department of defense agency financial report fiscal year 2012

Department of Defense Agency Financial Report for FY 2012
Additionally, the Department receives allocation transfers from certain funds meeting the
OMB exception and all related activity is included in the Department’s financial statements.
The exceptions reported by the Department include South Dakota Terrestrial Wildlife Habitat
Restoration, Inland Waterways and Harbor Maintenance. The Department receives allocation
transfers for the Security Assistance programs that meet the OMB exceptions for EOP funds.
These funds are reported separately from the DoD financial statements based on an
agreement with OMB.
As a parent, the Department allocates funds to the Departments of Transportation and
Agriculture, and reports all related activity in these financial statements.
1.D. Basis of Accounting
The Department’s financial management systems are unable to meet all full accrual
accounting requirements. Many of the Department’s financial and nonfinancial feeder
systems and processes were designed and implemented prior to the issuance of USGAAP.
These systems were not designed to collect and record financial information on the full
accrual accounting basis as required by USGAAP. Most of the Department’s financial and
nonfinancial legacy systems were designed to record information on a budgetary basis.
The Department’s financial statements and supporting trial balances are compiled from the
underlying financial data and trial balances of the Military Services and Defense Agencies
and their sub-entities. The underlying data is largely derived from budgetary transactions
(obligations, disbursements, and collections), from nonfinancial feeder systems, and
accruals made for major items such as payroll expenses, accounts payable, and
environmental liabilities. Some of the sub-entity level trial balances may reflect known
abnormal balances resulting largely from business and system processes. At the
consolidated level these abnormal balances may not be evident. Disclosures of abnormal
balances are made in the applicable footnotes, but only to the extent that the abnormal
balances are evident at the consolidated level.
The Department is determining the actions required to bring financial and nonfinancial
feeder systems and processes into compliance with USGAAP. One such action is the current
revision of accounting systems to record transactions based on the U.S. Standard General
Ledger (USSGL). Until all of the Department’s financial and nonfinancial feeder systems and
processes are able to collect and report financial information as required by USGAAP, the
Department’s financial data will be derived from budgetary transactions, data from
nonfinancial feeder systems, and accruals.
1.E. Revenues and Other Financing Sources
The Department receives congressional appropriations as financing sources for general
funds that expire annually, on a multi-year basis, or do not expire. When authorized by
legislation, these appropriations are supplemented by revenues generated by sales of goods
or services. The Department recognizes revenue as a result of costs incurred for goods and
services provided to other Federal agencies and the public. Full-cost pricing is the
Department’s standard policy for services provided as required by OMB Circular No. A-25,
User Charges. The Department recognizes revenue when earned within the constraints of its
current system capabilities. In some instances, revenue is recognized when bills are issued.
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Financial Information