CHAPTER 2 FINANCIAL MANAGEMENT OF RESOURCES

Each year the Navy must have billions of dollars to carry out its mission. This money comes from the taxpayers of the United States as determined by Congress.

The Navy must keep accounts to show how the money is spent. The accounts show the receipt and expenditure of public funds; the amount of government money, materials, and property on hand; and the cost of all operations, broken down by projects and programs. All these functions are part of financial management. Financial management is necessary to guarantee that government property and money are economically used in the public interest. Cost data assembled by projects and programs are used for budget planning and justification.

Although as an Aviation Storekeeper (AK), you are not an accountant or bookkeeper, you will often account for large amounts of public funds in the form of materials and stores. You are also involved in the preparation and processing of requisitions that constitute an expenditure of public funds. In addition, in keeping ship's operating target (OPTAR) records and submitting required reports, you are accounting for public funds.

Accounting for material and accounting for cash are basically the same. All government accounting is performed with the objective of guaranteeing that expenditures are made according to the desires expressed by Congress when the program was approved and the funds appropriated. According to this objective, records must be kept so that transactions can be examined at a later date and reconstruction of events made. Also within this objective, the disposition of funds and material must be provable. The logic of this recordkeeping is easy to understand if you have some knowledge of the overall financial operation of the government.

RESOURCE MANAGEMENT SYSTEM

The resource management system (RMS) is a series of systems designed to promote better management procedures throughout the Department of Defense (DOD) by providing managers with improved methods of obtaining and controlling resources required to accomplish the assigned missions.

A resource manager is any individual, either military or civilian, who is accountable and responsible for carrying out a significant mission or function and who makes decisions that will have a significant effect on the resources used.

As an AK you have daily contact with some

aspect of the RMS. An understanding of the background, objectives, and terms used will provide you with a clearer picture of the system. The following paragraphs contain some RMS definitions and information about the background and objectives applicable to all activities within the DOD.

DEFINITIONS

For a better understanding of the RMS, take a look at the following definitions of terms used throughout the AK community.

Accrual accounting is the method used where operating costs are accounted for in the fiscal (accounting) period during which the costs of resources consumed or applied are received.

Aviation Operating Forces include aviation squadrons, units, staffs, and ships supporting aircraft (for aviation funds only) assigned to the fleet accounting and disbursing centers (FAADCs) for accounting purposes.

Expense element codes are codes established by DOD to classify expenses for cost accounting and reporting purposes. They are listed and defined in the Navy Comptroller (NAVCOMPT) Manual, volume 2, chapter 4.

An expense limitation is the financial authority issued by a major claimant or subclaimant to an intermediate level of command, An example of an intermediate level command is the type commander (TYCOM), COMNAVAIRLANT or COMNAVAIRPAC.

A field (shore) activity, for purposes of the RMS, is a shore station that is issued an operating budget. It could be issued this operating budget by a major claimant; subclaimant, or expense limitation holder, depending on who has immediate responsibility. Because it is issued an operating budget, it is also a responsibility center.

A major claimant (or operating budget grantor) is a bureau, office, or command designated as an administering office under the Operations and Maintenance, Navy (O&MN) (regular and reserve) appropriations listed in the NAVCOMPT Manual, volume 2, chapter 2. Major claimants receive operating budgets directly from the Chief of Naval Operations (CNO).

Obligation authority is the budgeted amount within an operating budget approved in a fixed amount for incurring obligations or unfilled orders.

An operating budget is the annual budget and financial authority of an activity or command that contains the resources to perform that activity's mission.

An operating target (OPTAR) is an authorization of funds subject to administrative control issued to a level below the responsibility center. The recipient of an OPTAR is referred to as an OPTAR holder.

A responsibility center is an organizational unit headed by an officer or supervisor who is responsible for the management of all resources within the unit, and who, in most cases, can significantly influence the expense incurred within the unit.

Resources consist of military and civilian personnel; material on hand and on order; the entitlement to procure or use material, utilities, services required for performance of the basic mission of the responsibility center; and work or services to be performed for others.

Ship Operating Forces include active fleet ships, amphibious battalions and units, staff and commands, and certain designated shore activities,

Threshold is an administrative money ceiling established by the fleet commander. With Op-TAR accounting, aged unfilled orders below the established threshold are authorized to be administratively cAncelled, and OPTaR funds reclaimed. By the same token, unmatched expenditures below the established threshold are authorized by the FAADC to be threshold charged by the fleet to the OPTAR without detailed review by the OPTAR holder, thereby reducing available OPTAR funds.

An unfilled order, for accounting purposes, is a general term used to describe a request document for material or services that has been entered in the OPTAR log. Untilled order documents (chargeable) are assembled and forwarded to the FAADC by the OPTAR holder when the procedures require the chargeable unfilled orders to be matched against expenditures submitted by issuing and paying activities.

A work unit is a unit of measurement such as documents processed, tonnage moved, students trained, or gallons processed. The term is used to provide quantitative information of the physical output applicable to a subdivision in the operating budget.