Reconciliation and Closure in Foreign Military Sales

As the delivery of articles and services listed on a case nears completion, the case manager should begin making preparations to complete reconciliation and close the case. The key players in FMS case closure are the IA, DFAS–SCA, and the international partner. But, ultimately, the responsibility for successful case closure falls on the shoulders of the case manager at the IA.

While closure is the final phase in the FMS case life cycle, reconciliation should occur throughout the life of the case, starting with implementation. A single case can generate thousands of requisitions and procurement actions. Closing out all these transactions requires aggressive planning and continuous follow-up. Reconciliation can include the following:

• The financial and logistical actions that ensure proper accounting
• Accuracy and thoroughness of data
• Currency of schedules
• Timeliness and completeness of reporting

Case managers must reconcile cases at least annually. Case managers who defer reconciliation until the end of a case are setting themselves up for failure. Conversely, thorough and continuous reconciliation starting at implementation helps facilitate a successful case closure.

It is DSCA policy to close an FMS case as soon as it is feasible to do so. Timely closure reduces the administrative distraction of monitoring dormant cases that are logistically, but not financially, complete. This allows case managers to focus on executing and reconciling active cases. Additionally, closing cases promptly expedites the release of excess case funds back to the international partner. An IA declares that a case is a candidate for closure when it is Supply and Services Complete (SSC) and meets the following criteria:

• All materiel has been delivered.
• All services have been performed.

• International partner has confirmed there will be no new orders.
• International partner has not submitted a request to keep the case open.
• All Supply Discrepancy Reports (SDRs) are resolved.
• All warranty periods have elapsed.

Chapter 16 of the SAMM is dedicated to policies and procedures applicable to case reconciliation and closure. SAMM C16.3.3 requires IAs to include a note in most LOAs identifying an estimated case closure date. After a case is declared SSC, the IA will reconcile the case logistical and financial records and submit a case closure certification to DFAS–SCA within a specified time frame depending on the applicable case closure procedure used. DFAS will then complete the case closure/reconciliation process and ultimately provide the international partner with a final bill. An FMS case is considered closed when the international partner receives the final bill or a final statement of account (DD Form 645).

There are two methods of case closure: Accelerated Case Closure Procedures (ACCP) or non-ACCP. ACCP is the standard case-closure method for FMS cases. ACCP is voluntary, except for those international partners whose programs are financed with Foreign Military Financing (FMF). SAMM Table C4.T2 identifies which countries participate in ACCP. If an international partner participates in ACCP, then all of that international partner’s FMS cases will be closed under that program, including those implemented prior to the date the international partner decided to participate in ACCP. Since most international partners participate in ACCP, it is now considered the standard for case closure.

The ACCP methodology allows a case to be closed even if there are outstanding unliquidated obligations (ULO) against the case. Examples of an obligation include a work request for services, a procurement contract, or an inventory requisition. Under ACCP, the case manager, with assistance from contract and financial management personnel, estimates the unliquidated obligation value. The ULO value is the difference between the estimated final-case obligations and the current cumulative case expenditures. The ULO amount is billed and collected from the international partner and placed by DFAS–SCA into an international partner–owned, country-level Case Closure Suspense Account (CCSA). At this point, the case is considered “Interim Closed,” and the international partner receives a final bill (DD 645) indicating that the case is closed. Subsequent case disbursements for the ULOs will be processed against the CCSA, thus enabling cases closed by ACCP to remain closed. International partners receive regular CCSA statements as part of their quarterly DD Form 645 FMS Quarterly Billing Statement attachments. If the CCSA balance exceeds anticipated ULOs, the international partner may receive a refund.

Even though the international partner receives a “final bill” when a case is interim closed under ACCP, eventually the case has to be “Final Closed.” An Interim Closed case is not moved into Final Closed status until all outstanding obligations equal the final disbursements. If there are excess ULO collections at final closure, the international partner may receive a reimbursement from the CCSA.

Non-ACCP is used for international partners that have elected not to participate in ACCP and whose programs are wholly financed with national funds. Normally, the estimated closure date for a non-ACCP LOA is thirty-six months after the completion of the longest underlying contract. Under non-ACCP, cases may be closed when there are no unliquidated obligations (ULOs) against the underlying open contracts. If no contracts apply, then the estimated closure date is normally thirty-six months from the last scheduled delivery or service. Since closing a case under non-ACCP can be cumbersome and time-consuming, most international partners elect to participate in ACCP.

Although final closure marks the end of the life cycle of an FMS case from a practical and operational standpoint, cases never really close from a DOD accounting perspective. DOD policy requires that all charges or credits against a case be processed, regardless of when they arise. Thus, although very infrequent, it is possible for a case to be considered closed for many years, only to be reopened when a final audit finds a lost expenditure. If the international partner participates in the ACCP, this newly discovered expenditure will be processed against the CCSA. If the international partner is a non-ACCP participant, then the affected case could be reopened.

Reopening a case is undesirable for both the international partner and the IA. For the international partner, it may mean trying to justify a new expenditure for a case reported as delivered and complete years before. At a minimum, reopened cases distract all concerned from the important business of processing, implementing, managing, reconciling, and closing currently active cases.