0501 Overview

This chapter establishes the Department of Veterans Affairs’ (VA) financial policies regarding payroll accounting.

Key points covered in this chapter:

• VA will comply with Office of Management and Budget (OMB) Circular A-136, and Treasury Financial Manual Volume I, Part 2, Chapter 4700 when reporting salary, leave, and benefits in VA’s financial statements.
• VA’s payroll activities include entering employee information, maintaining and updating systems, monitoring data interfaces with the payroll provider, reconciling errors in payroll charges to VA’s appropriations, and reporting payroll expenses;
• Defense Finance and Accounting Service (DFAS) processes VA payroll transactions, except for VA’s Office of Inspector General (OIG), whose payroll is processed by Department of Agriculture’s National Finance Center; and
• Financial Services Center (FSC) processes and reconciles accounting transactions related to payroll expenses.

0502 Revisions

Section	Revision	Office	Reason for Change	Effective Date
Various	Full review	OFP	Full review of format standards, processes, and legislation	February 2026
0504	Edited FSC R&R	FSC	Enhance clarity	February 2026

For a complete list of previous policy revisions, see Appendix A: Previous Policy Revisions.

0503 Definitions

Central Accounting Reporting System (CARS) – Handles accounting and reporting for all Federal agencies. CARS is the electronic system of record for the Government’s financial data which provides streamlined agency reporting and supports Governmentwide standardization.

Defense Civilian Pay System (DCPS) – A payroll system operated by DFAS.

Fund Balance with Treasury (FBWT) – The aggregate amount of funds on deposit with Treasury, including general funds, deposit funds, trust funds, special funds, and revolving funds. FBWT is an asset of the VA and a liability of the General Fund of the Treasury. FBWT does not represent a net asset to the Government as a whole.

General Ledger (GL) – Provides a uniform chart of accounts and technical guidance for standardizing Federal agency accounting.

Treasury Account Symbol (TAS) – An identification code assigned by Treasury, in collaboration with OMB and VA, to an individual appropriation, receipt, or other fund account.

0504 Roles and Responsibilities

Defense Finance and Accounting Service (DFAS) is VA’s designated payroll service provider responsible for payroll processing, disbursing pay, making appropriate deductions, and reporting expenses to VA’s Lines of Accounting (LOAs).

Financial Services Center (FSC) is responsible for reconciling pay period salary expense recorded in VA accounting systems with DFAS and Treasury reports, entering necessary adjustments, monitoring the automated monthly accruals of salaries and benefits, correcting VA accounting systems payroll interface rejects, and providing financial reporting pay data.

0505 Policies

050501 General Policies

1. In accordance with the E-Government Act of 2002 e-Payroll Initiative, the Office of Management and Budget (OMB) selected the Defense Finance and Accounting Service (DFAS) to process VA’s payroll transactions, except for VA’s Office of Inspector General (OIG), whose payroll is processed by Department of Agriculture’s National Finance Center.
2. VA will transmit HR, timekeeping, and employee data to DFAS. DFAS will process and disburse payments and report transactions to VA, Treasury, and taxing authorities using the Defense Civilian Pay System (DCPS).
3. VA will recognize the full obligation for an incentive liability when the agreement is signed, including multi-year student loan awards and retention incentives. See Government Accountability Office (GAO) Publication B-325526 dated July 2014.
4. DFAS will calculate pay and other employee benefits and will generate salary payments in DCPS.
5. DFAS will provide VA details related to salaries and employee benefits paid as well as leave accrued and used, Leave and Earnings Statement, and W-2 data.
6. FSC will ensure that payroll transactions are interfaced to VA’s accounting system and that their effect is reflected in the General Ledger (GL).
7. FSC will reconcile each pay period’s accounting system data with VA’s Funds Balance with Treasury (FBWT) and DCPS salary cost reporting.
8. FSC will post necessary adjustments to VA’s accounting system in a timely manner.
9. On a monthly basis, FSC will reconcile payroll expense data recorded in the GL with VA accounting system records and Treasury balances using Treasury’s Central Accounting Reporting System (CARS). This reconciliation is performed by Treasury Account Symbol (TAS) for reporting purposes. Associated reporting adjustments are recorded to match CARS for unreconciled payroll items due to timing differences.

050502 Payroll Reporting

1. VA will comply with Office of Management and Budget (OMB) Circular A-136, and Treasury Financial Manual Volume I, Part 2, Chapter 4700 when reporting salary, leave, and benefits in VA’s financial statements.
2. VA will report end of fiscal year employee salary and benefit accruals in accordance with Statement of Federal Financial Accounting Standards (SFFAS) 1, and will report salary expense in VA’s financial statements.
3. VA will accrue salaries and benefits for services rendered in the period but not yet paid. See Volume VI, Chapter 10 – Employee Accrued Salaries and Benefits, for additional information.

0506 Authorities and References

• E-Government Act of 2002
• Federal Accounting Standards Advisory Board (FASAB) Handbook by Chapter
  • Statement of Federal Financial Accounting Standards (SFFAS) 1, Accounting for Selected Assets and Liabilities
• OMB Circulars,
  • A-136, Financial Reporting Requirements
• Treasury Financial Manual Volume I, Part 2, Chapter 4700, Federal Entity Reporting Requirements for the Financial Report of the United States Government
• GAO Appropriations Law – decision search,
  • B-325526, July 16, 2014, Obligation of Bonuses under Military Service Agreements
• VA Financial Policies
  • Volume VI, Chapter 10 – Employee Accrued Salaries and Benefits

0507 Rescissions

Volume XV, Chapter 5, Payroll Accounting, November 2022.

Appendix A: Prior Revisions

Section	Revision	Office	Reason for Change	Effective Date
Volume change	Move to Volume XV with other payroll chapters	OFP (047G)	Making Volume III available for obligations chapters	September 2023
0503	Add definitions	OFA & OFP	CARS, FBWT, GL and TAS merit definition.	November 2022
050501 General Policies	Section title change	OFP (047G)	Full update format standard	November 2022
050501C General Policies	Add incentive obligation recognition timing requirement	OFP (047G)	Share inquiry guidance	November 2022
All	Reformatted and consolidated	OFP (047G)	5-year Update	November 2020