Volume 11B, Chapter 11 - U.S. Department of Defense

DoD 7000.14-R

2B

Financial Management Regulation

Volume 11B, Chapter 11

* June 2021

VOLUME 11B, CHAPTER 11: ¡°REIMBURSEMENTS AND REVENUE

RECOGNITION - DEFENSE WORKING CAPITAL FUNDS¡±

SUMMARY OF MAJOR CHANGES

Changes are identified in this table and also denoted by blue font.

Substantive revisions are denoted by an asterisk (*) symbol preceding the section,

paragraph, table, or figure that includes the revision.

Unless otherwise noted, chapters referenced are contained in this volume.

Hyperlinks are denoted by bold, italic, blue, and underlined font.

The previous version dated October 2002 is archived.

PARAGRAPH

Chapter Title

1.0

(1101)

2.4

(110204)

2.5

(110205)

2.6

(110206)

2.8

(110208)

3.1

(110301)

EXPLANATION OF CHANGE/REVISION

Modified the Chapter title from ¡°Reimbursements And

Revenue Recognition¡± to ¡°Reimbursements and Revenue

Recognition - Defense Working Capital Funds.¡± This aligns

with the titles used for Chapters 1 - 3. It also distinguishes

the Chapter from Volume 11A during online searches.

Revised the ¡°General¡± section and added ¡°Overview¡±,

¡°Purpose¡± and ¡°Authoritative Guidance¡± paragraphs in order

to comply with the DoD Financial Management Regulation

Standard Operating Procedures.

Updated guidance for use of Project Orders in accordance

with Title 41, United States Code, section 6307

(41 U.S.C. ¡ì 6307) and for usage of Economy Act Orders in

accordance with 31 U.S.C. ¡ì 1535.

PURPOSE

Updated guidance for work performed per 10 U.S.C. ¡ì 127a.

Revision

Updated guidance for Work Performed in Advance of

Reimbursable Orders in accordance with the Office of

Management and Budget Circular A-11.

Updated requirements for stabilized rates to align with

Volume 2B, Chapter 9.

Updated guidance for recognizing and reporting revenue in

accordance with Federal Accounting Standards Advisory

Board, Statement of Federal Financial Accounting

Standards 7, and relevant portions of the Deputy Chief

Financial Officer Memorandum, ¡°Policy Change to Account

for In Transit Inventory Assets (FPM 19-10),¡± dated

December 9, 2019.

11-1

Revision

Revision

Revision

Revision

Revision

Revision

DoD 7000.14-R

2B

PARAGRAPH

3.2

(110302)

3.4

(110304)

4.0

(1104)

Financial Management Regulation

Volume 11B, Chapter 11

* June 2021

EXPLANATION OF CHANGE/REVISION

Updated guidance on Service Type and End-Product Type

Orders.

Removed the budgetary and proprietary accounting entries

provided in the former section 3.0 and referred users to the

DoD U.S. Standard General Ledger Transaction Library.

Removed the Prior Period Adjustment content provided in

the former section 4.0 because this guidance is given in

Volume 4, Chapter 17.

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PURPOSE

Revision

Revision

Deletion

DoD 7000.14-R

2B

Financial Management Regulation

Volume 11B, Chapter 11

* June 2021

Table of Contents

VOLUME 11B, CHAPTER 11: ¡°REIMBURSEMENTS AND REVENUE RECOGNITION DEFENSE WORKING CAPITAL FUNDS¡± ................................................................................. 1

*1.0

GENERAL (1101).......................................................................................................... 4

1.1

1.2

1.3

2.0

Overview (110101) ........................................................................................................ 4

Purpose (110102) ........................................................................................................... 4

Authoritative Guidance (110103)................................................................................... 4

REIMBURSEMENTS (1102) ........................................................................................... 5

2.1

2.2

2.3

*2.4

*2.5

*2.6

2.7

*2.8

2.9

3.0

Reimbursement Principles (110201) .............................................................................. 5

Reimbursable Orders (110202) ...................................................................................... 6

Basis for Reimbursement (110203) ............................................................................... 6

Performance Under Project Orders and Economy Act Orders (110204) ....................... 7

Reimbursement for Contingency Operations and Humanitarian Efforts (110205) ....... 8

Work Performed in Advance of a Reimbursable Order (110206) ................................. 9

Follow-up on Unfunded Reimbursable Orders (110207) .............................................. 9

Billing Standard (110208) ............................................................................................ 10

Disputed Bills between DoD Components (110209) ................................................... 11

REVENUE RECOGNITION (1103)............................................................................... 11

*3.1

*3.2

3.3

*3.4

Reporting Requirements (110301) ............................................................................... 11

Service Type Orders versus End-Product Type Orders (110302) ................................ 13

Revenue Billings (110303)........................................................................................... 16

Accounting for Reimbursements and Revenue Recognition (110304) ........................ 16

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DoD 7000.14-R

Financial Management Regulation

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Volume 11B, Chapter 11

* June 2021

CHAPTER 11

REIMBURSEMENTS AND REVENUE RECOGNITION

- DEFENSE WORKING CAPITAL FUNDS

*1.0

GENERAL (1101)

1.1

Overview (110101)

Reimbursements are collections earned for selling goods or providing services.

Reimbursable obligations are obligations financed by offsetting collections credited to an

expenditure account in payment for goods and services provided by that account. The collection

must be authorized by law to credit the specific appropriation or fund account.

The Under Secretary of Defense (Comptroller) must authorize reimbursable authority through

budget formulation in Annual Operating Budgets and statutory authorization in the annual

National Defense Authorization Act. Refer to Volume 3, Chapter 15 for additional information

relating to the standards for recording the receipt and distribution of budgetary resources in

execution-level activities.

1.2

Purpose (110102)

This chapter establishes guidance for reimbursements and revenue recognition for the

DoD Defense Working Capital Fund (DWCF).

1.3

Authoritative Guidance (110103)

The accounting policy and related requirements prescribed in this chapter are in accordance

with the applicable provision of:

1.3.1. Federal Accounting Standards Advisory Board, Statement of Federal Financial

Accounting Standards 7 (SFFAS 7) ¡°Accounting for Revenue and Other Financing Sources and

Concepts for Reconciling Budgetary and Financial Accounting.¡±

1.3.2. Office of Management and Budget (OMB) Circular A-11 ¡°Preparation,

Submission, and Execution of the Budget.¡±

1.3.3. Standard Financial Information Structure. ¡°DoD Standard Reporting Chart of

Accounts and DoD U.S. Standard General Ledger (USSGL) Transaction Library.¡±

1.3.4. Title 10, United States Code, section 127a (10 U.S.C. ¡ì 127a) ¡°Operations for which

Funds Are Not Provided In Advance: Funding Mechanisms,¡± 10 U.S.C. ¡ì 2208 ¡°Working-capital

Funds,¡± 10 U.S.C. ¡ì 2210 ¡°Proceeds of sales of supplies: credit to appropriations,¡± and

10 U.S.C. ¡ì 2563 ¡°Articles and Services of Industrial Facilities: Sale to Persons Outside the

Department of Defense.¡±

1.3.5. U.S. Department of the Treasury (Treasury), Bureau of the Fiscal Service,

Federal Account Symbols and Titles (FAST Book).

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DoD 7000.14-R

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Financial Management Regulation

2.0

REIMBURSEMENTS (1102)

2.1

Reimbursement Principles (110201)

Volume 11B, Chapter 11

* June 2021

2.1.1. 10 U.S.C. ¡ì¡ì 2208 and 2210 provide the basic transactional authority for the DWCF.

These authorize the Secretary of Defense to finance inventories of supplies, industrial-type

activities, and commercial-type activities that provide common services within or among activities

of the DoD. Supply-type services involve the sale of material financed using contract authority

established by 10 U.S.C. ¡ì 2210(b) subsequently liquidated using revenue earned and collected

from sales. Industrial-type services may be financed for requirements internal to a military

department or for external customers and commercial-type activities may be financed when

common services are required within or among the departments and agencies that comprise the

DoD. As required by 10 U.S.C. ¡ì 2208(o), charges for goods and services provided through a

DWCF activity must include amounts to recover the full costs of goods and services provided and

amounts for capital investment recovery.

2.1.2. The DWCF billings to and reimbursements from ordering activities for services or

goods provided must be accomplished in the most efficient and expeditious manner available to

reduce or eliminate the need for additional DoD working capital. In addition, the nature of the

DWCF requires ordering activities to budget, control, and account for the cost of all goods and

services ordered (refer to 10 U.S.C. ¡ì 2208).

2.1.3. As a result, a DWCF activity:

2.1.3.1. Must bill ordering activities for all costs incurred as a result of an accepted

customer order as long as the billings does not exceed the fixed-price contract amount.

2.1.3.2. Must bill customer order cancellation or reduction costs. When a job order

is canceled or reduced in scope after a DWCF activity has commenced work or incurred costs on

the order, the costs incurred, plus the applied overhead (that is, indirect and other normally

allocated overhead, such as General and Administrative (G&A) costs) plus costs associated with

the cancellation or reduction must be charged to the customer. Examples of directly associated

cancellation or reduction costs to be charged to customers are advance planning costs,

non-creditable direct materiel, special test equipment, necessary preservation and/or shipment

effort, and any additional effort necessitated by the cancellation and/or reduction; for example,

salvaging of materiel. In addition, costs charged to customers should include the costs of salaries

payable to employees hired specifically to work on the canceled order until the employees are, or

could have been, separated through a reduction in force or other appropriate action

(taking into account appropriate administrative lead time), or reassigned to other direct jobs.

Materiel is defined as all items necessary to equip, operate, maintain, and support military activities

without distinction as to their application for administrative or combat purposes, excluding real

property, installations, and utilities. Materiel is either serviceable (i.e., in an issuable condition)

or unserviceable (i.e., in need of repair to make it serviceable). This definition is taken from

DoD Instruction 4140.01 ¡°DoD Supply Chain Materiel Management Policy.¡±

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