July 2, 2020 MEMORANDUM FOR ASSISTANT SECRETARIES OF

OFFICE OF THE UNDER SECRETARY OF DEFENSE

1100 DEFENSE PENTAGON

WASHINGTON, DC 20301-1100

COMPTROLLER

July 2, 2020

MEMORANDUM FOR ASSISTANT SECRETARIES OF THE MILITARY DEPARTMENTS

(FINANCIAL MANAGEMENT AND COMPTROLLER)

DIRECTORS OF DEFENSE AGENCIES

DIRECTORS OF DOD FIELD ACTIVITIES

SUBJECT: Reporting Department of Defense Deposit Fund Liabilities (FPM 20-10)

References: (a) U.S. Department of the Treasury, Treasury Financial Manual Supplement,

“Federal Account Symbols and Titles (FAST) Book,” September 2019

(b) Office of Management and Budget Circular A-11, “Preparation, Submission,

and Execution of the Budget,” December 18, 2019

Accounting Standards (SFFAS) 1, “Accounting for Selected Assets and

Liabilities,” as amended by SFFAS 31, “Accounting for Fiduciary Activities,”

October 24, 2006

This memorandum establishes DoD policy for reporting deposit fund liabilities. Deposit

fund activity is external to the budget process, but will be reviewed by auditors as part of their

review of our reconciliation of Funds Balance with Treasury. Collections into deposit funds are

monies from the public and are not connected to any previous rights and obligations of the

U.S. Government. The DoD Treasury Index, as defined in reference (a), into which the funds are

collected also represents the entity responsible for reporting the deposit fund liability regardless

of the source of the funds.

The Department’s position is supported by references (b) and (c). This policy will be

incorporated into the next update of the DoD Financial Management Regulation, Volume 4,

Chapter 2, and Volume 12, Chapter 1. Additional detail and examples are provided in the

attachment.

Ms. Charlotte Beacham ([email protected]) is my point of contact

(POC). Mr. Paul McDonald ([email protected]) is the Defense Finance and

Accounting Service POC.

Mark E. Easton

Deputy Chief Financial Officer

Attachment:

As stated

EASTON.MARK.ED

WARD.1149725241

Digitally signed by

EASTON.MARK.EDWARD.11497

25241

Date: 2020.07.02 09:10:23 -04'00'

Reporting DoD Deposit Fund

Liabilities July 2020

1 Attachment

DOD POLICY

The U.S. Department of the Treasury (Treasury) component, i.e., Treasury Index (TI) as identified

in the Federal Account Symbols and Titles Book, that holds the funds on behalf of the public is

responsible for reporting the deposit fund liability, regardless of the source of the funds.

Deposit fund activity is external to the budget process and therefore, it is not appropriate to project

rights and obligations to the funds to one entity over another. The funds are held in a Treasury

account of the U.S. Government; however, the ownership of the funds is the public.

To further illustrate the Department’s position based on the State and local income tax (SALT)

example from the Office of Management and Budget (OMB) Circular No. A-11, the outlay

transaction for Federal employee payroll may be divided into two parts; the outlay from the budget

to pay payroll and the collection into the deposit fund from the public (i.e., the employee) for funds

due to the State. The outlay for the gross payroll amount is the end of the U.S. Government’s

rights and obligations to the funds lifecycle. The collection into the deposit fund is from the public

and is not connected to any previous U.S. Government rights and obligations.

An expansion of the OMB example: Joe Sailor is a Navy accountant. Joe’s gross pay is $1,000

which contains $100 due to the state of Ohio. The $1,000 gross pay disbursement fully liquidates

the Navy liability for Salaries and Wages Expense related to Joe and is recorded in the Navy

payroll appropriated line of accounting (budget) for $1,000. This is the end of the

U.S. Government’s rights and obligations to the funds as they have been paid to Joe as documented

on his Leave and Earnings Statement. The $100 that goes into the SALT deposit fund on Joe’s

behalf to eventually pay the state of Ohio is actually sourced from Joe and his pay, not the Navy

appropriated dollars.

This concept is the same as any other payment to a non-federal entity, except in the case of SALT

payroll withholdings where the U.S. Government retains possession (not rights and obligations)

of the cash until the U.S. Government remits it to the State. With other non-federal payments that

do not involve deposit funds, the U.S. Government retains neither possession nor rights and

obligations.

Because the source of the funds is the public and the U.S. Government has no rights and

obligations, whichever Treasury component is in possession of the funds should report the liability.

It is a managerial decision for DoD to determine which deposit fund (TI) to hold the cash. If Joe’s

State withholdings were collected into TI-97, the liability should be reported on the TI-97

consolidated financial statements. If Joe’s State withholdings were collected into TI-17, the

liability should be reported on the TI-17 Department of the Navy financial statements. So long as

the Treasury component that possesses the public funds reports the liability, the DoD financial

statements are accurate and no rights or obligations have been commingled.

Reporting DoD Deposit Fund Liabilities

July 2020

2 Attachment

AUTHORITATIVE GUIDANCE

 Office of Management and Budget Circular No. A-11, “Preparation, Submission, and

Execution of the Budget,” December 18, 2019 (Section 20.11 (f))

https://www.whitehouse.gov/wp-content/uploads/2018/06/a11.pdf

 Federal Accounting Standards Advisory Board, Statement of Federal Financial Accounting

Standards (SFFAS) 1, “Accounting for Selected Assets and Liabilities” (paragraph 31), as

amended by SFFAS 31, “Accounting for Fiduciary Activities” (paragraph 32),

October 24, 2006

http://files.fasab.gov/pdffiles/handbook_sffas_31.pdf

 U. S. Department of the Treasury, “Federal Account Symbols and Titles (FAST) Book,”

September 2019

https://www.fiscal.treasury.gov/reference-guidance/fast-book/