Department Of Defense Agency Financial Report 2007 - Section 2: Financial Information Page 28
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82Department of Defense Agency Financial Report 2007
Section 2: Financial Information
0
Federal Employees’ Compensation Act transactions with the Department of Labor, and benefit program transactions with the
Office of Personnel Management.
The Department’s proportionate share of public debt and related expenses of the Federal Government is not included. The
Federal Government does not apportion debt and its related costs to federal agencies. The Department’s financial statements,
therefore, do not report any portion of the public debt or interest thereon, nor do the statements report the source of public
financing, whether from issuance of debt or tax revenues. Generally, financing for the construction of the Department’s
facilities is obtained through appropriations. To the extent this financing ultimately may have been obtained through the
issuance of public debt, interest costs have not been capitalized since the U.S. Treasury does not allocate such costs to the
Department.
1.H. Transactions with Foreign Governments and International Organizations
Each year, the Department sells defense articles and services to foreign governments and international organizations under
the provisions of the Arms Export Control Act of 1976. Under the provisions of the Act, the Department has authority to
sell defense articles and services to foreign countries and international organizations generally at no profit or loss to the U.S.
Government. Payment in U.S. dollars is required in advance.
The Department additionally reports foreign military sales transactions on behalf of the Executive Office of the President.
1. I. Funds with the U.S. Treasury
The Department’s monetary resources are maintained in U.S. Treasury accounts. The disbursing offices of Defense Finance
and Accounting Service (DFAS), the Military Departments, the U.S. Army Corps of Engineers (USACE), and the Department
of State’s financial service centers process the majority of the Department’s cash collections, disbursements, and adjustments
worldwide. Each disbursing station prepares monthly reports to the U.S. Treasury on check issues, electronic fund transfers,
interagency transfers, and deposits.
In addition, DFAS sites and USACE Finance Center submit reports to the U.S. Treasury by appropriation on interagency
transfers, collections received, and disbursements issued. The U.S. Treasury records these transactions to the applicable Fund
Balance with Treasury (FBWT) account. The Department’s recorded balance in FBWT accounts and U.S. Treasury’s FBWT
accounts must balance monthly.
1.J. Foreign Currency
Cash is the total of cash resources under the control of the Department, which includes coin, paper currency, negotiable
instruments, and amounts held for deposit in banks and other financial institutions. Foreign currency consists of the total U.S.
dollar equivalent of both purchased and nonpurchased foreign currencies held in foreign currency fund accounts. Foreign
currency is valued using the U.S. Treasury prevailing rate of exchange.
The majority of cash and all foreign currency is classified as nonentity and is restricted. Amounts reported consist
primarily of cash and foreign currency held by disbursing officers to carry out their paying, collecting, and foreign currency
accommodation exchange missions. Cash seized during Operation Iraqi Freedom is restricted to assist the Iraqi people and
support the restoration of Iraq.
The Department conducts a significant portion of its operations overseas. The Congress established a special account
to handle the gains and losses from foreign currency transactions for five general fund appropriations: operation and
maintenance, military personnel, military construction, family housing operation and maintenance, and family housing
construction. The gains and losses are calculated as the variance between the exchange rate current at the date of
payment and a budget rate established at the beginning of each fiscal year. Foreign currency fluctuations related to other
appropriations require adjustments to the original obligation amount at the time of payment. The Department does not
separately identify foreign currency fluctuation transactions.
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