Questions concerning this policy chapter should be directed to:

• Veterans Health Administration
• Veterans Benefits Administration
• National Cemetery Administration
• Debt Management Center
• Financial Services Center
• Construction and Facilities Management
• All others

1001 Overview

This chapter establishes the Department of Veterans Affairs’ (VA) financial policies for VA’s Supply Fund, which supports VA’s mission and other Federal agencies through the operation and maintenance of a supply system.

Key points covered in this chapter:

• The statutory authority for the Supply Fund is contained in 38 U.S.C. § 8121;
• VA’s Supply Fund is used for the procurement of supplies, equipment, and personal services and the repair and reclamation of used, spent or excess personal property;
• The primary customers of the supply fund are VA and Department of Defense (DOD);
• Supply fund costs of furnished services, equipment, and supplies must be reimbursed by customers from appropriated resources;
• The Supply Fund will use the modified accrual basis of accounting; and
• The VA Supply Fund will adhere to all reporting requirements.

1002 Revisions

Section	Revision	Office	Reason for Change	Effective Date
Appendix C and 1006	Updated obligations chapter reference and links updates	OFP	Volume and chapter number changed; renew links not working	July 2024
Various	Updated office names to current nomenclature.	OFP (047G)	For clarity	October 2023
Various	Updated to new policy format and completed full review.	OFP (047G)	Full review process	October 2023
100502	Added use related to IT purchases.	OFP (047G)	For clarity	October 2023

Refer to Appendix A for the listing of previous revisions.

1003 Definitions

Revenues – Inflow of resources that have been earned.

Fund Budget – Includes all anticipated revenues and expenses for Enterprise Centers (ECs) within the fund.

Revolving Fund – A fund established by Congress to finance a cycle of business-like operations through fees charged for goods or services provided.

1004 Roles and Responsibilities

Secretary of the Department of Veterans Affairs approves all additions and deletions of Enterprise Centers to the fund.

Revolving Fund Board of Directors (RFBOD) approves activities to be included in the funds, reviews and approves budgets, identifies and approves actions to resolve problems in a fund’s operations, and reviews studies of costs and service quality.

Principal Deputy Assistant Secretary for Management and the Deputy Executive Director, Office of Acquisition, Logistics and Construction are co-chairs of the RFBOD and oversee all financial management activities relating to the fund’s programs and operations.

Under Secretaries, Assistant Secretaries, Other Key Officials and Chief Financial Officers (CFO)s are responsible for ensuring compliance with the policies set forth in this chapter.

1005 Policies

100501 General Policies

1. 38 U.S.C. § 8121, authorized VA to establish a Supply Fund.
2. VA’s Supply Fund was created to operate and maintain a VA supply system for the:
   • Procurement of supplies, equipment, and personal services; and
   • Repair and reclamation of used, spent or excess personal property.
3. VA’s Supply Fund’s principal business lines are:
   • Office of Acquisition Logistics (OAL), which includes
     • VA Acquisition Academy (VAAA)
     • Acquisition Program Support (APS)
     • Strategic Acquisition Management Initiatives (SAMI)
     • Procurement Policy, Systems, and Oversight (PPSO)
     • Office of Revolving Fund Fiscal Office
   • Office of Procurement Acquisitions and Logistics (OPAL); which includes
     • National Acquisition Center (NAC)
     • Denver Logistics Center (DLC)
     • Hines Service and Distribution Center (SDC), which includes the Service and Reclamation Division
     • Strategic Acquisition Center (SAC)
     • Technology Acquisition Center (TAC)
     • Logistics Support Services, which includes Transportation and Publications
4. VA utilizes the Acquisition Centers for a variety of services. For more information on the various Acquisition Centers refer to Appendix B.
5. Obligations and payments to the Supply Fund consist of a service fee, and, when applicable, the cost of procured goods or services.
   1. The service fee collected for the sale of products or services may be retained for future use and is not subject to fiscal year (FY) limitations.
   2. The payment for cost of procured goods or services is subject to fiscal law requirements relative to current, expired, or canceled/closed appropriations. Obligations must be canceled, and funds returned to the buyer/Treasury if procurement actions are not completed before the cancelation/closing of the related appropriation.
6. Appropriated funds do not lose their FY identity in the Supply Fund. Funds returned to a customer are subject to the normal restrictions for use of appropriated funds, including expired or cancelled funds.
   1. When a customer uses current FY funds to incur an obligation with the Supply Fund, the amount obligated remains available for payment once the work is completed, equivalent to funding from a private vendor.
   2. If the Supply Fund does not perform the work ordered under the agreement, it must deobligate the associated funds and return them to the customer.
   3. Any obligated funds remaining upon completion and full billing of work must be deobligated and returned to the customer. Funds returned to a customer are subject to the normal restrictions for the use of appropriated funds including those restrictions related to expired or cancelled funds.
7. 38 U.S.C. § 8121 allows VA to sell goods and services to VA and DOD organizations. The Supply Fund may conduct business with other entities under the authority of the Economy Act (31 U.S.C. § 1535).
8. Transactions related to Economy Act (31 U.S.C. § 1535) agreements must be deobligated at the end of the fiscal year to the extent that the performing agency has not performed or incurred valid obligations. For additional information on the Economy Act, refer to VA Policy Volume I, Chapter 11, Intragovernmental Transactions.
9. Customers must have a current-year bona fide need in order to obligate funds with the Supply Fund. A bona fide need related to a future funding period must use the future period’s funds, once available. See Appendix C: Office of General Counsel (OGC) White Paper, “Bona Fide Need and Revolving Funds” for more information on selecting the appropriate period’s funds.
10. VA Supply Fund is not a vehicle to “park” expiring funds to extend their availability. It is not legally permissible for VA customers to use the Supply Fund to “park” or “bank” expiring funds because a customer lacks sufficient time to appropriately obligate funds before the period of availability expires. Refer to Appendix C for further explanation. According to the General Accountability Office (GAO) “parking” usually occurs when an agency transfers fixed-year funds to a revolving or franchise fund in the mistaken belief that, by doing so, the funds lose their fixed-year character and remain available indefinitely. For more information see GAO/B-288142, September 6, 2001.
11. Appropriations will reimburse VA’s Supply Fund for the cost of all services, equipment, and supplies furnished. Reimbursement rates are based on estimated or actual direct cost (including the cost of recent significant purchases of the equipment or supply item involved) and indirect cost. See 38 U.S.C. § 8121.
12. VA will process all Supply Fund transactions involving cash collections and disbursements under an approved Treasury Account Symbol (TAS) (e.g., 36X4537).
13. At the end of each fiscal year, VA’s Secretary will determine the amount of excess cash in the Supply Fund, if any. Excess cash is defined as monies not needed to maintain an adequate inventory level and effective financial management of the Supply Fund. Excess cash will be transferred to the Department of the Treasury as miscellaneous receipts.

100502 Supply Fund Uses

1. VA will use Supply Fund collections to pay for:
   • Expenses incurred by OAL and OPAL; 
   • Expenses related to overhead operations of the Fund;
   • Repair, inspection, and testing costs of Supply Fund property; and  
   • Incidental charges for transporting and storing Supply Fund property.
2. VA will not use Supply Fund collections to pay for expenses associated with building a new structure or refurbishing an existing structure. Such expenses must be paid by the appropriate construction appropriation account.
3. OGC has opined that the Supply Fund may enter into agreements for turnkey assisted acquisitions to procure equipment and installation of that equipment through the Supply Fund. For more information on how to use the Supply Fund for “turnkey” equipment purchases see VAOPGCADV 1-2021.
4. In accordance with P.L. 83-149 (July 27, 1953) and 38 U.S.C. § 8121, the Supply Fund is authorized to directly fund all information technology (IT) expenses necessary for the maintenance and operation of the VA Supply System, in lieu of using the IT Systems account. Public Law 83-149 (July 27, 1953) codified at 38 U.S.C. § 8121, authorizes the VA Supply Fund to fund all expenses and equipment necessary for the maintenance and operation of the Supply System including Automatic Data Processing (ADP) software and systems. Because there is no clear indication in the current (or any prior) appropriations act that Congress intended to repeal, amend, or override the Supply Fund authority and alter Supply Fund operations with respect to ADP and other support systems, IT needed to operate and maintain the Supply System should continue to be funded by the Supply Fund in accordance with the Supply Fund authorization statute (not the VA IT Systems account). This conclusion recognizes the statutory rule of construction that two statutes should be construed harmoniously to give effect to both however possible.

100503 Supply Fund Accounting

1. The Supply Fund uses the modified accrual accounting method, which is a combination of accrual and cash basis accounting.
   1. Supply Fund accounting transactions will be recorded under the modified accrual accounting method such that operating expenses are recognized in the period in which they occur; and
   2. Capital expenses and other long-term assets are not recognized as expenses (capitalized) until they are used.
2. Supply Fund staff will reconcile proprietary and budgetary information monthly in accordance with all applicable rules and regulations.
3. The Supply Fund’s control and subsidiary accounts will be reconciled monthly by Supply Fund staff. To the extent possible, inaccuracies or discrepancies disclosed will be located and adjusted before preparation and submission of financial reports.
4. The Supply Fund will prepare an annual business-type budget for operations under the fund.
5. VA will use the Supply Fund budget authority to incur obligations, and it will recognize revenue on a ‘fee-for-service’ basis.
6. Services provided by the Supply Fund will be on a reimbursable basis.
7. The VA Supply Fund will use reimbursable authority as authorized via an OMB approved SF-132 and funded via a fully authorized (and customer obligated) IAA to procure goods and services for customers who have established interagency agreements.
8. Cash receipts resulting from items such as: fees charged to Supply Fund customers, property returned to the supply system when no longer required by activities to which it had been furnished, the disposal of scrap, sale of excess or surplus personal property of the fund, and monies from carriers and others for loss or damage to personal property may be used to procure goods and services for the Supply Fund.
9. To keep inventory low, VA’s Supply Fund will rely on Just-In-Time (JIT) deliveries from suppliers whenever possible.
10. Supply fund customers must obligate the appropriate funds upon signature of the buy/sell agreement (i.e., Paper Form or G-Invoicing).
11. The Supply Fund’s accounting system must conform to the accounting principles, standards, and general requirements prescribed for VA as a whole; and must provide for the integration of the Supply Funds accounts with those of VA.

100504 Supply Fund Reporting

1. The VA Supply Fund will adhere to all VA reporting requirements.
2. The Supply Fund will prepare consolidated financial statements independent of VA’s consolidated financial statements.
3. The Supply Funds consolidated financial statements will be prepared in accordance with Federal Accounting Standards Advisory Board (FASAB) standards and related concepts, which constitute Federal generally accepted accounting principles.
4. The VA Supply Fund will provide information for inclusion in VA’s quarterly and year-end consolidated financial statements Governmentwide Treasury Account Symbol Adjusted Trial Balance System (GTAS) and Treasury Report on Receivables (TROR).
5. VA’s Supply Fund will utilize the United States Standard General Ledger (USSGL) to identify Supply Fund specific activities that are reported both separately by the fund and as part of VA’s consolidated quarterly and annual financial reporting cycles.

1006 Authorities and References

• United States Code (U.S.C.)
  • 31 U.S.C. § 1535, Agency agreements
  • 31 U.S.C. § 3512, Executive Agency Accounting and Other Financial Management Reports and Plans
  • 31 U.S.C. § 3515, Financial Statements of Agencies
  • 38 U.S.C. § 8121, Revolving supply fund
  • 41 U.S.C. § 3902, Severable services contracts for periods crossing fiscal years
• National Acquisition Center (NAC)
• NAC Federal Supply Schedule (FSS)
• Office of Management and Budget (OMB) Circulars  
  • A-11, Preparation, Submission, and Execution of the Budget
  • A-123, Management’s Responsibility for Enterprise Risk Management and Internal Control
  • A-130, Managing Information as a Strategic Resource
  • A-136, Financial Reporting Requirements – Revised
• Service and Distribution Center (SDC), Hines, IL
• Strategic Acquisition Center (SAC)
• Statement of Federal Financial Accounting Standards (SFFAS) 7,
• Accounting for Revenue and Other Financing Sources and Concepts for Reconciling Budgetary and Financial Accounting
• Technology Acquisition Center (TAC)
• Treasury Federal Account Symbols and Titles (FAST) Book
• Treasury Financial Manual (TFM) Volume 1, Part 2, Chapter 1500, Description of Accounts Relating to Financial Operations
• VA Financial Policy Library
• VAOPGCADV 1-2021, VA OGC Law Library Memorandum re: Use of the Supply Fund for “Turnkey” Equipment Purchases

1007 Rescissions

This chapter rescinds Volume II, Chapter 10A – Supply Fund, dated October 2023.