Attachment 1: Security Assistance Management Manual E-Change 809 
Return of Excess Foreign Military Sales Funds

1. Add Section C9.11.9.:

   C9.11.9. Returning Excess FMS Funds to a Partner. A return of excess FMS funds that meets the criteria outlined in Section C9.11.5.1. must be requested by a designated representative of the FMS partner through the Security Cooperation Information Portal (SCIP), which requires a token for access. Returned FMS funds will be sent to a partner's authorized bank account only when requested by a designated representative.

   C9.11.9.1. Roles and Responsibilities.

   C9.11.9.1.1. Defense Security Cooperation Agency Country Finance Director. The DSCA (Office of Business Operations, Financial Policy & Regional Execution Directorate (OBO/FPRE)) Country Finance Director (CFD) is responsible for the financial oversight and direction of FMS partner programs. The CFD ensures partner programs remain solvent and appropriate actions are taken to avoid arrearages, including reviewing and approving the return of excess FMS funds, with consideration of the partner's current financial status. The CFD shall:

   C9.11.9.1.1.1. Develop and maintain written bilateral operating procedures with individual partners to facilitate requests for the return of excess FMS funds from holding account(s). These procedures include maintaining record of designated representative(s) authorized to request the return of funds, an associated signature list, and authorized bank account(s) information for depositing excess funds. These procedures must be agreed upon and signed by the DSCA Deputy Assistant Director (OBO/FPRE) and two partner nation representatives, including one representative at the Flag Officer/General Officer or Senior Executive Service-level. The U.S. Military Group (MILGRP) is required to attest as witness of partner nation signatures on the agreed-upon bilateral operating procedures for the return of excess FMS funds.

   C9.11.9.1.1.2. Receive return of excess funds requests submitted by foreign partners in SCIP. The request must include the holding account number, exact amount to be returned, requester's contact information, and bank account information for the return of excess FMS funds. Return of excess FMS fund requests received via other means (i.e. email) must be redirected to the CFD through SCIP by the partner. The CFD will prepare the supplemental financial information form. If the request cannot be submitted in SCIP, a face-to-face process will be followed to authenticate the requester and bank account information. DSCA (OBO/FPRE) will submit the request through the appropriate MILGRP point of contact for action. The MILGRP must receive face-to-face confirmation from the nation's Ministry of Defense (MoD) representative that the information presented on the request is accurate and is a legitimately authorized request for a return of excess FMS funds in accordance with established bilateral operating procedures.

   C9.11.9.1.1.3. Validate holding account balances, assess the partner's cash position, verify requester and bank account information, and ensure return of excess FMS fund requests align with established bilateral operating procedures. The CFD will endorse the package with a digital signature and submit the recommendation to the appropriate designated official for final decision to approve or deny the return of excess FMS funds. The designated officials are as follows:

   1. Regional Execution Division Chief - Approval up to $250M
   2. Deputy Assistant Director (OBO/FPRE) - Approval $251M - $1,000M
   3. Chief Operating Officer/Chief Financial Officer (COO/CFO) - Approval over $1,000M

   C9.11.9.1.1.3.1. If the request is approved, the CFD will provide a digitally signed approval package to the Defense Finance and Accounting Service (DFAS) Country Manager (CM) for further processing.

   C9.11.9.1.1.3.2. If the request is denied, due to insufficient excess funds or inadequate information to authenticate the request, the CFD will notify the partner of denial and the rationale with a copy to the DFAS CM.

   C9.11.9.1.1.4. Follow up with the partner via email to confirm receipt of funds once the return of FMS funds has been processed.

   C9.11.9.1.1.5. Maintain documentation for each return of excess FMS funds request, including the partner's request and DSCA's approval or denial. The CFD will provide quarterly reports to the DSCA COO/CFO on the return of FMS funds activity and unresolved issues.

   C9.11.9.1.2. Defense Finance and Accounting Service - Security Cooperation Accounting. DFAS Security Cooperation Accounting (SCA) is responsible for collecting payments, maintaining FMS cash accounting records, and transferring partner's cash to the FMS partner's approved bank account. DFAS shall:

   C9.11.9.1.2.1. Upon receipt of an approval from DSCA, validate the request for the return of excess FMS funds package for completeness and alignment with established procedures. The DFAS CM will notify the DSCA CFD if the requested return of excess FMS funds cannot be processed due to insufficient available cash at the time of receipt.

   C9.11.9.1.2.2. Prepare and digitally sign the Standard Form 1049 (SF1049), Public Voucher for Refunds. The DFAS CM will send the complete package, consisting of the SF1049, the partner's return of excess FMS funds request, and the completed supplemental financial information form to the DFAS Certifying Official for processing through the appropriate holding account. The DFAS CM will notify the DSCA CFD upon completion, or if the transaction was unsuccessful.

   C9.11.9.1.2.3. Maintain records of all returns of excess FMS funds, including the partner's request, the DSCA approval, and the SF1049 voucher.

   C9.11.9.1.3. Exceptions. A request for an exception, including a proposed alternative solution, may be submitted to DSCA OBO Financial Policy for review and approval. All exception requests must include justification and supporting documentation to ensure compliance with overarching intent to safeguard partner nation resources via strengthened authentication practices.

   C9.11.9.1.4. Audit and Accountability. To ensure compliance with audit standards and maintain financial accountability, the return of excess FMS funds reconciliation process involves multiple layers of control and oversight. DFAS performs daily and monthly reconciliations to verify the accuracy of return transactions. SF1049 vouchers are reconciled against the Defense Integrated Financial System (DIFS) and Defense Agencies Initiative (DAI) to confirm that funds are withdrawn from the correct account. Monthly reconciliations are conducted between DIFS, DAI, and the U.S. Treasury's Central Accounting and Reporting System at the country-level to confirm return transactions are reported for the correct amount.

2. Add Section C9.11.10.:

   Current:

   C9.11.10. Erroneous Payments. In the event of an erroneous or fraudulent payment, the DSCA CFD must be notified immediately, who will inform the FMS partner and the in-country MILGRP to initiate corrective actions. The DSCA CFD will also coordinate with DSCA (Front Office, Office of the General Counsel (FO/OGC)

   C9.11.10.1. The DFAS CM, in coordination with the DSCA CFD, will investigate the cause, validate the transaction, and coordinate recovery or reprocessing of funds as necessary.

   C9.11.10.2. In the event fraud is suspected, the payment must be reported to the DoD Office of Inspector General in accordance with the DoD Financial Management Regulation Volume 5.

   C9.11.10.3. All erroneous payments must be documented, reported to DSCA (OBO/FPRE), and included in refund activity reports. Detailed records of the transaction, investigation, and corrective actions must be maintained for audit and compliance purposes.

3. Update Section C9.11.5.1.:

   From:

   C9.11.5.1. Excess Funds - National Funds. Excess national funds are transferred to a cash Holding Account upon case closure, case cancellation, or purchaser's request. At the purchaser's written request, deposits in cash Holding Accounts may be applied to other FMS cases or refunded if the purchaser is not on the current quarter Arrearage Report, there are no collection delinquencies on other FMS cases, and there is sufficient cash reserve to meet financial requirements (including termination liability (TL) if no Standby Letter of Credit (SBLC) applies) for the next quarter. Cash refunds must be approved by DSCA (Office of Business Operations (OBO)).

   To:

   C9.11.5.1. Excess Funds - National Funds. Excess national funds are transferred to a cash Holding Account upon case closure, case cancellation, or purchaser's request. At the purchaser's written request, deposits in cash Holding Accounts may be applied to other FMS cases or refunded returned if the purchaser is not on the current quarter Arrearage Report, there are no collection delinquencies on other FMS cases not permissible by special billing arrangements, and there is sufficient cash reserve to meet financial requirements (including termination liability (TL) if no Standby Letter of Credit (SBLC) applies) for the next quarter. Cash refunds Returns of excess FMS funds must be approved by DSCA (Office of Business Operations (OBO)) (refer to Section C9.11.9.).