# Presentation: 909020

## Accounting and Finance Policy Update

**Mr. Robert McNamara**
- December 2008

- Office of the Under Secretary of Defense (Comptroller)

## Mission

Provide Accounting and Finance Policy and Publish in the DoD Financial Management Regulation

**Provide Accounting and Finance ****Policy and Publish in the ****DoD Financial Management Regulation**

## DoD Financial Management Regulation

**DoD Financial Management Regulation (FMR) 7000.14-R is at **_**http://www.defenselink.mil/comptroller/fmr/**_
- Contains 15 Volumes with 519 Chapters and Over 8,500 Pages
- Website Contains a Link to Ask Financial Management Questions

## DoD Financial Management Regulation Major Subjects

| Financial Management Information | Financial Statements |
| --- | --- |
| Budget Formulation | Military Pay |
| Budget Execution | Travel Pay |
| Property, Plant and Equipment | Civilian Pay |
| Fund Balance with Treasury | Contract Payment |
| Accounts Receivable | Reimbursables |
| Accounts Payable | Working Capital Funds |
| Environmental Liabilities | Grants |
| Inventory | Nonappropriated Funds |
| Disbursing | Antideficiency Act Violations |
| Reporting Policy and Procedures | Foreign Military Sales |

## DoD Financial Management RegulationUpdate Plan

**Goal:  Update Entire DoD FMR by December 2009**
- Streamlined DoD FMR Update Process and Reduced Chapter Update Timelines
- Prioritized Chapter Updates Based on:
- Statutory and Regulatory Requirements
- GAO and IG Audit Recommendations
- Other Financial Management Issues
**Over 250 of the 519 DoD FMR Chapters Updated Between January and November 2008**

## DoD Financial Management Regulation Internal Controls

**Up-to-Date Regulations Strengthen Overall Internal Controls**
**Knowledge of Updated Regulations Allow Management to Incorporate Significant Policy into Internal Control Test Plans**
**Consistent Application and Compliance with Regulations Tighten Internal Controls **
**Drafting Overall Internal Control Chapter on Financial Management Principles**

## DoD Financial Management Regulation Updates

**Statutory and Regulatory**
- Improper Payments Information Act
- Pay Entitlements
- IRS 3% Withhold
- Antideficiency Act Violations
- Inventory and Related Property
- Real Property
- Environmental Liabilities

**Notes:**
Improper Payments  (Separate Slide)
Pay Entitlements
Updated Regulation to Reflect Military, Civilian, and Travel Pay Entitlement Changes
IRS 3% Withhold
Federal and State Agencies are Required to Withhold 3% from Payments Made for Property or Services and Submit to IRS
Public Law 109-222 (Section 511), 26 USC 3402(t)
Applies to all Payments After December 31, 2010 
Recoupment of Withhold Through Annual Tax Return Filings
ADA Violations  (Separate Slide)
Inventory and Related Property
Established Policy to Use Historical Cost Using the Moving Average Cost Flow Assumption Rather Than Latest Acquisition Cost for Valuing Inventory and Operating Materials and Supplies
Real Property
Policy Effective Fiscal Year 2011 Requires Real Property Assets and Depreciation to be Reported on the Financial Statements of the Entity that Funded the Acquisition
Entities that Occupy Facilities but Do Not Reimburse the Entity that Funded the Acquisition will be Required to Impute the Cost of the Benefits Received and Record the Cost on their Financial Statements
Environmental Liabilities
Established Policy that Requires Reconciliation of Environmental Sites with Property, Plant and Equipment Assets to Ensure all Sites are Identified and Cleanup Costs Estimated and Reported

## DoD Financial Management Regulation Updates

**Audit Recommendations**
- Fund Balance With Treasury
- Disbursing
- Contingency Operations Payments
- Defense Support to Civil Authorities
- Accounts Payable
- Nonappropriated Funds
- Military Housing Privatization Initiative
**Other Financial Management Issues**

**Notes:**
Fund Balance with Treasury
Updated Policy to Require Components to Perform Monthly Reconciliations of DoD Fund Balances with Treasury
Disbursing  (Separate Slide)
Contingency Operations Payments
Recent DoD Inspector General Audit Identified Conflict in Applicability of the Prompt Payment Act (PPA) to Contingency Operations Payments
Defense Support to Civil Authorities
DoD IG Audits Identified Outdated and Lack of Guidance for DSCA Operations, Such as Hurricane Relief
Accounts Payable
DoD IG Audit Identified Internal Control Weaknesses in Accounts Payable
Nonappropriated Funds 
Military Housing Privatization Initiative
Developing General Accounting Policy on DoD Private Sector Investments that will Value Asset Transfers (Book or Fair Market Value)
Other Financial Management Issues
Reflect Implementation of the United States Standard General Ledger and Treasury Financial Manual
Reflect and/or Reference Current Statutory, Regulatory, or Accounting and Financial Management Policy
Improve Readability, Reduce Redundancy, and Hyperlink to Source Documents

## DoD Financial Management Regulation Updates

**Planned**
- Internal Controls
- Military Equipment Depreciation
- Government-Wide Accounting Modernization
- Standards for Recording Commitments and Obligations
- Environmental Liabilities

**Notes:**
Internal Controls
Drafting Overall Internal Control Chapter on Financial Management Principles

Military Equipment Depreciation (Separate Slide)

Government-Wide Accounting Modernization Project
Treasury’s Government-Wide Initiative for Disbursement and Collection Processing
Treasury Disbursed Organizations – First Phase
Non-Treasury Disbursed Organizations (DoD) – Second Phase

Standards for Recording Commitments and Obligations

Environmental Liabilities
Clarifying Policy that Will Identify the Complete Universe of Environmental Liabilities
Defines Acceptable Supporting Documents for Cost Estimates
Requirements for Maintaining Accurate Supporting Documentation

## Improper Payments Information Act (IPIA)(Public Law 107-300)

**New DoD FMR Improper Payments Chapter in Development**
- Will Include Specific IPIA Requirements and Implement Office of Management and Budget Guidance

| FY 2008 Results | Outlays ($B) | IP Estimate (%) | IP Estimate ($M) |
| --- | --- | --- | --- |
| Military Pay | $ 72.1B | 0.60% | $434.6M |
| Civilian Pay | $ 26.4B | 0.28% | $73.9M |
| Military Retirement | $ 35.6B | 0.12% | $44.0M |
| Travel Pay * | $   5.2B | 2.00% | $103.0M |
| Military Health Benefits
(FY 2007) | $   9.5B | 0.93% | $88.6M |
|     Total | $148.9B | 0.50% | $744.1M |

**Travel Pay universe not identified/sampled for FY 2008*

## Anti-Deficiency Act (ADA) Violations

**New Policy****	**
- Require all Key Fund Control Personnel Receive Appropriations Law Training Every Five Years
- Require Documentation of ADA Investigator Independence
**Most Common ADA Violations**
- Obligation of Funds in Excess of Formal Subdivision
- Unauthorized Obligations and Expenditures
- Improper Use of O&M Funds for Military Construction and Procurement Items
- Obligation of Funds Before Funds are Available
**Issues****	****	****	****	**
- Congressional Visibility
- Preventive Measures
- Timeliness of ADA Investigations
- 39 Ongoing Formal Investigations – 15 Over 12 Months Old
- 26 Ongoing Preliminary Investigations – 16 Over 3 Months Old

## Disbursing

**Updated Various DoD FMR Disbursing Chapters that Focused on Good Cash Management Practices Such as**
- EFT, IPAC, and Purchase Card as Preferred Method of Payment
- ITS.gov as Preferred Method of Payment for Foreign Currency Transactions
- Added Guidance on Emergency Disposition of Currency
- Added Both Certifying Officer and Disbursing Officer as Responsible for Detecting Fraud on Vouchers

## Military Equipment Depreciation

**Revised DoD FMR Volume 4 Chapter 6 to Allow the Use of Activity Based Depreciation for Military Equipment**
**Activity Based Depreciation Recognizes the Change in Asset Value as a Result of Use**

**Notes:**

AT&L is Currently Working on Asset Management System Modifications to Calculate Activity Based Depreciation for Fighter, Attack, Airlift, and Rotary Wing Aircraft Along With Combat and Tactical Vehicles

## QUESTIONS