ALCOAST 005/09 COMDTNOTE 7130 SUBJ: FY09 INTERIM FINANCIAL GUIDANCE FOR EXECUTION OF AFC-45 FUNDING A. FINANCIAL RESOURCE MANAGEMENT MANUAL (FRMM), COMDTINST M7100.3 (SERIES) 1. PURPOSE: THIS MESSAGE PROVIDES AN UPDATE ON THE COAST GUARD STATUTORY AUTHORITY FOR AFC-45 FUNDING SPECIFICALLY RELATED TO THE USE OF OPERATING EXPENSE (OE) AND ACQUISITION, CONSTRUCTION, AND IMPROVEMENT (AC AND I) FUNDS AS DISCUSSED IN REF A. 2. BACKGROUND: CHAPTER 5.M. OF REF A CURRENTLY STATES THAT GENERAL POLICY AND THRESHOLDS FOR OE VS. AC AND I USES WILL BE PROMULGATED VIA GENERAL MESSAGE. A COMPREHENSIVE REVIEW OF THE POLICY CONDUCTED IN FY08 DETERMINED THAT NO STATUTORY AUTHORITY EXISTED TO SUPPORT THE POLICY AS IT WAS WRITTEN. AS A RESULT, THE POLICY WAS TEMPORARILY REMOVED FROM REF A. AS A RULE, OE FUNDS, INCLUDING AFC- 45, ARE FOR OPERATIONS AND MAINTENANCE AND AC AND I FUNDS APPROPRIATED FOR VESSELS OR SMALL BOATS ARE AVAILABLE FOR ACQUISITION, REPAIR, CONSTRUCTION, AND IMPROVEMENT. CONGRESS HAS MADE AMOUNTS AVAILABLE FOR REPAIRS TO VESSELS OR SMALL BOATS IN THE OE AND AC AND I APPROPRIATIONS. ACCORDINGLY, THE COAST GUARD MUST DISTINGUISH BETWEEN REPAIRS THAT ARE RELATED TO OPERATIONS AND MAINTENANCE, AND REPAIRS THAT ARE RELATED TO RENOVATION AND IMPROVEMENT. 3. POLICY: EFFECTIVE IMMEDIATELY, ALL SECTIONS IN CHAPTER 5.M OF REF A PERTAINING TO OE VS. AC AND I USES ON VESSELS OR SMALL BOATS ARE CANCELLED. THE FOLLOWING POLICY CHANGES AND DEFINITIONS ARE IMPLEMENTED: A. MAINTENANCE: PER FEDERAL ACCOUNTING STANDARDS ADVISORY BOARD (FASAB) STANDARD NO. 6, MAINTENANCE IS DEFINED AS THE ACT OF KEEPING ASSETS IN USEABLE CONDITION. IT INCLUDES (UNIT AND DEPOT) PREVENTIVE MAINTENANCE, NORMAL REPAIRS, REPLACEMENT OF PARTS AND STRUCTURAL COMPONENTS, AND OTHER ACTIVITIES NEEDED TO PRESERVE THE ASSET SO THAT IT CONTINUES TO PROVIDE ACCEPTABLE SERVICES AND ACHIEVE ITS USEFUL LIFE. THIS DEFINITION IS ADOPTED TO DISTINGUISH BETWEEN NORMAL REPAIRS THAT ARE CLEARLY MAINTENANCE, AND THOSE MAJOR REPAIRS THAT IMPROVE OR EXTEND THE USEFUL LIFE OF A VESSEL. THIS IS A REASONABLE WAY TO CONSTRUE THE STATUTE. MAINTENANCE EXCLUDES ACTIVITIES AIMED AT EXPANDING THE CAPABILITY OR CAPACITY OF AN ASSET OR OTHERWISE UPGRADING IT TO SERVICE NEEDS DIFFERENT FROM, OR SIGNIFICANTLY GREATER THAN, THOSE ORIGINALLY INTENDED. ALL UNIT AND DEPOT LEVEL MAINTENANCE ON VESSELS OR SMALL BOATS WILL BE PERFORMED WITH OE FUNDS, USING AFC-30 AND AFC-45 RESPECTIVELY. B. MAJOR REPAIR AND RENOVATION: NORMAL REPAIRS ARE DEFINED AS THOSE REPAIRS REQUIRED TO RESTORE THE OPERATIONAL SOUNDNESS OF A VESSEL AND RETURN IT BACK TO SERVICE. NORMAL REPAIRS WILL BE PERFORMED WITH OE FUNDS. MAJOR REPAIRS THAT ARE INTENDED TO RENOVATE A VESSEL OR BOAT, OR CLASS OF VESSELS OR BOATS, AND RESULT IN AN EXTENSION OF USEFUL LIFE WILL BE FUNDED FROM THE AC AND I APPROPRIATION. MAJOR VESSEL MODERNIZATION PROGRAMS, SHIP CONVERSIONS, MAJOR REACTIVATIONS, MAJOR REMANUFACTURE PROGRAMS, AND MAJOR SERVICE LIFE EXTENSION PROGRAMS ARE EXAMPLES OF RENOVATION PROJECTS THAT INCLUDE REPAIR AND WILL BE FUNDED FROM AC AND I. C. MAJOR REPAIR AND IMPROVEMENTS: IMPROVEMENTS ARE DEFINED AS ANY ACTIVITY THAT SPECIFICALLY INCREASES THE CAPACITY OR CAPABILITIES, OR EXTENDS THE USEFUL LIFE, OF AN ASSET. IMPROVEMENTS MAY INCLUDE MAJOR REPAIRS AND WILL BE FUNDED FROM THE AC AND I APPROPRIATION. D. TECHNOLOGY REFRESHMENT: TECHNOLOGY REFRESHMENT IS THE INTENTIONAL INCREMENTAL INSERTION OF NEWER TECHNOLOGY TO IMPROVE RELIABILITY, MAINTAINABILITY AND/OR REDUCE MAINTENANCE COSTS. TECHNOLOGY REFRESHMENT CAN INVOLVE MINOR PERFORMANCE ENHANCEMENT OF THE ASSET BUT IS TYPICALLY DONE WITH THE INTENTION OF IMPROVING THE MAINTAINABILITY OF THE ASSET. ALL TECHNOLOGY REFRESHMENT ACTIONS ARE EXECUTED WITH OE FUNDS UNLESS PART OF A LARGER, OVERARCHING MAJOR REPAIR, RENOVATION, OR IMPROVEMENT PROJECT AS DEFINED IN PARAS 3.B. AND 3.C. (FUNDED BY AC AND I). E. REPLACEMENT OF SUBSYSTEMS AND COMPONENTS ON A VESSEL OR SMALL BOAT: (1) REPLACEMENTS IN KIND OF SUBSYSTEMS OR COMPONENTS ARE FUNDED FROM THE OE APPROPRIATION AS LONG AS THE ACTION FALLS UNDER MAINTENANCE AND/OR TECHNOLOGY REFRESHMENT DESCRIBED IN PARAS 3.A. AND 3.D. (2) REPLACEMENT OF SUBSYSTEMS AND COMPONENTS WITH NEWER, CURRENT TECHNOLOGY IS EXECUTED WITH OE FUNDS AS LONG AS THE INTENT OF THE PROJECT IS FOR MAINTAINABILITY OR TECHNOLOGY REFRESHMENT AND NOT SPECIFICALLY TO IMPROVE THE CAPABILITY AND CAPACITY OR EXTEND THE USEFUL LIFE OF THE PARENT ASSET (VESSEL OR SMALL BOAT). (3) REPLACEMENT OF SUBSYSTEMS OR COMPONENTS DUE TO COMPLETE OBSOLESCENCE OR BECAUSE THE MANUFACTURER DISCONTINUES PRODUCTION AND SUPPORT IS AN OE EXPENSE AS LONG AS THE NEW COMPONENTS DO NOT SPECIFICALLY IMPROVE THE CAPABILITY OR CAPACITY OR EXTEND THE USEFUL LIFE OF THE PARENT ASSET (VESSEL OR SMALL BOAT). F. SAFETY MODIFICATIONS: SAFETY MODIFICATIONS ARE MODIFICATIONS TO THE VESSEL OR SMALL BOAT THAT ALLOW THE VESSEL OR SMALL BOAT TO EXECUTE ITS DESIGNED MISSION IN A SAFE AND EFFICIENT FASHION. SAFETY MODIFICATIONS ARE TO BE EXECUTED WITH OE FUNDS UNLESS THEY IMPROVE THE CAPABILITY AND CAPACITY, OR EXTEND THE USEFUL LIFE OF THE PARENT ASSET (VESSEL OR SMALL BOAT). SAFETY MODIFICATIONS THAT ARE EXECUTED WITH OE FUNDS DO NOT AFFECT OR MODIFY THE STRUCTURE OF THE ASSET OR HAVE SIGNIFICANT IMPACTS TO THE CONFIGURATION OF OTHER COMPONENTS OF THE ASSET. 4. FUNDING DETERMINATIONS: ALL DECISIONS REGARDING OE AND AC AND I FUNDING DETERMINATIONS SHALL BE DOCUMENTED AND FILED WITH THE PROCUREMENT/PROJECT FILE. THE ADMIN RECORD SHALL CLEARLY DOCUMENT PROJECT SCOPE, PROJECT INTENT AND ENGINEERING RATIONALE FOR THE FUNDING DETERMINATION. ALL PROPOSED AND FUNDED NAVAL PROJECTS WILL INCLUDE THE ADMIN RECORD WITH THE FUNDING DETERMINATION ANALYSIS AS PART OF THE CURRENT, PROGRAMMATIC REVIEW PROCESS OF ALL NAVAL ENGINEERING PROJECTS. REVIEW OF INDIVIDUAL PROJECTS IN THE NAVAL ENGINEERING PROGRAM MUST INCLUDE THE KNOWN SCOPE OF ALL OTHER PROJECTS BEING PLANNED OR CONDUCTED. IN SOME CASES MULTIPLE, RELATED PROJECTS COULD CONSTITUTE A MAJOR REPAIR, RENOVATION OR IMPROVEMENT AS DEFINED IN PARAS 3.B. AND 3.C. THIS ANALYSIS AND CERTIFICATION MUST BE INCLUDED IN THE ADMINISTRATIVE RECORD. 5. IN THE EVENT THAT AN URGENT OPERATIONAL REQUIREMENT PROJECT, WHICH SHOULD BE PROPERLY FUNDED WITH AC AND I, IS DEEMED BY COMDT TO BE HIGHER IN PRIORITY THAN PROJECTS IN THE CURRENT FY AC AND I BUDGET, THE COMDT (CG-4), COMDT (CG-7), COMDT (CG-8) AND COMDT (CG- 9) STAFFS WILL EXPLORE ALL LAWFUL MEANS TO FUND THIS OPERATIONAL REQUIREMENT. THESE STRATEGIES MAY INCLUDE, BUT ARE NOT LIMITED TO: DEFERRING OTHER BUDGETED AC AND I VESSEL OR SMALL BOAT PROJECTS, REQUESTING AUTHORITY TO REPROGRAM FUNDS WITHIN THE AC AND I APPROPRIATION, OR REQUESTING AUTHORITY TO TRANSFER FUNDS FROM ANOTHER CG APPROPRIATION. 6. RDML K. A. TAYLOR, ASSISTANT COMMANDANT FOR RESOURCES AND CHIEF FINANCIAL OFFICER, SENDS. 7. INTERNET RELEASE AUTHORIZED.