AFinP-1 financial principles for NATO support arrangements

What it is

AFinP-1, an Allied Financial Publication, sets the financial principles and procedures NATO nations use in two situations: when one nation provides support to another, and when a group of nations sets up a jointly funded, multinational arrangement. Nations record their agreement to use it in STANAG 6025, which is the publication's cover and the reason it carries any institutional standing at all. The current edition, Edition B Version 2, took effect in January 2024 and superseded Edition B Version 1.

AFinP-1 addresses nations, not companies. It is written in terms of "participating nations," a "providing party" and a "demanding party" for direct support, and the "participants" in a multinational arrangement. A company only meets its content where a contract or a national authority carries these principles down into that company's own paperwork, and the document is explicit, twice, that it does not itself entitle any nation to receive support or commit any nation to provide it: it only supplies the financial mechanics once the nations concerned have concluded a separate agreement or arrangement covering the specific case.

Two terms with precise meanings

The publication gives two everyday words narrower, defined meanings. An "agreement" is "a legally binding document." An "arrangement" is "bilateral or multilateral statements of mutual understanding," and the document names a Memorandum of Understanding, a Technical Arrangement, a Letter of Intent and a Joint Declaration as examples. Two nations recorded reservations against how those definitions are then used: the Netherlands objected that "agreement" and "arrangement" are used "interchangeably throughout the document," and preferred a single term; Norway read the requirement that support "will be governed by agreements" together with the definitions as potentially requiring a treaty-level instrument for host nation support, and reserved the right to keep using arrangements instead. Nations also accept common NATO financial terminology, and the publication leaves existing bilateral or multinational agreements untouched.

Direct support, nation to nation

Once an agreement is in place, "prior to the commencement of the provision of support," cost recovery follows one of several bases unless support is provided free of charge: reciprocal arrangements aiming to waive charges altogether where national law allows, full cost, or incremental cost, defined as all additional costs the providing party incurs that it would not have incurred had the support not been provided, with the elements listed in Annex A. Where national law permits, a set of further principles apply: administrative overheads and contract administration costs are not charged, except where the providing party is itself charged by a third party for the support; support is free of duties, taxes and similar charges on a reciprocal basis; interest, sunk capital recovery and depreciation are not charged; equipment attrition caused by the demanding party may be recovered; there is no charge for leasing the providing party's land; reimbursement can be made in kind; healthcare follows Article IX(5) of the NATO SOFA; and welfare, catering and accommodation cost the demanding party's members no more than the providing party's own forces pay. Warranties extend no further than national law or an international agreement already requires, and the demanding party bears the cost of any legal proceedings the providing party brings on its behalf.

The process runs on a set timetable. The providing party prepares a cost estimate in the agreed currency and sends it within a reasonable period. Invoices must carry the minimum content set out in Annex B, and an electronic invoice has to be the output of an authorised conversion and carry a signature. Payment is due, in principle, within 60 days of the demanding party receiving the invoice (clause 2.3(5)), in the agreed currency, with bank and currency-exchange charges borne by the demanding party. Cost information is made available on request, to give as much transparency as possible to the pricing process. Where advance payment is not required, invoices are preferably submitted within 30 days of the activity's completion (clause 2.3(7)). The providing party keeps billing and supporting documents under its own national law, open to inspection by the demanding party on request, in the NATO standard format for request, receipt, return and invoice set out in Annex A of STANAG 2034 (clause 2.3(8)). Claims and damages follow Article VIII of the NATO SOFA, or whatever the participants have separately agreed.

Multinationally funded arrangements

Because practice varies with the nature of each project, this half of the publication is deliberately general rather than a fixed procedure. A multinational arrangement between two or more nations has to identify its funding sources and cost share, and address joining, withdrawal, termination and arbitration up front, either directly or by referring to supplementary financial rules, regulations or budgetary policies. Joining an existing arrangement needs every existing party's approval and may carry an accession quota that weighs capital expenditure already incurred, inflation and depreciation, and it usually changes the cost share. A withdrawal has to specify the value and duration of the participant's remaining financial obligations. A termination has to address how the remaining multinationally funded assets are allocated. Disputes over interpretation or application are to be resolved between the participants at the lowest level possible.

The financial principles and procedures such an arrangement adopts are expected to cover: the budget year and financial period, the budget currency and structure, budget preparation and approval, budget execution (commitments, payments, receipts, transfers, carry-forward and cancellation of credits), national contributions and calls for funds, deposit and investment of funds, financial and budgetary management responsibilities, property administration (write-off, loss or damage, residual value), procurement procedures, accounting and reporting, financial statements, internal control, and auditing. The document lists these as headings an arrangement's own rules must fill in; it does not fill them in itself.

What counts as a cost

Annex A's incremental costing matrix sorts recoverable costs into four groups: personnel, including the difference in pay, allowances and temporary-duty costs between supporting one party alone and supporting both; operation and maintenance of equipment, computed on fuel, spares and repairs by consumption or usage, with ships costed only on the amount above what the providing party would have spent regardless; supplies, materials, training aids and ammunition, at replacement value for items not returned; and operation and maintenance of infrastructure and facilities, costed above the providing party's own baseline, or pro-rated by usage for contracted services.

Minimum invoice content

Annex B sets what an invoice needs, whichever cost basis applies: an invoice number; the "To" and "From" parties' names, full address and company ID, with a VAT number if registered; the invoice date; full bank details, including IBAN and SWIFT, or a routing number and BIC where there is no IBAN; payment type, mode, due date and currency; a reference to the specific order or contract; and a full description of the goods or services delivered, with quantity, unit price, tax and total amount. Where relevant, it also expects the means of transport, the time and place of delivery, the receiving military unit, the date of taxable supply, and the contact details of the person responsible.

Getting the document

NATO publishes AFinP-1 through the NATO Standardization Document Database at no charge. ComplyTrain does not sell it or host a copy; the NSDD listing for AFinP-1 is the source.

Standards it references

• STANAG 2034Background