01/31/08 FMS Financial Management

01/31/08 MILSTRIP Requisition Payment Schedule Letter of Request Stock Pricing Data LOA Procurement Data Services Data Termination Liability Computation LOA Terms of Sale Obligation Authority Contract BANDARIA Billing Statement DD-645 LOAN Reimbursement & Reconciliation Documents $ Contract Payment Expenditure Authority Performance/ Delivery Report CARGO DFAS Training/ Services FMS Financial Management

01/31/08 FMS Financial Management Responsibilities  Under Secretary of Defense (Comptroller) [USD(C)] 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

01/31/08 FMS Financial Management Funds Management

01/31/08 All Implemented FMS Cases ( )

01/31/08 $ $ BANK 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

01/31/08 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

01/31/08 FMF $ $ Interest Bearing Accounts $ $ Commercial Banking Accounts Flow of Funds Implementing Agency Trust Fund $ Purchaser LOA (I.D./Payment Schedule)

01/31/08 Foreign Military Financing Basic Policies  Annual authorization/appropriation  Method of acquisition - FMS  Scope  U.S. materiel/services  Maritime transportation (U.S. flag vessels)  Exceptions to policy - DSCA review  Repayable FMF  In U.S. Dollars - loan repayment schedule  Arrearages - Brooke Amendment suspension (SAMM C9.T7)

01/31/08 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 R), Chapter 4, Section 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

01/31/08 Commercial Banking Account (CBA)  Used for FMS deposits in lieu of direct deposits into the Trust Fund /FRB IBA  DSCA Policy Memo # 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

01/31/08 Obligation Authority OA FMF $ $ Interest Bearing Accounts $ $ Commercial Banking Accounts Flow of Funds Implementing Agency Trust Fund $ Purchaser LOA (I.D./Payment Schedule)

01/31/08 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.

01/31/08 Delivery Transaction Reimbursable Direct Cite Flow of Funds Implementing Agency Trust Fund $ Purchaser FMF OA $ $ Interest Bearing Accounts LOA (I.D./Payment Schedule) $ $ Obligation Authority Commercial Banking Accounts Expenditure Authority /EA/$

01/31/08 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.

01/31/08 FMS Trust Fund Bandarian Case YCY Contract Administration Services (CAS) Transportation Contract Payments Administration GMK YCY KCG Hold. Acct. D N A B A R I A IA/Treasury Reimbursements Delivery Transaction D N A B A R I A Cost = Clearing Accounts PC&H

01/31/08 DD 645 (FMS Billing Statement) Delivery Transaction Reimbursable Direct Cite Flow of Funds Implementing Agency Trust Fund $ Purchaser FMF OA $ $ Interest Bearing Accounts LOA (I.D./Payment Schedule) $ $ Obligation Authority Commercial Banking Accounts Expenditure Authority /EA/$

01/31/08 Flow of FMS Funds DFAS-IN FMS Trust Fund DFAS-IN FMS Trust Fund Bandaria Trust Fund Account Case THM Case YCY Credit Holding Account Case SAB Case KCG Cash Holding Account Case GMK ACC Suspense Account MILDEP (IA) MILDEP (IA) Purchaser $$ $ $ FMF $ $ DD 645 Billing Statement Delivery Transaction LOA (Initial Deposit/Payment Schedule) OA/EA $$ IBA/CBA

01/31/08 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

01/31/08 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

01/31/08 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 applies

01/31/08 Payment Schedule Initial Deposit 15 Mar Jun Sep 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 Estimated Payment Schedule Payment Date:QuarterlyCumulative $2,613,552 $2,946,345 $3,345,693 $3,851,409 $4,456,131

01/31/08 Termination Liability & Contractor Holdback Progress Payments Goods & Services from Procurement during Initial Deposit period Goods & Services from Stock during Initial Deposit period 50% of Case Admin I.D. = $2,613,552 Initial Deposit BN-D-YCY

01/31/ IDM11J11S11D11M12J12 Total Payment by FMS Customer Estimated Disbursements to Contractor Termination Liability Reserve $ MILLIONS Termination Liability Example

01/31/08 Standby Letter of Credit (SBLC)  Used in lieu of Termination Liability  DSCA Policy Memo # applies  Guarantees payment in case of termination  DSCA responsible for approval/rejection  Customers with SBLCs:  Greece, Oman, Singapore, UAE

01/31/08 FMS Financial Management Funds Management