department of defense agency financial report fiscal year 2012

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Department of Defense Agency Financial Report for FY 2012 Costs and Exchange Revenue Dollars in Millions As of September 30 2012 Restated 2011 2. Earned Revenue A. Intragovernmental Revenue $ (27,308.0) $ (37,028.9) B. Non-Federal Revenue $ (55,996.8) $ (78,011.0) C. Total Revenue $ (83,304.8) $ (115,039.9) 3. Losses/(Gains) from Actuarial Assumption Changes for Military Retirement Benefits $ 70,427.3 $ (12,369.8) 4. Costs Not Assigned to Programs $ 0.0 $ 0.0 5. (Less: Earned Revenues) Not Attributed to Programs $ 0.0 $ 0.0 Total Net Cost $ 768,853.6 $ 684,225.5 Abnormal Balances Operations, Readiness & Support Intragovernmental Gross Cost on the SNC has an abnormal balance of $56.3 billion. The current business practice is to include elimination reporting in this program group. Operations, Readiness & Support Intragovernmental Earned Revenue on the SNC has an abnormal balance of $13.7 billion. The current business practice is to include elimination reporting in this program group. Earned Revenue includes an abnormal balance of $93.7 million in USSGL account 5909 (Contra Revenue for Other Revenue). During FY 2012, the prior year deferred revenue balance was reversed and the current year recorded. The prior year deferred revenue was greater than the current year causing the abnormal balance. Restatements The Department identified an understatement of General Property, Plant and Equipment. This correction increased the FY 2011 net cost by $72.2 million. This prior period adjustment is reflected in the schedule above as non-Federal Gross Cost in Procurement; Research, Development, Test and Evaluation. See Note 26, Restatements, for additional information. Other Disclosures The SNC represents the net cost of programs and organizations of the Department that are supported by appropriations or other means. The intent of the SNC is to provide gross and net cost information related to the amount of output or outcome for a given program or organization administered by a responsible reporting entity. The Department’s current processes and systems capture costs based on appropriation groups as presented in the schedule above. The lower level costs for major programs are not presented as required by the Government Performance and Results Act. The Department is in the process of reviewing available data and developing a cost reporting methodology as required by the Statement of Federal Financial Accounting Standards (SFFAS) No. 4, “Managerial Cost Accounting Concepts and Standards for the Federal Government”, as amended by SFFAS No. 30, “Inter-Entity Cost Implementation”. 120 Financial Information
Department of Defense Agency Financial Report for FY 2012 Intragovernmental costs and revenue represent transactions made between two reporting entities within the Federal Government. Public costs and revenues are exchange transactions made between the reporting entity and a non-Federal entity. The Department’s systems do not track intragovernmental transactions by customer at the transaction level. Buyer side expenses are adjusted to agree with internal seller side revenues. Expenses are generally adjusted by reclassifying amounts between Federal and non-Federal expenses. Intradepartmental revenues and expenses are then eliminated. The SNC presents information based on budgetary obligation, disbursement, and collection transactions, as well as data from nonfinancial feeder systems. Amounts are adjusted for accruals, such as payroll expenses, accounts payable, and environmental liabilities. The General Fund data is primarily derived from budgetary transactions (obligations, disbursements, and collections), data from nonfinancial feeder systems, and accruals made for major items. While Working Capital Funds primarily record transactions on an accrual basis, the systems do not always capture actual costs in a timely manner. The Department’s accounting systems generally do not capture information relative to heritage assets separately and distinctly from normal operations. The Department implemented SFFAS No. 33, “Pensions, Other Retirement Benefits, and Other Postemployment Benefits: Reporting the Gains and Losses from Changes in Assumptions and Selecting Discount Rates and Valuation Dates”. The standard requires the separate presentation of gains and losses from changes in long term assumptions used to estimate liabilities associated with pensions, other retirement benefits, and other postemployment benefits on the SNC. The SFFAS No. 33 also provides a standard for selecting the discount rate and valuation date used in estimating these liabilities. During FY 2011, based on SFFAS No. 33, the Department included all costs associated with the change in the actuarial liabilities for military retirement in “Losses/(Gains) from Actuarial Assumption Changes”. During FY 2012, the Department of Treasury and the Government Accountability Office provided additional guidance which specified only trend and other assumption changes should be recorded as “Losses/(Gains) from Actuarial Assumption Changes”. To ensure comparability, the FY 2011 column on the Statement of Net Cost has been updated to reflect the additional guidance. As a result, there may be inconsistencies between the FY 2011 column and the FY 2011 published statements. NOTE 19. DISCLOSURES RELATED TO THE STATEMENT OF CHANGES IN NET POSITION Abnormal Balances Net Cost of Operations includes an abnormal balance of $93.7 million in USSGL account 5909 (Contra Revenue for Other Revenue). During FY 2012, the prior year deferred revenue balance was reversed in the current year and the current year deferred revenue was recorded. The prior year deferred revenue was more than the current year deferred revenue causing this account balance to be abnormal. Nonexchange Revenue includes an abnormal balance of $26.4 million in USSGL account 5320 (Penalties and Fines Revenue). During 4th Quarter, FY 2012, penalties 121 Financial Information
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