401. Defence Service Program (DSP) Overview
1. Article 103 provides a macro picture of the Reference and Planning Levels expected from Government. This planning level is adjusted for Departmental revenues and flow-through transfers. Where warranted, anticipated funding adjustments for Treasury Board-approved specific activities or initiatives have been included. For planning purposes, Table 4-1 outlines anticipated supply, which is used to form the pillar of the planned allocations to Level One Managers for the three-year horizon.
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2001/2002 |
2002/2003 |
2003/2004 |
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*$(BY Millions) |
11,119 |
11,305 |
11,525 |
2. The allocation of defence resources is a reflection of the management framework adopted following the MCCRT process and formalized in the DMS manual. Each Level One Manager is provided an operating budget to generate, support or maintain the forces required for operations. In addition, some Level One Managers are tasked to manage one or more corporate accounts on behalf of the Department to deliver specific outcome(s). Using appropriate priorities to guide decision-making (refer to article 207), senior management balances the resources required to meet the approved strategic direction. This balance is achieved by allocating appropriate resources to the following accounts:
a. Operating Budgets: Includes the sum of personnel (civilian SWE & Reserve/Rangers), as well as operations and maintenance directly controlled by Level One Managers in the execution of their assigned tasks and goals;
b. Corporate Accounts: Includes such items as Military Training Assistance Program (MTAP), Research & Development (R&D), Departmental reserves and grants & contributions (G&C), Military Relocation Budget, NFTC;
c. National Procurement: Includes the acquisition of material and services required to sustain, but not significantly improve the performance, value or capability of equipment, services and systems;
d. Military Human Resources: Includes the Military Pay budget managed by ADM(HR - Mil). This budget is not adjusted for inflation, as any adjustments are funded separately by Treasury Board Secretariat;
e. Capital: This account includes the capital equipment, construction and minor requirement accounts to acquire or improve capital assets including capital funding provided to Level One Managers (non-strategic equipment, miscellaneous requirements and minor construction). Acquisition includes the design, development, construction or purchase of capital assets. Also included are capital leases or rental agreement. Improvements include any alterations or renovations that significantly increase the performance, value or capability of a capital asset or extend its useful or economic life by more than a year; and
f. Statutory: This includes the employer's contributions to pensions and other employee benefit plans.
3. The macro planned resource allocations (by pillar) for Fiscal Year 2001-02 for each Level One Manager as of 31 March 2000 are outlined in Table 4-2.
*Corp Svcs includes Departmental Reserves & Statutory Payments
4. DPG 2001 - Budget Highlights. Budget 2000 marked a significant milestone for Defence with the first significant defence spending increase in nearly a decade. Key changes to Defence Services Program are outlined below:
a. Capital Equipment. The strategic capital equipment budget will receive an immediate increase of $80M, and grow by over $300M in the last year of the planning period;
b. Capital Construction. The DPG 2000 $60M capital construction deferral will be returned over two fiscal years and the construction budget will grow to more than $200M by the end of the planning period;
c. Non-strategic Capital. The DPG 2000 non-strategic capital reduction of $25M has been returned. The $25M have been apportioned equally to CMS, CLS, CAS and the VCDS (for all other Level One Mangers);
d. Miscellaneous Requirements (MRs). A non-baseline $25M has been added to Level One Managers' operating budgets for FY 2001-02 to address critical shortfalls;
e. National Procurement(NP). The NP account will be increased by $100M annually over the planning period. New funding will be apportioned to Level One Managers in accordance with the NP priorities table in section 207; and
f. Operating Budgets. The DPG 2000 in-year reduction of 1.5% in FY 2001-02 and FY 2002-03 have been returned to all Level One Managers and $54M in new activities were funded as part of the DPG 2000 Business Planning Process.
5. Allocations were finalized at the 2 March 2000 DMC. Level One Comptrollers can obtain full details on the budget adjustments from ADM (Fin CS)/Director Budget.
402. RESOURCE MANAGEMENT FRAMEWORK
1. In January 1999 a new fiscal framework was approved by PMB. This framework reflects the reality that each year there are unexpended funds, attributable to project delays, account imbalances due to historical trends, overestimation, as well as a variety of external factors affecting revenue and timely expenditure. The unexpended funds are either re-allocated throughout the fiscal year or carried forward. This is not surplus capacity but rather represents the normal degree of expense deviation in a large enterprise. Consequently, the DM has authorized over-programming the Departmental budget based on the 2% Structural Unexpended Rate.
2. This approach to departmental over-programming requires the cooperation of all Level One Managers. The Department will perform quarterly reviews of the allocations in the "expenditure framework" to ensure it does not breach its final appropriation. Managers will identify uncommitted/surplus funds quarterly during the fiscal year. These reviews will be aligned with external reporting processes as warranted. PMB reviews will occur shortly after 30 June, 30 September for mid-year, mid-December and after the end of each month in the fourth quarter. At each review, senior management will be presented with recommendations to re-align the DSP in order to ensure the total expenditure framework will be within the final appropriation.
3. Investment Opportunities (IOs). In December 1999, in recognition of the severe pressures on the defence budget, DND received $350M of end-year funding from the Government. To optimize the use of any future year-end funding as generated internally or externally, an Investment Opportunity Working Group (IOWG) has been formed by VCDS/DFPPC to plan for any late-year surplus of funds. Such preparatory work will allow DND to better select the IOs to maximize the benefit to the Defence Services Program.
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