FINANCIAL MANAGEMENT POLICY MANUAL

eceives full reimbursement for costs associated with these sales.
2. MILITARY DEPARTMENT SPONSOR.
Due to the difference in various foreign government military
organizational policies and mission assignments, it has been necessary for
the Department of Defense to establish principles for determining which
United States military service will negotiate for the sale of specific
hardware. As a general rule, the United States military service that is
responsible as the project manager for development, test, and acquisition
of a specific weapons system, negotiates the sale of that weapons system
or related services with the foreign customer military service. For
example, the Navy is project manager for the F-14 aircraft and would
negotiate a sale of this aircraft with a foreign military service.
3. FUNDING OF FOREIGN MILITARY SALES
a. Obligational Authority.
Department of the Navy (DON) agreements with foreign countries or
international organizations for the provision of defense articles and
services, pursuant to the Army Export Control Act (P.L. 94-329), are
executed on United States Department of Defense Offer and
Acceptance (DD Form 1513). Based on the signed DD Form 1513,
Defense Finance and Accounting Service (DFAS-DENVER) provides
obligational authority to DON on a Foreign Military Sales (FMS)
Obligational Authority (DD Form 2060) funding document. This
document shows the obligational authority for a fiscal year by case
identified by that portion of obligational authority applicable to direct
citation and the portion applicable to reimbursable effort against
performing appropriations. A Foreign Military Sales (FMS) Planning
Directive (DD Form 2061) is also required for each DD Form 1513.
The DD Form 2061 contains detailed pricing elements, planned
financing appropriations, or direct citation along with other
information and is the basic source document for preparing the DD
Form 2060. Increases and decreases in obligational authority are to be
treated as an annual appropriation; accordingly, prescribed DON
policy and procedures pertain.
b. Expenditure Authority.
Most sales are made on a "dependable undertaking" basis. To ensure
that the U.S. Government will not suffer a loss resulting from the sale,
the foreign government agrees to provide cash to cover payments to
contractors and to reimburse the Department of the Navy for work
performed. Initially, most obligational authority is in the form of
unfunded contract authority, i.e., the cash needed for expenditures is
not available. The DFAS-DENVER is responsible for obtaining the
required cash, as needed, from foreign customers on a quarterly basis.
Financial Management Policy
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