How a case is accounted for

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1. The case as a job order

Each Foreign Military Sales (FMS) case is an accounting unit, much like a commercial job order, under Chapter 3 of Volume 15 of the Financial Management Regulation (FMR) (FMR Vol. 15, Ch. 3, para. 2.1.1). Its identifier combines the customer or international organization code, the implementing agency (IA) code and a three-position case designator assigned by the IA. Obligational authority (OA) to carry out a case is released by case identifier. Cash, by contrast, is managed at country level, to make sure enough is available for expenditures and to identify arrearages under a country’s dependable undertaking (FMR Vol. 15, Ch. 3, para. 2.1.2).

Case management means obtaining OA, releasing requisitions or procurement work orders, and reporting physical delivery (FMR Vol. 15, Ch. 3, para. 2.1.3). The first two run through the accounting system. Sound control requires the same source document to be used for reporting to both the financial and the logistical systems, including delivery reporting. How the trust fund itself keeps its accounts is covered in how the trust fund keeps its books.

The chapter’s accounting requirements serve several purposes (FMR Vol. 15, Ch. 3, para. 1.1). They assure Defense control and accountability of cases implemented in the FMS Trust Fund (FMR Vol. 15, Ch. 3, para. 1.1.1). They provide the information for financial statements, quarterly bills to purchasers and financial status reports to case managers and Defense Security Cooperation Agency (DSCA) staff (FMR Vol. 15, Ch. 3, para. 1.1.2). They also support timely reporting of financial management problems (FMR Vol. 15, Ch. 3, para. 1.1.4), and set internal controls for the payment requirements of the Arms Export Control Act (FMR Vol. 15, Ch. 3, para. 1.1.5).

2. Three sets of responsibilities

DSCA oversees and monitors use of the FMS Trust Fund, including periodic reviews of funding levels and unused balances (FMR Vol. 15, Ch. 3, para. 2.2.1). The Defense Finance and Accounting Service (DFAS) performs the accounting, billing, disbursing and collecting for the fund, keeps audit trails to source documents and produces financial statements (FMR Vol. 15, Ch. 3, para. 2.2.2). Among its duties, it maintains the fund’s budget execution records and tells DSCA when an arrearage occurs (FMR Vol. 15, Ch. 3, para. 2.2.2.2 and FMR Vol. 15, Ch. 3, para. 2.2.2.3). It also summarizes the case-line accounts, reconciles the summary cash accounts with the Treasury, and prepares monthly, quarterly and annual statements.

IAs fill trust fund orders in three ways (FMR Vol. 15, Ch. 3, para. 2.2.3.1). They issue and accept reimbursable orders into a financing appropriation or working capital fund account, issue allotments of trust fund OA to performing components, or authorize direct citation of the trust fund, account 11X8242. They make sure appropriation records reflect the reimbursable program (FMR Vol. 15, Ch. 3, para. 2.2.3.2), maintain audit trails (FMR Vol. 15, Ch. 3, para. 2.2.3.4), and keep the case-line accounts in coordination with DFAS (FMR Vol. 15, Ch. 3, para. 2.2.3.5). They also carry out the Dormant Account Review Quarterly of obligations and unfilled customer orders (FMR Vol. 15, Ch. 3, para. 2.2.3.3).

Components that receive an allotment of administrative budget authority from DSCA must stay within the allotment and meet the volume’s documentation rules (FMR Vol. 15, Ch. 3, para. 2.2.4). They return unobligated OA to DSCA at the end of each fiscal year and also perform the dormant account review.

3. Allotments for direct citation

Amounts coded (A) in the direct cite column of the OA request are allotments of case contract authority (FMR Vol. 15, Ch. 3, para. 5.1.1). Allotment holders must request expenditure authority from DFAS before disbursing against them, and DFAS releases it incrementally as the allottee needs to disburse. The component holding the allotment keeps detailed commitment, obligation and expenditure records by case and line (FMR Vol. 15, Ch. 3, para. 5.1.2). It sends DFAS a monthly status-of-allotment report, supported by delivery transactions equal to the month’s net change in accrued expenditures or contractor advances.

Monthly status-of-allotment information and reconciliation reports reach DFAS by the 20th calendar day after each accounting month ends (FMR Vol. 15, Ch. 3, para. 5.1.3). DFAS uses them, with supporting documents, to reconcile the trust fund with the Treasury. At year end, components submit a certified final consolidated OA request and status-of-allotment information for direct cite funds (FMR Vol. 15, Ch. 3, para. 5.3.1). The final OA request carries a certification that it reflects OA as Chapter 2 of the volume requires (FMR Vol. 15, Ch. 3, para. 5.3.2). The allotment report carries a signed certification that the amounts are correct and that all known transactions meeting the statutory recording criteria have been obligated (FMR Vol. 15, Ch. 3, para. 5.3.3).

4. Budget execution

The budget execution rules have three objectives (FMR Vol. 15, Ch. 3, para. 7.1.2). Mandatory reports reflecting the accounting records must reach the Treasury on time. Unneeded OA must be formally withdrawn from every participating organization at the end of each fiscal year. And IA case records must agree with DFAS at case-line level throughout the life of each case. DFAS provides trust fund accounting data to the components (FMR Vol. 15, Ch. 3, para. 7.2.1), and DSCA monitors the program and the required budget execution reports (FMR Vol. 15, Ch. 3, para. 7.2.2).

DFAS itself submits the budget execution reports on trust fund operations (FMR Vol. 15, Ch. 3, para. 8.1). They include a monthly Standard Form 133, Report on Budget Execution, for account 11X8242 (FMR Vol. 15, Ch. 3, para. 8.1.1). Information once sent to the Treasury on a Fiscal Service form now reaches it through the Treasury’s own reporting system (FMR Vol. 15, Ch. 3, para. 8.1.2). DFAS also supplies the relevant sections of the annual Chief Financial Officer financial statements (FMR Vol. 15, Ch. 3, para. 8.1.3).

IAs and supporting components run year-end reviews of the unobligated reimbursable program, so unneeded budget authority goes back to the trust fund (FMR Vol. 15, Ch. 3, para. 7.2.3.1). They make sure the reimbursable program appears properly in appropriation or working capital fund reports, and submit their own reports accurately and on time. They reconcile their case records to DFAS’s case-line transactions periodically (FMR Vol. 15, Ch. 3, para. 7.2.3.4) and work with DFAS to resolve variances (FMR Vol. 15, Ch. 3, para. 7.2.3.5). They prepare Case Closure Certificates as soon as possible after supply and services are complete, and within 24 months for countries in the accelerated closure procedures (FMR Vol. 15, Ch. 3, para. 7.2.3.6).

Key terms

Case identifier	The customer code, IA code and three-position designator that name a case.
Direct citation	Citing the FMS Trust Fund itself on contracts, rather than a Defense appropriation.
Allotment	A grant of case contract authority to a component, used with expenditure authority.
Status-of-allotment report	The monthly report of commitments, obligations and expenditures by case and line.
Dormant Account Review Quarterly	The quarterly review of obligations and unfilled orders.

Every statement above links to the document behind it. The full source list for this piece is on the sources page.

This page describes public United States government programs for general information. It is not legal, regulatory or procurement advice, and it does not address the facts of any particular case.

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