ASMC Viewpoint

DEFENSE FINANCIAL HIGHLIGHTS

DoD on the Hill

CR extended until December 18:  Congress passed, and the President is expected to sign, an extension of the Continuing Resolution (CR) for FY2010 until December 18, 2009.  The CR, which is attached to the FY2010 Interior and Environment Appropriations bill, will provide funding for seven appropriations bills, which have not yet been signed into law.  Two bills are in conference between the House and Senate (DoD and Transportation/HUD).  Five other bills (Commerce/Justice/Science, Financial Services, Labor/HHS/Education, Military Construction/VA, and State/Foreign Operations) await Senate floor action before they can go to conference.  Action on appropriations bills slowed to a crawl this week as Congress turned its attention to Health Care reform.  Now that the CR has been extended for seven weeks, the pressure for quick action on appropriations seems to have waned.  To follow what action there is on the FY2010 appropriations bills, go to the Library of Congress' Thomas website.

FY2010 DoD Appropriations conference still not finished:  House and Senate conferees did not complete work this week on the FY DoD Appropriations bill.  So the DoD bill joins six other appropriations bills in the CR.  However, action could be completed quickly now that the FY2010 Defense Authorization bill is ready for signature.  Look for the DoD bill to be completed and sent to the President between now and Veterans' Day. 

President signs FY2010 Defense Authorization Bill:  The President signed the FY2010 Defense Authorization bill this week.  The bill contains a number of public-private competition provisions of interest.  It temporarily suspends public-private competition under A-76 until DoD reviews existing policies and procedures and complies with current legal requirements. It also places time limits on the length of competitions for activities that are now being performed by federal employees.  The bill also includes financial management provisions of interest.  It sets a goal for DoD to achieve and auditable financial statement by September 30, 2017, and requires DoD to use business process re-engineering before it acquires new IT systems.

Defense Budget and Financial Management News

Hale issues priorities for achieving audit readiness:  In case you missed it, a few months ago Under Secretary of Defense (Comptroller) Robert F. Hale issued a memo that outlined DoD's priorities for improving financial information and processes to support audit readiness.  Hale advised that due to limited DoD resources, each DoD Component must address financial management improvement efforts in priority order to achieve the most effective and useful results.  The primary goal is working to achieve unqualified audit opinions.  But, emphasis is to be placed on improvements that make information more useful to DoD managers.  The memo advises DoD Components to adjust current plans to focus on Statements of Budgetary Resources and then on mission critical assets. 

CBO projects increased resources needed to meet DoD's budget plan:  The Congressional Budget Office (CBO) released it long-term assessment of DoD's FY2010 budget plan in testimony before the House Budget Committee.  According to CBO estimates, executing the FY2010 DoD baseline budget will require six percent more funding than requested.  CBO cites continuing growth in pay and benefits, greater than exp[ected increases in O&M funding, cost growth in weapons systems, and investments in new capabilities as major cost drivers.

Other Issues of Interest

Patrick Fitzgerald named to head DCAA:  DoD announced this week that Patrick Fitzgerald will replace April Stephenson as director of the Defense Contract Audit Agency (DCAA).  Ms. Stephenson has been directort since February, 2008.  Mr. Fitzgerald is currently the Army Auditor General and head of the DCAA Oversight Committee.  DCAA has recently been buffeted by congressional criticism of its lack of effectiveness in controlling fraud and waste in DoD contracting.  The agency has also been the subject of recent General Accountability Office (GAO) reports charging it with failure to follow auditing standards, inadequate auditor independence, and lack of sufficient planning and supervision of DoD auditors.

Bob Speer is acting Assistant Secretary of the Army (FM&C):  Robert M. Speer is the Acting Assistant Secretary of the Army (Financial Management and Comptroller) until the President nominates someone for the Post.  Earlier this month, he was designated the Principal Deputy Assistant Secretary of the Army (FM&C).  Bob comes back to the Army after spending four years with Pricewaterhouse/Coopers Public Services where he worked in the area of audit support and enterprise risk management.  Prior to that, he had a distinguished Army military career and served in many areas of financial management and operations for the Army and the Defense Finance and Accounting Service (DFAS).

DEFENSE FINANCIAL HIGHLIGHTS

DoD on the Hill

Appropriations bills make little progress:  The President signed the FY 2010 Agriculture Appropriations bill this week, making it only the second appropriations bill signed so far (the Legislative Branch bill--including the Continuing Resolution (CR)--was signed in early October).  In the only other action of note, the final Homeland Security Appropriations bill passed the Senate and, along with the Energy and Water bill, awaits the President's signature.  House Majority Leader Steny Hoyer (D-MD) criticized the Senate for not passing five appropriations bills still on their docket.  There are three bills in conference that could be completed and be ready for the President next week (DoD, Interior & Water, and Transportation).  But even if this should happen, Congress will have to pass an extension of the current CR, which expires on October 31.  It is being reported on the Hill that the House is now working up a bill to extend the current CR until December 15.  there is also a possibility that Congress will not be able to finish all appropriations bills before Congress adjourns for the year.  If that happens, they will have to package the remaining bills in an Omnibus FY 2010 Appropriations bill.  Students of legislative history will remember the President signed an FY 2009 Omnibus appropriation bill in March of this year that contained 9 appropriations bills (all but DoD, Homeland Security, and Transportation, which were passed together on September 30, 2008). To follow the action on the FY 2010 appropriations bills, go to the Library of Congress' Thomas website.

FY2010 DoD Appropriations conference could end soon:  House and Senate conferees are winding down their work on the Fy 2010 DoD Appropriations bill.  They could be ready to pass and send the conferenced bill to the President next week.  House Appropriations Defense Subcommittee chair Jack Murtha (D-PA) stated in an interview this week that there are just a few items remaining to be resolved, including funding for the new presidential helicopter (which had drawn a presidential veto threat).  Action could slow down if, as reported, some members push to include unpassed appropriations bills in one Omnibus bill attached to the DoD bill, which is considered politically a must-pass bill.  However, there is no widespread support for such a move at this time so the bill is likely to go forward. 

FY2010 Defense Authorization bill sent to the President:  After voting to cut off debate, the Senate yesterday approved the final FY2010 Defense Authorization bill and sent it to the President for signature.  The President had earlier threatened to veto the bill if it contained funding for the F-35 alternative engine program.  The final bill contains this funding, but Senate leaders believe the White House will approve the bill notwithstanding.  The final bill contains a 3.4 percent military pay raise, repeals the National Security Personnel System (NSPS), and provides authority for federal retirees under the Federal Employment Retirement System (FERS) to receive credit for unused sick leave when calculating retirement payments.  It also funds more than requested F/A-18-E/F and C-17 aircraft and ends F-22 buys.  To read a summary of the FY2010 Defense Authorization conference report, go to the Senate Armed Services Committee website.

Other Items of Interest

Public-Private pay gap widens in 2009:  CovExec,com reported this week the Federal Salary Council announced that the difference between the average pay for federal and private-sector employees increased from 25.17 percent in 2008 to 26.42 percent in 2009.  However, the Council made no further recommendation on the 2010 federal pay increase, citing the lack of final congressional action on the raise.  Analysts expect the raise to be between 2 percent proposed by the President and approved in the House-passed Financial Services Appropriations bill and the 2.9 percent raise included in the Senate Appropriations committee version of the bill.  The FY2010 Defense Authorization bill includes a 3.4 percent military pay raise.

President nominates Gladys Commons to be Navy FM:  In case you missed it, President Obama has nominated Ms. Gladys J. Commons to be Assistant Secretary of the Navy (Financial Management and Comptroller).  The Senate Armed Services Committee held her confirmation hearing yesterday.  Most recently, Ms. Commons served as Comptroller of the Military Sealift Command.  Many ASMC members will remember that she was the Principal Deputy Assistant Secretary of the Navy (Financial Management and Comptroller) for eight years ans was Acting Assistant Secretary for a short time.

DEFENSE FINANCIAL HIGHLIGHTS

DoD on the Hill

Appropriations bills move forward, slowly:  After showing a flash of activity last week, congressional action to complete FY 2010 Appropriations bills slowed a bit this week.  Only two bills moved forward:  1) the final FY2010 Energy and Water bill passed the Senate and joined the Agriculture bill in the queue for the President's signature; and 2) the Homeland Security bill finished conference, was passed in the House, and now awaits Senate final action.  In a press interview, Sen. Inouye (D-HI), chair of the Senate Appropriations Committee, again stressed his desire to move appropriations bill along before floor action begins on the Health Reform bill later this month.  He has set his sights on the DoD, Transportation, and Interior & Environment bills.  To follow the action on the FY 2010 appropriations bills, go to the Library of Congress "Thomas" web site.

FY 2010 DoD Appropriations bill conference continues:  House ans Senate conferees continued work on the Fy 2010 DoD Appropriations bill this week, but no agreement was reached.  In a letter to the conferees, Secretary Gates again stated that he would recommend that the President veto a bill that provides funding for a new presidential helicopter and the F-35 alternative engine program.  Appropriators appear to be more supportive of the F-35 second engine program than funding for the new helicopter.  They may be helped by the authorizers in their efforts to save the engine funding.  The FY 2010 Defense Authorization conferenced bill also contains funding for the engine program.

FY 2010 Defense Authorization bill not yet ready for the President:  Last week it appeared that the FY 2010 Defense Authorization bill was going to the President for signature very soon.  The House had passed the bill and the Senate seemed ready to act.  However, a week has gone by and the Senate still has not brought the bill to the floor.  It may be that the Senate is waiting for the Appropriations conference to finish before they act.

Other Issues of Interest

No COLA adjustment for federal retirees and Social Security recipients in 2010:  A number of press sources reported this week that there will be no cost of living increase for federal retirees and Social Security recipients next year.  In 2009, federal retirees under CSRS received a 5.8 percent increase in their annuity checks and FERS retirees got a 4.8 percent increase.  The 2009 Social Security increase  was 5.8 percent.  To partially offset the lack of increase for those on Social Security, the President has announced his support for a one-time payment of $250.  This payment could come from already enacted stimulus funding.

DEFENSE FINANCIAL HIGHLIGHTS

DoD on the Hill

Senate moves to complete appropriations bills:  To date, Congress has completed and the President signed only one FY 2010 appropriations bill--the Legislative Branch bill, which includes a Continuing Resolution funding the rest of the rest of the government through October 31.  But, now the pace of congressional activity is increasing as it hopes to move appropriations bills before attention turns to Health Care Reform on both the House and Senate floors.  The Senate wants to complete the five bills they have not passed so conferees can finish as many bills as they can before the CR ends.  The Agriculture and the Energy & Water bills are on the verge of going to the President.  Four other bills are in conference (DoD, Homeland Security, Interior & Environment, and Transportation) and could be ready for the President's signature in a week.  And, the Commerce, Justice, & Science bill will soon be ready to go to conference.  o track the status of the FY 2010 appropriations bills, go to the Library of Congress' "Thomas" web site.

 FY 2010 DoD Appropriations conference begins:  The Senate passed the FY 2010 DoD Appropriations bill this week and began meeting with the House to iron out differences between the bills.  Among the issues conferees must resolve are funding for a new presidential helicopter and for the alternative engine for the F-35.  President Obama has issued veto threats (albiet not too strong as veto threats go) if the final bill includes funding for these two programs.  Many observers in the press indicate that the White House has recently eased back on its threat.  You can review the House-passed bill and the Senate-passed bill for further details.

FY 2010 Defense Authorization bill ready for the president:  House and Senate conferees finished work on the FY 2010 Defense Authorization bill this week.  The House passed the bill and the Senate will soon follow.  The final bill could go to the President next week.  Conferees provided a 3.4 percent pay raise for military personnel, up from the 2.9 percent requested by the President.  While the bill does approve many program terminations and adjustments the President requested, it does authorize buying more F/A-18E/F and C-17 aircraft than requested.  And in a challenge to a presidential veto threat, conferees agreed to provide funding for the F-35 alternative engine program. Of interest to DoD financial managers, the bill sets a goal for the achievement of a DoD auditable financial statement by September 30, 2017.  To review a summary of the FY 2010 Defense Authorization conference report, go to the Senate Armed Services Committee web site.

Defense Budget and Financial Management News

 OMB issues guidance on performance management:  OMB Director Peter Orszag sent a memorandum to agencies this week announcing a set of program evaluation initiatives as part of the FY 2011 budget process.  The initiatives include: 1) greater transparency in making evaluation information and results available online; 2) an interagency working group on performance management to develop government-wide guideline for performance evaluation; and 3) a voluntary program for agencies to request additional funding to support high-priority evaluation activities.  Initial efforts of these activities will focus on social, educational, and economic program.  Other programs, such as national defense, will not be included in the initial scope.

Other Issues of Interest

Congress repeals NSPS:  The final FY 2010 Defense Authorization bill ready for the President's signature repeals the National Defense Personnel System (NSPS) and requires DoD to transfer NSPS employees to existing personnel systems.  The bill also allows DoD to propose flexibilities in hiring, assigning, and rating personnel, but requires congressional approval.  Earlier this year, the Defense Business Board issued a report that recommended the reconstruction of NSPS.  Secretary Gates has directed a thorough review of the report and had asked the Defense Authorization Committee to give DoD time to complete the review before acting.

FERS employer to receive retirement credit for unused sick leave:   In a surprise move, conferees included a provision in the FY 2010 Defense Authorization bill (see above) that provides credit for unused sick leave to retiring federal workers covered under the Federal Employment Retirement System.  Earlier reports had indicated that the provision would not be in the final bill.  Heavy pressure from employees unions and congressional supporters seemed to have turned the tide.  The benefit, which will be phased in over four years, allows FERS employees to apply unused sick leave when they calculate their length of service to determine retirement pay.  Workers covered under the Civil Service Retirement System (CSRS) already have this benefit.

ADM Mullen to continue as Chairman of the JCS:  In case you missed it, last month the Senate confirmed ADM Mike Mullen for a second two-year term as Chairman of the Joint Chiefs.  ADM Mullen is the 17th Chairman and was sworn in for his first term on October 1, 2007.  As Chairman, ADM Mullen is the senior ranking member of the Armed Forces and is the principal military advisor to the President.  For more information on the functions of the Chairman, go to the JCS web site. 

DEFENSE FINANCIAL HIGHLIGHTS

DoD on the Hill

President signs FY 2010 Continuing Resolution to keep government running:  The President signed yesterday a Continuing Resolution to keep federal agencies operating through October 31, 2009, or until they receive enacted FY 2010 appropriations.  The CR is included in the FY 2010 Legislative Appropriations bill, the only (of 12) FY 2010 appropriations bill to be enacted before the beginning of the new fiscal year.  The CR essentially funds agencies at the FY 2009 appropriated level, allows no new program starts, and prohibits production increases above the FY 2009 level.  You can find the complete text of the CR on the Library of Congress' "Thomas" web site under the FY 2010 Legislative Branch Appropriations bill.

Senate still debating FY 2010 Defense Appropriations bill:  The Senate continued debating the FY 2010 DoD Appropriations bill this week, but couldn't finish before the end of the fiscal year.  This means that DoD will be funded under a CR until the following events occur:  1) the Senate passes the bill; 2) it is reconciled with the House bill in conference; 3) the House and Senate pass the conferenced bill; and 4) the President signs the bill.  But, if the final bill includes funding for the F-22 and the F-35 (Joint Strike Fighter) alternative engine program, the President could veto the bill, as he has threatened to do.  This would further delay completion.  There are also other impediments to quick congressional action.  October is supposed to be Health Care Reform month in Congress.  This will certainly capture the attention  of members and the press, especially if a bill moves toward floor action in either body.  Also, now that the fiscal year has begun and there is a month-long CR, the pressure is off for quick action on appropriations.  Congress generally responds to pressure points and in their absence, takes as much time as it has to act.  So, it appears the drama could continue for a few weeks before we can expect to get FY 2010 appropriations.  Watch this space!

FY 2010 Military Construction funding not yet on Senate floor:  The House passed the FY 2010 Military Construction/Veterans Affairs appropriations bill on July 10.  The Senate Appropriations Committee reported out a bill on July 7, but has yet to take it to the Senate floor.  For now, funding for construction programs, base closure, and family housing is included in the CR.  A push will certainly be made to complete action before the CR ends.  However, there is a further complication to funding new military construction programs:  They have to be authorized in the Defense Authorization bill, which is slowly moving to final action.  Don't look for a final military construction appropriations bill until much later in October.  To review the summaries, reports, and text of both bills go to the "Thomas" web site. 

FY 2010 Defense Authorization conference nearing completion:  House and Senate conferees are moving to complete action on the FY 2010 Defense Authorization bill.  However, neither the House nor Senate have scheduled floor time to consider the conferenced bill.  One stumbling block to completing action appears to be funding for the F-35 alternative engine program.  The President has threatened to veto the bill if it includes this funding.

Defense Budget and Financial Management News

GAO recommends DCAA improve management oversight and audit quality:  The General Accountability Office (GAO) has charged that the Defense Contract Audit Agency (DCAA) has audit problems at numerous offices, including inadequate auditor independence, insufficient testing of audits, and lax planning and supervision of auditors.  The GAO released these findings in a report on its assessment of the DCAA's management environment and audit quality assurance.  In order to address these problems, GAO suggested at a congressional hearing that the agency be granted more independence by making it report directly to the Deputy Secretary of Defense.  Currently, DCAA reports to the DoD Comptroller.  DoD strongly objects to the proposed change, arguing such a change might actually undercut the agency's independence by making it more susceptible to political decisions.  To review this report, go to the GAO web site.

Other Issues of Interest

FERS Retirement Credit for unused sick leave stalls:  The House version of the FY 2010 Defense Authorization bill includes the authority to provide payment for uused sick leave to retiring federal workers covered under the Federal Employees Retirement System (FERS).  Currently, only workers in the Civil Service Retirement System (CSRS) can apply unused sick leave when they calculate their length of service to determine retirement pay.  But now, after bouncing around Congress since it was introduced in late 2007, the proposal appears to have reached another roadblock.  The Senate did not include it in its version of the Defense Authorization bill, and reports from the Hill indicate that conferees may not include it in the final conferenced bill.  We have reported on congressional progress on this benefit for the last three years.  It appears that we may still be following its progress in 2010.

Most in NSPS will get same pay raise as GS workers:  Secretary Gates has announced that employees covered under the National Security Personnel System (NSPS) will receive an across-the-board pay raise equal to that received by GS employees.   NSPS employees who earn a rating above "unacceptable" will get 100% of the GS raise.  The size of that raise will probably fall between 2% and 2.9% as reported in last week's Highlights.  For information on the proposed pay raise and other NSPS recommendations and reports, go to the NSPS website.