EDFMTC Module 1 Section 3 Outline of Test Notations PDF

**MOD 1, Section 1** The Legislative Process - 1776 Declaration of Independence - 1781 Articles of Confederation - The principle of separation of power among the executive, legislative, and judicial branches was devised to allay the fear that a monolithic centralized go...

**MOD 1, Section 1** The Legislative Process - 1776 Declaration of Independence - 1781 Articles of Confederation - The principle of separation of power among the executive, legislative, and judicial branches was devised to allay the fear that a monolithic centralized government, in which all power is vested, would lead to tyranny. - 1789 US Constitution - The Constitution represents a set of general principles from which implementing statutes and codes have emerged. The legislative process begins when a bill is introduced and ends when the bill is signed into law. **Article I---The Legislative Branch** - **Raise taxes.** \"The Congress shall have power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defense and general Welfare of the United States.\" - **Borrow money.** \"The Congress shall have power To borrow Money on the credit of the United States.\" - **Regulate commerce.** \"The Congress shall have Power To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes.\" - **Conscript forces.** \"The Congress shall have Power \... To provide for calling forth the Militia to execute the Laws of the Union, suppress Insurrections and repel Invasions.\" - **Declare war.** \"The Congress shall have power \... To declare War, grant Letters of Marque and Reprisal, and make Rules concerning Captures on Land and Water.\" - **Raise and support armies.** \"The Congress shall have power \... To provide and maintain a Navy\" - **Provide and maintain a Navy**. \"The Congress shall have power \... To raise and support Armies, but no Appropriation of Money to that Use shall be for a longer Term than two Years.\" **Congress** Since representatives serve the people of their districts, the U.S. Constitution requires any revenue bills (e.g., tax increases) to be initiated in the House of Representatives. By tradition, appropriation bills are also initiated in the House of Representatives. **Bills** - A bill is a legislative proposal of a general nature. A bill may propose either a public or private matter, but both are numbered in the same sequence. Public bills are the most numerous. Private bills are designed to affect or benefit specific individuals or groups of individuals. Together, bills account for a large majority of the total of legislative proposals of each Congress. The Senate numbers bills in sequence starting with number 1, and each number is preceded by the designation *S*. House bills are similarly numbered and prefaced by *H.R.* Thus, bill number 100 in the Senate is written S.100, and in the House, H.R.100. **Joint Resolutions *-*** Joint resolutions may originate in either the House of Representatives or Senate. There is little practical difference between a bill and a joint resolution. Both are subject to the same procedure. A joint resolution originating in the House of Representatives is designated *H.J. Res.* (*S.J. Res.* For the Senate) followed by its individual number. Joint resolutions become law in the same manner as bills. Congress also uses the joint resolution process to consider a proposed amendment to the Constitution. Article V of the Constitution states that Congress may propose such amendments upon two-thirds vote of both House and Senate. Upon approval, Congress sends the proposed amendment directly to the Administrator of General Services for submission to the individual states for ratification consideration. Ratification requires the approval of three-fourths of the states. Proposed amendments are not presented to the president for approval. **Concurrent Resolutions *-*** Matters affecting the operations of both the House of Representatives and Senate are usually initiated by means of concurrent resolutions. A concurrent resolution originating in the House of Representatives is designated *H.Con.Res.* (*S.Con.Res.* for the Senate) followed by its individual number. The concurrent budget resolution is an example of such a resolution. On approval by both the House and Senate, a concurrent resolution is signed by the Clerk of the House and the Secretary of the Senate; it is not presented to the president for action. **How a Bill Becomes a Law:** **Consideration by Committee---Public Hearings and Markup Sessions** Usually, the first step in this process is a public hearing, where the committee members hear witnesses representing various viewpoints on the measure. Each committee makes public the date, place, and subject of any hearing it conducts. A transcript of the testimony taken at a hearing is made available for inspection in the committee office, and frequently the complete transcript is printed and distributed by the committee. After hearings are completed, the bill is considered in a session that is popularly known as the **markup session**. Members of the committee study the viewpoints presented in detail. Amendments may be offered to the bill and the committee members vote to accept or reject these changes. This process can take place at either the subcommittee level, the full committee level, or both. For example, the House Appropriations Committee has subcommittees for each of the appropriations bills. The subcommittee on Defense holds hearings, drafts a bill, and forwards the proposed bill to the full Appropriations Committee. If the committee votes to report a bill, the explanatory statement accompanying the legislation is written. The committee\'s explanatory statement is generally referred to as the **committee report**. This report describes the purpose and scope of the measure and the reasons for recommended approval. While the committee report is not normally part of the bill, it does show intent of the committee and is critical in guiding decisions within federal agencies. If specifically directed by the committee chair, the explanatory statement can be incorporated in the bill and, if signed by the president, becomes part of the law. House report numbers are prefixed with *H. Rept.* and then a number indicating the Congress; Senate reports are *S. Rept.* Consideration of a measure by the full House or Senate can be a simple or very complex operation. In general, a measure is ready for consideration by the full chamber after a committee has reported it. Under certain circumstances, it may be brought to the floor directly. The consideration of a measure may be governed by a rule. A **rule** is itself a simple resolution, which must be passed by the House or Senate, that sets out the particulars of debate for a specific bill, including how much time will be allowed for debate, whether amendments can be offered, and other matters. Debate time for a measure is normally divided between proponents and opponents. Each side yields time to those members who wish to speak on the bill. When amendments are offered, they are also debated and voted upon. After all debate is concluded and amendments decided upon, members are ready to vote on final passage. In some cases, a vote to recommit the bill to committee is requested. This is usually an effort by opponents to change some portion or table the measure. If the attempt to recommit fails, a vote on final passage is ordered. **Presidential Action---Approval or Veto -** The president, under Article I, section 7, clause 2, of the Constitution, has ten days (Sundays excepted) after the bill has been presented to him in which to act upon it. The following actions can occur: - **Approval and signature.** If the president approves the bill and signs it, giving the date, it is transmitted with this information by messenger to Congress. The bill is delivered to the Archivist of the United States who designates it as a public or private law, depending upon its purpose, and gives it a number. Public and private laws are numbered separately and serially. - **Does not sign but allows the bill to become law.** If the president does not wish to approve a bill but is unwilling to veto it, the president may, by not returning it within the ten-day period after it is presented, permit it to become a law without approval. The archivist makes an endorsement on the bill that, having been presented to the president of the United States for approval and not having been returned to the house of Congress in which it originated within the time prescribed by the Constitution, it has become a law without presidential approval. - **Pocket veto.** If Congress is adjourned and the president fails to sign a bill during the ten-day period, that bill does not become law. This action is referred to as a pocket veto. - **Veto.** If the president does not favor a bill and vetoes it, the bill is returned the house of origin without approval, together with objections thereto (referred to as the **veto message**). Highlights of key legislation guiding financial management in federal agencies include: - **1921 Budget and Accounting Act.** - Required the president to submit an annual budget proposal to Congress and established OMB and the Government Accountability Office (GAO, formerly the General Accounting Office). - **1974 Congressional Budget and Impoundment Control Act:** - Established House and Senate Budget Committees - Created Congressional Budget Office - Established detailed calendar for the congressional budget process - Established the framework and guidance for impoundment - Increased the controls around the Anti-deficiency Act (ADA) statutes. Specifically, funding was no longer available for obligation until apportioned by OMB and allocated internally within the agencies. - **1990 Chief Financial Officers (CFO) Act:** - Established CFOs in specified agencies and cabinet departments - Tasked CFOs with overseeing financial management and financial information systems in the federal government - The CFO Act focused the major federal agencies on CFO activities in addition to federal budgeting. It fundamentally increased the emphasis on achieving clean audit opinions and created the CFO Council to help further that goal. Within DoD, the Under Secretary of Defense (Comptroller)---the USD(C)---was designated as the CFO and the Defense Finance and Accounting Service was created in response to the CFO Act. - **1993 Government Performance and Results Act (GPRA):** - Focused budget process on planning and outcomes - Required agencies to submit strategic plans - Required annual performance plans - Required performance reports **MODULE 1 \| GOVERNMENT RESOURCE MANAGEMENT ENVIRONMENT** - **2010 GPRA Modernization Act (GPRAMA):** - Annual Performance Plan requires OMB to establish federal priority goals and agencies to establish priority goals - Agency Performance Reports (APRs) required annually, but quarterly for any priority goals - APR must show actual performance trend over past five years GPRA and GPRAMA are primarily focused on integrating strategic planning, performance planning and performance reporting with the budgeting and reporting processes in the federal agencies. The strategic planning framework, producing both the National Defense Strategy and the Strategic Management Plan, addresses those requirements **Role of Authorization in Appropriations Law** The annual National Defense Authorization Act (NDAA) provides two types of authorizations: - Enabling or organic, which authorizes new projects, organizations, and activities - Authorizing appropriations, which authorize the appropriations to provide funding for the agencies. - In the DoD, authorizations are explicitly required for major military construction projects, the military end strength, military personnel pay and benefits, major procurement programs, and RDT&E new starts as well as any requested multiyear programs. **Principles Of Appropriations Law** Since appropriations law begins with the Constitution, Congress has passed additional statutes that together address three primary principles for federal appropriations: - Purpose - Time - Amount The most authoritative source of legal use of appropriated funds is the appropriations act itself and the relevant National Defense Authorization Act. **Basic Principle - Principle of Purpose** Funds may be obligated and expended only for the purposes authorized in appropriations acts or other laws. The purpose statute, codified at 31 U.S.C. 1301, states that appropriations shall be applied only to the objects for which the appropriations were made, except as otherwise provided by law. **Principle of Time** Placing time limits on appropriations allows Congress to align executive branch activities to the session of Congress that provided the appropriations. Section 1502(a) of 31 U.S.C. is generally referred to as the bona fide needs rule, which states, "The balance of an appropriation or fund limited for obligation to a definite period is available only for payment of expenses properly incurred during the period of availability or to complete contracts properly made within that period of availability \...." In other words, obligations can only be made within the period of availability as designated by Congress for each specific appropriation. Obligational authority is: - **Available.** The available period refers to the period for which the appropriation is available for new obligations, disbursements, and obligation adjustments. For example, the period is generally one year for O&M appropriations and two years for Research and Development (R&D) appropriations. - **Expired.** When expired, disbursements and adjusting obligations are permissible but new obligations are not allowed for new scope. Every time-constrained appropriation is in an expired status for five years after the end of its period of availability. - **Canceled.** When canceled, the account is closed by Treasury and no adjustments are allowed, with the exception of intragovernmental corrections. **First Statutory Exception for Severable Services Contracts** The first statutory exception to the bona fide needs rule is that DoD has authority under 10 U.S.C 3133 (formerly 10 U.S.C. 2410a) to award a severable services contract of up to 12 months and cross fiscal years. Contracts are charged to the fiscal year in which the obligation occurs (as determined by the bona fide needs rule), even though some of the services are performed in the next fiscal year. **Second Statutory Exception: Multiyear Contracts** **Multiyear contracting** is a generic term describing the process under which the government may contract for the purchase of supplies or services for more than one year, but not more than five program years. This idea is not to be confused with a *multiple-year appropriation*, which may fund an effort in a single year that requires several years to complete. However, there are exceptions. Multiyear contracts usually provide that performance during the subsequent years of the contract is contingent upon the appropriation of funds and provide for a cancellation payment to be made to the contractor if such appropriations are not made. Multiyear contracts are special because the government contracts for up to five years of effort and becomes liable for the entire five years of effort at the time of contract award. This is an exception to the fundamental concept of fully funding any end items in only one appropriations act for investment items or not funding ahead of need for services. **Second Statutory Exception To The Bona Fide Needs Rule** The relevant law for DoD is 10 U.S.C. 3501 for acquisition of goods and property (including major end items or weapon systems) and 10 U.S.C. 3531 for services. Alternatively, the law permits DoD to obligate the amount for each of the five years against appropriations enacted for each of those years. DoD policy is to fund and budget for multiyear contracts on an annual basis irrespective of the authority to fully fund up front for the entire contract period, per DoD FMR Volume 2A, paragraph 010203. If DoD chooses to fund the contract incrementally, termination costs stipulated in the contract may be paid for from original-year appropriations, appropriations currently available for the same general purpose, or appropriations made specifically for those payments. A contract under this law must relate to the bona fide needs of the contract period as opposed to the need only of the first fiscal year of the contract period. An exception to full funding to allow for essentially incremental funding of investment programs under certain circumstances and when explicitly authorized in the NDAA is provided in 10 U.S.C. 3501. **Anti-deficiency Act (ADA)** It is a violation of the ADA to over-obligate or expend at these levels: - Appropriation - Apportionment - Allocation - Allotment ADA violation penalties may be: - Administrative - Criminal, but only if there was an intentional violation (knowingly and willfully) **Augmentation** An agency may not augment its appropriation from outside sources without some statutory authority to do so. Congress uses appropriations to control agency operations, and the use of additional funds above and beyond what Congress has provided to the agency through appropriations will constitute an ADA violation since the agency will be spending beyond the limits permitted to it by Congress. The basic governing statute is the miscellaneous receipts statute at 31 U.S.C. 3302(b), which states that an official receiving money for the government from any source shall deposit the money in the Treasury as soon as practicable without deduction for any charge or claim. To do otherwise and in the absence of specific statutory authority constitutes an illegal augmentation of appropriated funds. **Sequestration** refers to automatic federal spending cuts that occur through the withdrawal of funding for certain (but not all) government programs. The Balanced Budget and Emergency Deficit Control Act of 1985 (also known as the Gramm-Rudman-Hollings Act) first provided for automatic spending cuts (called *sequesters*) if the federal deficit exceeded a set of fixed deficit targets. The process for determining the amount of the automatic cuts was found unconstitutional in 1986 and Congress enacted a reworked version of the law in 1987. However, the reworked act failed to prevent large budget deficits. The Budget Enforcement Act of 1990 supplanted the fixed deficit targets entailed in the Gramm- Rudman-Hollings Act and revised the federal government budget control process. It created two new budget control processes: a set of caps on annually appropriated spending and a pay-as-you go (PAYGO) process for entitlements and taxes. The PAYGO rule requires that tax cuts, or increases in entitlement and other mandatory spending, must be covered by tax increases or cuts in mandatory spending. It does not apply to discretionary spending (spending that is controlled through the appropriations process). **The Federal Budget Cycle** Budget formulation is the phase in which organizations draft their budgets and each agency consolidates and prepares the budget for the president and Congress. The budget formulation process is governed by OMB Circular A-11. The formulation phase starts as early as 21 months prior to the fiscal year in which the budget will be executed. Organizations use budget guidance, performance plans, and strategic plans to develop their budgets. OMB Circular A-11 **Budget Formulation Phase** The budget formulation phase, laid out in OMB Circular A-11, has six major steps: 1\. OMB issues guidance. 2\. Organization develops draft. 3\. Agency submits budget estimates to OMB. 4\. OMB holds hearings on agency budgets. 5\. President makes final decisions on agency budgets. 6\. President transmits the budget to Congress. **OMB Issues Guidance** During February, OMB will issue guidance, providing allowance letters, with five-year planning levels and guidance on relevant policy. This guidance is used to establish overall agency budget levels and to establish initial priorities among programs. **Organization Develops Draft** Depending on the agency, organizations can develop several draft budgets prior to forwarding a budget to Congress. A typical agency would require the first draft budget---in the case of DoD, the program estimate---21 months prior to the budget year (BY) in January of budget year minus one (BY-1). In DoD, the preparation of the budget estimate follows the programming phase. The organization develops this budget based on: - Budget call guidance - Performance adjustments from the current year (CY) budget - Considerations from its strategic planning document **Agency Submits Budget to OMB** Agencies review the early budget submissions and, based on OMB guidance in Circular A-11, may require that an adjusted budget be submitted. After all guidance is incorporated in the organization's budget, the agency submits its budget to OMB in September. By special arrangement with OMB, OSD and OMB conduct a joint review of the budget submissions from the military departments and Defense agencies at the same time that OMB budget examiners are reviewing the budget submissions from the other executive department agencies. This joint review by OSD and OMB is known as the **fall review**, which normally occurs during the September--December period. Once decisions are finalized by OSD and OMB, the DoD portion of the President's Budget is submitted to OMB by the Office of the Under Secretary of Defense (Comptroller) \[OUSD(C)\] in late December or early January to be incorporated into the President's Budget that will be submitted to Congress no later than the first Monday in February. **OMB Reviews** During the fall review, the economic outlook is again assessed by the staffs of the Treasury Department, the Council of Economic Advisors, and OMB. Revenue estimates are prepared for presentation to the president for a decision, along with budget estimates. Based upon the review, OMB may change funding, making adjustments to the agency budgets. This is formalized by the OMB passback. **OMB Passback** The results of the OMB review of the agency budget are provided to the agency in a letter from the OMB director to the head of the agency. The document is called the **passback**. The passback can change funding for individual programs, reduce or increase overall funding for the agency, or direct that additional funding be added to specific programs within existing agency funding levels. Passback results can be appealed to the president by the agency head. **Key Concepts and Terms** OMB Circular A-11 provides a detailed listing of key terms and concepts for the federal budget process. Several of the more common terms will be germane to the overview of the process: - **Appropriation.** A form of budget authority that provides both the authority to incur obligations and the authority to liquidate the obligations (outlay). - **Budget authority.** The authority to incur obligations that will result in outlays; this authority is provided in appropriations acts and includes direct enacted budget authority, spending authority from offsetting collections (reimbursable authority), and borrowing authority. The fourth type of budget authority, contract authority, provides authority to incur obligations but does not provide authority for outlays. - **Constant dollars.** A way for programs and budgets to be costed. Constant dollars must be based on a referenced fiscal year. The amounts of all funding lines are then based on the present value of future years discounted back to that year. In this way, inflation is taken out of the future funding. - **Current dollars.** A way for programs and budgets to be costed. Current dollars are dollars based on the funding year. Inflation is included in current-year dollars. - **Reimbursable authority.** A common type of budget authority obtained through customer orders and may be documented in an agreement such as a Military Interdepartmental Purchase - Request (MIPR) or Interagency Agreement, FS Forms 7600A and 7600B. The budget authority, once earned after the work is completed and the customer is billed, is called spending authority from offsetting collections. - **Revolving funds.** Organizations that perform work for other governmental agencies or private parties with the budget authority of orders received from customers. Costs are recovered when the customers are billed. One type of revolving funds are intragovernmental funds, which include the DoD Defense Working Capital fund. - **Spend-out rate.** The amount estimated to outlay from each appropriation, year by year. The Budget Enforcement Act divides spending into two types: - **Direct (mandatory) spending (MS).** The authority for annual mandatory expenditures is found in permanent statutes. Mandatory spending is estimated to total 59% of government spending in FY 2025. - **Discretionary spending (DS).** Budget authority is found in the 12 annual appropriations bills. Discretionary spending is estimated to total 27% of government spending in FY 2025. Estimated interest on the debt is expected to total 14%. **President\'s Budget** The basic volume of the President\'s Budget includes the President's message, information on the President's priorities, and summary tables. **LESSON 3 \| THE FEDERAL BUDGET CYCLE** Two additional volumes accompany the President\'s Budget: - **Analytical Perspectives.** Contains analyses that address specific issues. This volume also includes economic analyses of federal spending, information on federal borrowing and forecasted debt estimates. - **Appendix.** Contains detailed information on each individual appropriation being requested in the President's Budget, organized by agency. Each appropriation summary includes draft appropriation language, a summary of programs, a budget schedules for each account; legislative proposals; **Linking DoD\'s Planning, Programming, Budget, and Execution Process** The DoD uses the Planning, Programming, Budgeting, and Execution (PPBE) process to formulate the DoD budget portion of the President's Budget. Budget formulation is based on performance plans and informed by the analyses in the planning and programming phases. Formulation, in turn, forms the basis for execution, and execution provides results to be used in formulating the next budget cycle. The importance of implementing GPRA through PPBE becomes apparent---by conducting strategic planning, developing performance plans, and establishing performance goals, DoD is better able to justify its budget and uses the National Defense Strategy (NDS), complemented by the Strategic Management Plan, as its strategic planning documents. **The Federal Budget Process: Congressional Action** The congressional budget process has undergone significant changes following the passage of Congressional Budget and Impoundment Control Act of 1974 (as amended by the Gramm- Rudman-Hollings Budget Control Act and its amendments). Results of the Congressional Budget and Impoundment Control Act include: - Congress passes a concurrent budget resolution (CBR), which focuses on overall budget totals, the balance between defense and non-defense budget levels, and the implications for the budget deficit - A new budget committee was established in each house and a new, professionally staffed Congressional Budget Office (CBO) was also established to support CBR process - The fiscal year shifted from July 1 through June 30 to October 1 through September 30. This action was designed to give Congress additional time to complete action on the federal budget. Three separate, but related, processes occur in Congress associated with the congressional action phase: - The concurrent budget resolution process - The authorization process - The appropriations process **Budget Resolution** The congressional action phase usually begins with appearances by the Director of OMB and the Secretary of the Treasury before the House and Senate budget committees and appropriations committees to explain the general basis for the budget proposals. These committees and subcommittees then hold separate hearings to review the justifications from each agency and receive testimony from: - Members of Congress - Representatives of federal departments and agencies - The general public - Organizations that the committees deem appropriate The House and Senate budget committees manage the budget resolution step. These committees use the analysis provided by the CBO as well as the views and estimates provided by the standing committees regarding the funding required to continue their programs. **Scorekeeping** is the process of estimating the budgetary effects of pending legislation and comparing them to a baseline, such as a budget resolution, or to any limits that may be set in law. **House and Senate Appropriations Committees** The appropriations committees in each chamber are organized along the lines of the 12 major appropriations bills. The three appropriations subcommittees in each house that directly impact DoD are the: - Appropriations Subcommittee on Defense, which drafts the Defense Appropriations Bill - Appropriations Subcommittee on Military Construction/Veterans Affairs, which drafts the Military Construction/Veterans Affairs Appropriations Bill - Energy and Water Development Subcommittee, which drafts the appropriations bills that, in part, provides money to the Department of Energy for military purposes (e.g., nuclear fuel and nuclear warheads) and for Army Corps of Engineers Civil Work projects **Supplementals or Budget Amendments** During the congressional budget process, DoD may determine the need to revise the original estimates upward or downward due to developments that have occurred since the estimates were originally transmitted to Congress. For example, additional funds for the current or budget year may be necessary to meet unforeseen requirements or emergencies that have arisen since the budget was prepared. The specific amounts subsequently recommended to Congress are the result of detailed analysis and review, based on the conditions at the time the recommendation is transmitted. These revisions can take one of two forms: - **Budget amendments** are estimates transmitted to Congress that amend (revise) budget estimates transmitted previously and on which Congress has not completed action - **Supplemental requests** are normally transmitted to Congress as requests to provide funds in addition to amounts already appropriated for the ongoing fiscal year. To the extent that previously unforeseen requirements for the current year can be identified before January, supplemental appropriation requests are included in the budget documents. Additional requests to carry out new legislation enacted after the budget was formulated may be prepared and transmitted to Congress as budget amendments or supplementals. All budget amendments and supplementals are transmitted from OMB, since they are amendments or supplements to the President's Budget estimate. **3.2.6 Continuing Resolutions** If Congress does not pass the appropriations bills by the first day of the new fiscal year (October 1), the agencies who have not received new appropriations may continue to operate only if Congress passes---and the president signs---a continuing resolution (CR). A CR serves as a temporary appropriations act when passed by both houses and signed by the president. If the agency does not have its appropriations act and a CR is not signed by October 1, the agency is in a lapse of appropriations situation and must shut down its normal operations in order to avoid violating the Anti-deficiency Act. (Actions pertaining to protection of property and personal safety may continue.) In the case of a temporary appropriations act: - A CR provides budget authority for specific ongoing activities for a specific period of time. - Congress can extend the availability of funds by amending the fixed cutoff date stated in the resolution. - Extensions may run beyond the session of Congress in which the extensions are enacted - Portions can continue for the entire fiscal year if Congress determines that some or all of the remaining bills will not be enacted individually - The regular appropriation, when enacted, supersedes the continuing resolution and governs the period of availability Because a CR provides appropriated funds, those funds are also required to be apportioned by OMB. The agency's authority to obligate funds is generally an amount equal to the current year authority or the requested authority, whichever is less. However, the rules may vary from year to year and may vary by agency. Rules for DoD are generally quite specific. When the president signs the appropriations bill, it becomes an act (a law). The appropriations acts provide agencies with direct enacted budget authority. Recall that budget authority and the availability of budgetary resources for obligation and expenditure are limited by: - **Purpose.** Funds may be obligated and expended only for the purposes authorized in appropriations acts or other laws. - **Time.** The period of time that agencies may incur new obligations against an appropriation are governed by that specific appropriation. Obligations must represent a bona fide of the time period that the appropriation is available for obligation. - **Amount.** Obligations and expenditures may not exceed the amounts established in law, apportioned by OMB, and allocated or allotted within the agency. All of the types of budget authority is distributed to agencies by OMB as part of the apportionment process. Once the Treasury appropriation warrant is forwarded to the appropriations fundholder and the agency receives the apportionment (Standard Form \[SF\] 132), the agency and its components may obligate the government to pay for goods and services used in carrying out its programs as authorized in the appropriation. Therefore, budget authority, once apportioned, becomes the authority to obligate or **obligational authority**. **Appropriation Warrants** Recall that issuance of an appropriation warrant is the first legal action taken after the president signs the appropriations bill into law and is usually an automatic action taken by the Department of the Treasury based on that law. An appropriation warrant is a financial control document issued pursuant to law (usually appropriations acts) and is normally for the total funding amount stated in the appropriations law for the department or agency involved. Warrants establish the amount of monies authorized to be withdrawn (disbursed) from the central accounts that are maintained by Treasury. The warrant is the basis for recording appropriations (cash) on the books of Treasury and DoD. A different warrant procedure is used if legislation on new appropriations is not completed by the beginning of the fiscal year and a continuing resolution legislation is enacted. In this case, Treasury procedures usually require that temporary warrants be prepared by the agency. Once prepared, the warrants are then submitted to Treasury where they are authenticated/signed and returned to the agency. **Apportionment** Apportionment, required by 31 U.S.C. 1512, is part of the governmentwide system for administrative control of appropriations and funds. **Apportionment** is a distribution of an amount available for obligation and/or commitment in an appropriation or fund account into amounts available for specified time periods, activities, projects, or combinations thereof as approved by OMB and the agency. The apportionment system is intended to: - Achieve the most effective and economical use of the funds available - Prevent the necessity for supplemental or deficiency appropriations The amounts apportioned limit the obligations that may be incurred. Revisions to the previous apportionment, called reapportionment, reflect changes in the amount of financial resources previously authorized for obligation. The apportionment review process is critical as funds are subsequently obligated and expended in accordance with the apportionment process following these guidelines: - Annually, agencies submit initial apportionment requests to OMB via SF-132 within ten days after the approval of the act providing new budget authority authority and at the beginning of each fiscal year. In the case of DoD, the initial apportionment requests are submitted by OUSD(C). - OMB reviews resource requirements, may apportion funds on a quarterly or annual basis, or may withhold authority for administrative or technical considerations - OMB is required to act on the apportionment request within 30 days after the approval of the act providing new budget authority It is a violation of law for an agency to incur obligations or make expenditures in excess of the amount apportioned. The concept of apportionments arose as part of the ADA and the 1974 Budget Impoundment and Control Act elevated the apportionment and budget authority process. Congress became concerned when various government departments spent appropriated funds at such a rapid rate that they were exhausted before the end of the fiscal year. As a result, today any obligations in excess of apportioned budget authority or delegated budget authority that has been designated with ADA delegation will constitute a reportable ADA violation. **Agency Submits SF-133 to OMB** SF-133, Report on Budget Execution, must be submitted to OMB quarterly. SF-133 covers each open fiscal year for each account and displays the status of all budgetary resources for each year, listing the types and amounts of resources available, their apportionment status, and the amounts obligated and outlaid on a cumulative basis for the current fiscal year. Key terms you should know are: - **Budget authority.** The amount of money available that an organization can obligate. - **Commitments.** Funds administratively reserved for specific purposes. - **Obligations.** Funds legally reserved for a specific purpose. - **Outlays.** Funds that have actually been moved from Treasury. **Concurrent Budget Resolution** The concurrent budget resolution is a non-binding agreement between the two chambers of Congress. It establishes overall federal spending levels and guides the budget process for the next fiscal year. This is an important part of the budget process because it establishes the parameters for resource allocation to different programs and agencies. It also reinforces Congress\'s power of the purse by letting it control the pace and size of federal spending and help prioritize certain policy goals. - Congressional budget committees\' responsibilities include: - Fixing maximums for new budget authority - Setting outlay targets for the whole budget and various major functions - Establishing targets for the gross national debt, federal revenues, and surplus or deficit - Developing a joint explanatory statement that includes estimated allocation of the budget total to committees with jurisdiction over spending or revenue measures Once the CBR has been passed, the appropriations committees subdivide the allocations among subcommittees, which sets the limits for each of the 12 appropriations bills. **MOD 1 Section/Module 3 - MANAGEMENT'S RESPONSIBILITY FOR ENTERPRISE RISK MANAGEMENT AND INTERNAL CONTROL - - 20 Questions (25% Test)** **Lesson 1 & 2 -- Noted Test Areas** 1. Enterprise Risk Management (ERM) and Internal Control (IC) are components of a governance framework. a. ERM as a discipline deals with identifying, assessing, and managing risks. b. Internal control is a process effected by an entity's oversight body, management, and other personnel that provides reasonable assurance that the objectives of an entity will be achieved. 2. 5 Framework Responsibilities c. Establishing and achieving goals and objectives d. Seizing opportunities to improve effectiveness and efficiency of operations e. Providing reliable reporting f. Maintaining compliance with relevant laws and regulations g. Implementing management practices that effectively identify, assess, respond, and report on risks 3. Center of ERM & IC Requirements h. OMB Circular A-123 i. Requires each agency to develop a risk profile, includes 7 components 1. ID Objectives 2. ID Risk 3. Inherent Risk Assessment 4. Current Risk Response 5. Residual Risk Assessment 6. Proposed Risk Response 7. Proposed Action Category ii. Internal Control Over Reporting (ICOR) \[was previously Internal Control Over Financial Reporting (ICOFR)\] -- provide assurance testing for financial reports iii. Federal Information System Controls Audit Manual (FISCAM) - originally issued by GAO in January 1999, presents a methodology for performing information system control audits. Two types of controls (1) General Controls, (2) Business Process Controls. i. Federal Managers\' Financial Integrity Act (FMFIA) of 1982 -- ALSO known as Integrity Act iv. Section 2 (31 U.S.C. 3512(d)(2)) FMFIA requires Annual Statement of Assurance - head of each executive agency annually submit to the President and Congress j. A-123 & FMFIA reinforces Government Performance and Results Act Modernization Act (GPRAMA) k. Government Accountability Office (GAO) Standards for Internal Control in the Federal Government (the Green Book) 4. Agencies complete Annual Risk Profile and submit external in Agency Financial Report (AFR) or the Performance and Accountability Report (PAR). 5. Leading ERM and Internal Controls international standards setters l. Committee of Sponsoring Organizations of the Treadway Commission (COSO) m. International Organization for Standardization (ISO) 6. ERM Definition n. Agency-wide approach to addressing the full spectrum of the organization's external and internal risks by understanding the combined impact of risks as an interrelated portfolio, rather than addressing risks only within silos. 7. Major Types of Risk o. Inherent p. People q. Control 8. Shared Service Providers r. Management is still responsible for processes and user controls of 3^rd^ party, must monitor the process as whole 9. Internal Controls provide reasonable assurance that: s. Programs achieve intended results t. Resources used efficiently u. Protection from waste, fraud, mismanagement v. Laws and regulations followed w. Financial reporting reliable and accurate 10. 5 Components of Internal Controls x. Control environment y. Risk assessment z. Control activities a. Information and communication b. Monitoring 11. Internal Control Deficiencies c. Control deficiency d. Significant deficiency -- reported internal e. Material weakness -- reported external -- AFP/PAR 12. OMB Circular No. A-130, Appendix I f. Responsibilities for Protecting and Managing Federal Information Resources, Security Programs/Privacy Programs 13. Annual Statements -- Levels of Assurance g. Unmodified statement of assurance -- effective, no material weakness h. Modified statement of assurance -- effective, one or more material weakness i. Statement of no assurance -- no assessments, material weakness pervasive