How supporting activities are reimbursed

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1. Support ordered by the implementing agency

Defense Department components support Foreign Military Sales (FMS) cases when the implementing agency (IA) asks them to, under Chapter 8 of Volume 15 of the Financial Management Regulation (FMR) (FMR Vol. 15, Ch. 8, para. 8.1). The request must be a requisition or a formal order. It must state the dollar value of the support, the appropriation that will pay the resulting bills, the appropriation that will bill and record the reimbursement, and the IA’s address symbol. Under a formal order, the supporting component bills the IA on a Standard Form 1080, backed by delivery transactions. Payments to contractors may be made only under expenditure authority issued by the accounting office.

Here the accounting office is Security Cooperation Accounting, a directorate within the Defense Finance and Accounting Service (DFAS). The disbursing officer includes the delivery transactions in a consolidated submission to it, and passes on amounts due for inventory items or services once DFAS reimburses them (FMR Vol. 15, Ch. 8, para. 8.1). How delivery reporting fits into case execution is covered in delivery reporting on a case.

2. Requisitions that cite the trust fund

Requisitions from the IA whose fund and signal code shows direct citation of the FMS Trust Fund are processed for prompt delivery, within 30 days (FMR Vol. 15, Ch. 8, para. 8.2.1). Obligations are recorded once the funding authorization arrives and the requisition is released to the supply source. Disbursements are recorded against the case after the interfund bills are validated and accepted in the IA’s database. The IA reports the obligation, adjustments and disbursement to DFAS. Requisitions sent to non-Defense suppliers need approved expenditure authority.

Within the Defense Department, the interfund billing activity must obtain self-reimbursement authority for interfund requisitions. If stocked items are not available for prompt delivery and new procurement is needed, the supplying activity uses interdepartmental purchase request, direct cite procurement or commercial buying procedures (FMR Vol. 15, Ch. 8, para. 8.2.2). For non-Defense suppliers, the summary bill and detailed transactions go to the IA. The IA converts them into FMS delivery transactions and sends them to DFAS within five working days. DFAS uses them to prepare delivery reports to the purchasers and gives a copy to the implementing components for their supply records.

3. The Command Pay List

Every month, DFAS sends each reporting activity a Command Pay List. The list totals the deliveries or work in process charged to cases during the period, leaving out accounts payable (FMR Vol. 15, Ch. 8, para. 9.1.1). It includes the activity’s own delivery transactions, less payables and rejected items, plus charges computed by DFAS. Its last line, total reimbursable to this payee, should equal what the payee receives. Some computed charges are reimbursable to the activity and others are not (FMR Vol. 15, Ch. 8, para. 9.1.1.1). The administrative surcharge and contract administration charges are not reimbursable to it (FMR Vol. 15, Ch. 8, para. 9.1.1.4). Packing, crating and handling is reimbursable, except on working capital fund items.

Below-the-line transportation charges can be either (FMR Vol. 15, Ch. 8, para. 9.1.1.3.1). The reimbursable part does not apply to working capital fund items shipped on or after October 1, 1991, and the inland rate of 2.75 percent stopped applying to stock fund items from October 1, 1990. Transportation bill codes are used to bill purchasers when the actual method of transport differs from the one shown by the delivery term code, and returns of repaired material use code L (FMR Vol. 15, Ch. 8, para. 9.1.1.3.2).

4. Checking what was paid

A Detail Delivery Feedback List accompanies the pay list and shows each delivery transaction processed, with the add-on amounts DFAS computed (FMR Vol. 15, Ch. 8, para. 9.1.2). It has no summary totals and is used to compare deliveries reported with deliveries processed. Its columns show the amount paid to the activity, the total value reported, stock fund add-ons, contract administration add-ons, the transaction date and accessorial administrative costs.

The IA Performance Report Transaction Register has five parts (FMR Vol. 15, Ch. 8, para. 9.1.3). One lists delivery transactions DFAS could not process, with the reasons, and these should be corrected and resubmitted within 30 days (FMR Vol. 15, Ch. 8, para. 9.1.3.1). Another lists transactions processed with management alerts, to be checked for proper preparation. The rest show transactions DFAS computed for the IA (FMR Vol. 15, Ch. 8, para. 9.1.3.3), corrections DFAS made to IA reports (FMR Vol. 15, Ch. 8, para. 9.1.3.4), and deletions (FMR Vol. 15, Ch. 8, para. 9.1.3.5). DFAS keeps a control file of outstanding rejects and sends copies to the IAs (FMR Vol. 15, Ch. 8, para. 9.2).

5. Deliveries not yet paid

The Accounts Payable List shows reimbursable deliveries for which payment is not being made (FMR Vol. 15, Ch. 8, para. 9.1.4.1). There are three reasons. The country’s funds may be frozen, the country may not have enough cash available, or the case may provide for payment 60 days after delivery. The list totals all reimbursable transactions not yet paid to the reporting activity (FMR Vol. 15, Ch. 8, para. 9.1.4.2). A voucher backup listing shows the amount paid under the pay list, by country, IA and reporting activity (FMR Vol. 15, Ch. 8, para. 9.1.5).

Detailed payable records are kept only in installation-level systems, so they can only be aged there (FMR Vol. 15, Ch. 8, para. 9.1.6). Making sure vendors are paid promptly is the installation accounting activity’s job, and IAs should validate general ledger balances against payables reported to the Defense Integrated Financial System each month. Reporting activities reconcile reimbursable deliveries to amounts reimbursed, checking that the voucher backup equals the payment and the pay list, and contacting DFAS if they differ (FMR Vol. 15, Ch. 8, para. 9.3).

Key terms

Command Pay List	The monthly DFAS list of deliveries charged to cases and amounts reimbursable to the payee.
Delivery transaction	The record of an article or service delivered, which drives billing and reimbursement.
Transportation bill code	The code used to bill transport when the actual method differs from the delivery term code.
Transaction Register	The five-part report of processed, rejected, corrected and deleted delivery transactions.
Expenditure authority	DFAS authority required before contractors are paid from the trust fund.

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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