Defense Financial Highlights

President orders agencies to upgrade government payment card security

Tuesday, October 21st, 2014

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Federal agencies will soon be implementing greater security measures and new technology in their payment card programs to improve the data security of financial transactions.

Citing the significant economic consequences of recent data breaches (such as Target and Home Depot), President Obama issued an Executive Order directing “to transition payment processing terminals and credit, debit, and other payment cards to employ enhanced security features, including chip-and-PIN technology.”

Even though the government’s payment card program includes many safeguards against fraud and abuse, the president determined that “the Government must further strengthen the security of consumer data,” by upgrading its payment card program.

Agencies are to use the National Technology Transfer and Advancement Act of 1995 and Office of Management and Budget (OMB) Circular A-119 as guides to determine which security enhancement to use.

By January 1, 2015, new payment processing terminals will “include hardware necessary to support such enhanced security features,” according to the Order. By the same date, the Treasury Department will develop a plan for installing “enabling software that supports enhanced security features.”

Existing government credit, debit, and payment cards (used for official business) that do not have enhanced security features will have to be replaced. The General Services Administration (GSA) will begin replacing such cards provided through GSA contracts no later than January 1, 2015.

Other agencies with such card programs will also have to provide OMB (by January 1, 2015) with plans that will ensure that their cards have enhanced security features.

The Executive Order also addresses the security of federal online transactions. The president orders the National Security Council (NSC), the Office of Science and Technology, and OMB to develop a plan that ensures “that all agencies making personal data accessible to citizens through digital applications require the use of multiple factors of authentication and an effective identity proofing process,” within 90 days. These plans will have to be implemented within 18 months.

CBO estimates FY2014 budget deficit drops to $486 billion

Friday, October 10th, 2014

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The Congressional Budget Office (CBO) estimates that the final FY2014 federal budget deficit was 486 billion, $195 billion lower than FY2013.  The decline in the deficit resulted from higher government revenues (+$239 billion), while federal spending increased only $44 billion.

This is the lowest recorded annual budget deficit since FY2008 (-$458 billion) and is almost $100 billion lower than the Office of Management and Budget (OMB) projected in its Mid-Session Review in July.

When measured as a percent of Gross Domestic Product (GDP), the deficit dropped to 2.8 percent from 4.1 percent in FY2013.  This is below the average for the past 40 years and significantly lower than the 9.8 percent recorded in 2009.

According to CBO, revenue growth was led by a seven percent increase (+$114 billion) in individual income and payroll tax withholding due to higher wages and salaries and the expiration in the temporary 2 percent reduction in payroll taxes (for social security). Other nonwitholding individual income tax receipts (principally estimated tax payments) rose by $43 billion. Corporate incomes tax receipts increased by $48 billion mainly due to higher taxable profits.

Federal spending grew by only one percent (+$44 billion) in FY2014, according to CBO. Spending on federal discretionary and mandatory programs increased by only +$9 billion (0.3 percent) as increases for Social Security, Medicare, and Medicaid (totaling +$87 billion) were offset somewhat by declines in military spending (-$30 billion), unemployment insurance payments (-$24 billion), and other program outlays (-$24 billion). However, spending on interest on the debt rose by $12 billion and lower net payments to government sponsored enterprises (such as Fannie Mae and Freddie Mac, which are considered offsetting receipts) resulted in a $23 billion increase to outlays.

Data on government expenditures and receipts and the deficit are reported in the Monthly Statement of Receipts and Outlays of the United States Government (MTS) prepared by the Treasury Department. Treasury will report the official FY2014 budget deficit later this month.

Federal employee health insurance premiums set to rise 3.2 percent in 2015

Wednesday, October 8th, 2014

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Health Insurance premiums for employees covered under the Federal Employees Health Benefits (FEHB) Program will increase an overall average of 3.2 percent in 2015, the Office of Personnel Management (OPM) announced this week. The 2015 increase is lower than the 3.7 percent increase in 2014 and the 3.4 percent rise in 2013.

In releasing the new rates, OPM said that the 2015 increase “represents the fourth consecutive year that FEHB rate increases have been below 4 percent.”

The FEHB program covers 8.2 million people who can choose from among more than 250 health plans.  FEHB plans cover about 85 percent of all federal employees and 90 percent of federal retirees. According to OPM, FEHB is the largest employer-sponsored health benefits program in the U.S.

While premiums vary with each plan, enrollee’s average bi-weekly payments next year will increase by $2.93 for self-only and by $6.89 for family plans.  Premiums for specific plans are available on the OPM Website.

OPM also announced that the average 2015 premiums for the Federal Employees Dental and Vision Insurance Program (FEDVIP) will increase 1.7 percent for dental coverage and will rise by 1.5 percent for vision coverage.

The Open Season for health, dental and vision, and flexible spending accounts will start on November 10, 2014 and end on December 8, 2013.  Open season allows federal employees and retirees to make changes to their plans and eligible employees to enroll in the plan of their choice.

OMB gives agencies guidance for operating under FY2015 CR

Monday, October 6th, 2014

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The Office of Management and Budget (OMB) has issued guidance setting the rules under which federal agencies will operate during the FY2015 Continuing Resolution (CR) enacted (H.J. Res 124) late last month. The CR period runs from October 1 through December 11, 2014.

Under this guidance, OMB will apportion (distribute funds to agencies to be available for obligation) funds automatically to appropriations accounts during the CR period, unless language in the CR provides for specific levels of funding or special rules.

The amount provided in the FY2015 CR is the “rate for operations provided in the applicable appropriations acts for fiscal year (FY) 2014 and under the authority and conditions provided in such Acts,” according to the OMB memo.  The amount is net of any rescissions, plus or minus mandated transfers, and includes a 0.0554 percent reduction required in the CR (Section 101(b). However, funds designated for Overseas Contingency Operations/Global War on Terrorism and disaster relief are excluded from the 0.0554 percent cut.

OMB calculates the automatic apportionment rate by multiplying the annualized amount by the percentage of the year covered in the CR.  In this case the automatic apportionment rate is 19.73 percent to cover the 72-day CR period.

Not all accounts receive funding during the CR period.  Agencies cannot obligate funds for accounts for which no funding was included in an FY2015 appropriations bill that has been passed or reported out of committee in either the House or the Senate. If a program (PPA) within an account has not been funded (zero-funded) by the House or Senate, the account will receive an automatic apportionment and the agency can fund the program within the account total.

OMB notes that the CR provides limited authority (in Section 112) to mitigate civilian furloughs during the CR period   Apportionments for civilian personnel compensation and benefits can be apportioned at an “accelerated rate.”  However, OMB advises that agencies must receive written pre-approval to receive a higher rate, but expects few if any written apportionments using this authority.

The OMB memo addresses specific CR issues of interest in a “Frequently Asked Questions” format in Attachment A of the memo. 

Cost of U.S. military operations against ISIL is increasing

Tuesday, September 30th, 2014

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The cost of military operations in Iraq and Syria to combat the Islamic State of Iraq and the Levant (ISIL) is growing as Department of Defense (DoD) operations continue and expand.

The Pentagon announced a few weeks ago that the cost of the operations in Iraq were averaging $7.5 million dollars per day. Since then the air operations have been expanded to include strikes against ISIL forces in Syria and costs have increased. The U.S. and its partners have conducted 43 air strikes against ISIL forces in Syria, according to Hagel.

Last week, in a news conference Defense Secretary Hagel said the cost of DoD’s operations is now running between $7 and $10 million per day. A study prepared by the Center for Strategic and Budgetary Assessment (CSBA) estimated that DoD spent between $780 and $930 million through September 24.

Secretary Hagel stressed that the costs for these operations are being funded from the Overseas Contingency Operations (OCO) appropriations provided by Congress for FY2015.

Hagel also underscored that the U.S. is not acting alone in this effort. “A broad coalition has been and will continue to be a cornerstone of our strategy against ISI, he said.

But, he warned, the “diplomatic economic and military campaign will require a long-term commitment from the United States and all of our partners and allies.” “We are at the beginning, not the end of our effort to degrade and destroy ISIL” he cautioned. And, he said, the costs of ongoing operations will “require additional funding from Congress.” He said the administration is working with Congress to determine the source of this funding.

Some members of Congress have been calling for hearings to assess the cost as well as a debate on the goals and strategy underlying military operations against ISIL. However, the full Congress does not return until after the November elections so these hearings and congressional debate will probably not happen until mid-November.

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