FMS Financial Management

1. FMS FinancialManagement

2. $ FMS Financial Management LOA Terms of Sale Termination Liability Computation Letter of Request LOA Payment Schedule Services Data Stock Pricing Data Contract MILSTRIP Requisition Procurement Data Obligation Authority Training/ Services Billing Statement DD-645 DFAS BANDARIA Contract Payment Expenditure Authority LOAN Reimbursement & Reconciliation Documents Performance/ Delivery Report CARGO

3. FMS Financial Management Responsibilities • Under Secretary of Defense (Comptroller) [USD(C)] • Director, Defense Finance and Accounting Service (DFAS) • DFAS, Security Cooperation Accounting, Indianapolis (DFAS-IN) • Director, Defense Security Cooperation Agency (DSCA) • Implementing agencies

4. FMS FinancialManagement Funds Management

5. All Implemented FMS Cases(5-29-12)

6. FMS Trust Fund An account in the U.S. Treasury DFAS-IN is the banker Identified to country and case No interest paid to purchaser $ $ BANK

7. Sources of Financing Cash Purchaser parliamentary/legislative appropriation Private credit (commercial institutions) Third country Foreign Military Financing Program (FMFP) Congressionally directed grants/loans Other Congressionally Appropriated Funds DoD Security Cooperation Programs

8. Flow of Funds LOA (I.D./Payment Schedule) Trust Fund $ Purchaser Implementing Agency $ $ $ FMF $ Interest Bearing Accounts Commercial Banking Accounts

9. Federal Reserve Bank (FRB) Interest Bearing Account (IBA) Used for FMS deposits in lieu of direct deposits into the Trust Fund DoD FMR, Volume 15 (DoD 7000.14-R), Chapter 4, Section 040102.D applies Requires 1 agreement between: FMS purchaser Purchaser’s Central Bank FRB New York DSCA DFAS withdraws funds monthly Normally 60 days of cash kept in FRB IBA Normally does not include FMFP FRB Board of Governors must approve

10. Commercial Banking Account (CBA) Used for FMS deposits in lieu of direct deposits into the Trust Fund /FRB IBA DSCA Policy Memo # 04-02 applies Requires 2 agreements: Between FMS purchaser and commercial bank Between FMS purchaser and DSCA DFAS withdraws funds monthly Normally 60 days of cash kept in CBA Does not apply to FMFP DSCA responsible for approval / rejection

11. Flow of Funds LOA (I.D./Payment Schedule) Trust Fund $ Purchaser Implementing Agency $ OA $ • Obligation Authority $ FMF $ Interest Bearing Accounts Commercial Banking Accounts

12. Obligation Authority (OA) Authority issued by DFAS to the IA to place legally binding orders and contracts that will require payment at some point in the future from a country's FMS trust fund account.

13. Flow of Funds LOA (I.D./Payment Schedule) Trust Fund $ Delivery Transaction Purchaser Implementing Agency $ OA /EA/$ $ • Obligation Authority $ FMF • Expenditure Authority $ • Reimbursable • Direct Cite Interest Bearing Accounts Commercial Banking Accounts

14. Expenditure Authority Authorization from DFAS to make expenditures from a foreign country's FMS trust fund against recorded obligations in an amount not to exceed the funds in the country's trust fund account.

15. FMS Trust FundBandarian Case YCY B B A A A I A I R N N R D A D A Cost = Clearing Accounts Delivery Transaction Hold. Contract Administration Services (CAS) GMK Acct. YCY KCG IA/Treasury Reimbursements Contract Payments Transportation Administration PC&H

16. Flow of Funds LOA (I.D./Payment Schedule) DD 645 (FMS Billing Statement) Trust Fund $ Delivery Transaction Purchaser Implementing Agency $ OA /EA/$ $ • Obligation Authority $ FMF • Expenditure Authority $ • Reimbursable • Direct Cite Interest Bearing Accounts Commercial Banking Accounts

17. Flow of FMS Funds LOA (Initial Deposit/Payment Schedule) DFAS-IN FMS Trust Fund DD 645 Billing Statement Delivery Transaction Case YCY Case THM MILDEP (IA) Purchaser Credit Holding Account Case GMK $ Cash Holding Account ACC Suspense Account $ Case SAB Case KCG OA/EA Bandaria Trust Fund Account $ $ FMF IBA/CBA

18. Terms of Sale LOA Page 1 • FMS Credit • FMS Credit (Non-Repayable) • EDA Grant • MAP Merger • Cash with acceptance • Payment on delivery • Cash prior to delivery • Dependable undertaking • LOA standard terms and conditions • SAMM Table C9.T8

19. Cash Prior to Delivery • Applies only to sales from DoD stocks • The USG expects the purchaser to pay as required or on demand • The U.S. collects in advance of any cost or expenditure on behalf of the purchaser • Therefore, total case value need not be collected with acceptance

20. Dependable Undertaking Applies to sales from procurement The USG "TRUSTS" the purchaser to pay as required or on demand The U.S. collects in advance of any cost/expenditure on behalf of the purchaser Deliveries, Progress Payments, Termination Liability, Contractor Holdback Therefore, total case value need not be collected with acceptance DSCA Policy Memo 09-07 applies

21. Payment Schedule Estimated Payment Schedule Payment Date: Quarterly Cumulative $2,613,552 $2,946,345 $3,345,693 $3,851,409 $4,456,131 Initial Deposit 15 Mar 2011 15 Jun 2011 15 Sep 2011 15 Dec 2011 $2,613,552 $332,793 $399,348 $505,716 $604,722 • Budget/forecast information • Basis for forecast in DD form 645 • One payment schedule per LOA

22. Initial DepositBN-D-YCY I.D. = $2,613,552 50% of Case Admin Goods & Services from Stock during Initial Deposit period Goods & Services from Procurement during Initial Deposit period Progress Payments Termination Liability & Contractor Holdback

23. Termination Liability Example 20 19 18 17 16 15 14 13 12 11 $ MILLIONS 10 9 8 7 6 5 4 3 2 1 0 ID M11 J11 S11 D11 M12 J12 Total Payment by FMS Customer Estimated Disbursements to Contractor Termination Liability Reserve

24. Standby Letter of Credit (SBLC) Used in lieu of Termination Liability DSCA Policy Memo # 01-22 applies Guarantees payment in case of termination DSCA responsible for approval/rejection Customers with SBLCs: Greece, Oman, Singapore, UAE

25. FMS FinancialManagement Funds Management