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    Is this an overstatement of the budget? Can an organization overstated their budget and use the excess for other purposes, even if it is related to the weapons system?


    Answer

    Background:  The use of Air Force 3010 "Aircraft Procurement" funds can be used for Production articles and for Initial Spares.  This appropriation has a three-year obligation period, and uses the "Full Funding" policy to buy useable end items.  In this case, Subscale Aerial Targets called BQM-167A's are being procured.  Since the contract option was exercised in January 2011, they correctly funded the contract option with FY09, FY10, and FY11 available procurement funding.  See Financial Mgt Regulation (FMR), DoD 7000.14-R, Volume 2B, Chapter 4 for more information at
    http://comptroller.defense.gov/Portals/45/documents/fmr/Volume_02b.pdf
     
    The budget is based on the Program's cost estimate, in then-year dollars, which takes into account inflation and outlay rates. The Firm Fixed Price contract is based on a negotiated amount with the contractor.  Any negotiated savings is available to use for additional quantities, per the terms of the contract.
     
    The justification for the procurement funds is found in the P-40, with additional details shown in P5- and P5A-exhibits.  The following findings were based on a review of the contract option modification and the procurement budget exhibits which you provided separately.
     
    Finding #1:  The P5 and P-5A Budget Exhibits show two different unit costs for the same item, Subscale Aerial Targets BQM-167A.  The unit costs should be the same.
    -- Exhibit P-5 , column for FY2011, shows a budget unit cost of $871,000, which is only 1.27% higher than the unit cost in the Contract Option price of $860,062.
    -- Exhibit P-5A, for January 2011 award, the unit price shown was $993,000, with a quantity of 41  (only 40 were purchased in the contract mod).  These were funded with FY09, FY10, and FY11 funds, therefore, you cannot reconcile the total funding amount back to the funding in the P-40 exhibit which is by fiscal year.
     
    Finding #2:  The contract option was exercised in January 2011.  Therefore, the unit cost on the Exhibit P-5A which matches this contract award date is $993,000, vice the $961,000 in your initial question.  Be sure to match the contract award dates with the correct column in the budget exhibit.
     
    Finding #3:  From the budget and contract documentation which you sent, we cannot determine which unit cost in the budget exhibits is correct. Therefore, reconciling the Budget Exhibit unit cost (either from the P-5 or the P-5A) to the Contracted unit cost is not possible.
      
    Finding #2:  The contract option was exercised in January 2011.  Therefore, the unit cost on the Exhibit P-5A which matches this contract award date is $993,000, vice the $961,000 in your initial question.  Be sure to match the contract award dates with the correct column in the budget exhibit.
     
    Finding #3:  From the budget and contract documentation which you sent, we cannot determine which unit cost in the budget exhibits is correct. Therefore, reconciling the Budget Exhibit unit cost (either from the P-5 or the P-5A) to the Contracted unit cost is not possible.
     
    Finding #4:  In regard to the statement that "the budget is given to them from the MAJCOM. They have no control over the amounts."  The budget is based on their cost estimates and budget requests sent forward from their office.  The MAJCOM would use this information to determine how much money to give them. So, I'm not sure why this statement was made.
     
    Recommend that you contact the Air Force Targets Program Office personnel. Their Financial Manager should be able to reconcile the numbers for you in more detail, and explain the differences in unit costs within the budget exhibits.  Additional questions to ask them would be:
     
    1) Which unit cost was their FY11 procurement appropriation based on?
    2) If they had unobligated FY09 and FY10 funds, why did they ask for the FY11 amount for a quantity of 41.  (They used $2.580M from FY09, and $3.44M from FY10 to pay for quantities in FY11).
    3) Is their procurement obligation rate meeting the established AF/DOD Comptroller goals?  A low obligation rate could be an indication of an overstatement of the budget request. 
     

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