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    Since NAF funds have no appropriation, if liquidated damages are accessed will the funds return to the MWR or will they go into the treasury like other retrieved funds? The customer wants us to access liquidated damages because she believes they will be retuned to her organization for her use. Please advise. Thank you for any help.


    The answer to this question appears to be reasonably straight forward, as long as the funds used for the construction project were in fact Nonappropriated Fund (NAF) funds and not appropriated Military Construction (MILCON) funds.

    The utilization, recording, and reporting of NAF funds is addressed in DoD Financial Management Regulation (FMR) 7000.14-R, Volume 13, and Department of Defense Instruction (DoDI) 1015.15.

    FMR, Volume 13, Chapter 1, paragraph 2.11 (010211) states, “NAFs are government monies that are not appropriated by Congress and are not held within the Treasury. These are separate funds that are not recorded in the books of the Treasury. NAFs are administered only through a NAFI.”  Therefore, since NAF funds are not held within the Treasury, there is no way that the liquidated damages addressed in this Question could go to the Treasury.  Rather, the only option is for those funds to be returned to the NAF Instrumentality (NAFI) that they originally came from.

    Since MILCON funds are held within the Treasury, if MILCON had been utilized for the construction project, any recovered liquidated damages would be returned to the Treasury.

    Summary: Recovered liquidated damages accruing from NAF funded activities should return to the NAFI that originally funded the activity.  FMR, Volume 13, and DoDI 1015.15 elaborate on how the NAFI would account for and report the return of any recovered liquidated damages.

    Suggestions:  First, read DoD Financial Management Regulation (FMR) 7000.14-R, Volume 13. Second, read DoDI 1015.15.  Finally, it is most strongly recommended that you contact your Government Contracting Officer, your local financial comptroller organization, and acquisition legal counsel for more information and their policy interpretation of this issue.

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