Year end, write-offs and the Antideficiency Act

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1. Three controls on a running case

Once a case is running, the Financial Management Regulation applies three kinds of financial control to it. A year-end review pulls back authority that is not needed. Small imbalances can be written off rather than chased. And the Antideficiency Act (ADA), with a wider set of adverse financial conditions, covers the cases where spending runs ahead of authority. All three appear in Chapter 3 of Volume 15 (FMR Vol. 15, Ch. 3, para. 9.1, FMR Vol. 15, Ch. 3, para. 11.0 and FMR Vol. 15, Ch. 3, para. 12.0).

2. The year-end review

At the end of each fiscal year, implementing agencies should review the reimbursable obligational authority (OA) received to implement each case (FMR Vol. 15, Ch. 3, para. 9.1.1). The review is the basis for withdrawing unnecessary unobligated balances, through a year-end OA request.

In a non-expiring performing account, reimbursable OA may be kept at year end for three purposes only (FMR Vol. 15, Ch. 3, para. 9.1.2). It may cover certifiable obligations already incurred, or amounts committed in a formal commitment accounting system, or items already delivered from inventory and services already performed. Anything else is withdrawn by September 30. The regulation accepts that reviews happen before the last day of the year, so the amount kept may run somewhat above the goal. It still expects estimating to improve until unnecessary balances are eliminated.

Expiring accounts are held to a tighter test (FMR Vol. 15, Ch. 3, para. 9.1.3). By the close of the year they may show reimbursable OA only for earned reimbursements or certifiable obligations. During the year, amounts needed in expired accounts for within-scope contract changes are transferred from the trust fund as required.

3. Paying the performing accounts back

When items leave inventory or Defense Department services are performed, the account concerned is reimbursed within 30 calendar days of the shipment or performance (FMR Vol. 15, Ch. 3, para. 9.2.1). The rule covers items sold under section 21 of the Arms Export Control Act (AECA). It also covers procurements under section 22 where direct cite financing is not used.

Which year’s account is credited depends on the transaction (FMR Vol. 15, Ch. 3, para. 9.2.2). For services, it is the account current when the work is performed. For sales from inventory, it is the account current when the items drop from inventory (FMR Vol. 15, Ch. 3, para. 9.2.2.1). Receipts from items that will not be replaced go to the Special Defense Acquisition Fund (FMR Vol. 15, Ch. 3, para. 9.2.2.2). For procurements financed through an appropriation, it is the account current when the order is accepted (FMR Vol. 15, Ch. 3, para. 9.2.2.3).

4. Writing off small imbalances

An implementing agency that finds unresolved reconciliation issues on a case may write off the imbalances under write-off guidelines (FMR Vol. 15, Ch. 3, para. 11.0). The vouchers it prepares cite the administrative surcharge account and go to the Defense Finance and Accounting Service (DFAS).

Problem disbursements are unmatched disbursements, negative unliquidated obligations and in-transit disbursements. Up to $2,500 per transaction they are handled under the Department’s general problem disbursement policy (FMR Vol. 15, Ch. 3, para. 11.1). Larger ones should be brought to the Comptroller of the Defense Security Cooperation Agency (DSCA), if they are still within that policy’s processing timelines.

For other financial transactions, up to $200 may be charged to the administrative surcharge account to allow prompt reconciliation (FMR Vol. 15, Ch. 3, para. 11.2). Where such write-offs are used while readying a case for closure, the closure certificate must say so in its remarks. DFAS also sends DSCA a quarterly summary of those certificates. The closure process is described in how a case is reconciled and closed.

5. The trust fund counts as appropriated money

Foreign money in the trust fund is still subject to the Antideficiency Act. For ADA purposes, funds count as appropriated if they are made available for collection and spending under specific statutory authority, whatever their source (FMR Vol. 15, Ch. 3, para. 12.1.1). "In applying the ADA, the FMS Trust Fund is considered to be, and will be, treated as appropriated funds" (FMR Vol. 15, Ch. 3, para. 12.1.1).

The regulation lists four ways a potential violation can occur (FMR Vol. 15, Ch. 3, para. 12.1.2). One is issuing OA or awarding a contract without a signed Letter of Offer and Acceptance (LOA). Another is obligating or spending case funds for an unauthorized purpose, and a third is violating apportionments or indemnity clauses. The fourth is incurring obligations on a Building Partner Capacity case after the financing appropriation’s period of availability for new obligations has expired. Because of the complexity of the Arms Export Control Act’s provisions, the regulation calls it important to consult legal counsel and comptroller officials on potential violations (FMR Vol. 15, Ch. 3, para. 12.1.3).

6. Adverse financial conditions

Some out-of-balance records are reportable without being violations (FMR Vol. 15, Ch. 3, para. 12.2.1). These adverse financial conditions arise when OA exceeds case or line values, or when commitments or obligations exceed OA. They also arise when disbursements exceed obligations, or when expenditure authority is not requested before a disbursement. They are reported in the same format as ADA violations.

DFAS sends components a monthly analysis showing where disbursements exceed expenditure authority at case level, or where authority was requested but left unused and not returned (FMR Vol. 15, Ch. 3, para. 12.2.2.1). Components have 15 calendar days to explain each discrepancy, the corrective action and its timing. Two within-scope situations need no report if corrected within 60 calendar days (FMR Vol. 15, Ch. 3, para. 12.2.3). One is an obligation above the LOA’s total estimated cost that is followed by a modification to the purchaser. The other is an excess caused by duplicate or erroneous postings or by postings from inventory systems.

Key terms

Year-end OA request	The request used to withdraw reimbursable authority not needed at the end of a fiscal year.
Problem disbursement	An unmatched disbursement, negative unliquidated obligation or in-transit disbursement.
Write-off authority	Authority to clear small imbalances by charging the administrative surcharge account.
Antideficiency Act (ADA)	The statute on spending beyond authority, applied to the trust fund as appropriated funds.
Adverse financial condition	A reportable imbalance in case records that is not necessarily an ADA violation.

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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