The Navy Working Capital Fund Budget & Execution Cycle

April 22, 2013 | By scnewsltr
[caption id="attachment_709" align="alignleft" width="150"]Cmdr. Steve Macdonald Navy Working Capital Fund Branch Head (Acting) Cmdr. Steve Macdonald
Navy Working Capital Fund Branch Head (Acting) The budget to execution cycle is demanding, and more so when you can only execute at last year’s plan during a continuing resolution.   It is further compounded in an election year and by the ever-present dark cloud of sequestration as a constant and hovering companion for months, creating numerous “what-if” drills.  This has just been plain tough and a wild ride at the same time!  While sequestration seems an abnormal example, it truly is not.  There is always something brewing that threatens funding, some other thing competing for that last available dollar.  The budget process is continuous and concurrent.  The beginning and ending of one budget to the next seemingly blur across an unseen line.  While one budget is executing, another is working its way through higher approval at the Department of Defense or Congress, and yet another budget is just beginning to form as the next Program Objective Memorandum (POM).  The question, “Which year are we talking about?” is valid to base-line discussions that frequently span many years.  I assumed duties as the Financial Management Analyst for Navy Working Capital Fund-Supply Management (FMB-415) in March 2012, just in time to start with a new budget cycle, but in the middle of an execution cycle.  We all prepare for our next job the best we can through training classes and conducting turn-over with the outbound person.  But in retrospect, the preparations seem all too short when the full weight of the job leans in on you.  That one last question I should have asked before I said, “I relieve you,” now seems like the holy grail.  The reality is, no cycle is easy.  There are always internal and external influences pulling and stretching what is academically the same process year-in and year-out, but truly is never the same.  And, in that, every new day has the opportunity for some entertainment… “I wonder what crazy – stuff - will happen today?”  The budget process is complex as it goes through multiple iterations within the Navy and externally through Office of the Secretary of Defense (OSD) and Congress.  The final product of the process will fund the entire Department of the Navy, from the acquisition of ships, planes and Marine Corps hardware, to pay and allowances, procurement of weapons and ammunition, purchase of food and fuel, and all the repair and supply support elements that keep the Navy and Marine Team ready to carry the fight to our Nation’s adversaries.  Looking back on my Supply Officer Department Head tour, I remember battling with Surface Force Atlantic (SURFLANT) to justify a request for a few thousand dollars in Operating Target (OPTAR) funds to get what the ship needed.  With those memories in mind, it can be a little frustrating to hear people at the strategic level refer to tens, even hundreds, of thousands of dollars as “decimal dust” and, “don’t worry about it, it’s a rounding error.”  While the scale here is enormous, fighting for rounding errors can mean real money at the waterfront.  The analysts around me battle down to the last dollar to get the budget right.  I am confident that no one will ever make a movie about a budget analyst who swept up $100,000 in rounding errors, but to the Sailors and Marines -- whose OPTAR balances are positively impacted -- that budget analyst is an unknown and unseen hero.   The process starts at the program level, and drives requirements up through multiple command echelons.  These requirements begin Navy level consolidation with the programmers, and the resource sponsors determine what is funded.  At this level, the transformation of material to money becomes more pronounced.  Both are demanding tasks to begin the balancing act of funding the right requirements with limited resources to meet combatant commanders’ warfighting capability requests.  When the programming and resourcing decisions are made, the budget is then turned over to the Office of Budget, also known as Financial Management and Budget (FMB).  At this level, the vocabulary has shifted from individual program elements of amphibious assault vehicles, planes and ships to the universal language of dollars, spoken by all involved from the Department of the Navy (DON), the Office of the Secretary of Defense (OSD), the Office of Management Budget (OMB), and Congress.  The DASN BUDGET FMB is responsible to the Secretary of the Navy through the Assistant Secretary of the Navy for Financial Management and Comptroller (ASN (FM&C)) for formulation, justification, and execution of the DON budget.  The division within FMB that prepares, justifies and tracks execution of the Navy Working Capital Funds (NWCF) in the Navy budget is the Civilian Resources and Business Affairs Division, also known as FMB-4.  Within FMB-4, FMB-415, a Navy Supply officer, handles the Navy Working Capital Fund-Supply Management (NWCF-SM) portion of the budget, encompassing both Navy and Marine Corps Supply Management NWCF-SM accounts for about 4.5 percent of the DON budget.  There are three main phases of the budget – formulation, justification, and execution.  The Navy’s budget migrates through each phase in an iterative process and as it works its way along, its name changes, too.  When the Department of the Navy starts formulating our budget, it is an internal process which is called the “DON” budget, and a round of justification takes place between lower echelons to higher echelons seeking approval of new programs or increased spending authority for existing programs.  Then, after trade-offs and blessing by the Senior Leadership, the Navy submits the Budget Estimate Submission, aka BES, to OSD and another round of justification happens.  For this round, the Department and OSD are reviewing with an eye to how the DON budget will impact Combatant Commanders, and also looking holistically at the Department of Defense's capabilities around the globe, since the Services support each jointly.  When OSD has made final decisions, FMB incorporates those changes in what becomes the President’s Budget (PB) to Congress.  It is at this point that another round of justification and deliberation takes place that culminates in Congress’ passage of Authorization and Appropriation bills.   Admittedly, the above is a fairly large, over-simplification.  The PB is not really the final product to which the DON will execute, Congress determines that, but once OSD submits the PB to Congress, much of the DON’s budget process focus shifts to the next year’s budget.  Months will have passed when Congress lets us know to what dollar amounts we are to target execution, and by that time, Navy will have completed the next DON and OSD budgets, and may be nearing completion of the next PB.  It is a continuous, and concurrent, process.  After the Department has finalized the President’s Budget and the focus has shifted to the following year, the FMB-415 analyst is still on call to answer Congressional queries for the budget currently under review, which could include clarification on budget exhibits, statements, transcripts of hearings, submission of additional backup material or point papers, and preparation of appeals to authorization and appropriation language or reports.  In the span of a few minutes, you might discuss FY15 with someone in the Navy, Congress might send a question about FY14, and OSD could ask about FY13 execution.  Which year are we talking about?  The FMB-415 NWCF-SM analyst is an integral part of the DON’s working relationship with OSD to formulate the President’s Budget, which is due to Congress the first Monday in February each year, although this year has been different.  This budget work can be just plain tough.  Experience in both execution of the current year’s budget and, justification and defense of the proposed budget moving forward are required, and at times, you can you switch between the two frequently within the span of only moments.  This frequently involves scheduling and attending hearings, and coordinating and clearing all responses for additional information.   Every day has a new challenge or opportunity.  The hard decisions made along the way -- which program to fund, and which to cut -- always translate into questions to be answered, numbers recalculated, and impact statements returned; and, frequently on a very short timeline, often measured in only hours.  Once passed into law, the budget becomes a plan to execute.  FMB is responsible for tracking performance to plan and the FMB-415 analyst monitors Navy and Marine Corps Supply Management Activity Groups obligation and expenditure performance.  The Naval Supply Systems Command (NAVSUP) is the single, largest NWCF Budget Submitting Office (BSO) to FMB, accounting for nearly $7 billion of the Navy’s budget each year.  NAVSUP N8 works closely with FMB-4 to ensure the proper amount of obligation authority is secured each year to properly operate the NWCF-SM revolving fund.  NWCF-SM’s mission is to ensure that the Marines and fleet units are properly equipped, and repair parts are available to conduct prompt repairs to keep ships steaming the oceans and planes in the air.  The budgetary uncertainty the entire Department of the Navy faces is just the most recent version of a challenge we have faced many times before – deliver a well equipped, trained and ready sea-going force with less funding than circumstances seemingly require.  As in the past, we will succeed, thanks to every member of the Navy-Marine Corps team.    By Cmdr. Steve Macdonald Navy Working Capital Fund Branch Head (Acting) Office of the Assistant Secretary of the Navy, Financial Management and Comptroller, DASN Budget