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    When finance pays the contractor early and the contractor offered a discount for early payment. Do all funds have to be deobligated? Some say if it is under $500.00 those funds don't have to be deobligated. I read that all excess funds have to be deobligated before close out. Then the question was is that discount considered excess funds? What are excess funds?


    Answer

    When the contractor gives a discount for early payment the discounted amounts are not "excess funds", but instead are "remaining funds". "In the administrative closeout process, excess funds do not include "remaining" funds due to price variance, rounding or cost underrun funding, as the ACO does not interface with the official accounting records (
    http://guidebook.dcma.mil/17/Deobligation.htm ). "Excess funds" are defined as funds relating to a specific line item or deliverable that was not performed on a contract. A contract modification will be issued to deobligate these excess funds. "Remaining funds" are those funds left on contract due to price variance, rounding or cost underrun funding and where all contract performance as required by the contract has been completed. If remaining funds are not used they will be deobligated after the final voucher submission and do not require a modification. The process described below is an excerpt from the DCMA Guidebook for excess funds and remaining funds:Excess Funds
    • "During the contract closeout process, the ACO should deobligate excess funds after final price determination.
      • The purpose is not to match MOCAS but rather to ensure the funding on the contract is in accordance with the terms of the contract.
    • For the purpose of initiating closeout per FAR 4.804-5, excess funds are funds relating to a specific line item or deliverable that was not performed on a contract. These funds shall be removed by contract modification (SF 30), adjusting the line items, the funding and/or the deliverable quantity as appropriate.
      • When funds are identified as excess and available for deobligation, the ACO shall review unliquidated obligations (ULOs) against open and cancelled appropriations.
    • The SF30 distribution shall include a copy sent to the accounting and funding station/s cited in the contract, in accordance with DFARS 204.2.
    Remaining Funds
    • In the administrative closeout process, excess funds do not include "remaining" funds due to price variance, rounding or cost underrun funding, as the ACO does not interface with the official accounting records. These are handled under the Q-Final process in MOCAS and final disposition of these funds is a PCO function at final closeout.
    • The administrative closeout procedures for Q-final funds is as follows:
      • To close out firm fixed price contracts with "remaining" funds due to price variance, quantity variation (attributable to FAR 52.211-16), contractor underbilling, or rounding, the ACO shall verify the contractor has shipped and been paid and the government shall have accepted the final item on the contract. The ACO will then annotate the amount of remaining funds in the ACO Notebook remarks field in MOCAS, the official file copy of the NLA, and then process the F NLA in MOCAS. This will notify DFAS not to reopen the contract and allow the mechanical removal of remaining funds by MOCAS (Q Final transaction per DLAM 8000.3; Chapter 2.4.4), which in turn, generates a PK9 transaction, notifying the PCO that the contract was administratively closed with remaining funds in the official accounting records (vs. MOCAS payment records). It is then the PCO's responsibility to proceed with final closeout, including notification to their funding station.
    • For cost contracts with remaining funds, when the final voucher is submitted to DFAS-Columbus for payment, DFAS entitlement currently codes the payment as an interim payment. DFAS currently processes final vouchers as "Final" only when after payment, the ULO is zero in the MOCAS payment records.
      • The ACO will annotate the amount of remaining funds in the ACO Notebook remarks field.
      • After final payment, if the contract does not move to Section 5, the ACO may process a "G" and "F" NLA.
    • When the contract moves to Section 5 and the ULO matches the amount in the ACO notebook remark, DFAS will not reopen the contract. This allows for the mechanical removal of remaining funds by MOCAS (Q Final as above), which in turn, generates a PK9 transaction, notifying the PCO that the contract was administratively closed with remaining funds in the official accounting records (vs. MOCAS payment records) and will alert the PCO to proceed with final closeout. "


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