Department Of Defense Agency Financial Report 2007 - Section 2: Financial Information Page 62
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82Department of Defense Agency Financial Report 2007
Section 2: Financial Information
7
The model’s resulting projections were analyzed to ensure the estimates were reliable. The analysis was based on four tests:
(1) a sensitivity analysis of the model of economic assumptions, (2) a comparison of the percentage change in the liability
amount by agency to the percentage change in the actual incremental payments, (3) a comparison of the incremental paid
losses (the medical component in particular) in CBY 2007 (by injury cohort) to the average pattern observed during the prior
three charge back years, and (4) a comparison of the estimated liability per case in the 2007 projection to the average pattern
for the projections for the most recent three years.
Voluntary Separation Incentive (VSI) Program
The P.L. 102-190 established the VSI program to reduce the number of military personnel on active duty. The VSI Board of
Actuaries approved the assumed annual interest rate of 4.5% used to calculate the actuarial liability. Since the VSI program
is no longer offered, the actuarial liability is expected to continue to decrease with benefit outlays and increase with interest
cost. The liability is calculated annually at the present value of all remaining payments.
Market Value of Investments in Market-based and Marketable Securities: $573.1 million
DoD Education Benefits Fund (EBF)
The P.L. 98-525 established the EBF program to recruit and retain military members and aid in the readjustment of military
members to civilian life. The EBF Board of Actuaries approved the assumed interest rate of 5% used to calculate the actuarial
liability.
Market Value of Investments in Market-based and Marketable Securities: $1.4 billion
Other Federal Employment Benefits
Other Federal Employment Benefits primarily consists of accrued pensions and annuities and an estimated liability for
Incurred But Not Reported medical claims not processed prior to fiscal year end.
Note 18. General Disclosures Related to the Statement of Net Cost
Intragovernmental Costs and Exchange Revenue
As of September 30
2007
2006 Restated
(amounts in millions)
Intragovernmental Costs
$
27,266.6
$
31,990.6
Public Costs
640,871.8
602,553.4
Total Costs
668,138.4
634,544.0
Intragovernmental Earned Revenue
(20,465.9)
(24,327.1)
Public Earned Revenue
(25,220.5)
(24,168.6)
Total Earned Revenue
(45,686.4)
(48,495.7)
Net Cost of Operations
$
622,452.0
$
586,048.3
The Statement of Net Cost (SNC) represents the net cost of programs and organizations of the Federal Government 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 do not capture and report accumulated costs for major programs based upon the performance
measures 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
Standard No. 4, “Managerial Cost Accounting Concepts and Standards for the Federal Government.”
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