Module 5 - Financial Management

Question 1

Budget Authority

Answer 1

Spending limit provided by Congress

Amount you can obligate on your program in terms of Purpose, Time, and Amount, that leads to commitment, obligation, expenditures, and outlay

Question 2

Commitment

Answer 2

Administrative Reservation of funds by the local comptroller, in anticipation of future obligation.

It Ensures that the funds are available in the amount requested, correct fiscal year, and proper appropriation.

Question 3

Obligation

Answer 3

Legal reservation of funds to make a future payment of money

An obligation is created when the local Procuring Contracting Officer (PCO) signs a contract

Question 4

Expenditure

Answer 4

A charge against available funds, resulting from a voucher, claim, or other document approved by a competent authority

Question 5

Outlay

Answer 5

The vendor cashes the expenditure check and money flows from the Treasury to the vendor or supplier

Question 6

Five Defense-Wide Appropriation Categories

Answer 6

Research Development Test and Evaluation (RDT&E)
Procurement
Operation and Maintenance (O&M)
Military Personnel (MILPERS)
Military Construction (MILCON)

Question 7

Research Development Test and Evaluation (RDT&E)

Answer 7

Funds
* Research and development of equipment Materials and computer application software
* Research and development installations
*Testing and Evaluation

Obligation Period
2 Years

Question 8

Procurement

Answer 8

Funds
* Programs approved for production, including purchasing end items and defense systems, spares, and major modifications

Obligation Period
3 Years

Question 9

Operation and Maintenance (O&M)

Answer 9

Funds
* Day to day operations, minor construction, HQ operations, training and education, civilian salaries, expenses of operational military forces, travel, base operations support, fuel, and recruiting

Obligation Period
1 Years

Question 10

Military Personnel (MILPERS)

Answer 10

Funds
* Pay and allowances of active duty and reserve military personnel, permanent Change of Station (PCS) moves, training in conjunction with PCS, subsistence, bonuses, and retire pay accrual

Obligation Period
1 Years

Question 11

Military Construction (MILCON)

Answer 11

Funds
* Bases, schools, missile storage facilities, Maintenace facilities, medical/dental clinics, libraries, and military family housing

Obligation Period
5 Years

Question 12

Flyaway Cost

Answer 12

Prime Mission Equipment (PME)

Uses Procurement appropriations only

Question 13

Weapon System Cost

Answer 13

Flyaway Costs AND Support Items

Uses Procurement appropriations only

Question 14

Development Cost

Answer 14

Development Costs of PME and support Items

Systems Engineering

Program management

Test and Evaluation

Uses RDT&E appropriations Only

Question 15

Procurement Costs

Answer 15

Weapon System Cost (Flyaway Costs + Support Items) AND Initial Spares

Uses Procurement appropriations only

Question 16

Program Acquisition Cost

Answer 16

Development Cost (RDT&E) + Facilities (MILCON) + Procurement Costs (PROC)

Question 17

Operation and Support Cost

Answer 17

Sustainment Cost (O&M and MILPERS) + Disposal Cost (O&M)

Question 18

Life Cycle Cost

Answer 18

Program Acquisition Cost (RDT&E, MILCON, PROC) AND Operating and Support costs (O&M, MILPERS)

Question 19

Life Cycle Cost Estimate (LCCE) and Three Topics

Answer 19

Estimated cost of developing, producing, deploying, maintaing, operating and disposing of a system over its entire lifespan.

Prepared and reviewed at Milestones A, B, and C

Topics:
*Appropriation Categories
*Life Cycle Cost Categories
*Work Breakdown Structure

Question 20

Life Cycle Cost Categories

Answer 20

*Research and Developemnt (R&D)
*Operations and Support (O&S)
*Investment Costs
*DEMIL/Disposal Cost

Question 21

LCCE Cost Categories: Research and Developemnt (R&D)

Answer 21

Costs associated with the research and development phases including MSA, TMRR, and EMD phases

Question 22

LCCE Cost Categories: Operations and Support (O&S)

Answer 22

Costs incurred in using the system: personnel, fuel, maintenance (unit and depot), sustaining investment (replenishment spares), and training.

incurs the largest percentage of program costs

Question 23

LCCE Cost Categories: Investment Costs

Answer 23

Costs include the total cost of procuring the prime equipment, its related support equipment, facilities, initial spares, and fielding of the system

Incurred mainly in the Production and deployment phase

Question 24

LCCE Cost Categories: DEMIL/Disposal Cost

Answer 24

Cost to demilitarize and dispose of the system after its useful life

Question 25

Work Breakdown Structure

Answer 25

Provides a framework for: *Program and technical planning *Cost estimating *Resource allocations *Performance measurements *Status reporting LCCE uses the WBS to aggregate and show costs by system and subsystem

Question 26

Cost Estimating Techniques: Analogy

Answer 26

Used early int he life of a program in MSA< TMRR, and early EMD Compares new system with one or more existing similar systems which has accurate cost and technical data Strength: -Quick -inexpensive -Easy to change Weaknesses: -Subjective -Not as Precise -New system may not have a direct comparison

Question 27

Cost Estimating Techniques: Parametric

Answer 27

Used in TMRR and Early EMD Generate an estimate based on system performance or design characteristic Uses a database of elements from similar systems Uses multiple systems and makes statistical inferences about Cost Estimating Relationships (CER) Strength: -Uses CER -Inexpensive -East to do What if drills Weaknesses -Moderately subjective -Precision only as good as database

Question 28

Cost Estimating Techniques: Engineering

Answer 28

Used towards later stages of EMD when you have detailed designs for the system Most detailed of all techniques and costliest to implement Starts at the lowest level of definable work within the WBS and estimates: - Direct labor hours using company and general industry standards - Raw materials and purchase part requirements Strength -Very accurate in later stages of EMD -Limited subjectivity Weaknesses -Very expensive -Very time consuming -Difficult to do what if drills

Question 29

Cost Estimating Techniques: Actual Costs

Answer 29

Used mainly in P&D phase Employs extrapolation from actual costs that were contracted for or actually incurred on that system during an earlier period Strengths -Very accurate Limited subjectivity Weaknesses -Often actual cost data are not available when creating the budget request -Hard to do what if drills

Question 30

Above Threshold Reprogramming Actions Requiring Congressional Prior Approval

Answer 30

- Congressional special interest items - Major system procurement quantity increases - General transfer authority (GTA) - Initial of new start RDT&E estimated to cost >= $10M within first 3 years - Initiation of new start procurement program estimated to cost >= $10M within first 3 years - Termination of appropriated programs

Question 31

Above Threshold Reprogramming Actions that can be executed Internally

Answer 31

- Do not involve a change in the purpose or amounts approved by Congress - Must be approved by the DoD Comptroller - Applies mainly to administrative realignment of BA

Question 32

Below Threshold Reprogramming

Answer 32

- Allows limited transfer of Budget Authority among programs within an appropriation category - Controlled and approved by local or service defense agency comptrollers - Does not require Congressional involvement

Question 33

Below Threshold Programming: RDT&E

Answer 33

MAX INTO: Lesser of +$10M or +20% MAX OUT: Lesser of -$10M or -20% Level of Control: Program Element (PE) Obligation Availability: 2 Years

Question 34

Below Threshold Programming: PROC

Answer 34

MAX INTO: Lesser of +$10M or +20% MAX OUT: Lesser of -$10M or -20% Level of Control: Line Item Obligation Availability: 3 Years

Question 35

Below Threshold Programming: O&M

Answer 35

MAX INTO: +$10M MAX OUT: -$10M Level of Control: Budget Activity Obligation Availability: 1 Years

Question 36

Below Threshold Programming: MILPERS

Answer 36

MAX INTO: +$10M MAX OUT: -$10M Level of Control: Budget Activity Obligation Availability: 1 Years

Question 37

Below Threshold Programming: MILCON

Answer 37

MAX INTO: Lesser of +$2M or +25% MAX OUT: No specific Congressional Restriction Level of Control: Project Obligation Availability: 5 Years