DEFENSE SECURITY COOPERATION AGENCY
MEMORANDUM FOR :
DEPUTY UNDER SECRETARY OF THE AIR FORCE FOR INTERNATIONAL AFFAIRS
Execution and Closure Guidance for Pseudo Letters of Offer and Acceptance (Pseudo Cases) Financed with U.S. Appropriated Funds that have a Limited Period of Availability, DSCA Policy 11-06
The attached guidance provides clarification of execution and closure procedures for pseudo cases funded with U.S. appropriated funds that have a limited period of availability. Once funds expire for new obligation, specific attention must be provided to ensure all financial transactions are liquidated and cases closed before funds cancel.
None of the procedures in this'guidance are new; most can be found in DoD 7000.14-R, Department of Defense Financial Management Regulation. The procedures are simply presented in one document for ease of use in application to pseudo Letters of Offer and Acceptance/cases.
Should you have any questions concerning this guidance or require further clarification, please contact my action officer, Michele Kennedy, firstname.lastname@example.org, 703-604-6578. For specific case information, please contact Matt Rothamel, email@example.com, 703-602-1321.
Execution and Closure Guidance for
Issued by DSCA-DBO
Table of Contents
Execution and Closure Guidance for
This document consolidates and clarifies the application of existing financial and fiscal guidance to pseudo cases funded with United States Government (USG) appropriations that have a limited period of availability. The Department of Defense Financial Management Regulation (DoD FMR), DoD 7000.14-R, contains explicit guidance concerning expiring and canceling funds. A listing of volumes and chapters addressing this policy are at Attachment A. Refer also to the Federal Acquisition Regulation (FAR) and Defense Federal Acquisition Regulation (DFAR). Specific references within this guidance are also highlighted at Attachment A.
Foreign Military Sales (FMS) Trust Fund budget authority is classified as permanent, indefinite, no-year authority. Budget authority associated with FMS cases is treated as non-expiring money. Many of the pseudo cases implemented via the FMS Trust Fund, however, are financed with expiring appropriations and these funds are required to be obligated in the FMS Trust Fund prior to the appropriation expiring, and expended prior to the appropriation canceling. This guidance does not address pseudo cases that implement requirements and funding transferred to DSCA under authority of section 632(b) of the Foreign Assistance Act of 1961, as amended. DSCA Programs (PGM) normally controls processes associated with such transfers.
All financial and acquisition documents include a fund cite that reflects the appropriation and year of expiration. The appropriation fund cite financing pseudo cases reflects an expiration date; however, once the funds are transferred into the FMS Trust Fund, the FMS Trust Fund fund cite is used on financial documents. Therefore, do not rely on the fund cite associated with the case to determine whether funds should be treated as expiring/canceling. The first indicator that a case is not a traditional FMS case is that within the line of accounting, the FMS country code is depicted by an alpha-numeric designator versus an alpha-alpha designator. This unique country code is assigned for each specific authority (see Attachment B). [Note: Some NATO organizations' FMS country codes also have alpha-numeric designators. Refer to the SAMM, Table C4.T2. for a complete listing of FMS country codes.]
When the pseudo cases are financed with funds that are required to be treated as expiring/ canceling, the funds in the FMS Trust Fund must be obligated within the period of appropriation availability, expended within five years after the appropriation expires for new obligations, and any unexpended funding returned to the U.S. Treasury or the original funds holder before the end of the fifth year after funds expire for obligation. Accordingly, pseudo cases and contracts associated with those cases must be final closed prior to returning the unexpended funds. Guidance unique to a specific program may be provided under separate cover.
The following graphic depicts the typical timeline for an annual (1-year) authorization/ appropriation. Many pseudo cases are funded with annual (1-year) appropriations, such as the section 1206 program funded with Defense-wide Operation and Maintenance (O&M). The Afghanistan Security Forces Fund (ASFF) and Iraqi Security Forces Fund (ISFF) have either a 1-year or 2-year period of availability, depending on the authorization. The Pakistan Counterinsurgency Fund (PCF) has a two-year period of availability and the Pakistan Counterinsurgency Capability Fund (PCCF), when merged with PCF, has a three-year period of availability. Care must be taken to understand the nature of the appropriation underlying a pseudo case. [Attachment B further reflects the year of authorization/appropriation, when the funds expire, and when the funds cancel.]
In the example below, the appropriation is for one year beginning 1 Oct 2005 (FY 06), expiring 30 Sep 2006, and canceling 30 Sep 2011. Barring any specific legislative language, the appropriation cancels five years after the funds expire for obligation.
To ensure a pseudo case is closed in sufficient time to allow funds to be returned to the U.S. Treasury by 30 September of the year of cancellation, all open funding lines against such documents should be closed by 31 July of the year of cancellation. This would mean that the Contracting Officer's Representative (COR), or government representative, will ensure that vendors have submitted all invoices and they have been paid in full. In addition, the pseudo cases must be reconciled and final closed.
To ensure this guidance is interpreted consistently, the following definitions from the DoD FMR Glossary are provided for reference:
Pseudo cases should contain a standard note, "Funds Expiration, Purpose, and Availability," that defines the source of the appropriation and the period of availability.
There are several actions that may assist the Implementing Agency and the case manager in assuring the case closure timeline is met:
Managing expiring funds associated with pseudo cases implemented in the FMS Trust Fund is a challenge. Realizing the inherent limitations of managing expiring funds in the FMS system and following these guidelines can improve program execution. With adequate planning and timely execution, participants can work together to overcome potential obstacles.
By 15 June of each year, DSCA Business Operations, Country Financial Management Division (DBO/CFM) will provide the Implementing Agencies with a listing of specific case designators for cases that have expired funds subject to cancelation that must be closed prior to the end of the subsequent fiscal year (year 5 after funds expire). The Implementing Agencies will be reminded that obligations must be liquidated to ensure case closure by 31 July of the canceling fiscal year and that funding will not be available for any billings/expenditures after 30 September of that year due to cancelation of the funds. [Note: By 15 November of each year, DSCA DBO/CFM will provide a listing of all cases for which funds have expired for new obligation, but have not yet canceled. This will be an update of the 15 June listing plus any other open cases - i.e., if 2011 is the canceling year, the listing would also include cases that cancel in 2012, 2013, 2014, 2015, and 2016.]
The case is then a candidate for closure when (1) all ordered items have been physically delivered, (2) all ordered services performed (i.e., supply/services complete), and (3) the period of funds availability for new obligation has expired, in addition to all other conditions of the pseudo case having been fulfilled.
DFAS Indianapolis shall review the closure certificate and perform actions to close the pseudo LOA document in the Defense Integrated Finance System (DIFS). If DFAS Indianapolis has questions on the closure certificate, they shall contact the Implementing Agency listed on the certificate. Implementing Agencies shall check the DIFS closure inventory on an as needed basis to determine which pseudo cases have been closed. DFAS Indianapolis should close pseudo cases containing no inhibitors within 30 days of closure certificate and "C1" closure transaction receipt.
The format at Attachment C is to be used to provide periodic updates on the status of canceling fund pseudo cases during the year of funds cancelation. With this update, the Implementing Agency should also provide any cases with known inhibitors that will not allow case closure. This form shall be provided to DSCA DBO/CFM as indicated below, or as otherwise directed:
By 30 June of the fiscal year preceding funds cancelation, the Implementing Agencies shall provide contact information to the DSCA DBO/CFM expiring funds focal point as to who will serve as the single point of contact/facilitator within the Implementing Agency. This contact shall establish periodic teleconferences with stakeholders and with DSCA DBO/CFM to review all canceling pseudo cases and, most importantly, any case at risk of not closing by 31 July. Further, this individual shall prepare the "due outs" and manage follow-up action(s) for their Implementing Agency. The established telecons will afford the opportunity to understand the details of any pseudo case issue(s) and avoid possible misinterpretation/misstatement as they are staffed through the chain of command and at DSCA. The Implementing Agency contact shall be proactive and lead the stakeholders within their respective Implementing Agency to timely pseudo case closure.
Before an appropriation cancels, the Implementing Agency must identify, to DSCA, valid unliquidated obligations subject to closure to determine whether appropriations are available for future adjustments or payments against such obligations. Also the Implementing Agency must confirm whether adequate resources are available to pay for obligations that will cancel within an account (DoD FMR, Volume 3, Chapter 10, 100201.D.) If funds are required for pseudo cases where funds have expired/canceled, DSCA must be contacted for approval. Refer to DSCA Policy 10-08, dated January 29, 2010, subject: "DoD Appropriated Funds Prior Year Activity."
Per the DoD FMR, Volume 3, Chapter 10, 100201.F, when a currently available appropriation is used to pay an obligation, which otherwise would have been properly chargeable (both as to purpose and amount) to a canceled appropriation, the total of all such payments from that current appropriation may not exceed the lesser of:
None of the procedures documented herein are new. Attention paid early and throughout the life of a pseudo case to ensure deliveries, final billings, and reconciliation of all financial records occur in sufficient time to close the case in the year of funds cancellation, if not before, will maximize the ability to accomplish the mission, fully fund requirements, and minimize the risk of unexpended funds. For a ready reference, a notional timeline of actions is provided at Attachment D.
Department of Defense (DoD) Financial Management Regulation (FMR) References:
Federal Acquisition Regulation (FAR) References:
Defense Federal Acquisition Regulation (DFAR) References:
Part I: Department of Defense Appropriations and Related Authorities
Part II: Department of State Related Authorities
* Refer to the SAMM, Policy Memo listing, for additional pseudo country codes
AUTHORIZATION THROUGH EXPIRING YEAR
POST FUNDS EXPIRATION THROUGH YEAR OF CANCELATION
POST YEAR OF CANCELATION
* See guidance for notes concerning on/about dates