0501 Overview

This chapter establishes the Department of Veterans Affairs’ (VA) policies for accounting and reporting investment transactions.

Key points covered in this chapter:

• VA holds investments in Treasury securities comprised of non-marketable Special Bonds, Certificates, Notes and non-Federal trust investments;
• VA will recognize marketable securities at acquisition cost;
• VA will record allowances to reflect estimated losses of principal;
• VA will reconcile Treasury investment fund balances in accordance with Treasury Financial Manual (TFM) Volume I, Part 2, Chapter 4300; and
• VA will report investments in accordance with Statement of Federal Financial Accounting Standards (SFFAS) 1, and Office of Management and Budget (OMB) Circular A-136.

0502 Revisions

See changelog.

0503 Definitions

Accrued Interest – Interest earned on a security instrument that has not yet been paid or received.

Classification, Transactions and Accountability (CTA) – Federal Program Agencies use the Classification, Transactions and Accountability Module within the Central Accounting Reporting System (CARS) to reclassify or correct their accounting activity which serves as a basis of Treasury’s publications to Congress and the public regarding federal revenues and expenditures.

Discount – The difference between the price and the par (face) value of an investment when less than par value is paid or received for a security.

Discounted Cash Flow Analysis – A valuation method that accounts for the time value of money, or the present value of projected future transactions.

Interest Method – The method used to amortize premium and discount over the life of the Treasury security.

Marketable Treasury Securities – Debt securities, including Treasury bills, notes and bonds, offered by Treasury to the marketplace which can then be bought and sold on securities exchange markets. Their bid (high) and ask (low) prices are publicly quoted by the marketplace.

• Treasury bills are issued at a discount, redeemed at the par (face value) amount on the maturity date, and have maturities of not more than one year;
• Treasury notes have maturities of at least one year, but not more than ten years; and
• Treasury bonds have maturities of more than ten years.

Market-based Treasury Securities – Debt securities issued by Treasury to Federal entities without statutorily determined interest rates. Although the securities are not marketable, their terms, including price and interest rates, mirror the terms of marketable Treasury securities.

Non-marketable Treasury Securities – Special series debt securities that Treasury issues to Federal entities at par (face) value. The securities are redeemed at face value on demand; investing entities recover the full amounts invested.

Premium – The difference between the price and the par value when more than par value is paid or received for a security.

Price – The market price (or value) for a security as of noon on the day of the investment or redemption.

Principal or par value – The stated or face amount of a security.

Subordinated Position – Ranking of debt below more senior loans or securities with respect to claims on assets or earnings by creditors.

Treasury Direct FedInvest Application – FedInvest is a Federal Investment Program application owned and maintained by the Bureau of the Fiscal Service, to be used by federal agencies that have investment authority in Government Accounts Series Securities.

Unrealized Discount – The value of the discount carried until a security is redeemed or matures.

0504 Roles and Responsibilities

Under Secretaries, Assistant Secretaries, Other Key Officials, Administration and Staff Office CFOs, and Fiscal Officers are responsible for ensuring compliance with the policies outlined in this chapter.

Financial Services Center (FSC) is responsible for providing support for the accounting and reporting of VA’s investments, including posting, reconciling, and recording asset transactions and events, as requested.

Veterans Benefit Administration (VBA) is responsible for supporting the accounting and reporting of investments within VA’s insurance program and investments in trust certificates issued by the American Housing Trusts.

0505 Policies

050501 General Policies

1. VA invests in three types of Treasury securities:
   • non-marketable securities;
   • market-based securities expected to be held to maturity; and
   • marketable securities expected to be held to maturity.
2. VA will use the FedInvest application to initiate transactions in Government Account Series securities, to submit transaction requests, or review reports.
3. VA will account for and report investment transactions in accordance with the guidance in SFFAS 1, TFM 2-4300 and OMB Circulars A-11 and A-136.

050502 Valuation of Investments

1. VA will recognize Treasury investment securities at their acquisition cost which equals the security’s face value plus or minus a premium or discount on the investment.
2. If the acquisition is made in exchange for non-monetary assets, the acquired security should be recognized at the fair market value of either the security acquired or the asset given up, whichever is more determinable.
3. Subsequent to their acquisition, VA investments in Treasury securities will be carried at their acquisition cost plus or minus amortization of premium or discount, if any.
4. Whether the investment is in non- marketable, market-based or marketable Treasury securities, amortization will occur over the life of the underlying securities, as follows:
   1. For Treasury bonds, VA will use the interest method, and;
   2. For Treasury bills, VA will use the straight-line method.
5. VA may redeem investments at any time for their original purchase price.
6. Interest rates for Treasury special securities will be based on average market yields for comparable Treasury issues.
7. Special bonds, which mature during various years, will generally be held to maturity unless needed to finance insurance claims and dividends.
8. VBA will record allowances to reflect estimated losses of principal as a result of the subordinated position in housing trust certificates.
9. VBA will base the estimated allowance computations upon discounted cash flow analysis.
10. VBA will use income derived from its housing trust certificates to fund the Housing Trust Reserve Fund. The Housing Trust Reserve Fund will help VA cover shortfalls in scheduled monthly principal and interest on loans and realized losses incurred in the prior month.

050503 Accounting for Investments

1. VA will account for its investments in Treasury securities separately from investments in securities issued by non-Federal entities.
2. VA will separate receipt accounts to distinguish between the different types of activities (investments, redemptions, and unrealized discounts) and will classify realized earnings as receipts.
3. Interest receivable will be recognized as it is earned on investments in interest- bearing securities.
4. FSC will reconcile investment fund balances with Treasury in accordance with TFM Volume I, Part 2, Chapter 4300.

050504 Reporting of Investments

1. VA will report investment transactions at par value through the Classification Transactions and Accountability (CTA) Module in the Central Accounting Reporting System to the Treasury Bureau of the Fiscal Service.
2. VA will report investments in the consolidated financial statements at cost (net of amortized premiums or discounts and accrued interest), which approximates market value.
3. VA will disclose in notes to the financial statements the components of investments, including the market value of the investments, in accordance with the reporting requirements of OMB Circular A-136.

0506 Authorities and References

• Central Accounting Reporting System (CARS), Types of Transactions Reported in CARS CTA
• SFFAS 1, Accounting for Selected Assets and Liabilities, paragraph 72
• Office of Management and Budget Circulars
  • A-11, Preparation, Submission, and Execution of the Budget, Part I, Section 20.12
  • A-136, Financial Reporting Requirements – Revised
• Treasury Financial Manual (TFM), Volume I, Part 2, Chapter 4300

0507 Rescissions

VA Financial Policy Volume V, Chapter 5 – Investments, September 2020.

0508 Approval

This policy was approved by the VA Chief Financial Officers’ Council on July 7, 2023.