPERATING FORCES)
None
Unless Specified
O & M
+15M
1 YEAR
+10M
Not Specified
MILPERS
BUDGET ACTIVITY
1 YEAR
Lesser of
+2M or
+25%
Not Specified
MILCON
PROJECT
5 YEARS
Reference Source: Memo Change (30 Oct 96) to DoD Financial Management Regulation , Volume 3

26. Congressional Prior Approval
Applies to Actions Involving:
General Transfer Authority (between appropriations)
Major System Procurement Quantity Increases
Congressional Special Interest Items
Amounts exceeding specified thresholds within an appropriation
Initiation of new programs or new starts within existing programs exceeding amounts
Termination of programs meeting certain criteria
Requires:
Approval by USD (Comptroller)
Approval by HAC / SAC and HASC / SASC
Approval by House and Senate Committees on Intelligence (for intelligence assets)

27. Internal Reprogramming
Applies To:
- Reprogramming actions that do not involve changes from the purpose and amounts justified in budget presentations to Congress
Requires:
- Approval by the USD (Comptroller)

28. Appropriation Life - Example
PROCUREMENT APPROPRIATION
EXPIRED ACCOUNT FY 1 FUNDS
CANCELLED
FY 1 FY 2 FY 3 FY 4 FY 5 FY 6 FY 7 FY 8 FY 9
NEW OBLIGATIONS NO NEW OBLIGATIONS CURRENT
APPROPRIATION
OBLIGATION ADJUSTMENTS
Limited to lesser of:
EXPENDITURES % of current
appropriation
ACCOUNTING IDENTITY Unexpended balance
of cancelled appn 94 95 96 97 98 99 00 01 02 . 00 01 02