Department Of Defense Agency Financial Report 2007 - Section 2: Financial Information Page 26
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82Department of Defense Agency Financial Report 2007
Section 2: Financial Information
funds. The Department uses these appropriations and funds to execute its missions and subsequently report on resource
usage.
General funds are used for financial transactions funded by congressional appropriations, including personnel, operation and
maintenance, research and development, procurement, and military construction accounts.
Working capital funds (WCF) received funding to establish an initial corpus through an appropriation or a transfer of
resources from existing appropriations or funds. The corpus finances operations and transactions that flow through the
fund. The WCF resources the goods and services sold to customers on a reimbursable basis and maintains the corpus.
Reimbursable receipts fund future operations and generally are available in their entirety for use without further congressional
action. At various times, the Congress provides additional appropriations to supplement the WCF as an infusion of cash
when revenues are inadequate to cover costs within the corpus.
Trust funds contain receipts and expenditures of funds held in trust by the government for use in carrying out specific
purposes or programs in accordance with the terms of the donor, trust agreement, or statute. Certain trust and special funds
may be designated as earmarked funds. Earmarked funds are financed by specifically identified revenues, required by statute
to be used for designated activities, benefits or purposes, and remain available over time. The Department is required to
separately account for and report on the receipt, use and retention of revenues and other financing sources for earmarked
funds.
Special fund accounts are used to record government receipts reserved for a specific purpose.
Deposit funds are used to record amounts held temporarily until paid to the appropriate government or public entity. The
Department is acting as an agent or custodian for funds awaiting distribution.
The Department is a party to allocation transfers with other federal agencies as a transferring (parent) or receiving (child)
entity. Allocation transfers are an agency’s legal delegation of its authority to obligate budget authority and outlay funds
to another agency. Generally, all financial activity related to these allocation transfers (e.g., budget authority, obligations,
outlays) is reported in the financial statements of the parent entity. Exceptions to this general rule apply to specific funds for
which OMB has directed that all activity be reported in the financial statements of the child entity. These exceptions include
U.S. Treasury-Managed Trust Funds, Executive Office of the President (EOP), and all other funds specifically designated by
OMB.
The Department is a receiving (child) party to allocation transfers for the following agencies: Departments of Agriculture,
Interior, Energy, and Transportation; the Appalachian Regional Commission; and the Federal Highway Administration.
Additionally, the Department is a party to other allocation transfers as the child for certain funds meeting the OMB exception
and all related activity is thus 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, and the EOP.
As the parent, the Department allocates funds to the Departments of Transportation and Agriculture and reports related
activity in its financial statements.
1.D. Basis of Accounting
For FY 2007, the Department’s financial management systems are unable to meet all of the requirements for full accrual
accounting. Many of the Department’s financial and nonfinancial feeder systems and processes were designed and
implemented prior to the issuance of GAAP for federal agencies. These systems were not designed to collect and record
financial information on the full accrual accounting basis as required by GAAP. Most of the Department’s financial and
nonfinancial legacy systems were designed to record information on a budgetary basis.
The Department has undertaken efforts to determine the actions required to bring its financial and nonfinancial feeder
systems and processes into compliance with GAAP. One such action is the current revision of its 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 updated to collect and report financial information as required by GAAP,
the Department’s financial data will be derived from budgetary transactions (obligations, disbursements, and collections),
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