1. Financial Management of Security Cooperation Cases Overview
Lesson #0410
5 January 2017

2. Funds Management

3. USG SC/SA Financial Management Responsibilities

4. Defense Security Cooperation Agency (DSCA) Implementing Agencies (IAs)
Department of Defense (DoD) SC Case Financial Management Responsibilities
DoD Comptroller
Financial Management Regulation (FMR)
Defense Security Cooperation Agency (DSCA)
Portfolio and Finance Directors / Managers
Implementing Agencies (IAs)
Country, Program, Case, and Finance Managers
Defense Finance Accounting Service (DFAS) Security Cooperation Accounting (SCA)
Country Manager and Accountant
Security Cooperation Organizations (SCOs)

5. Foreign Purchaser
Budget funds as required
Timely payment of bills
Communicate/coordinate with USG their requirements for any unique / special Financial Plans or waivers
Participate in Case Reviews
Financial Discrepancy Reporting

6. Industry (i.e. Procurement)
Coordinate with USG on development of P&A and LOA price estimates
Negotiate and sign contracts for procurement of LOA materials and/or services
Coordinate with USG IAs, contracting officers and auditors on delivery of LOA materials and/or services
Timely and accurate billing of contracted provided materials and/or services

7. LOA (with Initial Deposit/Payment Schedule)
Flow of Case Funds
LOA (with Initial Deposit/Payment Schedule)
Purchaser
Implementing
Agency (IA) 7

8. How Much and How Soon Will the USG Collect on the LOA?
LOA initial deposit and payment schedules are based on CALCULATED amounts of costs that the USG expects to incur in case execution
Calculations factor in LOA Term(s) of Sale, line’s Period of Performance, costs, etc.

9. LOA Initial Deposit and Payment Schedules
Goods & Services from Stock
Goods & Services from Procurement
Progress Payments
Termination Liability & Contractor Holdback
Admin Surcharge (amount dependent upon case, funding, etc.)
Other Authorized Surcharges (e.g. PC&H, Transportation, CAS, etc.)
IA is responsible for providing accurate
data, reviewing, AND updating
LOA Payment Schedule if required
SAMM C9.9, C , GB pp to 12-13

10. How Much and How Soon Will the USG Collect on the LOA?
LOA initial deposit and payment schedules are based on CALCULATED amounts of costs that the USG expects to incur in case execution
The time period for those cost calculations are done per the AECA, FMR, and SAMM requirements
Calculations factor in LOA Term(s) of Sale, line’s Period of Performance, costs, etc.

11. Time Period for LOAs Initial Deposit and Payment Schedules
Offer Expiration Date (OED)
Earliest Quarterly Payment Schedule Date
For Period
Covering
11 Sep – 10 Dec Mar Apr-Jun
11 Dec – 10 Mar Jun Jul-Sep
11 Mar – 10 Jun Sep Oct-Dec
11 Jun – 10 Sep Dec Jan-Mar
What’s the OED for case YCY?
31 October 2014
LOA Initial Deposit Period Depends upon the LOA OED
FMR VOL 15 CH , SAMM C9.T12, Green Book p

12. BN-D-YCY LOA Initial Deposit Period
O N D J F M A M J J A S O
What is the YCY Initial Deposit period coverage?
31 October 2014 through 31 March 2015
Initial Deposit must cover the outlays and/or deliveries anticipated until the first quarterly payment is received
SAMM C
Green Book pp through 12-13
BN-D-YCY pp. 11 and 15

13. How Much and How Soon Will the USG Collect on the LOA?
LOA initial deposit and payment schedules are based on CALCULATED amounts of costs that the USG expects to incur in case execution
The time period for those cost calculations are done per the AECA, FMR, and SAMM requirements
LOA Term of Sale is an extremely important factor in those calculations
Calculations factor in LOA Term(s) of Sale, line’s Period of Performance, costs, etc.

14. Terms of Sale Important financial entry on every LOA
All eight (8) terms defined in references
“Cash Prior to Delivery” and “Dependable Undertaking” are most common
Some countries have “Cash with Acceptance”
SAMM C9.8, C9.T11
Green Book pp and 12-11

15. LOA Payment Schedules
Budget/forecast information
IA is responsible for providing accurate data, reviewing, AND updating if required
Basis for forecast in DD form 645
One payment schedule per LOA (if required)
See example on Bandaria case BN-D-YCY) pages #15 through #16

16. LOA (with Initial Deposit/Payment Schedule)
Flow of Case Funds
LOA (with Initial Deposit/Payment Schedule)
Trust
Fund
(DFAS - SCA) $
Purchaser $
Implementing
Agency (IA) $
FMF / BPC $
(DSCA controls) 16

17. Country’s (e.g. Bandaria) funds USG funds (i.e. grants or loans)
Sources of Case Funds
Country’s (e.g. Bandaria) funds
USG funds (i.e. grants or loans)
USG Security Cooperation funds (e.g. Building Partner Capacity (BPC) funds for ‘pseudo’ cases)
Will discuss more in BPC lesson
Foreign Military Financing Program (FMFP)
“FMS Credit (Non Repayable)” is the most common
For all FMF loans (“FMS Credit”), the IAs must use a stand-alone LOA for the implementation and utilization of funds
SAMM C9.7, DSCA Policy Memo 16-17, Green Book p. 12-6

18. Foreign Military Financing (FMF)
Annual appropriation – USG responsibilities from ‘cradle-to-grave’
USG $$....not a ‘blank check’ for Bandaria
Coordinate LORs requesting use of FMF
Must have funds within approved scope
Constraints (unless approved exceptions)
Transportation on U.S. flag vessels and aircraft
Defense Articles and Services That Should Not be purchased with FMF (SAMM C9.T10)
FMS only except for potentially 10 countries
SAMM C9.T10, C9.7.3, Green Book pp through 12-10

19. BPC Programs and Authorities
Program execution (e.g. logistic and financial) constraints vary depending upon the program
Refer to SAMM C15.T2 for each applicable program

20. Example of BPC Programs and Authorities
Yikes!
Afghanistan Security Forces Fund (ASFF)

21. Financial Time Limits for BPC “J8”
DSCA directed
closure date
New Obligations
FY15 ASFF “J8” program
is a two-year appropriation per the law
Refer to SAMM C15.T2 for each applicable program
Obligation Adjustments
Disbursements
1 Oct 2014
30 Sep 2016
31 July 2021
30 Sep 2021
Funds expire for
new obligations
Funds Cancel for
Expenditures
DSCA Policy Memo “Execution and Closure guidance for Pseudo cases and DSCA Financial Management Class are great tools to assist!

22. $ Flow of Case Funds $ $ $ $ $ Trust Fund
LOA (with Initial Deposit/Payment Schedule)
Trust
Fund
(DFAS - SCA) $
Purchaser $
Implementing
Agency (IA) $ $
FMF / BPC $
(DSCA controls) $
Interest Bearing Accounts at FRB NY - SAMM C9.11.2
Commercial Banking Account – SAMM C9.11.3 $ 22

23. FMS Trust Fund
U.S. Treasury account at the Federal Reserve Bank of New York for FMS & BPC case funds
No interest is earned by depositors
DSCA “manages” the funds
DFAS SCA is the “accountant”
All funds identified and accounted for (e.g. country / program, case, line)
SCIP provides partial visibility on case and country funds in the FMS Trust Fund for each of the FMS and BPC cases
SAMM C9.3.9, C9.11.1, Green Book pp and 12-5

24. Flow of Security Cooperation Case Funds
LOA (with Initial Deposit/Payment Schedule)
Delivery
Transactions
Trust
Fund
(DFAS - SCA) $
Purchaser $
Implementing
Agency (IA)
Financial
Authority
FMF / BPC $
(DSCA controls) $ $ $
USG reimbursements
Contractor direct cite payments $
Interest Bearing Accounts at FRB NY - SAMM C9.11.2
Commercial Banking Account – SAMM C9.11.3 $ 24

25. Notional View of FMS Trust Fund and Delivery Transactions Reporting
FY Program (U5)
Trust Fund Account
Zastavia (ZS)
FMS Trust Fund
(DFAS SCA)
Bandaria (BN)
BN-P-LHL
BN-B-URK
BN-D-TAD
Cash Holding
Account
ACC Suspense
Delivery
Transactions
DSCA ‘manages’ funds at a country/ program level but DFAS SCA ‘accounts’ for those funds at the case/line level
Credit
Holding Account
IAs to DFAS SCA within 30 days of occurrence
FMR VOL 15 SEC , Green Book pp through 12-31

26. Bandaria Case BN-B-URK Outflows from FMS Trust Fund Example
Cost
= Clearing
Accounts D N A B R
Delivery
Transaction
Outflows to Cost Clearing Accounts determined by Delivery Source Codes (DSCs) reported by IAs to DFAS SCA I A
BN-B-URK
IA/Treasury
Reimbursements
Contract
Administration
Services (CAS)
Contract
Payments
Administrative
Charge
Transportation
FMR VOL , Green Book pp through 12-31, and through 12-50

27. Security Cooperation Pricing

28. Security Cooperation (SC) Pricing Key Concepts
Systematic and not arbitrary
DoD pricing procedures IAW AECA, FMR Volume 15 CH 7 Pricing, and SAMM C9.5 (FMS Charges)
Correlation to provided materials and services
Transparent
RECOVER COSTS (unless waived or granted)
Same pricing methodology per FMR and SAMM for LOA development and execution
LOA prices are an estimate subject to future adjustment per LOA Terms & Conditions

29. Direct and Indirect Charges (‘Above and Below the LINE’)
(‘Above the LINE’)
“THE
LINE”
Indirect Charges
(‘Below the LINE’)
Net Estimated Cost equals the total of all the LOA Line values
Direct Charges: Included in the materiel and/or services cost
Indirect (i.e. accessorial) Charges: Not included within a line item value and usually computed as a percentage of costs
SAMM C9.3.6, BN-D-YCY p. 15

30. Security Cooperation (SC) Price Formula
AUTHORIZED
CHARGES
(to recover applicable USG Total Costs unless waived per SAMM C9.6) SC
PRICE
BASE
PRICE
(calculations based on multiple factors)
LOA
BILLING STATEMENT
DD-645
FMR Volume 15 Chapter 7 SAMM C9.5, Green Book through 12-28

31. SC Base Price Calculation Factors
Funding Source (FMF, BPC, WCF, etc.)?
Materiel:
Procurement (for what country)?
Stock?
Excess Defense Article (EDA)?
Non-excess inventory item? To be replaced?
Services: Contractor (country?) or Military?
Training by DoD?
Key Points: Pricing is complex with lots of factors. Refer pricing questions to your DoD Case financial POCs and/or come back for the DISCS CF course!
FMR VOL 15 CH 7, SAMM C9.5, Green Book pp through 12-21

32. Security Cooperation (SC) Price Formula
AUTHORIZED
CHARGES
(to recover applicable USG Total Costs unless waived per SAMM C9.6) SC
PRICE
BASE
PRICE
(calculations based on multiple factors)
Operating Costs
Contract Admin. Services
Packing, Crating, Handling
Transportation
Administrative Costs
Investment Costs
Nonrecurring Cost
“THE LINE”
FMR Volume 15 Chapter 7; SAMM C9.5
Green Book through 12-28

33. Administrative Charge
Percentage (changed periodically) charged per LOA line and delivery transaction
Provides the financial ‘foundation’ for the USG to conduct SC responsibilities including funding for (not all inclusive)
USG SC functions (e.g. DSCA, ISCS, SCOs, etc.)
Information technology initiatives (e.g. SCIP, etc.)
USG Security Cooperation “Standard Level of Service”
FMR Vol. 15, 0706, SAMM C9.T4, SAMM C9.T2, Green Book pp through 12-27

34. Standard Level of Service (SLS)
SLS activities are case-related activities covered by the Administrative Surcharge.
Develop and Write
Implement
Manage
Execute
and close a case
SLS activities/functions listed in SAMM Table C9.T2 under the “FMS Admin” column represent indirect charges funded by the Administrative Surcharge
Sometimes, these activities are ‘Above’ Standard Level of Service
SAMM C
Green Book 12-26

35. Case-Related Manpower Functions and Funding Source Matrix Example
Row
Activity
Admin
Case
Non-Standard
Frequency 21
Actions necessary to go from LOR receipt to LOR complete if necessary. X
If multiple iterations of LOR responses are required due to changes in the Partner's request, any additional costs will be case funded. 63
Prepare customer unique tech orders. 71
Pull and/or prepare reports needed to monitor case execution status and keep purchaser informed.
(Note: Does not include reports and data available from Security Cooperation Information Portal (SCIP) since the purchaser can pull this data.)
This is day-to-day activity, not the annual case review.
Any tailored reports requested in the LOR. Providing reports from SCIP.
Generating customer requested tailored reports more than once per year.
Locate Case Activity(s) to determine if it should be paid by Admin or case line in SAMM C9.T2

36. Performance / Delivery Reporting and Billing

37. $ Flow of Case Funds $ $ $ $ $ $ Trust Fund
LOA (with Initial Deposit/Payment Schedule)
Trust
Fund
(DFAS - SCA) $
DD645
Quarterly Bill
Delivery
Transactions
Purchaser
Implementing
Agency (IA) $
Financial
Authority $ $ $
USG reimbursements
Contractor direct cite payments
FMF / BPC $
(DSCA controls) $
Interest Bearing Accounts at FRB NY SAMM C9.11.2
Commercial Banking Accounts SAMM C9.11.3 $ 37

38. Security Cooperation Billing Key Points
By law, USG must normally collect in advance
Purchasers are billed quarterly (DD-645)
DD-645 quarterly bill summarizes activity accomplished plus forecast period
Applicable DD-645 attachments – will discuss
DD-645 data inputs includes Implementing Agencies (IAs) delivery transaction reports
Some countries have Special Billing Arrangements (SBAs)
FMR VOL 15 Ch. 8, SAMM C6.1.2, C9.8 and C9.10, Green Book pp through 12-39

39. FMS Billing Statements and Reports
DD Form 645
FMS Delivery Listing
FMS Financial Forecast
Holding account statements
ACC suspense account
FMS Reply Listing to Customer Requests for Adjustments (i.e. Supply Discrepancy Reports - SDRs)
DISCS “Security Cooperation Billing Handbook” (i.e. Red Book) is a textbook to assist in understanding and interpreting all the billing reports and codes.
FMR VOL 15 Chapter 8, SAMM C9.10, Green Book pp through 12-39

40. Billing Timeline Completed Work Period / Quarter
Projected Mailing Date
Payment Due to DFAS SCA
Planned Future Work Period / Quarter
01 OCT - 31 DEC
15 January
15 March
01 APR - 30 JUN
01 JAN - 31 MAR
15 April
15 June
01 JUL - 30 SEP
15 July
15 September
15 October
15 December
Work Done in Just Completed Quarter
FMR VOL 15 Chapter 8, SAMM C9.T16, Green Book pp and 12-34

41. Special Billing Arrangements (SBAs)
Unique billing arrangement(s) between FMS Purchaser Country and DoD (DSCA and DFAS SCA)
Compensate (e.g. county/multiple case programs) for individual case(s) payment schedule variances
Based on average cash requirements and required on-hand reserves
Minimizes excess cash deposits
Coordinate SBAs with DSCA Country Director and Finance Directors/Managers
SAMM C9.10.2, Green Book p

42. Bandaria SBA Example
If a country has Special Billing Arrangements – SBA(s), they pay at Country/Program level vice the individual case DD-645 Column #14, BUT individual Case LOA Payment Schedules still need to be reviewed and updated as required!

43. Security Cooperation Financial References
U.S. Law:
Arms Export Control Act (AECA)
Foreign Assistance Act (FAA)
DoD (Comptroller) Regulation:
Financial Management Regulation (FMR) , Vol. 15
DoD (DSCA) Financial Policies: SAMM Chapter 9
Textbooks – Help understand all of the above
ISCS ‘Green’ book CH 12 (Financial Management)
ISCS ‘Red’ book (Billing)
FMS Admin Surcharge Account Handbook for the SCO
DoS PM “GRANT MILITARY ASSISTANCE GUIDE”

44. Lesson Summary
Financial POCs with different responsibilities at each of the DoD organizations managing the cases
Online references (FMR, SAMM, ISCS pubs, etc.)
USG required to recover TOTAL COST
Review and keep LOA payment schedules accurate
Timely and accurate delivery transaction reports
Case financials managed at Country/program Level but accounted for at a case and line level
USG provides quarterly billing statements to customer

45. Financial Management of Security Cooperation Cases Overview
Lesson #0410
5 January 2017