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    Are PSI's typically funding with CLS dollars or should they be generally seen as AA&S contracts and funded with PMA dollars?


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    The question you posed is which types of funds are PSI's are typically using either CLS or PMA dollars?  The telephone conversation you and I had discussing the issue revealed that there are differing opinions of which fund to use.  Both PMA and CLS are O&M funding which as seen below from the FMR Volume 2A Chapter 1 defines the expense characteristic of O&M funding.
     
    2BDoD 7000.14-R Financial Management Regulation Volume 2A, Chapter 1 *October 2008
     
    C. Policy for Expense and Investment Costs
    1. DoD policy requires cost definition criteria that can be used in determining the content of the programs and activities that comprise the Defense budget. The primary reasons for these distinctions are to allow for more informed resource allocation decisions and to establish criteria for determining which costs are appropriate to the various defense appropriations.
     
    2. The cost definition criteria contained in this policy are only applicable to the determination of the appropriation to be used for budgeting and execution. Cost definitions for accounting purposes are contained in Volume 1.
     
    3. Costs budgeted in the Operation and Maintenance (O&M) and Military Personnel appropriations are considered expenses. Costs budgeted in the Procurement and Military Construction appropriations are considered investments. Costs budgeted in the Research, Development, Test and Evaluation (RDT&E), Base Realignment and Closure (BRAC), and Family Housing appropriations include both expenses and investments. Definitions for costs within the Defense Working Capital Funds are provided in Chapter 9 and in Section 010214.
     
    4. Items procured from the Defense Working Capital Funds will be treated as expenses in all cases except when intended for use in weapon system outfitting, government furnished material (GFM) on new procurement contracts, or for installation as part of a weapon system modification, major reactivation, or major service life extension.
     
    D. Procedures for Determining Expenses Versus Investments. The following criteria will be used to distinguish those types of costs to be classified as expenses from those to be classified as investments for budgeting purposes:
    1. Expenses. Expenses are costs of resources consumed in operating and maintaining the Department of Defense. When costs generally considered as expenses are included in the production or construction of an investment item, they shall be classified as investment costs. Military personnel costs are an exception to this rule. The following guidelines shall be used to determine expense costs:
    a. Labor of civilian, military, or contractor personnel.
    b. Rental charges for equipment and facilities.
    c. Food, clothing, and fuel.
    d. Supplies and materials designated for supply management of the Defense Working Capital Funds.
    e. Maintenance, repair, overhaul, rework of equipment.
    f. Assemblies, spares and repair parts, and other items of equipment that are not designated for centralized item management and asset control and which have a system unit cost less than the currently approved dollar threshold of $250,000 for expense and investment determinations. This criterion is applied on the basis of the unit cost of a complete system rather than on individual items of equipment or components that, when aggregated, become a system. The
    concept of a system must be considered in evaluating the procurement of an individual end item. A system is comprised of a number of components that are part of and function within the context of a whole to satisfy a documented
    requirement. In this case, system unit cost applies to the aggregate cost of all components being acquired as a new system.
    g. Cost of incidental material and items that are not known until the end item is being modified are conditional requirements and are considered expenses because the material is needed to sustain or repair the end item.
    h. Engineering efforts to determine what a modification will ultimately be or to determine how to satisfy a deficiency are expenses.
    i. Facilities sustainment, O&M-funded restoration and modernization projects. Planning and design costs are excludedfrom the cost determination for purposes of determining compliance with the amounts established in 10 U.S.C. 2805 for minor construction projects; however, design costs are not excluded from capitalization.
     
    I conducted some research on the SAF/FM website but was unable to locate any additional guidance for this topic.  You have already contacted your Comptroller for a decision on which type of O&M funds so I would wait for the Comptroller's decision.  Another possible avenue would be to contact legal for an opinion on which fund to use. 
     

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