DOD 7110.1-M

DOD Manual 7110.1-M Department of Defense BUDGET GUIDANCE MANUAL

Office of the Comptroller of the Department of Defense Washington, DC 20301-1100 (Program/Budget) May 1990 DEPARTMENT OF DEFENSE BUDGET GUIDANCE MANUAL SIXTH REPRINT - 1990 This manual provides standing reference for the preparation, justification, and execution of budget requirements within the Department. Budget guidance, published under separate cover, will provide additional information and requirements unique to each budget cycle. The Budget Guidance Manual is issued biennially, consistent with the Department's internal biennial PPBS cycle. This reprint is for use during all phases of the FY 1992/FY 1993 biennial budget. The following summarizes, by appropriation title, the major revisions reflected in this reprint: Military Personnel: New exhibits have been added which provide additional information regarding retention bonuses, Reserve personnel costs, and retired pay accrual: MP-7 - Aviation Retention Bonus MP-8 - Medical Officer Retention Bonus MP-9 - Summary of Basic Pay and Retired Pay Accrual Costs (Active) MPR-5 - Summary of Basic Pay and Retired Pay Accrual Costs (Reserve) MPR-6 - Active Reserve/Guard (AGR) Personnel Costs PB-30W - Full-Time Support Personnel (Reserve) Operation and Maintenance: The following exhibits have been deleted from Operations and Maintenance requirements: OP-12 - Federal Employees Retirement System Costs OP-43 - Modernization Program Summary OP-47 - Ship Repair and Modernization OP-75 - Flying Hour Costs PBA-6 - Modernization Program PBA-14 - Supply Operations PBA-27 - Personnel Data by Major Force Program Four new exhibits have been added: OP-5 (Attachment 7) - Real Property Maintenance & Minor Construction OP-27H - Historic Building Costs OP-27P - Real Property Maintenance/Minor Construction PBA-28 - Tactical Air Forces In addition, revisions have been made to many Operation and Maintenance exhibits. Changes are annotated with vertical lines in the margins of each revised exhibit format page in the appendices. Procurement: Chapter 241 has been expanded to include policy sections on "Criteria for Determining Expense and Investment Costs" and "Full Funding of Procurement Programs." A new requirement to submit one copy of the "Ship Cost Adjustment Report" by July 1 of each year has been included in Chapter 244. Four new exhibits have been added to budget submission requirements for the procurement accounts: P-22B - Training Requirements Analysis P-29a - Outfitting Costs - Comparison with Previous Submissions P-30a - Post Delivery Estimates - Comparison with Previous Submissions P-36 - Deport Level Ship Maintenance Schedule Exhibit P-33, Missile System Modification, has been modified slightly and renumbered, and is now Exhibit P-3b. In addition, revisions have been made to the following exhibits: P-3 - Weapon System Modifications P-5 - Aircraft Cost Analysis P-24 - Ammunition Cost Analysis P-35 - Major Ship Component Fact Sheet Research, Development, Test, and Evaluation: A new exhibit RD-2, RDT&E Budget Review Data is required for the September OSD/OMB budget submission. The RD-5 exhibit requirement has been deleted and the Exhibit PB-33B, RDT&E Descriptive Summary, which has been modified slightly, is to be submitted in its place. Military Construction/Family Housing: To new chapters have been added to reflect new submission requirements. Chapter 265 addresses the Base Closure account, and identifies requirements in support of this effort. Chapter 266 addresses Real Property Maintenance Activities, and is an expansion of the section formerly included in the Operation and Maintenance chapters. In addition, a separate section has been included to address third-party contracting. Revolving Funds: Major changes have been made to the Stock Fund guidance included in the Manual. Chapter 293 has been revised as follows: - Narrative has been revised to correct/add definitions of supply terms bringing the guidance in line with current policy. The SF-7 Exhibit has been cancelled. The required information will be obtained from other sources. - The SF-2, SF-3A, SF-3B, SF-3C, SF-4, SF-6, and SF-9 (by division) are no long required for the President's budget submission. - Section 29.3.3 C (Preparation of Material) reflects relabeled columns for the OSD Budget Estimate to accommodate capability to identify apportionment year requirements. - Section 293.4 (Timetable) reflects revised budget preparation milestones to provide more time to accomplish the required activities. Revisions have been made to the following Stock Fund exhibits: SF-1 - Summary Justification SF-2 - General Narrative Justification SF-3 - Operating Budget Requirements SF-3A - Peacetime Inventory Augmentation SF-3B - Operating Requirements by Weapon System/Category SF-3C - Mobilization Requirement SF-4 - Inventory Status SF-5 - Customer Price Calculation SF-6 - Reimbursable I) ues SF-8 - Analysis of Fund Balance with the Treasury SF-10 - Commodity Summary Industrial Fund requirements in Chapter 294 have been revised as follows: - Exhibits IF-2 (Summary of Selected Cost & Personnel Data), IF-8 (Summary of Cash Balances, sources, and Applications), and IF-14 (Reconciliation of Costs and Obligations), have been eliminated. Information provided by these three exhibits will be derived from other budget materials submitted. - The following Industrial Fund exhibits have been revised: IF-A - Summary of Operations IF-D - Statement of Revenue and Expense IF-E - Analysis of Changes in Government Equity IF-F - Parts I through IV IF-G - Base Operations Support & Personnel Data IF-4 - Summary of Price and Other Changes IF-10 - Real Property Maintenance Expenses IF-11 - Summary of Capital Purchases IF-12 - Proposed Billing Rate Adjustments IF-15 - Military Personnel Compensation - The old ACP exhibits for Capital Purchases have been eliminated and reformatted as Exhibits IF-16 and IF-17. - Exhibit IF-18 (Waste Minimization Capitalization Account) has been added to identify cost-effective waste minimization projects. Chapter 327 has been added to incorporate both Stock Fund and Industrial Fund guidance for submission of the President's budget. Service Industrial Fund and Stock Fund Overview material have been removed from Chapter 323. Special Analyses: Chapter 2B2, Information Technology Program, has been modified significantly and replaced in its entirety. In Chapter 2B8, Special Interest Areas, three new requirements have been added: PB-19 - Intermediate Range Nuclear Force PB-28 - Summary of Funds Budgeted for Environmental Projects PB-29 - Waste Minimization Capitalization Account In addition, two chapters have been added to the special analysis section in Part II and one chapter has been added to the special programs section in Part III of the manual: 2B5 - Overseas Cost Report 2B18 - DoD Drug Interdiction & Counter-drug Activities 333 - Cost of Medical Activities Report Other: Chapter 431, "Implementation of Reprogramming of DoD Appropriated Funds," and Chapter 432, "Implementation of Reprogramming of Military Construction and Family Housing Appropriated Funds," have been added to Part IV, Budget Administration. These chapters are added in conjunction with the cancellation of DoDD 7250.5, DoDI 7250.10 and DoDI 7250.14. Chapter 460 has been added to reflect the inclusion of guidance for the update of the defense Program data base. This chapter is added in conjunction with the cancellation of DoDI 7045.8. Chapter 521 has been revised as follows: - Outlays are to be reported on a net basis by Budget Authority. - Services will not submit machine readable transactions for military personnel assigned to Defense Agencies. Defense Agencies are still required to submit hard copy exhibits. - The description of diagnostic checks has been expanded. - A new Name Edit System (NES) Structure and Description file has been provided. The highlights discussed above are not all-inclusive. Those sections of the manual which have been revised since the last edition (July 1988) have been indicated by vertical lines in the margins. As in the past, we request that any questions or comments that might arise as you review and use the contents of this manual be directed to the Directorate for Plans and Systems, Room 3A862, the Pentagon. In this manner, it is hoped that this document will continue to prove current and useful to all involved in budget formulation, presentation, and execution. L.P. Dube Deputy Comptroller (Program/Budget) DOD BUDGET GUIDANCE MANUAL Table of Contents Chapter PART I - GENERAL POLICIES 111 General 112 Proposed Changes in Budget Structure, Appropriation Language and Requests for Exceptions to OMB Circular A-11 113 Budget Concepts 114 Pay Increases 115 Security Classifications PART II - BUDGET FORMULATION Section 1 - Budget Estimates Submission 211 General 212 Preparation of the Biennial Budget Estimates 213 Budget Estimates Summaries and Transmittal 214 Supplemental Appropriation Estimates 215 Additional Budget Submissions 218 Automation Requirements 219 Budget Review Procedures Section 2 - Military Personnel and Retired Military Personnel 222 Military Personnel Appropriations 223 Reserve Component Personnel Appropriations 224 DoD Military Retirement Fund 225 Military Personnel - Civil Functions Section 3 - Operation and Maintenance 231 General 232 Operations Accounts 235 National Board for the Promotion of Rifle Practice, Army 237 Court of Military Appeals, Defense 238 Civil Functions Section 4 - Procurement 241 General 242 Aircraft and Related Procurement 243 Missiles and Related Procurement 244 Ship Procurement 245 Other Procurement Section 5 - Research, Development, Test and Evaluation 251 Definitions, Policy and Criteria 252 Preparation of Budgets on an Incremental Programming Basis 253 Research, Development, Test and Evaluation Appropriations Section 6 - Military Construction and Family Housing 262 Military Construction Appropriations 263 Family Housing 264 Homeowners' Assistance Fund, Defense 265 Base Realignment and Closure 266 Real Property Maintenance and Minor Construction Section 7 - Receipts 271 Offsetting Receipts Section 9 - Revolving and Management Funds 291 Defense Production Guarantees 292 Laundry Service, Naval Academy 293 Stock Funds 294 Industrial Funds 295 Management and Working Funds 296 Trust and Trust Revolving Funds 297 National Defense Stockpile and Wm. Langer Jewel Bearing Plant Section 10 - Special Analyses 2B1 Communications, Command and Control (C3) Program 2B2 Information Technology 2B3 Defense Intelligence Program 2B4 Physical Security Activities 2B5 Overseas Cost Report 2B8 Special Interest Areas 2B9 Major Range and Test Facility Base 2B10 Productivity Improvements 2B12 Alcohol and Drug Abuse Control Programs 2B14 Civilian Civil Rights Programs 2B15 Operational Test and Evaluation Support 2B16 Defense Environmental Restoration Program 2B17 Federal Credit Programs 2B18 DoD Drug Interdiction and Counter-drug Activities PART III - BUDGET PRESENTATION Section 2 - Congressional Justification Material 321 General 322 Military Personnel Appropriations 323 Operation and Maintenance Appropriations 324 Procurement Appropriations 325 Research, Development, Test and Evaluation and Director of Test and Evaluation Appropriations 326 Military Construction, Family Housing and Homeowners' Assistance Appropriations 327 Revolving Funds 329 Supplemental and Amended Appropriations Requests Section 3 - Congressional Justification Material - Special Programs 331 Intelligence Programs/Activities 332 Communications, Command and Control (C3) 333 Cost of Medical Activities Report Section 4 - Congressional Budget Review 341 Witness Statements 342 Transcript Processing 343 Appeal Process on Congressional Actions PART IV - BUDGET ADMINISTRATION Section 1 - Apportionment 412 Apportionment and Reapportionment Schedule (DD Form 1105) Section 2 - Financial Authorities 422 Temporary Appropriation Warrants 423 Military Construction/Family Housing Fund Release Procedures Section 3 - Reprogramming 431 Implementation of Reprogramming of DoD Appropriated Funds 432 Implementation of Reprogramming of Military Construction & Family Housing Appropriated Funds Section 4 - Appropriation Transfer Authority 441 Appropriation Transfers Authorities 442 Functional Transfers Section 5 - Funding Review of Prior Year Program Execution 451 Status of Prior Year Military Construction Accounts Section 6 - General 460 Automated Defense Program (DP) Data Base 461 Automated Procurement Annex Data Base 462 Automated RDT&E Annex Data Base 463 Automated Construction Annex Data Base PART V - BUDGET AND ACCOUNTING CLASSIFICATIONS Section 1 - Classifications and Definitions 511 Functional Titles 512 Military Personnel Appropriations 513 Reserve Component Personnel Appropriations 514 DoD Military Retirement Fund 515 Special Programs 516 Research, Development, Test and Evaluation Appropriations 517 Military Construction, Family Housing, and Homeowners' Assistance Appropriations Section 2 - Coding for Automation 521 Name Edit System (NES) Structure and Description APPENDICES Appendix A: Military Personnel and Retired Military Personnel Appendix B: Operation and Maintenance Appendix C: Procurement Appendix D: Research, Development, Test and Evaluation Appendix E: Military Construction and Family Housing Appendix F: Revolving, Management, and Other Funds Appendix G: Special Analyses (Applicable to More than One Title) Appendix H: Other Exhibits (Applicable to More than One Title) DoD 7110.1-M PART I - GENERAL POLICIES Chapter 111 - General 111.1 Purpose and Applicability A. The Department of Defense Budget Guidance Manual is published under the authority of DoD Instruction 7110.1. B. The Manual provides general guidance on the formulation and submission of the budget estimates to the Office of the Secretary of Defense, the presentation of the budget and congressional justifications, the administration of the budget, and budgeting and accounting classifications. C. The Budget Guidance Manual 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. D. The provisions of the Manual apply to all military functions of the Department of Defense, military assistance, and the following civil functions of the Department of Defense: Payment to Military Retirement Fund Military Retirement Trust Fund Retired Pay, Defense (expired) Education Benefits Fund Wildlife Conservation 111.2 Organization A. The Manual is organized into five major parts and eight appendices: Part I - General Policies Part II - Budget Formulation Part III - Budget Presentation Part IV - Budget Administration Part V - Budget and Accounting Classifications Appendices - Budget Exhibits and Instructions B. Each part is further subdivided into sections (where necessary) and chapters. Chapter numbering contains the part and section identification and adds a sequential number. In some chapters, alphabetization has been necessary. Paragraph numbering is formulated from the chapter number plus a decimal point and a sequential number. Page numbering also uses the chapter number and adds a hyphen and a sequential number. C. The Appendices to this manual provide the required budget exhibits and formats along with instructions for their preparation, automated submission requirements and budget and accounting classification codes. 111.3 Changes A. Changes to the Manual will be issued biennially, at the beginning of each biennial budget cycle. Pen and ink changes will not be used. B. Changes on a page will be indicated by vertical lines in the margins. If an entire page or exhibit is changed, the vertical lines will run the length of the page. Each page of a change will be dated. Complete reprints of the Manual, when issued, will not reflect dated pages in order to indicate initial issue. 111.4 Reports Control Symbol The reporting requirements contained herein have been assigned Report Control Symbol DD-COMP (AR) 1092. Any changes in data covered by this Report Control Symbol as outlined in this Manual will be reviewed in accordance with DoD Directive 5000.19, Policies for the Management and Control of DoD Information Requirements. For identification and control purposes, the Report Control Symbol should be used in submitting data required by this Manual. Chapter 112 - Proposed Changes in Budget Structure, Appropriation Language and Requests for Exceptions to OMB Circular A-11 112.1 Proposed Changes in Budget Structure and Appropriation Language A. Under the provisions of Office of Management and Budget (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. Subsequent to the issuance of Circular A-11 by OMB each year, the Office of the Department of Defense, Comptroller (DoD(C)) will request that the DoD components submit be memorandum any proposals on the items listed above. If acceptable to DoD(C), 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 Assistant General Counsel (Fiscal Matters) as soon as possible after the passage of the current year's appropriation act. OAGC(FM) will accomplish coordination with OMB. 112.2 Exceptions to OMB Circular A-11 A. Each year the DoD Comptroller requests certain exceptions to OMB Circular A-11. Generally, these exceptions concern special situations that are unique to the Department of Defense. B. Subsequent to the issuance of Circular A-11 by OMB each year, the DoD(C), will address any exceptions required to the criteria defined in the circular. Unless otherwise notified by DoD(C) in writing, any DoD component recommendations for exceptions to Circular A-11 should be submitted by memorandum to DoD(C), Program/Budget, Plans and Systems Directorate, no later than August 1 of each year. If acceptable to DoD(C), these proposals will be forwarded to OMB for approval. Exceptions concerning the OMB/OSD joint review will be made by DoD(C). DoD(C) will consolidate all exception requests and seek from OMB. Components will be advised of exceptions granted. Chapter 113 - Budget Concepts 113.1 Budget Terminology Standard Government-wide definitions of budget terminology are provided in the Office of Management and Budget issuances, most notably Circulars A-11 and A-34. For the Department of Defense, the following are some of the more common budget concepts applicable to budget formulation: 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 from the succeeding year's appropriation. 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-leadtime require purchase early in order to reduce the overall procurement leadtime of the major end item. Advance procurement of long lead components is an exception to the DoD "full funding" policy. 3. Appeal: A request for reconsideration of an action taken to adjust, reduce, or delete funding for an item during the congressional review of the defense budget (authorization and appropriation). This progress is discussed in Chapter 343. 4. Apportionment: A distribution by the Office of Management and Budget of amounts available for obligation in appropriation or fund accounts of the Executive Branch. The distribution makes amounts available on the basis of specified time periods, programs, activities, projects, objects, or combinations thereof. The apportionment system is intended to achieve an effective and orderly use of funds. The amounts so apportioned limit the obligations that may be incurred. 5. Appropriations. An authorization by an act of the Congress that permits Federal agencies to incur obligations and to make payments out of the Treasury for specified purposes. An appropriation usually follows enactment of authorizing legislation. An appropriation act is the most common means of providing budget authority (see Budget Authority). Appropriations do not represent cash actually set aside in the Treasury for purposes specified in the appropriation act; they represent limitations of amounts which agencies may obligate during the time period specified in the respective appropriation acts. 6. Authorization (Authorizing Legislation): Basic substantive legislation enacted by the Congress which sets up or continues the legal operation of a Federal program or agency either indefinitely or for a specific period of time or sanctions a particular type of obligation or expenditure within a program. Such legislation is normally a prerequisite for subsequent appropriations or other kinds of budget authority to be contained in appropriation acts. It may limit the amount of budget authority to be provided subsequently or may authorize the appropriation of "such sums as may be necessary." 7. Biennial Budget: The FY 1986 Department of Defense Authorization Act required the submission of two-year budgets for the Department of Defense and related agencies beginning with FY 1988/FY 1989. The Department has fully institutionalized a biennial cycle for the Planning, Programming, and Budgeting System (PPBS), including the Defense Guidance (DG), the Program Objective Memorandum (POM), the Budget Guidance Manual (BGM) and budget formulation memoranda. A biennial budget, as currently structured, represents program budget estimates for a two-year period in which fiscal year requirements remain separate and distinct. 8. Budget Activity: Categories within each appropriation and fund account which identify the purposes, projects, or types of activities financed by the appropriation or fund. 9. Budget Amendment: A formal request submitted to the Congress by the President, after his formal budget transmittal but prior to completion of appropriation action by the Congress, that revises previous requests, such as the amount of budget authority. 10. Budget Authority: The authority becoming available during the year to enter into obligations that result in immediate or future outlays of Government funds. 11. Budget Deficit: The amount by which the Government's budget outlays exceed its budget receipts for any given period. Deficits are financed primarily by Treasury borrowing from the public. 12. Budget Receipts: Amounts received by the Federal Government from the public that arise from the exercise of governmental or sovereign power (primarily tax revenues, but also receipts from premiums of compulsory social insurance programs, court fines, license fees, etc.); premiums from voluntary participants in Federal social insurance programs; and gifts and contributions. Excluded from budget receipts are collections resulting from business-type transactions and payments between government accounts as a result of intragovernmental transactions. 13. Concurrent Resolution: A resolution passed by both Houses of Congress, but not requiring the signature of the President, setting forth, reaffirming, or revising the congressional budget for the United States Government for a fiscal year. A concurrent resolution on the budget, due by April 15, must be adopted before legislation providing new budget authority, new spending authority, new credit authority or changes in revenues or the public debt limit is considered. Other concurrent resolutions for a fiscal year may be adopted at any time following the first required concurrent resolution for that fiscal year. 14. Constant Dollars: A dollar value adjusted for changes in prices. Constant dollar series are derived by dividing current dollar estimates by appropriate price indices, a process generally known as deflating. The result is a time series as it would presumably exist if prices were the same throughout as in the base year - in other words, as if the dollar had constant purchasing power. Any changes in such a series would reflect only changes in the real (physical) volume of output. Constant dollar figures are commonly used for gross national product and its components. 15. Continuing Resolution: Legislation enacted by the Congress to provide budget authority for specific ongoing activities in cases where the regular fiscal year appropriation for such activities has not been enacted by the beginning of the fiscal year. The continuing resolution usually specifies a maximum rate at which the agency may incur obligations, based on the rate of the prior year, the President's budget request, or an appropriation bill passed by either or both Houses of the Congress. 16. Controlability: The ability under existing law to control budget authority or outlays during a given fiscal year. "Relatively uncontrollable" usually refers to spending that cannot be increased or decreased without changes in existing substantive law. At the Federal budget level, the largest part of such spending is the result of open-ended programs and fixed costs, such as social security and veterans' benefits. For defense, controlability is limited by the payments due under obligations incurred during prior years. 17. Current Services Estimates: Estimated budget authority and outlays for the upcoming fiscal year based on continuation of existing levels of service, i.e., assuming that all programs and activities will be carried on at the same level as in the fiscal year in progress and without policy changes in such programs and activities. These estimates of budget authority and outlays, accompanied by the underlying economic and programmatic assumptions upon which they are based (such as the rate of inflation, the rate of real economic growth, pay increases, etc.), are required to be transmitted by the President to the Congress. 18. Defense Management Report Decisions (DMRDs): The Defense Management Report of July 1989 mandated that DoD reduce its budget by $30 billion over the FY 1991-FY 1995 period through management efficiencies. To accomplish this goal, DoD has established DMRDs as part of the annual budget process. This process has three phases: Phase I consists of identification of management issues to pursue (early spring). The Comptroller will make these decisions. Phase II consists of research and analysis of the identified management issues (spring and summer). Phase III consists of the conversion of selected management issues into DMRDs during the fall budget review. The format for DMRDs will be similar to that of PBDs. 19. Defense Program (DP): The Defense Program (formerly FYDP) is the program and financial plan for the Department of Defense as approved by the Secretary of Defense. The DP arrays cost data and force structure over a six-year period (force structure for an additional 3 years), portraying this data by major force program for internal DoD review and by appropriation for congressional review. 20. Deferral of Budget Authority: Any action or inaction by any officer or employee of the United States that withholds, delays, or effectively precludes the obligation or expenditure of budgetary resources, including the establishment of reserves under the Antideficiency Act, as amended by the Impoundment and Control Act. Section 1013 of the Impoundment Control Act of 1974 requires a special message from the President to the Congress reporting a proposed deferral of budget authority. Deferrals may not extend beyond the end of the fiscal year in which the message reporting the deferral is transmitted and may be overturned by the passage of an impoundment resolution by either House of Congress. 21. Disbursements: In budgetary usage, gross disbursements represent the amount of checks issued, cash, or other payments made, less refunds received. Net disbursements represent gross disbursements less income collected and credited to the appropriation or fund account, such as amounts received for goods and services provided. 22. Expenditures: A term generally used interchangeably with outlays. 23. Expired Appropriation: An appropriation that is no longer available for obligation but is still available for payment of existing obligations. (See "M" Accounts.) 24. Federal Debt: Federal debt consists of public debt and agency debt. Public debt is that portion of the Federal debt incurred when the Treasury Department or Federal Financing Bank (FFB) borrows funds directly from the public or another fund or account. Agency debt is that portion of the Federal debt incurred when a Federal agency authorized by law, other than Treasury or the Federal Financing Bank, borrows funds directly from the public or another fund or account. 25. Fiscal Year: Any yearly accounting period without regard to its relationship to a calendar year. The fiscal year for the Federal Government begins on October 1 and ends on September 30. The fiscal year is designated by the calendar year in which it ends. Fiscal years are further designated as follows: Budget Year 1: The first fiscal year of a two-year period for which the budget is being considered Budget Year 2: The second fiscal year of a two-year period for which the budget is being considered Current Year: The fiscal year in progress. Past Year: The fiscal year immediately preceding the current year; the last completed fiscal year. 26. Full Funding Policy: The practice of funding the total cost of major procurement and construction projects in the fiscal year in which they will be initiated. 27. Impoundment: Any action or inaction by an officer or employee of the United States that precludes the obligation or expenditure of budget authority provided by the Congress. 28. Impoundment Resolution: A resolution of the House of Representatives or the Senate disapproving a deferral of budget authority set forth in a special message ordinarily transmitted by the President under section 1013 of the Impoundment Control Act of 1974. Passage of an impoundment resolution by either House of Congress has the effect of overturning the deferral and requires that such budget authority be made available for obligation. 29. Incremental Funding: The phasing of total funding of programs or projects over two or more fiscal years based upon levels and timing of obligational requirements for the funds. Differs from full funding concept where total funds for a program or project are provided in the fiscal year of program or project initiation, regardless of the obligational requirement for the funds. 30. "M" Account: Unliquidated obligations under an appropriation are transferred to (merged into) an "M" account at the end of the second full fiscal year following expiration. The "M" account remains available for the payment of unliquidated obligations charged to various-year appropriation accounts. 31. Multiyear Procurement: Procurement of a particular end item or system under a multiyear contract approved by specific provision of law. For the Department of Defense, multiyear procurement contracting of military hardware or systems must be specifically, and individually, approved by the Congress. 32. Object Classification: A uniform classification identifying the transactions of the Federal Government by the nature of the goods or services purchased without regard to the agency involved or the purpose of the programs for which they are used. 33. Obligations: Amounts of orders placed, contracts awarded, services received, or similar transactions made by Federal agencies during a given period, which will require outlays during the same or some future period. 34. Outlays: The amount of checks issued, interest accrued on most public debt, and similar transactions and cash disbursed; net of refunds and reimbursements. Outlays are also referred to as expenditures or net disbursements. 35. President's Budget: The budget for a particular fiscal year transmitted to the Congress by the President in accordance with the Budget and Accounting Act of 1921, as amended. Some elements of the budget, such as the estimates for the legislative branch and the judiciary, are required to be included without review by the Office of Management and Budget or approval by the President. 36. Program Budget Decision (PBD)/Defense Management Report Decision (DMRD): A budget decision document issued during the joint review of Service budget submissions by analysts of the Office of the Secretary of Defense (OSD) and the Office of Management and Budget (OMB). PBDs/DMRDs reflect the decisions of the Secretary of Defense as to appropriate program and funding to be included in the annual defense budget request which, in turn, is included in the President's Budget. 37. Program Decision Memorandum (PDM): A document containing the decisions by the Secretary of Defense on the program and resource levels identified in the Program Objectives Memorandum. 38. Program Objectives Memorandum (POM): The final product of the programming process within the Department of Defense, the Program Objectives Memorandum (POM) displays the resource allocation decisions of the Military Departments in response to and in accordance with Defense Guidance. 39. Program Year: The fiscal year in which authorization was provided and in which funds were appropriated for a particular program, regardless of the fiscal year in which funds for that program might be obligated. 40. Reapportionment: A revision by the Office of Management and Budget of a previous apportionment of budgetary resources for an appropriation or fund account. A revision would ordinarily cover the same period, project, or activity covered in the original apportionment. 41. Reappropriation: Congressional action to restore the obligational availability, whether for the same or different purposes, of all or part of the unobligated portion of budget authority that has expired or would otherwise expire in an annual or multiple-year account. Obligational authority in a current account may also be extended by a subsequent appropriation act. 42. Reconciliation Process: A process used by the Congress to reconcile amounts determined by tax, spending, and debt legislation for a given fiscal year with the ceilings enacted in the second and required concurrent resolution on the budget for that year. Section 310 of the Congressional Budget and Impoundment Control Act of 1974 provides that the second required concurrent resolution on the budget, which sets binding totals for the budget, may direct committees to determine and recommend changes to laws, bills, and resolutions, as required to conform with the binding totals for budget authority, revenues, and the public debt. 43. Recovery of Prior Year Obligations: Amounts made available in no-year and unexpired multiple-year accounts through downward adjustment of prior year obligations. 44. Reimbursements: Sums received by the Government for commodities sold or services furnished either to the public or to another Government account that are authorized by law to be credited directly to specific appropriation and fund accounts. These amounts are deducted from the total obligations incurred (and outlays) in determining net obligations (and outlays) for such accounts. 45. Reprogramming: Utilization of funds in an appropriation account for purposes other than those contemplated at the time of appropriation. Reprogramming is generally accomplished pursuant to consultation with and approval by appropriate congressional committees. 46. Rescission: The consequence of enacted legislation which cancels budgetary resources previously provided by the Congress prior to the time when the authority would otherwise lapse. Section 1012 of the Impoundment Control Act of 1974 requires a special message from the President to the Congress reporting any proposed rescission of budgetary resources. These proposals may be accepted in whole or in part through the passage of a rescission bill by both Houses of the Congress. 47. Rescission Bill: A bill or joint resolution that provides for cancellation, in whole or in part, or budgetary resources previously granted by the Congress. Under Section 1012 of the Impoundment Control Act of 1974, unless Congress approves a rescission bill within 45 days continuous session after receipt of the proposal, the budgetary resources must be made available for obligation. 48. Revolving Fund: A fund established to finance a cycle of operations through amounts received by the fund. Within the Department of Defense, such funds include stock funds and industrial funds, as well as other working capital funds. 49. Sequestration: The reduction or cancellation of new budget authority; unobligated balances, new loan guarantee commitments or limitations; new direct loan obligations, commitments, or limitations; spending authority; and obligation limitations. As delineated in the Deficit Control Act of 1985 (Gramm-Rudman- Hollings), sequestration is necessary if the projected deficit for a given fiscal year exceeds the maximum deficit amount for that year. 50. Supplemental Appropriation: An act appropriating funds in addition to those in an annual appropriation act. Supplemental appropriations provide additional budget authority beyond original estimates for programs or activities (including new programs authorized after the date of the original appropriation act) for which the need for funds is too urgent to be postponed until enactment of the next regular appropriation act. 51. Total Obligational Authority (TOA) Availability: The sum of (1) all budget authority granted (or requested) from the Congress in a given year, (2) amounts authorized to be credited to a specific fund, and (3) unobligated balances of budget authority from previous years which remain available for obligation. In practice, this term is used primarily in discussing the Department of Defense budget, and most often refers to TOA as "program" which equates to only (1) and (2) above. 52. Transfer Authority: Authority provided by the Congress to transfer budget authority from one appropriation or fund account to another. Chapter 114 - Pay Increases 114.1 General An analysis of increased pay costs covering military, classified civilian, and local national personnel is required as part of justification materials submitted in support of budget estimates and requests for apportionment. Such an analysis also may be required in responding to a specific request from the Office of Management and Budget. These analysis generally serve as the basis for requesting pay supplemental appropriations, but, upon request, they will also reflect the impact of such pay increases in the following fiscal year. 114.2 Basis of Pay Cost Estimates The amount of increased pay costs will be calculated on the basis of rates established in applicable executive orders, and comparable rates authorized for administrative pay systems. 114.3 Absorption of Pay Increases OMB normally directs agencies to absorb the costs of pay increases to the fullest extent possible. Pay supplementals are authorized to be proposed only where a determination has been made that full absorption is not possible. 114.4 Reimbursements A. In developing pay costs, consideration must be given to the additional payments for increased pay costs required to be made to other accounts and other Government agencies for work being done on a reimbursable basis, as well as offsets to increased pay costs derived from reimbursements from other accounts or agencies. B. Pay increase costs incurred by revolving and management funds should be completely recovered through increased charges in regular billings. Excepted from inclusion herein are Industrial Funds where rate stabilization policy applies and anticipated pay raises are included in the initial budget submission for the period. Shortfalls between budgeted and actual raises in Industrial Funds also are excluded from supplemental consideration. C. Reimbursements for military and civilian personnel detailed to other Government agencies will be charged in accordance with DoD Instruction 7230.5, and existing reimbursable agreements. D. Whenever feasible, except for Industrial Fund charges, rates for reimbursable personal services should be revised at the time of the pay increase to provide for proper reflection of the pay increases. 114.5 Reporting Required A. Exhibit PB-5, provided in Appendix H, will be used for increased pay cost reporting unless otherwise directed. In addition to providing pay cost data for all appropriation accounts and funds, Exhibit PB-5 will include data for Homeowners' Assistance, as applicable, and for civil functions such as Cemeterial Expenses and Wildlife Conservation. 1. For Industrial Funds, including the Defense Communications and Defense Supply Agency portions of the Defense Industrial Fund, the costs should be shown in Columns (2) and (3) on the Industrial Fund line and offset by an entry in Column (5) to reflect reimbursement from other accounts. B. A short narrative explanation of the methods used in computing the increased pay costs should accompany the analysis. This narrative will separately address military, classified civilians, U.S. wage board and foreign national direct personnel. C. All pay costs should be carefully developed and fully documented. In the case of military personnel, this documentation will include the average strength upon which pay increase costs are based, and details on the amounts for basic pay and related items affected by the pay increases. For classified civilians, this documentation will include man-years and related object class detail. For U.S. wage board man-years and foreign national direct personnel, the documentation will indicate the man-years involved, percentages increase, and the relationship to prior-year experience. Detailed supporting data should be maintained by the Component to be made available upon call. Chapter 115 - Security Classifications 115.1 General A. Instructions concerning premature disclosure of budget information prior to presentation to the Congress are contained in OMB Circular A-11. B. Instructions concerning security classification of the budget estimates submissions to OSD are contained in Chapter 213. C. Instructions concerning security classification of Congressional justification material are contained in Part III. 115.2 Classification of Procurement Exhibit P-1 Line Items and RDT&E Program Element Listings and Construction Annex (C-1) A. Procurement Exhibit P-1 Line Items Exhibit P-1 line items will only be classified in those situations where the existence of the item, project or program is classified or where classified elements of operations plans or force structure are revealed for any year following the current fiscal year being proposed for budget presentation. In this connection, missile quantities will not be classified unless such quantities, standing alone, give an accurate readiness posture or would permit quantity calculations of total stockpiles of nuclear warheads. B. RDT&E Program Elements 1. Dollar amounts for specific program elements will be classified not less than SECRET when it is considered that the element reveals significant information concerning the trends and emphasis of the United States Research and Development Program. 2. Specific program elements will also be classified when the existence of the program is classified or where classified program information is revealed. C. The Construction Annex (C-1) is designed to be an unclassified document. See Chapter 463 for instructions. 115.3 Security Classification of National Foreign Intelligence Program (NFIP) Budget Resource Information A. Unless other specific NFIP program guidance in effect requires a higher classification: 1. Information which, standing alone or in aggregate, reveals any Program Element total of the funding or manpower requirements of any program in the NFIP will be classified CONFIDENTIAL. 2. Information which permits the disclosure of any Program Element total of the funding or manpower requirements of any program in the NFIP, for example, through a subtractive process, will be classified CONFIDENTIAL. 3. Information which, standing alone or in aggregate, reveals overall DoD Component funding or manpower levels of the NFIP or its programs will be classified SECRET. 4. Whenever NFIP funding and manpower resource detail is combined with other unclassified programs in such a way as to effectively mask the NFIP resource Program Element total, such combined resource Program Element total may be treated as unclassified. B. Documents containing NFIP resource detail that is classified on the basis of this guidance shall be marked: CLASSIFIED BY DCI memo on 22 Dec 81 DECLASSIFY ON OADR C. The above guidance applies only to the program and budget preparatory process. Requests for clarification of the foregoing classification guidance should be forwarded to DUSD (Policy), Director on Information Security. Questions of application will be coordinated with the Intelligence Community Staff and responses will be disseminated to all interested DoD components.