Does the Anti-Deficiency Act apply to Foreign Military Sales?

For purposes of the Anti-Deficiency Act, appropriated funds are not limited to those funds specifically appropriated by the Congress to federal agencies from the general fund of the U.S. Treasury. Funds available to agencies are considered appropriated, regardless of their source, if made available for collection and expenditure pursuant to specific statutory authority. In applying the Anti-Deficiency Act, the FMS Trust Fund is considered to be, and is to be treated as, appropriated funds. Therefore, the Anti-Deficiency Act applies to transactions involving the FMS Trust Fund.

Potential violations can occur under the FMS trust fund when any of the following is done:

• Issuing OA and/or awarding an FMS contract without a signed LOA
• Obligating or expending FMS case funds for an unauthorized purpose, including purposes not provided for by law
• Other violations may occur related to apportionments or indemnity clauses

Detailed guidance for identifying and reporting violations under the Anti-Deficiency Act is contained in FMR Volume 14 (Administrative Control of Funds and Anti-Deficiency Act Violations). Due to the complexities of provisions in the AECA, it is important to consult with appropriate legal counsel and comptroller officials on potential violations of the Anti-Deficiency Act for FMS.

The three major legal provisions that concern funds execution are the: Anti-Deficiency Act, Misappropriation Act, and the Bona Fide Need Rule (also known as the “time statute”). Bona Fide Need rule (law) requires appropriated funds be used only for goods and services for which a need arises during the period of that appropriation’s availability for obligation.

An unexpired (or current) account is one where the appropriation balance is available for incurring obligations. An expired account is one where the appropriation balance is no longer available to incur new obligations. A closed/canceled account is one where, by law, the appropriation balance is canceled and not available for obligation or expenditure for any purpose.

If the funds on a case are provided by the international partner for purchase of case articles and/or services, there is typically no time limit on use of those funds unless stipulated by the international partner. Foreign Military Financing, once transferred to the FMS Trust Fund, also remains available indefinitely; other U.S. Government appropriations placed on a case, such as Building Partner Capacity funds, typically carry a period of availability. The balance of a fixed-term appropriation is available only for payment of expenses properly incurred during the period of availability or to complete contracts properly made and obligated within that period.