Module 5 - Financial Management Flashcards
Budget Authority
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
Commitment
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.
Obligation
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
Expenditure
A charge against available funds, resulting from a voucher, claim, or other document approved by a competent authority
Outlay
The vendor cashes the expenditure check and money flows from the Treasury to the vendor or supplier
Five Defense-Wide Appropriation Categories
Research Development Test and Evaluation (RDT&E)
Procurement
Operation and Maintenance (O&M)
Military Personnel (MILPERS)
Military Construction (MILCON)
Research Development Test and Evaluation (RDT&E)
Funds
* Research and development of equipment Materials and computer application software
* Research and development installations
*Testing and Evaluation
Obligation Period
2 Years
Procurement
Funds
* Programs approved for production, including purchasing end items and defense systems, spares, and major modifications
Obligation Period
3 Years
Operation and Maintenance (O&M)
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
Military Personnel (MILPERS)
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
Military Construction (MILCON)
Funds
* Bases, schools, missile storage facilities, Maintenace facilities, medical/dental clinics, libraries, and military family housing
Obligation Period
5 Years
Flyaway Cost
Prime Mission Equipment (PME)
Uses Procurement appropriations only
Weapon System Cost
Flyaway Costs AND Support Items
Uses Procurement appropriations only
Development Cost
Development Costs of PME and support Items
Systems Engineering
Program management
Test and Evaluation
Uses RDT&E appropriations Only
Procurement Costs
Weapon System Cost (Flyaway Costs + Support Items) AND Initial Spares
Uses Procurement appropriations only
Program Acquisition Cost
Development Cost (RDT&E) + Facilities (MILCON) + Procurement Costs (PROC)
Operation and Support Cost
Sustainment Cost (O&M and MILPERS) + Disposal Cost (O&M)
Life Cycle Cost
Program Acquisition Cost (RDT&E, MILCON, PROC) AND Operating and Support costs (O&M, MILPERS)
Life Cycle Cost Estimate (LCCE) and Three Topics
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
Life Cycle Cost Categories
*Research and Developemnt (R&D)
*Operations and Support (O&S)
*Investment Costs
*DEMIL/Disposal Cost
LCCE Cost Categories: Research and Developemnt (R&D)
Costs associated with the research and development phases including MSA, TMRR, and EMD phases
LCCE Cost Categories: Operations and Support (O&S)
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
LCCE Cost Categories: Investment Costs
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
LCCE Cost Categories: DEMIL/Disposal Cost
Cost to demilitarize and dispose of the system after its useful life
Work Breakdown Structure
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
Cost Estimating Techniques: Analogy
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
Cost Estimating Techniques: Parametric
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
Cost Estimating Techniques: Engineering
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
Cost Estimating Techniques: Actual Costs
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
Above Threshold Reprogramming Actions Requiring Congressional Prior Approval
- 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
Above Threshold Reprogramming Actions that can be executed Internally
- 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
Below Threshold Reprogramming
- 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
Below Threshold Programming: RDT&E
MAX INTO: Lesser of +$10M or +20%
MAX OUT: Lesser of -$10M or -20%
Level of Control: Program Element (PE)
Obligation Availability: 2 Years
Below Threshold Programming: PROC
MAX INTO: Lesser of +$10M or +20%
MAX OUT: Lesser of -$10M or -20%
Level of Control: Line Item
Obligation Availability: 3 Years
Below Threshold Programming: O&M
MAX INTO: +$10M
MAX OUT: -$10M
Level of Control: Budget Activity
Obligation Availability: 1 Years
Below Threshold Programming: MILPERS
MAX INTO: +$10M
MAX OUT: -$10M
Level of Control: Budget Activity
Obligation Availability: 1 Years
Below Threshold Programming: MILCON
MAX INTO: Lesser of +$2M or +25%
MAX OUT: No specific Congressional Restriction
Level of Control: Project
Obligation Availability: 5 Years
