DoD Financial Management Regulation Volume 2A, Chapter 1 ...

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´╗┐DoD Financial Management Regulation

Volume 2A, Chapter 1 + December 2005

SUMMARY OF MAJOR CHANGES TO DOD 7000.14-R, VOLUME 2A, CHAPTER 1

"GENERAL INFORMATION"

Substantive revisions are denoted by a preceding the section, paragraph, table or figure that includes the revision

PARAGRAPH EXPLANATION OF CHANGE/REVISION

010212.B.5

Correction to reflect the Department's current capitalization threshold for software, which is currently $100,000.

PURPOSE Correction

DoD Financial Management Regulation

CHAPTER 1 GENERAL INFORMATION

Table of Contents

Volume 2A, Chapter 1 +June 2004

0101 GENERAL POLICIES ...............................................................................................................................1 010101 Purpose ..................................................................................................................................................1 010102 Organization ..........................................................................................................................................1 010103 Changes to Volume 2.............................................................................................................................1 010104 Reports Control Symbol ........................................................................................................................1 010105 Requests for Exceptions to OMB Circular A-11 ...................................................................................1 010106 Proposed Changes in Budget Structure and Appropriation Language ..................................................2 010107 Budget Terminology/Definitions ...........................................................................................................2 010108 Security Classifications..........................................................................................................................9 010109 Budget and Performance Metrics Integration ........................................................................................9

0102 FUNDING POLICIES ..............................................................................................................................11 010201 Criteria for Determining Expense and Investment Costs.....................................................................11 010202 Full Funding of Procurement Programs...............................................................................................14 010203 Multiyear Procurement. .......................................................................................................................16 010204 Buy-to-Budget for Acquisition of End Items ........................................................................................18 010205 Transportation......................................................................................................................................19 010206 Engineering Change Orders.................................................................................................................20 010207 Factory Training ..................................................................................................................................20 010208 Interim Contractor Support..................................................................................................................20 010209 Commercial Off-the-Shelf (COTS) and Non-Developmental Item (NDI) Procurement.....................20 010210 Spares and Repair Parts .......................................................................................................................20 010211 Direct and Reimbursable Budget Plans. ..............................................................................................21 010212 Budgeting for Information Technology and Automated Information Systems ...................................22 010213 Research, Development, Test and Evaluation (RDT&E) - Definitions and Criteria ...........................23 010214 RDT&E - Incremental Programming and Budgeting Basis.................................................................31 010215 Defense Working Capital Funds - Operating Budget ..........................................................................32 010216 Defense Working Capital Funds - Mobilization/Surge Costs..............................................................32 010217 Defense Working Capital Funds - War Reserve Materiel ...................................................................33 010218 Defense Working Capital Funds - Military Personnel Costs...............................................................33 010219 Defense Working Capital Funds - Full Recovery of Costs/Setting Prices...........................................33 010220 Defense Working Capital Funds - Capital Budgeting .........................................................................35 010221 Defense Working Capital Funds - Base Support .................................................................................35 010222 Defense Working Capital Funds - Dual Funded Organizations ..........................................................36 010223 Defense Working Capital Funds - Customer Mandated Schedule ......................................................36 010224 Glossary of Terms ? Procurement .......................................................................................................37 010225 Glossary of Terms ? RDT&E ..............................................................................................................40

0103 PROGRAM AND BUDGET REVIEW SUBMISSION .........................................................................42 010301 General.................................................................................................................................................42 010302 Distribution ..........................................................................................................................................44 010303 Preparation of the Biennial Budget Estimates .....................................................................................53 010304 Second Year of the Department's Two-year Budget Review Cycle - Budget Material........................55 010305 Budget Estimates Summaries and Transmittal.....................................................................................56 010306 Supplemental Appropriations Submissions .........................................................................................57 010307 Additional Budget Submissions (ABS) ...............................................................................................57 010308 Major Budget Issues (MBIs)................................................................................................................58 010309 Budget Review Procedures..................................................................................................................58

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DoD Financial Management Regulation

CHAPTER 1 GENERAL INFORMATION

Table of Contents

Volume 2A, Chapter 1 +June 2004

0104 CONGRESSIONAL JUSTIFICATION/PRESENTATION .................................................................61 010401 General.................................................................................................................................................61 010402 Supplemental and Amended Appropriations Requests........................................................................64 010403 Distribution/Internet Posting of Budget Material ................................................................................65 010404 Witness Statements ..............................................................................................................................93 010405 Transcript Processing...........................................................................................................................94 010406 Appeal Process on Congressional Actions ..........................................................................................95

0105 BUDGET AUTOMATION REQUIREMENTS .....................................................................................97 010501 Automated Military Personnel Programs Database............................................................................97 010502 Automated Operation and Maintenance Programs Databases ...........................................................98 010503 Automated Procurement Programs Database ......................................................................................99 010504 Automated RDT&E Programs Database ...........................................................................................101 010505 Automated Construction Program Database......................................................................................102 010506 CIS Automation Requirements for the Biennial Program and Budget Review Submission .............104 010507 CIS Budget Structure Listing (BSL)..................................................................................................106

0106 UNIFORM BUDGET AND FISCAL ACCOUNTING CLASSIFICATIONS ..................................109 010601 General...............................................................................................................................................109 010602 Functional Titles ? Military Functions ..............................................................................................109 010603 Definitions of Functional Titles and Subdivisions - Military ............................................................110 010604 Functional Titles and Definitions ? Other Defense Civil Programs..................................................118

0107 AUTOMATED FUTURE YEARS DEFENSE PROGRAM (FYDP) DATABASES ........................119 010701 Standard Data Collection System (SDCS ..........................................................................................119 010702 FYDP Structure Management (FSM) System ...................................................................................121

0108 AUTOMATED COMMUNICATIONS, COMMAND AND CONTROL, INTELLIGENCE, SURVEILLANCE AND RECONNAISSANCE (C3ISR) DATABASE ..............................................................123 0109 SELECT AND NATIVE PROGRAMMING (SNaP) DATA INPUT SYSTEM ? BASIC GUIDANCE FOR INPUT THROUGH SNaP OF PROGRAMMING DETAIL DATA AND SELECTED BUDGET EXHIBITS FOR JOINT USE OF THE PROGRAM AND BUDGET REVIEW............................124

010901 Select and Native Programming (SNaP) Data Collection System. ....................................................124 0110 GENERAL GUIDANCE SUBMISSION FORMATS..........................................................................126

011001 Purpose ..............................................................................................................................................126 011002 Exhibits in Support of Section 0103 ? Program and Budget Review Submission ............................127 011003 Exhibits in Support of Section 0104 - Congressional Justification/Presentation...............................127 011004 Exhibits in Support of Section 0105 ? Budget Automation Requirements .......................................127 011005 Exhibits in Support of Section 0107 ? Automated FYDP Databases Requirements .........................127

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DoD Financial Management Regulation

CHAPTER 1

GENERAL INFORMATION

Volume 2A, Chapter 1 +June 2004

0101 GENERAL POLICIES

010101 Purpose

A. Volume 2 of the Financial Management Regulation (FMR) provides general guidance on the formulation and submission of the budget requests to the Office of the Secretary of Defense for the program and budget review submission and the presentation and justification of the budget requests to the Congress. This volume is established under the authority of DoD Instruction 7000.14.

B. Volume 2 of the FMR is intended as a comprehensive reference book on budget matters of the Department of Defense. Budget policy memoranda issued throughout the year will provide any necessary changes or revisions to this standing document, as well as special instructions and nonrecurring requirements unique to that year's budget cycle.

C. The provisions of Volume 2 apply to all military and specified civil functions of the Department of Defense.

D. An introduction to the total Financial Management Regulation, DoD 7000.14-R can be found in Volume 1 of the Regulation.

010102 Organization

A. Volume 2 is organized into 19 chapters that provide specific guidance, required budget exhibits and formats along with instructions for their preparation, and automated submission requirements.

010103 Changes to Volume 2

A. Changes to Volume 2 will be issued biennially, prior to the program and budget review of the initial biennial budget cycle. Pen and ink changes will not be issued.

B. Generally, significant changes on a page will be indicated by the paragraph or section containing a change being printed in ITALICS.

010104 Reports Control Symbol

Data requirements established by this volume are exempt from the requirement for assignment of a Report Control Symbol.

010105 Requests for Exceptions to OMB Circular A-11

A. Each year the Office of Management and Budget (OMB) issues Circular No. A-11 which addresses the preparation and submission of budget estimates for all Federal agencies.

B. Federal agencies are allowed to request exceptions to the requirements of Circular A-11 by submitting in writing to OMB all required exceptions by August 1. Exceptions approved by OMB are valid only for 1 year.

C. Each year the USD(Comptroller) requests certain exceptions to OMB Circular A-11. Generally, these exceptions concern special situations that are unique to the Department of Defense.

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DoD Financial Management Regulation

Volume 2A, Chapter 1 +June 2004

1. Subsequent to the issuance of Circular A-11 by OMB each year, any DoD Component requiring an exception to the requirements of Circular A-11 should submit in writing the specific section for which an exception is required and provide adequate rationale to justify the exception. The memorandum addressing the requested exceptions should be submitted directly to the Office of the USD(Comptroller), Program/Budget, Plans and Systems Directorate (Room 3A862, telephone (703) 697-9171) no later than July 15 of each year.

2. If the requested exception is acceptable to the USD(Comptroller), these proposals will be consolidated and forwarded to OMB for approval. Components will be advised of any exceptions approved by OMB.

3. All DoD Components are required to comply with any requested exceptions not approved and to properly reflect the information in the budget submissions.

010106 Proposed Changes in Budget Structure and Appropriation Language

A. Under the provisions of OMB Circular A-11, the following types of changes must be cleared with OMB:

1. Changes in the appropriation pattern, including proposed new accounts and changes in the titles and sequence of existing accounts.

2. Changes in the methods of funding a program.

3. Changes in program or budget activity classifications for the program and financing schedules for all appropriation accounts and funds.

B. Any proposed changes on the items listed above must be submitted by memorandum to the Office of the USD(Comptroller) that explains the proposal and the rationale for the changes. If acceptable to the USD(Comptroller), these proposals will be forwarded to OMB for approval.

C. Proposed changes in the wording of appropriation language should be submitted to the Office of the Deputy General Counsel (Fiscal) (Room 3D961, telephone (703)695-5864) as soon as possible after the passage of the current year's appropriations acts. ODGC(Fiscal) will coordinate changes with OMB.

010107 Budget Terminology/Definitions

A. Standard Government-wide definitions of budget terminology are provided in the Office of Management and Budget's issuances, most notably Circular A-11 (Section 20).

B. For the Department of Defense, some of the more common budget concepts applicable to budget formulation follow:

1. Accrual Basis of Accounting: A method of accounting in which revenues are recognized in the period earned and costs are recognized in the period incurred, regardless of when payment is received or made. There have been many initiatives over the years to convert the Federal Budget to an accrual accounting basis. Although the budget is on a cash basis, DoD accounting is on the accrual basis.

2. Advance Procurement: Authority provided in an appropriations act to obligate and disburse during a fiscal year before that in which the related end item is procured. The funds are added to the budget authority for the fiscal year and deducted from the budget authority of the succeeding fiscal year. Used in major acquisition programs for advance procurement of components whose long-lead-times require purchase early in order to reduce the overall procurement lead-time of the major end item. Advance procurement of long lead components is an exception to the DoD "full funding" policy and must be part of the President's budget request.

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