I believe the FAA regulates users of the NAS, aircraft, and airmen. While the military has their own certification processes and airspace, they are not normally exempt from complying with the FARs while operating in the NAS, nor are public aircraft flown by government agencies. I suggest you read Advisory Circular AC 00-1.1A, which outlines its authorities over Public Aircraft Operations. It basically says that public (government) aircraft "must continue to comply with the regulations applicable to all aircraft operating in the NAS." This is not optional or a courtesy. From the AC:
"e. What Oversight of PAO Does the FAA Have? The FAA has limited oversight of PAO,
though such operations must continue to comply with the regulations applicable to all aircraft
operating in the NAS. The government entity conducting the PAO is responsible for oversight of
the operation, including aircraft airworthiness and any operational requirements imposed by the
government entity. The government agency contracting for the service assumes the responsibility
for oversight of a PAO."
https://www.faa.gov/documentLibrary/media/Advisory_Circular/AC_00-1_1A.pdf
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