department of defense agency financial report fiscal year 2012

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Department of Defense Agency Financial Report for FY 2012 claims receivable, and refunds receivable. Allowances for uncollectible accounts due from the public are based upon analysis of collection experience by fund type. The DoD does not recognize all allowance for estimated uncollectible amounts from other Federal agencies. Claims against other Federal agencies are to be resolved between the agencies in accordance with dispute resolution procedures defined in the Intragovernmental Business Rules published in the Treasury Financial Manual. 1.L. Direct Loans and Loan Guarantees The DSCA administers the FMF program on behalf of the EOP. Direct loans and loan guarantees are authorized by sections 23 and 24 of the AECA of 1976, as amended, Public Law (P.L.) 90-269, as amended, and section 503(a) and other specific legislation. These loans and guarantees assist friendly foreign countries and international organizations in purchasing U.S. defense articles and services. 1.M. Inventories and Related Property The FMS Trust Fund and the accounts for funds appropriated for security assistance do not maintain inventory. The defense articles are provided to the FMS customer from the U.S. Government or the contractor pursuant to a contract with the U.S. Government. Defense articles sold from the DoD or the U.S. Coast Guard are assets of the providing component until title is transferred to foreign customer. 1.N. Investments in U.S. Treasury Securities Not applicable 1.O. General Property, Plant and Equipment Not applicable 1.P. Advances and Prepayments When advances are permitted by law, legislative action, or presidential authorization, the DoD’s policy is to record advances and prepayments in accordance with USGAAP. As such, payments made in advance of the receipt of goods and services are reported as an asset on the Balance Sheet. The DoD’s policy is to expense and/or properly classify assets when the related goods and services are received. Not all military services who execute on behalf of DSCA have implemented this policy primarily due to system limitations. 1.Q. Leases Lease payments for the rental of DSCA operating facilities are contracted for and classified as operating leases. The DSCA, as the lessee, receives the use and possession of leased property, for example real estate, from a lessor in exchange for payment of funds. An operating lease does not substantially transfer all the benefits and risk of ownership. Payments for operating leases are charged to expenses over the lease terms as it becomes payable. Office space and leases are funded by the FMS Trust Fund. These costs were gathered from existing operating leases and General Services Administration bills, and interservice support ADDENDUM B Unaudited Financial Statements – DSCA B-10
Department of Defense Agency Financial Report for FY 2012 agreements. Future year projections use the Consumer Price Index. The FMS Trust Fund and the accounts for funds appropriated for security assistance do not have capital leases. 1.R. Other Assets Other assets includes civil service employee pay advances, travel advances, and certain contract financing payments that are not reported elsewhere on the FMS Trust Fund and the accounts for funds appropriated for security assistance Balance Sheet. The FMS Trust Fund and the accounts for funds appropriated for security assistance conduct business with commercial contractors using two primary types of contracts: fixed price and cost reimbursable. Contract financing payments are defined in the Federal Acquisition Regulations (FAR), Part 32, as authorized disbursements to a contractor prior to acceptance of supplies or services by the Government. These payments are designed to alleviate the potential financial burden on contractors performing on certain long-term contracts and facilitate competition for defense contracts. Contract financing payments clauses are incorporated in the contract terms and conditions and may include advance payments, performance-based payments, commercial advance and interim payments, progress payments based on cost, and interim payments under certain cost-reimbursement contracts. It is DoD policy to record certain contract financing payments as other assets. Contract financing payments do not include invoice payments, payments for partial deliveries, lease and rental payments, or progress payments based on a percentage or stage of completion. The Defense Federal Acquisitions Regulation Supplement authorizes progress payments based on a percentage or stage of completion only for construction of real property, shipbuilding, and ship conversion, alteration, or repair. Progress payments based on percentage or stage of completion are reported as Construction in Progress. 1.S. Contingencies and Other Liabilities The SFFAS No. 5, Accounting for Liabilities of the Federal Government, as amended by SFFAS No. 12, “Recognition of Contingent Liabilities Arising from Litigation,” defines a contingency as an existing condition, situation, or set of circumstances that involves an uncertainty as to possible gain or loss. The uncertainty will be resolved when one or more future events occur or fail to occur. The FMS Trust Fund and the accounts for funds appropriated for security assistance recognize contingent liabilities when past events or exchange transactions occur, a future loss is probable, and the loss amount can be reasonably estimated. Financial statement reporting is limited to disclosure when conditions for liability recognition do not exist but there is at least a reasonable possibility of incurring a loss or additional losses. The FMS Trust Fund and the accounts for funds appropriated for security assistance risk of loss due to contingencies arise as a result of pending or threatened litigation or claims and assessments due to events such as aircraft, ship, and vehicle accidents; medical malpractice; property or environmental damages; and contract disputes. ADDENDUM B Unaudited Financial Statements – DSCA B-11
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