**Department of Defense**

**Missile Defense Agency**

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**FY 2003**

**Annual Financial Statements**

Missile Defense Agency

FY 2003 Annual Financial Statements

**UNAUDITED**

**TABLE OF CONTENTS**

**SECTION PAGE**

####  Management's Discussion and Analysis 3

Overview

Organizational Structure

Program Description

Budgetary and Financial Aspects

Controls and Legal Compliance

Systems

Limitations to the Financial Statements

MDA's Future Challenges

**Principal Statements 13**

Balance Sheet

Statement of Net Cost

Statement of Changes in Net Position

Statement of Budgetary Resources

Statement of Financing

####  Footnotes to the Principal Statements 22

**Supporting Consolidating/Combining Statements 52**

Consolidating Balance Sheet

Consolidating Statement of Net Cost

Consolidating Statement of Changes in Net Position

Combining Statement of Budgetary Resources

Combining Statement of Financing

####  Required Supplementary Stewardship Information 61

**Required Supplementary Information 67**

FY 2003 ANNUAL FINANCIAL STATEMENTS

Department of Defense

Missile Defense Agency

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# Management's Discussion and Analysis

**Missile Defense Agency**

**FY 2003 Annual Financial Statements (Unaudited)**

######### Management's Discussion and Analysis

##### I. Overview

Missile Defense Agency's mission is to develop, test and prepare for
fielding a missile defense system. Using complementary interceptors,
land, sea, air, and space based sensors and battle management command
and control systems, the planned missile defense system will be able to
engage all class and ranges of ballistic missile threats.

The Missile Defense Agency's (MDA's) goal is to defend the United
States, its deployed forces and friends and allies from ballistic
missiles of all ranges in all phases of flight. To accomplish this goal,
MDA is pursuing an aggressive Research, Development, Test & Evaluation
program. In December 2002, the President directed DoD to accelerate the
fielding of a modest missile defense capability in support of Initial
Defense Operations. MDA will work with the Combatant Commanders and
Services to procure and field elements of the overall ballistic missile
defense system as soon as practicable. While there is only a single
ballistic missile defense system, there is no final or fixed missile
defense architecture. MDA employs a spiral development approach to
incorporate upgrades to the ballistic missile defense system, the goal
of which is to:

-   Field an initial capability in 2004-05 in accordance with the
    President's direction;

-   Add networked, forward-deployed ground-, sea-, and space-based
    sensors to make the interceptors more effective in 2006-07;

-   Add additional interceptors; and

-   Add layers of increasingly capable weapons and sensors, made
    possible by emerging technologies.

The President's decision to implement this approach is possible due to a
successful test program. During the past two years, MDA has achieved
four long-range, ground-based intercepts; three ship-based
exoatmospheric intercepts; five short-range, ground-based intercepts;
and the first flight of the Airborne Laser aircraft. A total of 55
flight tests, of which 17 were intercept tests, as well as 60 ground
tests were conducted during this time period. Free from the constraints
of the Anti-Ballistic Missile Treaty of 1972, MDA expanded its testing
programs to include previously prohibited activities such as the testing
of sea-based radars (Aegis SPY-1), Theater High Altitude Area Defense
(THAAD) radar, and airborne sensors (Airborne Laser Infrared Search and
Track sensor) against long-range targets.

The Agency uses an evolutionary acquisition approach that capitalizes on
missile defense technology advances and incorporates these improvements
to adjust to threat and policy changes as appropriate. Using Research,
Development, Test & Evaluation resources almost exclusively and in
conjunction with an evolutionary approach, the strategy capitalizes on
technological progression and provides for development, limited
production and deployment of initial ballistic missile defense
capabilities incrementally as soon as they are ready. Adopting an
evolutionary acquisition model, the ballistic missile defense system is
constructed around a "Capability-based Block" approach. Each ballistic
missile defense system block spans a two-year timeframe and continuously
builds capability into the ballistic missile defense system by
introducing new sensor and weapon projects, and/or by augmenting and
enhancing existing capabilities. As the new projects mature they will be
integrated into the ballistic missile defense system to increase the
capability to respond to the evolving threat. Ballistic missile defense
system block management includes decision points at which activities
will be evaluated on the basis of effectiveness within the overall
system, technical risk, deployment schedule and cost. From these
decision points, developmental activities will be accelerated, modified
or terminated depending on progress and promise.

##### II. Organizational Structure

The MDA Director provides overall program guidance and direction in
conjunction with the executive staff. In guiding the activities of MDA,
the Director uses a systematic approach to the establishment of program
guidance and the development of goals to ensure execution of that
guidance. The two-letters and program managers then use the director's
guidance to establish a supporting set of six-, twelve- and
twenty-four-month goals. These goals include at a minimum the
development of technologies and systems that are effective, reliable,
and affordable.

In following MDA directions and guidance the focus of the business
functions and organizational structure are aligned to better implement
program activities as necessary to further develop, test and evaluate
(RDT&E) selected elements of the Ballistic Missile Defense System (BMDS)
and in achieving an effective, layered missile defense program that is
at the same time cost effective, technically sound and reliable.

The following organizational structure provides a view of the division
of system/ program/functional responsibilities within the MDA.

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##### III. Program Description

The MDA program is structured to develop a single, integrated, layered
missile defense capability. The list below delineates the DoD Services,
U.S. Government agencies and MDA elements that execute the ballistic
missile defense program.

-   Defense Information Systems Agency (DISA)

-   Defense Threat Reduction Agency (DTRA)

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-   Joint Theater Air and Missile Defense Organization (JTAMDO)

-   U.S. Army

    -   U.S. Army Program Executive Office for Air & Missile Defense
        (PEO AMD)

    -   U.S. Army Strategic Management Defense Command (SMDC)

-   U.S. Air Force

-   U.S. Navy

-   Missile Defense Agency

    -   Battle Management Command, Control & Communication (C2 BMC)

    -   Targets & Countermeasures

    -   System Engineering & Integration (SE&I)

    -   Test & Assessment

    -   Joint Warfighter Support

    -   Joint National Integration Center (JNIC)

    -   Terminal Defense

    -   Arrow

    -   Theater High Altitude Air Defense (THAAD)

    -   Patriot Advanced Capability-3 (PAC-3) (Transferred to the Army
        in the

> FY 2004 Appropriation)

-   Medium Extended Air Defense System (MEADS) (Transferred to the Army
    in the FY 2004 Appropriation)

-   Midcourse Defense

> \-- Ground Based Midcourse Defense (GMD)-- 2004 Test Bed
>
> \-- Aegis Ballistic Missile Defense (Aegis BMD)

-   Boost Defense

> \-- Kinetic Energy Boost (KE Boost)
>
> \-- Airborne Laser (ABL)

-   Sensor Defense

> \-- Space Tracking & Surveillance System (STSS)
>
> \-- Russian American Observation Satellite (RAMOS)

-   Ballistic Missile Defense Technology

Missile defense systems being developed and tested by MDA are primarily
based on hit-to-kill technology. Instead of an explosive warhead,
hit-to-kill relies on a very high closing speed to collide with and
destroy its target using only kinetic energy - the force of the
collision to pulverize the target warhead. It has been described as
hitting a bullet with a bullet - a capability that has been successfully
demonstrated in test after test. The Airborne Laser is not a hit to kill
technology system, but rather uses directed energy to destroy its
target.

In addition to interceptors, MDA is developing sensor systems that
enhance our ability to detect, track and identify ballistic missile
warheads from decoys. These sensors include ground-based early warning
radars and satellites. They are integrated with the rest of the
ballistic missile defense system through a sophisticated Battle
Management Command and Control network.

On December 16, 2002, the President directed the Secretary of Defense to
deploy an initial missile defense capability beginning in 2004 to
protect the United States and deployed forces, as well as friends and
allies.

##### IV. Budgetary and Financial Aspects

The financial statements reflect aggregate totals for the three general
fund appropriations comprising MDA's funding: Research, Development,
Testing, and Evaluation; Procurement; and Military Construction. The
Research, Development, Testing, and Evaluation appropriation funds
developing new weapon system capabilities as well as improving the
capabilities of existing weapon systems through applied research on
advanced concepts and the designing, building, and testing of
prototypes. The Procurement appropriation funds the acquisition of
currently fielded weapon systems and components. The Military
Construction appropriation funds the construction of military facilities
to include the ballistic missile defense system test bed.

MDA's total funding is comprised of the three appropriations identified
above; however, MDA's primary mission is to develop, test and prepare
for fielding a missile defense system and, therefore, the majority of
MDA's funding is from the Research, Development, Testing, and Evaluation
appropriation. In FY 2003, total current year funding was \$7.4 billion,
consisting of \$6.9 billion for Research, Development, Testing, and
Evaluation (93 percent of total funding); \$491.7 million for
Procurement (approximately 7 percent of total funding); and, \$23.4
million for Military Construction (less than 1 percent of total
funding).

MDA's appropriations are aligned in terms of program elements that
define the major areas of research and weapon capabilities in support of
MDA's mission. Funds are executed at the program element level. MDA's
internal organization executes nearly half of the funding while MDA's
Executing Agents execute the remaining funding. Executing Agents are the
military services and other defense organizations associated with
particular program elements. MDA provides funding to the Executing
Agents through a sub-allocation of budget authority. The Executing
Agents then, in turn, maintain accountability for the execution of the
funding through their own unique accounting systems.

Nearly half of the accounting for MDA's funding is performed in
accounting systems other than MDA's internal organization's accounting
system. The Defense Finance and Accounting Service compiles MDA's
financial statements based on data from MDA's internal organization
accounting system and summary level trial balances received from the
numerous accounting systems supporting the Executing Agents. All of
MDA's funds are accounted for, but the summary level information from
the Executing Agents does not provide sufficient support for determining
the reasonableness of the aggregate amounts in the financial statements.
Transaction level detail is needed in order to understand the amounts
and support research for resolving any abnormalities or major variances
noted. A limited variance analysis was conducted and is disclosed in the
footnotes to the financial statements; however, because of the lack of
transaction level detail, additional clarification is not available at
this time.

To overcome the current accounting systems' limitations, and to provide
a basis in the future for determining the reasonableness of any given
financial statement line item, there are several major efforts underway.
One major effort being undertaken is the procurement of a new accounting
system for MDA's internal organization through a cooperative agreement
with the Defense Finance and Accounting Service. MDA expects to
implement the system as soon as possible depending on the acquisition
timeline and the availability of a compliant system.

Another major effort underway is an assessment of the Fund Balance With
Treasury being conducted by the Defense Finance and Accounting Service.
The Fund Balance With Treasury is a material financial statement line
item for MDA and for the DoD agency-wide statements; however, currently
the transaction activity in the account cannot be reconciled, and that
has contributed to DoD's inability to prepare auditable financial
statements. The assessment is a cooperative effort among the military
services' auditors and the Defense Finance and Accounting Service's
auditors. The expectation is that the assessment will result in improved
reliability and support for the Fund Balance With Treasury and will be
one step leading to auditable MDA financial statements.

An additional major effort was MDA's preparation of a comprehensive
mid-range financial improvement plan as directed by the Under Secretary
of Defense (Comptroller). The plan identifies measurable steps to ensure
that material line items on each financial statement is auditable not
later than the respective dates outlined by the Under Secretary of
Defense (Comptroller). The plan details the resources associated with
the efforts, the material deficiencies needed to be resolved, and
measurable interim steps leading to pre-assessments, assessments, and
the final audit on MDA's FY 2007 annual financial statements. MDA is
preparing to complete significant steps outlined in the plan during FY
2004 and FY 2005 to include examination of the internal controls,
business processes, and other relevant items in support of the financial
statements within MDA's internal organization as well as the Executing
Agents. MDA's Audit Committee will provide oversight and direction
throughout the implementation of the mid-range financial improvement
plan.

##### V. Controls and Legal Compliance

Fiscal Year (FY) 2000 was the first year that MDA compiled its own
stand-alone financial statements since it was established in FY 1984.
The Office of the Under Secretary of Defense (Comptroller) waived the
requirement for MDA to subject its\
FY 2000 and FY 2001 financial statements to audits. In FY 2002, Public
Law 107-107 directed the DoD to minimize the resources used to prepare
and audit financial statements if an unqualified audit opinion was not
expected.

In lieu of financial statement audits, MDA hired an independent
Certified Public Accounting firm to perform assessments of the FY 2000
and FY 2001 financial statements. The results of these assessments
identified weaknesses and deficiencies that have been incorporated into
MDA's Mid-Range Financial Improvement Plan. MDA is committed to
obtaining an unqualified audit opinion and will work toward resolving
these weaknesses and deficiencies in order to achieve its goal.

In conjunction with the Federal Managers' Financial Integrity Act of
1982, the DoD must submit an annual Statement of Assurance through the
Secretary of Defense on its management controls to the President and
Congress. The Under Secretary of Defense (Comptroller) has the lead in
consolidating this effort. MDA has taken the necessary measures to
ensure that the evaluation of its system of management controls has been
conducted in compliance with the Federal Managers' Financial Integrity
Act of 1982. The evaluation of management controls extends to every
responsibility and activity that MDA undertakes and is applicable to
financial, administrative, and operational controls with the exception
of the system of internal accounting and administrative controls that is
within the purview of the Defense Finance and Accounting Service (DFAS).
DFAS performs MDA's accounting function, and they report separately to
DoD on compliance with the Federal Managers' Financial Integrity Act of
1982. The determination of reasonable assurance status is substantiated
by MDA's Internal Audit Office, letters of assurance from each MDA
manager, and external audits by the General Accounting Office and the
DoD Inspector General.

##### VI. Systems

Currently, MDA uses the Defense Joint Accounting System (DJAS) in
certifying and obligating funds for the agency headquarters operations.
For services and field related financial activity, MDA does not have
direct access to "official" detailed accounting data and must rely on
various DFAS and service accounting systems for funds transaction
recording, processing, and reporting. MDA requires direct access to
detailed financial accounting data from the various DFAS and service
accounting systems to fully execute its responsibility to manage all
programs and provide input to the Chief Financial Officer reporting
process. MDA is pursuing another accounting system to replace DJAS that
meets the requirements set forth in Public Law 106-644 and the Business
Management Modernization Program.

Realizing the need for gathering detailed financial accounting data in
preparation for a financial statement audit, MDA and five other DoD
organizations entered into a partnership with DFAS in developing the
TI-97 Inter-Agency Solution. The initial release of a similar solution
occurred two years ago and is currently being operated at U.S. Special
Operations Command, Tampa, Florida.

The TI-97 Inter-Agency Solution takes advantage of the capabilities
offered by the DFAS Corporate Database and DFAS Corporate Warehouse.
Using data warehousing technology, it will provide the customer with
unique tools and ready access to detailed, timely, and accurate
accounting, financial, operational, and managerial information. Other
benefits from the use of TI-97 will be timeliness and availability of
data, greater confidence in accuracy of data, enhanced decision-making,
and improved information flow.

Another system used by MDA is the DFAS Departmental Reporting System
(DDRS). DDRS is designed to standardize the DoD departmental reporting
process and produce the quarterly and annual departmental reports. DDRS
provides the customer with DoD standard official reports and financial
statements that are based upon, and linked to, data submitted from
Military Services and Defense Agencies that are using MDA funds. The end
state of DDRS includes the production of Military Services and Defense
Agencies' principal financial statements and applicable footnotes.

DoD established the Business Management Modernization Program in its
effort to ensure that the Department-wide critical accounting, finance,
and feeder systems comply with the federal financial management
requirements. At this time many current business processes and systems
do not adequately support management decision-making. The Business
Management Modernization Program will help capitalize on the
Department\'s strengths and infuse leading practices into its business
management operations.

##### VII. Limitations to the Financial Statements

The financial statements have been prepared to report the financial
position and results of operations for the entity, pursuant to the
requirements of Title 31, United States Code, Section 3515(b).

While the statements have been prepared from the books and records of
the entity, in accordance with the formats prescribed by the Office of
Management and Budget, the statements are in addition to the financial
reports used to monitor and control budgetary resources that are
prepared from the same books and records.

To the extent possible, the financial statements have been prepared in
accordance with federal accounting standards. At times, DoD is unable to
implement all elements of the standards due to financial management
systems limitations. DoD continues to implement system improvements to
address these limitations. There are other instances when DoD's
application of the accounting standards is different from the auditor's
application of the standards. In those situations, DoD has reviewed the
intent of the standard and applied it in a manner that management
believes fulfills that intent.

The financial statements presented should be read with the realization
that MDA is a component of DoD and subject to its policy, regulations,
and procedures within the area of responsibility of the Under Secretary
of Defense (Comptroller).

##### VIII. MDA's Future Challenges

Future MDA challenges will continue to be focused on and responsive to
the President's directions such as that contained in the National
Security Presidential Directive/NSPD-23, dated Dec 19, 2002 and DOD
Directive 5134.9, striving towards meeting all mandated requirements of
which the overarching thrust is the need to defeat all manner of hostile
ballistic missile attacks against the United States, its friendly
nations and allies through the continuing development, testing and
advancement of the MDS program. Specifically those challenges are to:

-   Field elements of the BMDS, in concert with the Warfighter,

-   Develop an integrated, layered BMDS that evolves capabilities to
    protect the U.S. homeland, forward deployed forces, friends and
    allies,

-   Develop and demonstrate new system concepts and components, and
    inserting them as they mature into existing BMDS or when world
    threat warrants.

The administration has announced a vision for government reform guided
by three principles in the President's Management Agenda. The President
believes that government should be:

-   Citizen centered, not bureaucracy centered;

-   Results oriented; and

-   Market based, actively promoting rather than stifling innovation
    through competition.

Establishing the link between budgets and performance is one of the
pillars of the administration's management agenda. The administration
has taken unprecedented steps to reform the budget process. The Office
of Management and Budget, in collaboration with other federal agencies,
has developed the Program Assessment Rating Tool, comprised of
assessment criteria on program performance and management. The Program
Assessment Rating Tool establishes a high, 'good government' standard of
performance and will be used to rate programs in an open, public
fashion.

The DoD financial management communities are working toward compliance
with the Chief Financial Officers Act of 1990 and other applicable
legislation; obtaining unqualified audit opinions; and providing
reliable, accurate, timely data. Several initiatives that are ongoing or
already completed are as follows:

-   Developing integrated financial management systems;

-   Reviewing, analyzing, and revising DoD-wide regulations and
    standards;

-   Using working groups to conduct studies;

-   Revising financial statement formats and contents to comply with
    standards issued by the Federal Accounting Standards Advisory Board
    and Generally Accepted Accounting Principles;

-   Accelerating preparation of financial statements from annual to
    semiannual to a quarterly basis;

-   Requiring all Defense Organizations to prepare their own stand-alone
    financial statements in FY 2005;

-   Developing electronic data calls; and

-   Upgrading Defense Finance and Accounting Service Defense
    Departmental Reporting System and Defense Corporate Warehouse for
    audit trail capabilities.

MDA's success in achieving its goals depends on the completion of these
initiatives and continued support from the top level of DoD management.

FY 2003 ANNUAL FINANCIAL STATEMENTS

Department of Defense

Missile Defense Agency

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# Principal Statements

  ----------------------------------------- ---- ---------------- ---- ----------------
  **Missile Defense Agency**                                           

  **CONSOLIDATED BALANCE SHEET**                                       

  **As of September 30, 2003 and 2002**                                

  **(Amounts in thousands)**                                           

                                                 **2003                **2002
                                                 Consolidated**        Consolidated**

  **1. ASSETS (Note 2)**                                               

        A. Intragovernmental:                                          

              1. Fund Balance with                                     
  Treasury (Note 3)                                                    

                  a. Entity                 \$   3,876,536        \$   4,432,137

                  b. Non-Entity Seized           0                     0
  Iraqi Cash                                                           

                  c. Non-Entity-Other            0                     0

              2. Investments (Note 4)            0                     0

              3. Accounts Receivable (Note       11,718                8,635
  5)                                                                   

              4. Other Assets (Note 6)           121                   1,806

              5. Total Intragovernmental    \$   3,888,375        \$   4,442,578
  Assets                                                               

                                                                       

        B. Cash and Other Monetary          \$   0                \$   0
  Assets (Note 7)                                                      

        C. Accounts Receivable (Note 5)          336                   2,237

        D. Loans Receivable (Note 8)             0                     0

        E. Inventory and Related                 0                     0
  Property (Note 9)                                                    

        F. General Property, Plant and           0                     0
  Equipment (Note 10)                                                  

        G. Investments (Note 4)                  0                     0

        H. Other Assets (Note 6)                 139,518               37,483

  **2. TOTAL ASSETS**                       \$   4,028,229        \$   4,482,298

                                                                       

  **3. LIABILITIES (Note 11)**                                         

        A. Intragovernmental:                                          

              1. Accounts Payable (Note 12) \$   58,938           \$   20,799

              2. Debt (Note 13)                  0                     0

              3. Environmental                   0                     0
  Liabilities (Note 14)                                                

              4. Other Liabilities (Note         7,281                 19,291
  15 & Note 16)                                                        

              5. Total Intragovernmental    \$   66,219           \$   40,090
  Liabilities                                                          

                                                                       

        B. Accounts Payable (Note 12)       \$   46,545           \$   44,724

        C. Military Retirement Benefits and      0                     0
  Other Employment-Related                                             

              Actuarial Liabilities (Note                              
  17)                                                                  

        D. Environmental Liabilities (Note       0                     0
  14)                                                                  

        E. Loan Guarantee Liability (Note        0                     0
  8)                                                                   

        F. Other Liabilities (Note 15 &          11,895                19,690
  Note 16)                                                             

       G. Debt Held by Public (Note 13)          0                     0

  **4. TOTAL LIABILITIES**                  \$   124,659          \$   104,504

                                                                       

  **5. NET POSITION**                                                  

        A. Unexpended Appropriations (Note  \$   3,782,836        \$   4,336,599
  18)                                                                  

        B. Cumulative Results of Operations      120,734               41,195

  **6. TOTAL NET POSITION**                 \$   3,903,570        \$   4,377,794

                                                                       

  **7. TOTAL LIABILITIES AND NET POSITION** \$   4,028,229        \$   4,482,298
  ----------------------------------------- ---- ---------------- ---- ----------------

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  **Missile Defense Agency**                                          

  **CONSOLIDATED STATEMENT OF NET COST**                              

  **As of September 30, 2003 and 2002**                               

  **(Amounts in thousands)**                                          

                                                                      

                                                **2003                **2002
                                                Consolidated**        Consolidated**

  **1. Program Costs**                                                

          A. Intragovernmental Gross Costs \$   578,190          \$   245,580

          B. (Less: Intragovernmental           (12,438)              (2,468)
  Earned Revenue)                                                     

          C. Intragovernmental Net Costs   \$   565,752          \$   243,112

                                                                      

          D. Gross Costs With the Public        7,166,371             5,750,912

          E. (Less: Earned Revenue From         \(1\)                 0
  the Public)                                                         

          F. Net Costs With the Public     \$   7,166,370        \$   5,750,912

          G. Total Net Cost                \$   7,732,122        \$   5,994,024

                                                                      

  **2. Cost Not Assigned to Programs**          0                     0

  **3. (Less: Earned Revenue Not                0                     0
  Attributable to Programs)**                                         

                                                                      

  **4. Net Cost of Operations**            \$   7,732,122        \$   5,994,024
  ---------------------------------------- ---- ---------------- ---- ----------------

  ------------------------------------------ ---- ---------------- ---- ----------------
  **Missile Defense Agency**                                            

  **CONSOLIDATED STATEMENT OF CHANGES IN NET                            
  POSITION**                                                            

  **As of September 30, 2003 and 2002**                                 

                                                                        

                                                                        

                                                  **2003                **2002
                                                  Consolidated**        Consolidated**

  **A. UNEXPENDED APPROPRIATIONS**                                      

                                                                        

  **1. Beginning Balances**                  \$   4,336,599        \$   2,884,124

  **2. Prior period adjustments (+/-)**           0                     0

  **3.  Beginning Balances, as adjusted**         4,336,599             2,884,124

  **4.  Budgetary Financing Sources:**                                  

         4.A. Appropriations received             7,338,157             7,734,099

         4.B. Appropriations                      99,788                0
  transferred-in/out (+/-)                                              

         4.C. Other                               (121,702)             (165,917)
  adjustments (rescissions, etc) (+/-)                                  

         4.D. Appropriations used                 (7,870,008)           (6,115,707)

         4.E. Nonexchange revenue                 0                     0

         4.F. Donations and forfeitures of        0                     0
  cash and cash equivalents                                             

        4.G. Transfers-in/out without             0                     0
  reimbursement (+/-)                                                   

        4.H. Other budgetary financing            0                     0
  sources (+/-)                                                         

                                                                        

  **5.  Other Financing Sources:**                                      

         5.A. Donations and forfeitures of        0                     0
  property                                                              

         5.B. Transfers-in/out without            0                     0
  reimbursement (+/-)                                                   

         5.C. Imputed financing from costs        0                     0
  absorbed by others                                                    

         5.D. Other (+/-)                         0                     0

  **6. Total Financing Sources**                  (553,765)             1,452,475

                                                                        

  **7. Net Cost of Operations (+/-)**             0                     0

                                                                        

  **8. Ending Balances**                     \$   3,782,834        \$   4,336,599
  ------------------------------------------ ---- ---------------- ---- ----------------

  ------------------------------------------ ---- ---------------- ---- ----------------
  **Missile Defense Agency**                                            

  **CONSOLIDATED STATEMENT OF CHANGES IN NET                            
  POSITION**                                                            

  **As of September 30, 2003 and 2002**                                 

                                                                        

                                                                        

                                                  **2003                **2002
                                                  Consolidated**        Consolidated**

  **B. CUMULATIVE RESULTS OF OPERATIONS**                               

                                                                        

  **1. Beginning Balances**                  \$   41,195           \$   69,498

  **2. Prior period adjustments (+/-)**           0                     0

  **3.  Beginning Balances, as adjusted**         41,195                69,498

  **4.  Budgetary Financing Sources:**                                  

         4.A. Appropriations received             0                     0

         4.B. Appropriations                      0                     0
  transferred-in/out (+/-)                                              

         4.C. Other                               0                     0
  adjustments (rescissions, etc) (+/-)                                  

         4.D. Appropriations used                 7,870,008             6,115,707

         4.E. Nonexchange revenue                 \(1\)                 0

         4.F. Donations and for feitures of       0                     0
  cash and cash equivalents                                             

        4.G. Transfers-in/out without             0                     0
  reimbursement (+/-)                                                   

        4.H. Other budgetary financing            94,881                (131,033)
  sources (+/-)                                                         

                                                                        

  **5.  Other Financing Sources:**                                      

         5.A. Donations and forfeitures of        0                     0
  property                                                              

         5.B. Transfers-in/out without            (157,611)             (22,140)
  reimbursement (+/-)                                                   

         5.C. Imputed financing from costs        4,386                 3,188
  absorbed by others                                                    

         5.D. Other (+/-)                         0                     0

  **6. Total Financing Sources**                  7,811,663             5,965,722

                                                                        

  **7. Net Cost of Operations (+/-)**             7,732,122             5,994,024

                                                                        

  **8. Ending Balances**                     \$   120,736          \$   41,196
  ------------------------------------------ ---- ---------------- ---- ----------------

  ----------------------------------------- ---- ------------ ---- ------------ -- --
  **Missile Defense Agency**                                                       

  **COMBINED STATEMENT OF BUDGETARY                                                
  RESOURCES**                                                                      

  **As of September 30, 2003 and 2002**                                            

  **(Amounts in thousands)**                                                       

                                                                                   

                                                 **2003            **2002          
                                                 Combined**        Combined**      

  **BUDGETARY FINANCING ACCOUNTS**                                                 

  **BUDGETARY RESOURCES**                                                          

  1\. Budget Authority:                                                            

      1a. Appropriations received           \$   7,338,157    \$   7,694,332       

      1b. Borrowing authority                    0                 0               

      1c. Contract authority                     0                 0               

      1d. Net transfers ()                       80,143            0               

      1e. Other                                  0                 0               

                                                                                   

  2.  Unobligated balance:                                                         

      2a. Beginning of period                    960,925           617,025         

      2b. Net transfers, actual (+/-)            19,645            39,767          

       2c. Anticipated Transfers balances        0                 0               

                                                                                   

  3\. Spending authority from offsetting                                           
  collections:                                                                     

      3a. Earned                                 0                 0               

           1. Collected                          13,637            34,938          

           2. Receivable from Federal            \(175\)           (32,471)        
  sources                                                                          

      3b. Change in unfilled customer            0                 0               
  orders                                                                           

           1. Advance received                   \(128\)           7,600           

           2. With out advance from Federal      1,720             3,535           
  sources                                                                          

      3c. Anticipated for the rest of year,      0                 0               
  without advances                                                                 

      3d. Transfers from trust funds             0                 0               

      3e. Subtotal                               15,054            13,602          

                                                                                   

  4\. Recoveries of prior year obligations       550,099           329,983         

                                                                                   

  5\. Temporarily not available pursuant to      0                 0               
  Public Law                                                                       

                                                                                   

  6\. Permanently not available                  (121,702)         (189,896)       

                                                                                   

  **7. Total Budgetary Resources**          \$   8,842,321    \$   8,504,813       
  ----------------------------------------- ---- ------------ ---- ------------ -- --

  ----------------------------------------- ---- ------------ ---- ------------ -- --
  **Missile Defense Agency**                                                       

  **COMBINED STATEMENT OF BUDGETARY                                                
  RESOURCES**                                                                      

  **As of September 30, 2003 and 2002**                                            

  **(Amounts in thousands)**                                                       

                                                                                   

                                                 **2003            **2002          
                                                 Combined**        Combined**      

  **STATUS OF BUDGETARY RESOURCES**                                                

  8\. Obligations incurred:                 \$                                     

      8a. Direct                            \$   8,085,813    \$   7,553,542       

      8b. Reimbursable                           14,885            (10,376)        

      8c. Subtotal                               8,100,698         7,543,166       

  9\. Unobligated balance:                                                         

      9a. Apportioned                            713,233           1,038,061       

      9b. Exempt from apportionment              0                 0               

      9c. Other available                        \(2\)             0               

  10\. Unobligated Balances Not Available        28,392            (76,414)        

  **11. Total, Status of Budgetary          \$   8,842,321    \$   8,504,813       
  Resources**                                                                      

                                                                                   

  **RELATIONSHIP OF OBLIGATIONS TO                                                 
  OUTLAYS:**                                                                       

  12\. Obligated Balance, Net -beginning of \$   3,272,741    \$   2,523,027       
  period                                                                           

  13.  Obligated Balance transferred,            0                 0               
  net (+/-)                                                                        

  14.  Obligated Balance, Net -end of                                              
  period:                                                                          

      14a. Accounts receivable                   (11,940)          (12,115)        

      14b. Unfilled customer order from          (12,570)          (10,851)        
  Federal sources                                                                  

      14c. Undelivered orders                    3,054,025         3,371,862       

      14d. Accounts payable                      107,932           72,643          

  15\.  Outlays:                                                                   

      15a. Disbursements                         7,684,347         6,343,606       

      15b. Collections                           (13,508)          (42,538)        

      15c. Subtotal                              7,670,839         6,301,068       

  16\.  Less: Offsetting receipts                0                 0               

  **17. Net Outlays**                       \$   7,670,839    \$   6,301,068       
  ----------------------------------------- ---- ------------ ---- ------------ -- --

  ------------------------------------------- ---- ------------ ---- ------------- -- --
  **Missile Defense Agency**                                                          

  **COMBINED STATEMENT OF FINANCING**                                                 

  **As of September 30, 2003 and 2002**                                               

  **(Amounts in thousands)**                                                          

                                                                                      

                                                   **2003            **2002           
                                                   Combined**        Combined**       

  **Resources Used to Finance Activities:**                                           

  **Budgetary Resources Obligated**                                                   

  1. Obligations incurred                     \$   8,100,698    \$   7,543,166        

  2. Less: Spending authority from offsetting      (565,152)         (343,585)        
  collections                                                                         

      and recoveries (-)                                                              

  3. Obligations net of offsetting                 7,535,546         7,199,581        
  collections and recoveries                                                          

  4. Less: Offsetting receipts (-)                 0                 0                

  5. Net obligations                               7,535,546         7,199,581        

  Other Resources                                                                     

  6.  Donations and forfeitures of property        0                 0                

  7.  Transfers in/out without                     (157,611)         0                
  reimbursement (+/-)                                                                 

  8.  Imputed financing from costs absorbed        4,386             3,188            
  by others                                                                           

  9\. Other (+/-)                                  0                 0                

  10\. Net other resources used to finance         (153,225)         3,188            
  activities                                                                          

  **11.  Total resources used to finance           7,382,321         7,202,769        
  activities**                                                                        

                                                                                      

  **Resources Used to Finance Items not                                               
  Part**                                                                              

  **Of the Net Cost of Operations**                                                   

  12.  Change in budgetary resources                                                  
  obligated for goods,                                                                

        services and benefits ordered but not                                         
  yet provided                                                                        

        12a. Undelivered Orders (-)                170,189           (1,080,620)      

        12b. Unfilled Customer Orders              1,591             11,135           

  13\. Resources that fund expenses                (5,371)           0                
  recognized in prior periods                                                         

  14.  Budgetary off setting collections and       0                 0                
  receipts that                                                                       

       do not affect net cost of operations                                           

  15.  Resources that finance the acquisition      0                 0                
  of assets                                                                           

  16.  Other resources or adjustments to net                                          
  obligated resources                                                                 

        that do not affect net cost of                                                
  operations                                                                          

       16a. Less: Trust or Special Fund                                               
  Receipts Related to Exchange                                                        

  in the Entity\'s Budget (-)                      0                 0                

       16b. Other (+/-)                            0                 0                

                                                                                      

  **17. Total resources used to finance items                                         
  not **                                                                              

  **      part of the net cost of                  166,409           (1,069,485)      
  operations**                                                                        

                                                                                      

  **18. Total resources used to finance the   \$   7,548,730    \$   6,133,284        
  net cost of operations**                                                            
  ------------------------------------------- ---- ------------ ---- ------------- -- --

  ------------------------------------------- ---- ------------ ---- ------------ -- --
  **Missile Defense Agency**                                                         

  **COMBINED STATEMENT OF FINANCING**                                                

  **As of September 30, 2003 and 2002**                                              

  **(Amounts in thousands)**                                                         

                                                                                     

                                                   **2003            **2002          
                                                   Combined**        Combined**      

  **Components of the Net Cost of Operations                                         
  that will**                                                                        

  **not Require or Generate Resources in the                                         
  Current Period:**                                                                  

                                                                                     

  Components Requiring or Generating                                                 
  Resources in Future Periods:                                                       

  19. Increase in annual leave liability      \$   0            \$   0               

  20. Increase in environmental and disposal       0                 0               
  liability                                                                          

  21. Upward/Downward reestimates of credit        0                 0               
  subsidy expense (+/-)                                                              

  22. Increase in exchange revenue receivable      0                 0               
  from the public (+/-)                                                              

  23. Other (+/-)                                  7,861             3,844           

  24. Total components of Net Cost of              7,861             3,844           
  Operations that                                                                    

        will require or generate resources in                                        
  future periods                                                                     

                                                                                     

  Components not Requiring or Generating                                             
  Resources:                                                                         

  25. Depreciation and amortization                0                 0               

  26. Revaluation of assets or                     0                 0               
  liabilities (+/-)                                                                  

  27. Other (+/-)                                  175,533           (143,102)       

  28. Total components of Net Cost of              175,533           (143,102)       
  Operations that                                                                    

       will not require or generate resources                                        

                                                                                     

  **29.  Total components of net cost of           183,394           (139,258)       
  operations that**                                                                  

  **      will not require or generate                                               
  resources in the current period**                                                  

                                                                                     

  **30. Net Cost of Operations**              \$   7,732,124    \$   5,994,026       
  ------------------------------------------- ---- ------------ ---- ------------ -- --

FY 2003 ANNUAL FINANCIAL STATEMENTS

Department of Defense

Missile Defense Agency

![](media/image1.png){width="1.75in" height="1.6909722222222223in"}

![](media/image2.png){width="1.25in" height="1.2444444444444445in"}

# 

# 

# 

# Footnotes to the Principal Statements

+------------+---------------------------------------------------------+
| **Note     | ######## **Significant Accounting Policies**            |
| 1.**       |                                                         |
+------------+---------------------------------------------------------+

# **1.A. Basis of Presentation**

These financial statements have been prepared to report the financial
position and results of operations of the Missile Defense Agency (MDA),
as required by the "Chief Financial Officers Act of 1990," expanded by
the "Government Management Reform Act of 1994," and other appropriate
legislation. The financial statements have been prepared from the books
and records of the MDA in accordance with the "Department of Defense
(DoD) Financial Management Regulation," Office of Management & Budget
(OMB) Bulletin No. 01-09, "Form and Content of Agency Financial
statements," and to the extent possible Federal Generally Accepted
Accounting Principles (GAAP). The accompanying financial statements
account for all resources for which the MDA is responsible except that
information relative to classified assets, programs, and operations has
been excluded from the statement or otherwise aggregated and reported in
such a manner that it is no longer classified. The MDA's financial
statements are in addition to the financial reports also prepared by the
MDA pursuant to OMB directives that are used to monitor and control the
MDA's use of budgetary resources.

The MDA is unable to fully implement all elements of Federal GAAP and
OMB Bulletin No. 01-09 due to limitations of its financial management
processes and systems, including nonfinancial feeder systems and
processes. Reported values and information for the MDA's major asset and
liability categories are derived largely from nonfinancial feeder
systems, such as inventory systems and logistics systems, designed to
support reporting requirements of maintaining accountability over assets
and reporting the status of federal appropriations rather than preparing
financial statements in accordance with Federal GAAP. As a result, the
MDA cannot currently implement every aspect of Federal GAAP and OMB
Bulletin No. 01-09. The MDA continues to implement process and system
improvements addressing the limitations of its financial and
nonfinancial feeder systems. A more detailed explanation of these
financial statement elements is provided in the applicable footnotes.

**1.B. Mission of the Reporting Entity**

In FY 2002, the MDA moved from an independently managed element-centric
(i.e., Major Defense Acquisition Program) focus to a single integrated
system approach for missile defense.

Thorough review of the U.S. Missile Defense Program resulted in the
decision to develop a new missile defense program that would integrate
all missile defense systems into a single, coherent architecture
designed to protect America and her allies and friends from all missile
attacks regardless of the range of the missiles.

On January 2, 2002, Secretary Rumsfeld approved the management
authorities required to execute the redirected U.S. Missile Defense
Program and also renamed the Ballistic Missile Defense Organization
(BMDO) to the Missile Defense Agency (MDA). This new missile defense
program would produce the most effective defenses in the shortest time
at a reasonable cost.

With this new challenge, the MDA manages, directs, and executes the
Ballistic Missile Defense (BMD) Program to achieve the following top
missile defense priorities:

To defend the U.S. deployed forces, allies and friends from present and
future ballistic missile threats.

To employ a Ballistic Missile Defense System (BMDS) that layers defense
to intercept missiles in all phases of flight against all ranges of
threats.

To enable the Military Services to field elements of the BMDS as soon as
practicable.

To develop and test technologies, use prototype and test assets to
provide early capability, if necessary, and to improve the effectiveness
of deployed capability by inserting new technologies as they become
available or when the threats warrant an accelerated capability.

**1.C. Appropriations and Funds**

The MDA receives appropriations from the general funds. General funds
are used for financial transactions arising under congressional
appropriations, including personnel, operation and maintenance, research
and development, procurement, and construction accounts.

**1.D. Basis of Accounting**

The MDA generally records transactions on a budgetary basis and not an
accrual accounting basis as is required by Federal GAAP. For FY 2003,
the MDA's financial management systems are unable to meet all of the
requirements for full accrual accounting. Many of the MDA's financial
and nonfinancial feeder systems and processes were designed and
implemented prior to the issuance of Federal GAAP for federal agencies
and, therefore, were not designed to collect and record financial
information on the full accrual accounting basis as required by Federal
GAAP. The MDA has undertaken efforts to determine the actions required
to bring its financial and nonfinancial feeder systems and processes
into compliance with all elements of Federal GAAP. One such action is
the current revision of its accounting systems to record transactions
based on the United States Government Standard General Ledger (USSGL).
Until such time as all of the MDA's financial and nonfinancial feeder
systems and processes are updated to collect and report financial
information as required by Federal GAAP, the MDA's financial data will
be based on budgetary transactions (obligations, disbursements, and
collections), transactions from nonfinancial feeder systems. However,
when possible, the financial statements are presented on the accrual
basis of accounting as required. One example of information presented on
the budgetary basis is the data on the Statement of Net Cost. Much of
this information is based on obligations and disbursements and may not
always represent accrued costs.

In addition, the MDA identifies programs based upon the major
appropriation groups provided by Congress. The MDA is in the process of
reviewing available data and attempting to develop a cost reporting
methodology that balances the need for cost information required by the
Statement of Federal Financial Accounting Standard (SFFAS) No. 4,
"Managerial Cost Accounting Concepts and Standards for the Federal
Government," with the need to keep the financial statements from being
overly voluminous.

**1.E. Revenues and Other Financing Sources**

Financing sources for general funds are provided primarily through
congressional appropriations that are received on both an annual and a
multiyear basis. When authorized, these appropriations are supplemented
by revenues generated by sales of goods or services through a
reimbursable order process. The MDA recognizes revenue as a result of
costs incurred or services performed on behalf of other federal agencies
and the public. Revenue is recognized when earned under the reimbursable
order process.

**1.F. Recognition of Expenses**

For financial reporting purposes, the DoD policy requires the
recognition of operating expenses in the period incurred. However,
because the MDA's financial and nonfinancial feeder systems were not
designed to collect and record financial information on the full accrual
accounting basis, accrual adjustments are made for major items such as
payroll expenses, accounts payable, and environmental liabilities. Net
increases or decreases in unexpended appropriations are recognized as a
change in the net position. Certain expenses, such as annual and
military leave earned but not taken, are financed in the period in which
payment is made.

Operating expenses were adjusted as a result of the elimination of
balances between DoD Components. See Note 19.I, Intragovernmental
Expenses and Revenue for disclosure of adjustment amounts.

**1.G. Accounting for Intragovernmental Activities**

The MDA, as an agency of the federal government, interacts with and is
dependent upon the financial activities of the federal government as a
whole. Therefore, these financial statements do not reflect the results
of all financial decisions applicable to MDA as though the agency was a
stand-alone entity.

The MDA's proportionate share of public debt and related expenses of the
federal government are not included. Debt issued by the federal
government and the related costs are not apportioned to federal
agencies. The MDA'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.

Financing for construction of DoD facilities is obtained through budget
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 Treasury of the United States (TUS) does not
allocate such interest costs to the benefiting agencies.

The MDA's civilian employees participate in the Civil Service Retirement
System (CSRS) and the Federal Employees Retirement Systems (FERS), while
military personnel are covered by the Military Retirement System (MRS).
Additionally, employees and personnel covered by FERS and MRS also have
varying coverage under Social Security. MDA funds a portion of the
civilian and military pensions. Reporting civilian pensions under CSRS
and FERS retirement systems is the responsibility of the Office of
Personnel Management (OPM). The MDA recognizes an imputed expense for
the portion of civilian employee pensions and other retirement benefits
funded by the OPM in the Statement of Net Cost; and recognizes
corresponding imputed revenue from the civilian employee pensions and
other retirement benefits in the Statement of Changes in Net Position.

To prepare reliable financial statements, transactions occurring between
components or activities within MDA must be eliminated. However, MDA, as
well as the rest of the federal government, cannot accurately identify
all intragovernmental transactions by customer. The Defense Finance and
Accounting Service (DFAS) is responsible for eliminating transactions
between components or activities of MDA. For FY 1999 and beyond, seller
entities within the Department provided summary seller-side balances for
revenue, accounts receivable, and unearned revenue to the buyer-side
internal DoD accounting offices. In most cases, the buyer-side records
have been adjusted to recognize unrecorded costs and accounts payable.
Intra-DoD intragovernmental balances were then eliminated.

The TUS, Financial Management Service (FMS) is responsible for
eliminating transactions between the Department and other federal
agencies. In September 2000, the FMS issued the "Federal
Intragovernmental Transactions Accounting Policies and Procedures
Guide." The Department was not able to fully implement the policies and
procedures in this guide related to reconciling intragovernmental
assets, liabilities, revenues, and expenses for non-fiduciary
transactions.

**1.H. Transactions with Foreign Governments and International
Organizations**

Each year, DoD Components sell defense articles and services to foreign
governments and international organizations, primarily 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.
Customers may be required to make payments in advance.

**1.I. Funds with the U.S. Treasury**

The MDA's financial resources are maintained in TUS accounts. The
majority of cash collections, disbursements, and adjustments are
processed worldwide at the DFAS, Military Services, and the United
States Army Corps of Engineers (USACE) disbursing stations, as well as
the Department of State financial service centers. Each disbursing
station prepares monthly reports, which provide information to the TUS
on check issues, electronic fund transfers, interagency transfers and
deposits.

In addition, the DFAS sites and the USACE Finance Center submit reports
to the TUS, by appropriation, on interagency transfers, collections
received, and disbursements issued. The TUS then records this
information to the applicable Fund Balance with Treasury (FBWT) account
maintained in the TUS system. Differences between the MDA's recorded
balance in the FBWT accounts and TUS - FBWT accounts sometimes result
and are subsequently reconciled. Material disclosures are provided at
Note 3. Differences between accounting offices' detail-level records and
TUS - FBWT accounts are disclosed in Note 21.B, specifically,
differences caused by in-transit disbursements and unmatched
disbursements (which are not recorded in the accounting offices'
detail-level records).

**1.J. Foreign Currency**

The MDA conducts a 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 computed 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. These currency
fluctuations are not separately identified.

**1.K. Accounts Receivable**

As presented in the Balance Sheet statement, accounts receivable
includes accounts, claims, and refunds receivable from other federal
entities or from the public. DoD policy is to not perform services for
nonfederal agencies or the public without a cash advance. The Department
does not recognize an allowance for estimated uncollectible amounts from
other federal agencies. Claims against other federal agencies are to be
resolved between the agencies. Material disclosures are provided at Note
5.

**1.L. Loans Receivable. As Applicable.**

This section is not applicable to the MDA.

**1.M. Inventories and Related Property**

This section is not applicable to the MDA.

**1.N. Investments in U.S. Treasury Securities**

This section is not applicable to the MDA.

**1.O. General Property, Plant and Equipment**

The MDA is working with OSD to develop policies and procedures relating
to the accounting for and reporting of MDA PP&E.

**1.P. Advances and Prepayments**

Payments in advance of the receipt of goods and services are recorded as
advances or prepayments and reported as an asset on the Balance Sheet.
Advances and prepayments are recognized as expenses when the related
goods and services are received.

1.Q. Leases

This section is not applicable to MDA.

1.R. Other Assets

Based on the provision of the Federal Acquisition Regulation, the MDA
makes financing payments under fixed price contracts. The MDA reports
these financing payments as advances or prepayments in the other assets
line item. The MDA treats these payments as advances or prepayments
because the MDA becomes liable only after the contractor delivers the
goods in conformance with the contract terms. If the contractor does not
deliver a satisfactory product, the MDA is not obligated to reimburse
the contractor for its costs and the contractor is liable to repay the
MDA for the full amount of the financing payments. The Department has
completed a review of all applicable federal accounting standards;
applicable public laws on contract financing; Federal Acquisition
Regulation Parts 32, 49, and 52; and the OMB guidance in 5 Code of
Federal Regulations Part 1315, "Prompt Payment." The Department has
concluded that SFFAS No. 1 does not fully or adequately address the
subject of progress payment accounting and is considering what further
action is appropriate.

1.S. Contingencies and Other Liabilities

The SFFAS No. 5, "Accounting for Liabilities of the Federal Government,"
defines a contingency as an existing condition, situation, or set of
circumstances that involves an uncertainty as to possible gain or loss
to the MDA. The uncertainty will be resolved when one or more future
events occur or fail to occur. A contingency is recognized as a
liability when a past event or exchange transaction has occurred, a
future loss is probable and the amount of loss 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 that a loss or additional loss will be
incurred. Examples of loss contingencies include the collectibility of
receivables, pending or threatened litigation, possible claims and
assessments. The MDA's loss contingencies arising as a result of pending
or threatened litigation or claims and assessments occur due to events
such as missile and vehicle accidents; property or environmental
damages; and contract disputes.

Other liabilities arise as a result of anticipated disposal costs for
the MDA's assets. This type of liability has two
components-nonenvironmental and environmental. Recognition of an
anticipated environmental disposal liability commences when the asset is
placed into service, consistent with SFFAS No. 6, "Accounting for
Property, Plant, and Equipment." Based upon the MDA's policies and
consistent with SFFAS No. 5, "Accounting for Liabilities of Federal
Government," a nonenvironmental disposal liability is recognized for an
asset when management makes a decision to dispose of the asset. The
Department has agreed to the recognition of the nonenvironmental
disposal liability for nuclear powered assets when the asset is placed
in service. Such amounts are developed in conjunction with and not
easily identifiable separately from environmental disposal costs.
Material disclosures are provided at Notes 14 and 15.

**1.T. Accrued Leave**

Civilian annual leave and military leave that has been accrued and not
used as of the balance sheet date are reported as liabilities. The
liability reported at the end of the fiscal year reflects the current
pay rates. Sick leave and other types of non-vested leave are expensed
as taken.

1.U. Net Position

Net Position consists of unexpended appropriations and cumulative
results of operations. Unexpended appropriations represent amounts of
authority which are unobligated and have not been rescinded or
withdrawn, and amounts obligated but for which legal liabilities for
payments have not been incurred.

Cumulative results of operations represent the balances that result from
subtracting expenses and losses, from financing sources including
appropriations, revenue, and gains since the inception of the activity.

1.V. Treaties for Use of Foreign Bases

The DoD Components have the use of land, buildings, and other
facilities, which are located overseas and have been obtained through
various international treaties and agreements negotiated by the
Department of State. The DoD capital assets overseas are purchased with
appropriated funds; however, title to land and improvements are retained
by the host country. Generally, treaty terms allow the DoD Components
continued use of these properties until the treaties expire. These fixed
assets are subject to loss in the event treaties are not renewed or
other agreements are not reached which allow for the continued use by
the Department. Therefore, in the event treaties or other agreements are
terminated whereby use of the foreign bases is no longer allowed, losses
will be recorded for the value of any non-retrievable capital assets
after negotiations between the U.S. and the host country have been
concluded to determine the amount to be paid the U.S. for such capital
investments.

1.W. Comparative Data

Beginning in FY 2001, the MDA presents the current and previous year's
financial data for comparative purposes. This data is presented in the
financial statements, as well as in the notes to the principal
statements. The financial statements and accompanying notes to the
financial statements report the financial position as of September 30,
2003, and results of operations for the FY then ended. Fluctuations
between the FY 2003 and the FY 2002 annual financial statements are
explained within the notes to the financial statements.

1.X. Unexpended Obligations

The MDA records obligations for goods and services that have been
ordered but not yet received. No liability for payment has been
established in the financial statements because goods or services have
yet to be delivered.

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<col style="width: 2%" />
<col style="width: 10%" />
<col style="width: 2%" />
<col style="width: 16%" />
</colgroup>
<tbody>
<tr class="odd">
<td><strong>Note 2.</strong></td>
<td colspan="3"><p id="nonentity-and-entity-assets" class="heading">
<strong>Nonentity and Entity Assets</strong></p></td>
<td colspan="7"></td>
</tr>
<tr class="even">
<td colspan="2" rowspan="2"><h6 id="section-13"></h6></td>
<td colspan="7"></td>
<td colspan="2"></td>
</tr>
<tr class="odd">
<td colspan="7"></td>
<td colspan="2">Nonentity Assets</td>
</tr>
<tr class="even">
<td colspan="2"></td>
<td colspan="3">Nonentity</td>
<td colspan="2">Entity</td>
<td colspan="2">Total</td>
<td colspan="2"></td>
</tr>
<tr class="odd">
<td colspan="2"></td>
<td></td>
<td colspan="2"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td colspan="2"><strong>1.</strong> <strong>Intragovernmental
Assets:</strong></td>
<td></td>
<td colspan="2"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td colspan="2">A. Fund Balance with Treasury</td>
<td>$</td>
<td colspan="2">0</td>
<td>$</td>
<td>3,876,536</td>
<td>$</td>
<td>3,876,536</td>
<td>$</td>
<td>0</td>
</tr>
<tr class="even">
<td colspan="2">B. Investments</td>
<td></td>
<td colspan="2">0</td>
<td></td>
<td>0</td>
<td></td>
<td>0</td>
<td></td>
<td>0</td>
</tr>
<tr class="odd">
<td colspan="2">C. Accounts Receivable</td>
<td></td>
<td colspan="2">22</td>
<td></td>
<td>11,696</td>
<td></td>
<td>11,718</td>
<td></td>
<td>0</td>
</tr>
<tr class="even">
<td colspan="2">D. Other Assets</td>
<td></td>
<td colspan="2">0</td>
<td></td>
<td>121</td>
<td></td>
<td>121</td>
<td></td>
<td>0</td>
</tr>
<tr class="odd">
<td colspan="2">E. Total Intragovernmental Assets</td>
<td>$</td>
<td colspan="2">22</td>
<td>$</td>
<td>3,888,353</td>
<td>$</td>
<td>3,888,375</td>
<td>$</td>
<td>0</td>
</tr>
<tr class="even">
<td colspan="2"></td>
<td></td>
<td colspan="2"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td colspan="2"><strong>2. Non-Federal Assets:</strong></td>
<td></td>
<td colspan="2"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td colspan="2">A. Cash and Other Monetary Assets</td>
<td>$</td>
<td colspan="2">0</td>
<td>$</td>
<td>0</td>
<td>$</td>
<td>0</td>
<td>$</td>
<td>0</td>
</tr>
<tr class="odd">
<td colspan="2">B. Accounts Receivable</td>
<td></td>
<td colspan="2">97</td>
<td></td>
<td>239</td>
<td></td>
<td>336</td>
<td></td>
<td>2,103</td>
</tr>
<tr class="even">
<td colspan="2">C. Loans Receivable</td>
<td></td>
<td colspan="2">0</td>
<td></td>
<td>0</td>
<td></td>
<td>0</td>
<td></td>
<td>0</td>
</tr>
<tr class="odd">
<td colspan="2">D. Inventory &amp; Related Property</td>
<td></td>
<td colspan="2">0</td>
<td></td>
<td>0</td>
<td></td>
<td>0</td>
<td></td>
<td>0</td>
</tr>
<tr class="even">
<td colspan="2">E. General Property, Plant and Equipment</td>
<td></td>
<td colspan="2">0</td>
<td></td>
<td>0</td>
<td></td>
<td>0</td>
<td></td>
<td>0</td>
</tr>
<tr class="odd">
<td colspan="2">F. Investments</td>
<td></td>
<td colspan="2">0</td>
<td></td>
<td>0</td>
<td></td>
<td>0</td>
<td></td>
<td>0</td>
</tr>
<tr class="even">
<td colspan="2">G. Other Assets</td>
<td></td>
<td colspan="2">0</td>
<td></td>
<td>139,518</td>
<td></td>
<td>139,518</td>
<td></td>
<td>0</td>
</tr>
<tr class="odd">
<td colspan="2">H. Total Non-Federal Assets</td>
<td>$</td>
<td colspan="2">97</td>
<td>$</td>
<td>139,757</td>
<td>$</td>
<td>139,854</td>
<td>$</td>
<td>2,103</td>
</tr>
<tr class="even">
<td colspan="2"><strong>3. Total Assets:</strong></td>
<td>$</td>
<td colspan="2">119</td>
<td>$</td>
<td>4,028,110</td>
<td>$</td>
<td>4,028,229</td>
<td>$</td>
<td>2,103</td>
</tr>
</tbody>
</table>

**Definition**

Assets are categorized as Entity or Nonentity. Entity assets consist of
resources that the Missile Defense Agency (MDA) has the authority to
use, or where management is legally obligated to use funds to meet
entity obligations. Nonentity assets are assets held by an entity, but
are not available for use in the operations of the entity.

### Fluctuation and/or Abnormalities

Nonentity assets balance of \$119 thousand reflects a decrease of
\$1,984 thousand, or 94 percent, from the FY 2002 balance. This variance
occurred because of the collection during FY 2003 of accounts receivable
that were posted in FY 2002 as the result of a reclassification of
\$2,088 thousand abnormal accounts payable from cancelled
appropriations. The additional variance was caused by the
reclassification of cancelled year accounts receivable from entity to
non-entity.

#### Note Reference

For Additional Line Item discussion, see:

####### Note 3, Fund Balance with Treasury

####### Note 5, Accounts Receivable

####### Note 6, Other Assets

For Regulatory Discussion on Nonentity and Entity Assets see, Department
of Defense Financial Management Regulation, Volume 6B, Chapter 10,
paragraph 1004.

+-------------+--------------------------------------------------------+
| **Note 3.** | ######## **Fund Balance with Treasury**                |
+-------------+--------------------------------------------------------+

+-----------------------------------+---+--------------+---+-------------+
| ######  {#section-14}             | # |              | # |             |
|                                   |   |              |   |             |
|                                   |   |              |   |             |
|                                   |   |              | { |             |
|                                   | { |              | # |             |
|                                   | # |              | s |             |
|                                   | s |              | e |             |
|                                   | e |              | c |             |
|                                   | c |              | t |             |
|                                   | t |              | i |             |
|                                   | i |              | o |             |
|                                   | o |              | n |             |
|                                   | n |              | - |             |
|                                   | - |              | 1 |             |
|                                   | 1 |              | 6 |             |
|                                   | 5 |              | } |             |
|                                   | } |              |   |             |
+-----------------------------------+---+--------------+---+-------------+
|                                   |   |              |   |             |
+-----------------------------------+---+--------------+---+-------------+
|                                   |   |              |   |             |
+-----------------------------------+---+--------------+---+-------------+
| **1.** **Fund Balances:**         |   |              |   |             |
+-----------------------------------+---+--------------+---+-------------+
| A. Appropriated Funds             | \ | 3,876,536    | \ | 4,432,138   |
|                                   | $ |              | $ |             |
+-----------------------------------+---+--------------+---+-------------+
| B. Revolving Funds                |   | 0            |   | 0           |
+-----------------------------------+---+--------------+---+-------------+
| C. Trust Funds                    |   | 0            |   | 0           |
+-----------------------------------+---+--------------+---+-------------+
| D. Other Fund Types               |   | 0            |   | 0           |
+-----------------------------------+---+--------------+---+-------------+
| E. Total Fund Balances            | \ | 3,876,536    | \ | 4,432,138   |
|                                   | $ |              | $ |             |
+-----------------------------------+---+--------------+---+-------------+
|                                   |   |              |   |             |
+-----------------------------------+---+--------------+---+-------------+
|                                   |   |              |   |             |
+-----------------------------------+---+--------------+---+-------------+
| **2**. **Fund Balances Per        |   |              |   |             |
| Treasury Versus Agency:**         |   |              |   |             |
+-----------------------------------+---+--------------+---+-------------+
| A. Fund Balance per Treasury      | \ | 0            | \ | 0           |
|                                   | $ |              | $ |             |
+-----------------------------------+---+--------------+---+-------------+
| B. Fund Balance per Agency        |   | 3,876,536    |   | 4,432,138   |
+-----------------------------------+---+--------------+---+-------------+
| C. Reconciling Amount             | \ | (3,876,536)  | \ | (4,432,138) |
|                                   | $ |              | $ |             |
+-----------------------------------+---+--------------+---+-------------+

**Other Information**

Missile Defense Agency (MDA) is a Department of Defense (DoD) agency
using Treasury Index 97 and funded with Defense appropriations. Treasury
of the United States (TUS) does not maintain separate appropriation
balances for Defense Agencies. The funding for MDA is controlled at the
limit level. The TUS reports at the appropriation basic symbol level,
one level above the limit level. The Defense Finance and Accounting
Service (DFAS) developed a register to maintain separate appropriation
balances for the Defense Agencies, compiled from reports of
disbursements and collections reported to TUS by Defense and other
government disbursing stations. The DFAS uses the Fund Balance per DFAS
to adjust MDA general ledger fund balances for financial statement
reporting. The Fund Balance per DFAS includes all disbursements and
collections reported to TUS which pertain to MDA appropriations.

**Note Reference**

See Note Disclosure 1.I., Significant Accounting Policies, for
additional discussion on financial reporting requirements and DoD
policies governing Funds with TUS.

For Regulatory Discussion on Fund Balance with Treasury, see DoD
Financial Management Regulation, Volume 6B, Chapter 10, paragraph 1005.

+----------------+-----------------------------------------------------+
| Note 4.        | ######## Not Applicable                             |
+----------------+-----------------------------------------------------+

+----------------+-----------------------------------------------------+
| **Note 5.**    | ######## **Accounts Receivable**                    |
+----------------+-----------------------------------------------------+

<table>
<colgroup>
<col style="width: 25%" />
<col style="width: 2%" />
<col style="width: 14%" />
<col style="width: 2%" />
<col style="width: 16%" />
<col style="width: 2%" />
<col style="width: 0%" />
<col style="width: 15%" />
<col style="width: 3%" />
<col style="width: 15%" />
</colgroup>
<thead>
<tr class="header">
<th colspan="6"></th>
<th colspan="2"></th>
<th colspan="2"></th>
</tr>
<tr class="odd">
<th></th>
<th colspan="7"></th>
<th colspan="2"></th>
</tr>
<tr class="header">
<th></th>
<th colspan="2"><p>Gross</p>
<p>Amount</p>
<p>Due</p></th>
<th colspan="2"><p>Allowance</p>
<p>For</p>
<p>Estimated</p>
<p>Uncollectibles</p></th>
<th colspan="3"><p>Accounts</p>
<p>Receivable,</p>
<p>Net</p></th>
<th colspan="2"><p>Accounts</p>
<p>Receivable,</p>
<p>Net</p></th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td colspan="2"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td><p><strong>1. Intragovernmental</strong></p>
<p><strong>Receivables:</strong></p></td>
<td>$</td>
<td>11,718</td>
<td></td>
<td>N/A</td>
<td colspan="2">$</td>
<td>11,718</td>
<td>$</td>
<td>8,632</td>
</tr>
<tr class="odd">
<td><strong>2. Non-Federal Receivables (From the Public):</strong></td>
<td>$</td>
<td>336</td>
<td>$</td>
<td>0</td>
<td colspan="2">$</td>
<td>336</td>
<td>$</td>
<td>2,237</td>
</tr>
<tr class="even">
<td><strong>3. Total Accounts Receivable:</strong></td>
<td>$</td>
<td>12,054</td>
<td>$</td>
<td>0</td>
<td colspan="2">$</td>
<td>12,054</td>
<td>$</td>
<td>10,869</td>
</tr>
</tbody>
</table>

####  {#section-17}

####  {#section-18}

4\. Allowance Method

Accounts receivable consist of amounts owed to the Missile Defense
Agency (MDA) by other federal agencies and by the public. Amounts due
from federal agencies are considered fully collectible; however, amounts
due from the public are usually presented as net of an uncollectible
amount. For this reporting period, MDA has reported a zero balance for
allowance for uncollectible accounts. MDA's accounting systems do not
age accounts receivable due from the public, thus hindering the ability
to properly estimate an allowance for uncollectible accounts. Accounts
receivable due from the public represent less than 3 percent of total
accounts receivable, and less than .009 percent of total assets. As the
balance is deemed immaterial, MDA will not establish an allowance for
uncollectible accounts. Instead, MDA will monitor the balance of
accounts receivable due from the public on a quarterly basis to assess
whether an allowance is warranted for future financial statements.

#### Fluctuation and/or Abnormalities

## Intragovernmental Receivables:

## The significant increase of \$3,086 thousand between FY 2003 and FY 2002 accounts receivable relates to the increase in FY 2003 Department of Defense (DoD) and other government agencies reimbursable programs.

#### Other Information

### [Non-Federal Receivables]{.underline}

### DoD policy is to not perform reimbursable services for non-federal activities without a cash advance and, therefore, to not accrue non-federal accounts receivable. The non-federal accounts receivable balance of \$336 thousand reflects a decrease of \$1,901 thousand, or 85 percent. This variance occurred because of the collection during FY 2003 of accounts receivable that were posted in FY 2002 as the result of a reclassification of \$2,088 thousand abnormal accounts payable from cancelled appropriations. The remaining variance was due to increases in refunds due from the public. The refunds are less than 90 days old.

###  {#section-19}

### [Elimination Adjustments]{.underline}

The MDA's accounting systems do not capture trading partner data at the
transaction level in a manner that facilitates trading partner
aggregations. Therefore, MDA was unable to reconcile intragovernmental
accounts receivable balances with its trading partners. The Department
intends to develop long-term systems improvements that will include
sufficient up-front edits and controls to eliminate the need for
after-the-fact reconciliations. The volume of intragovernmental
transactions is so large that after-the-fact reconciliation can not be
accomplished with the existing or foreseeable resources.

###  {#section-20}

###  {#section-21}

[Intragovernmental Receivables Over 180 Days]{.underline}

MDA intragovernmental receivables over 180 days total \$915 thousand.
\$904 thousand are due from other DoD entities; \$11 thousand are from
non-DoD entities.

##### [Non-federal Refunds Receivable]{.underline}

  ----------------------------- --------------------------- ------------------------
  **FY 2003 Non-Federal Refunds **FY 2003 Non-Federal       **% of Net
  [Receivable]{.underline}**    [Accounts Receivable        [Amount]{.underline}**
                                (Net)]{.underline}**        

  \$129 thousand                \$336 thousand              38%
  ----------------------------- --------------------------- ------------------------

MDA non-federal refunds receivable total \$129 thousand, the majority of
the refunds receivable are due from MOCAS contractors. Defense Finance
and Accounting Service (DFAS) is using the debt collection process to
collect the refunds.

#### Note Reference

See Note Disclosure 1.K., Significant Accounting Policies, for
additional discussion on financial reporting requirements and DoD
policies governing Accounts Receivable.

For further Discussion on Accounts Receivable see, DoD Financial
Management Regulation, Volume 6B, Chapter 10, paragraph 1007.

+---------------+-------------------------------------------------------+
| **Note 6.**   | ######## **Other Assets**                             |
+---------------+-------------------------------------------------------+

+------------------------------------+---+--------------+---+-------------+
|                                    |   |              |   |             |
+------------------------------------+---+--------------+---+-------------+
|                                    |   |              |   |             |
+------------------------------------+---+--------------+---+-------------+
|                                    |   |              |   |             |
+------------------------------------+---+--------------+---+-------------+
| **1. Intragovernmental Other       |   |              |   |             |
| Assets:**                          |   |              |   |             |
+------------------------------------+---+--------------+---+-------------+
| A. Advances and Prepayments        | \ | > 121        | \ | > 1,806     |
|                                    | $ |              | $ |             |
+------------------------------------+---+--------------+---+-------------+
| B. Other Assets                    |   | 0            |   | > 0         |
+------------------------------------+---+--------------+---+-------------+
| C. Total Intragovernmental Other   | \ | 121          | \ | 1,806       |
| Assets                             | $ |              | $ |             |
+------------------------------------+---+--------------+---+-------------+
|                                    |   |              |   |             |
+------------------------------------+---+--------------+---+-------------+
| **2.** **Non-Federal Other         |   |              |   |             |
| Assets:**                          |   |              |   |             |
+------------------------------------+---+--------------+---+-------------+
| A. Outstanding Contract Financing  | \ | > 0          | \ | > 0         |
| Payments                           | $ |              | $ |             |
+------------------------------------+---+--------------+---+-------------+
| B. Other Assets (With the Public)  |   | > 139,518    |   | > 37,483    |
+------------------------------------+---+--------------+---+-------------+
| C. Total Non-Federal Other Assets  | \ | 139,518      | \ | 37,483      |
|                                    | $ |              | $ |             |
+------------------------------------+---+--------------+---+-------------+
|                                    |   |              |   |             |
+------------------------------------+---+--------------+---+-------------+
| **3. Total Other Assets:**         | \ | 139,639      | \ | 39,289      |
|                                    | $ |              | $ |             |
+------------------------------------+---+--------------+---+-------------+

#### Fluctuation and/or Abnormalities

Line 1.A. -- Intragovernmental Other Assets -- Advances and Prepayments
balance of \$121 thousand decreased by \$1,685 thousand, or 93 percent
from 4^th^ Quarter, FY 2002 balance of \$1,806 thousand. Missile Defense
Agency (MDA) sellers reported a significant decrease of
intragovernmental advances and prepayments made by MDA. MDA adjusted
buyer-side advances and prepayment to agree with seller-side deferred
credits.

Seller Activity this Reporting Period:

Advances to DISA decreased (\$1,241)

Advances to Army WCF Depot Maintenance decreased (529)

Advances to Army Component Level increased 110

## Advances to Army RDT&E decreased (31) 

Advances to Others increased [6]{.underline}

Variance between periods (\$1,685)

Line 2. B. -- Non-Federal Other Assets - Other Assets (With the Public)
of \$139,517 thousand reflects an increase of \$102,034 thousand, or 272
percent for progress payments made to contractors. The net change
between 4^th^ Quarter FY 2002 and the current period correlates to the
increase in budget authority between FY 2001 and FY 2002. Increases in
acquisition programs in FY 2002 resulted in increases in progress
payments in FY 2003 that are in alignment with the normal execution of
acquisition program life cycles for major missile defense capabilities.
During the year of inception, progress payments are generally a smaller
percentage of the contract obligations, but a substantial increase
occurs during the second and subsequent years.

Other Information

[Other Assets]{.underline}

Other Assets totaling \$121 thousand include \$110 thousand advances to
the Army Component Level.

# [Intragovernmental Advances and Prepayments]{.underline}

The buyer-side advances to others balances were adjusted to agree with
seller-side advances from others on the books of other Department of
Defense (DoD) reporting entities. Additionally, the buyer-side
prepayment balances were adjusted to agree with seller-side deferred
credits on the books of other DoD reporting entities.

####  {#section-22}

#### Note Reference

See Note Disclosure 1. R. - Significant Accounting Policies for
additional discussion on

financial reporting requirements and DoD policies governing Other
Assets.

For Regulatory Discussion on "Other Assets" see, DoD Financial
Management Regulation, Volume 6B, Chapter 10, paragraph 1008.

+--------------------------+-------------------------------------------+
| Note 7.                  | ######## Not Applicable                   |
+--------------------------+-------------------------------------------+

+--------------------------+-------------------------------------------+
| Note 8.                  | ######## Not Applicable                   |
+--------------------------+-------------------------------------------+

+--------------------------+-------------------------------------------+
| Note 9.                  | ######## Not Applicable                   |
+--------------------------+-------------------------------------------+

+--------------------------+-------------------------------------------+
| Note 10.                 | ######## Not Applicable                   |
+--------------------------+-------------------------------------------+

+----------+-----------------------------------------------------------+
| **Note   | ######## **Lia                                            |
| 11.**    | bilities Not Covered and Covered by Budgetary Resources** |
+----------+-----------------------------------------------------------+

<table>
<colgroup>
<col style="width: 40%" />
<col style="width: 2%" />
<col style="width: 11%" />
<col style="width: 2%" />
<col style="width: 13%" />
<col style="width: 2%" />
<col style="width: 9%" />
<col style="width: 2%" />
<col style="width: 8%" />
<col style="width: 2%" />
<col style="width: 4%" />
</colgroup>
<thead>
<tr class="header">
<th></th>
<th colspan="8"></th>
<th></th>
<th></th>
</tr>
<tr class="odd">
<th></th>
<th colspan="6"></th>
<th colspan="4"></th>
</tr>
<tr class="header">
<th></th>
<th colspan="2">Covered by Budgetary Resources</th>
<th colspan="2">Not Covered by Budgetary Resources</th>
<th colspan="2">Total</th>
<th colspan="4">Not Covered by Budgetary Resources</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="4"></td>
</tr>
<tr class="even">
<td><strong>1. Intragovernmental Liabilities:</strong></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="4"></td>
</tr>
<tr class="odd">
<td>A. Accounts Payable</td>
<td>$</td>
<td>58,938</td>
<td>$</td>
<td>0</td>
<td>$</td>
<td>58,938</td>
<td>$</td>
<td colspan="3">0</td>
</tr>
<tr class="even">
<td>B. Debt</td>
<td></td>
<td>0</td>
<td></td>
<td>0</td>
<td></td>
<td>0</td>
<td></td>
<td colspan="3">0</td>
</tr>
<tr class="odd">
<td>C. Environmental Liabilities</td>
<td></td>
<td>0</td>
<td></td>
<td>0</td>
<td></td>
<td>0</td>
<td></td>
<td colspan="3">0</td>
</tr>
<tr class="even">
<td>D. Other</td>
<td></td>
<td>309</td>
<td></td>
<td>6,972</td>
<td></td>
<td>7,281</td>
<td></td>
<td colspan="3">0</td>
</tr>
<tr class="odd">
<td>E. Total Intragovernmental Liabilities</td>
<td>$</td>
<td>59,247</td>
<td>$</td>
<td>6,972</td>
<td>$</td>
<td>66,219</td>
<td>$</td>
<td colspan="3">0</td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td colspan="3"></td>
</tr>
<tr class="odd">
<td><strong>2. Non-Federal Liabilities:</strong></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td colspan="3"></td>
</tr>
<tr class="even">
<td>A. Accounts Payable</td>
<td>$</td>
<td>46,545</td>
<td>$</td>
<td>0</td>
<td>$</td>
<td>46,545</td>
<td>$</td>
<td colspan="3">0</td>
</tr>
<tr class="odd">
<td><p>B. Military Retirement Benefits and</p>
<p>Other Employment-Related Actuarial Liabilities</p></td>
<td></td>
<td>0</td>
<td></td>
<td>0</td>
<td></td>
<td>0</td>
<td></td>
<td colspan="3">0</td>
</tr>
<tr class="even">
<td>C. Environmental Liabilities</td>
<td></td>
<td>0</td>
<td></td>
<td>0</td>
<td></td>
<td>0</td>
<td></td>
<td colspan="3">0</td>
</tr>
<tr class="odd">
<td>D. Loan Guarantee Liability</td>
<td></td>
<td>0</td>
<td></td>
<td>0</td>
<td></td>
<td>0</td>
<td></td>
<td colspan="3">0</td>
</tr>
<tr class="even">
<td>E. Other Liabilities</td>
<td></td>
<td>2,253</td>
<td></td>
<td>9,642</td>
<td></td>
<td>11,895</td>
<td></td>
<td colspan="3">14,123</td>
</tr>
<tr class="odd">
<td>F. Total Non-Federal Liabilities</td>
<td>$</td>
<td>48,798</td>
<td>$</td>
<td>9,642</td>
<td>$</td>
<td>58,440</td>
<td>$</td>
<td colspan="3">14,123</td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td colspan="3"></td>
</tr>
<tr class="odd">
<td><strong>3. Total Liabilities:</strong></td>
<td>$</td>
<td>108,045</td>
<td>$</td>
<td>16,614</td>
<td>$</td>
<td>124,659</td>
<td>$</td>
<td colspan="3">14,123</td>
</tr>
</tbody>
</table>

# **Definitions**

# [Liabilities Not Covered]{.underline} 

Liabilities Not Covered by Budgetary Resources are those liabilities
which are not considered covered by realized budgetary resources as of
the balance sheet date.

# [Liabilities Covered by Budgetary Resources]{.underline}

Liabilities Covered by Budgetary Resources are those resources which are
covered by realized budget resources as of the balance sheet date.
Budgetary resources encompass not only new budget authority, but also
other resources available to cover liabilities for specified purposes in
a given year. Available budgetary resources include: (1) new budget
authority, (2) spending authority from offsetting collections (credited
to an appropriation or fund account), 3) recoveries of unexpired budget
authority through downward adjustments of prior year obligations, 4)
unobligated balances of budgetary resources at the beginning of the year
or net transfers of prior year balances during the year, and 5)
permanent indefinite appropriations or borrowing authority, which have
been enacted and signed into law as of the balance sheet date, provided
that the resources may be apportioned by the OMB without further action
by the Congress or without a contingency first having to be met.

**Fluctuation and/or Abnormalities**

Total Liabilities balance of \$124,659 thousand increased by \$20,155
thousand, or 19 percent from 4^th^ Quarter FY 2002. This increase is
attributed to adjustments made to intragovernmental payables to balance
with trading partners reported amounts.

**Other Information**

## Liabilities Covered by Budgetary Resources:

Line 1.D. - Other Intragovernmental Liabilities - of \$309 thousand
includes Employer Contributions and Payroll Taxes Payable of \$309
thousand

Line 2.E. -- Other Non-Federal Liabilities of \$2,253 thousand includes
Accrued Payroll Employer Share Fringe Benefits of \$251 thousand,
Contract Holdbacks of \$5 thousand, Employer Contributions and Payroll
Taxes of \$1,878 thousand, and Other Liabilities of \$119 thousand

[Liabilities Not Covered by Budgetary Resource]{.underline}

Line 1.D. - Other Intragovernmental Liabilities of \$6,972 thousand
includes Accounts Payable -- Canceled Appropriations of \$6,971 thousand
-- and Custodial Liability of \$1 thousand.

Line 2.E. -- Other Non-Federal Liabilities of \$9,642 thousand includes
Accrued Annual Leave of \$7,662 thousand and Accounts Payable --
Canceled Appropriations of \$1,980 thousand.

**Note Reference**

For Additional Line Item discussion, see:

Note 12, Accounts Payable

Note 15, Other Liabilities

For Regulatory Discussion on Liabilities Not Covered and Covered by
Budgetary Resources see, Department of Defense Financial Management
Regulation, Volume 6B, Chapter 10, paragraph 1013.

<table style="width:100%;">
<colgroup>
<col style="width: 22%" />
<col style="width: 10%" />
<col style="width: 2%" />
<col style="width: 13%" />
<col style="width: 2%" />
<col style="width: 17%" />
<col style="width: 2%" />
<col style="width: 5%" />
<col style="width: 8%" />
<col style="width: 3%" />
<col style="width: 11%" />
</colgroup>
<tbody>
<tr class="odd">
<td><strong>Note 12.</strong></td>
<td colspan="7"><p id="accounts-payable"
class="heading"><strong>Accounts Payable</strong></p></td>
<td colspan="3"></td>
</tr>
<tr class="even">
<td colspan="2"><strong>As of September 30</strong></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="3"></td>
<td colspan="2"></td>
</tr>
<tr class="odd">
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="3"></td>
<td colspan="2"></td>
</tr>
<tr class="even">
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="3"></td>
<td colspan="2"></td>
</tr>
<tr class="odd">
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"><blockquote>
<p>Interest,</p>
</blockquote></td>
<td colspan="3"></td>
<td colspan="2"></td>
</tr>
<tr class="even">
<td colspan="2" rowspan="2"></td>
<td colspan="2" rowspan="2">Accounts Payable</td>
<td colspan="2" rowspan="2"><blockquote>
<p>Penalties, and Administrative Fees</p>
</blockquote></td>
<td colspan="3">Total</td>
<td colspan="2">Total</td>
</tr>
<tr class="odd">
<td colspan="3"></td>
<td colspan="2"></td>
</tr>
<tr class="even">
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td colspan="3"></td>
<td colspan="2"></td>
</tr>
<tr class="odd">
<td colspan="2"><strong>1. Intragovernmental Payables:</strong></td>
<td>$</td>
<td>58,938</td>
<td></td>
<td>N/A</td>
<td>$</td>
<td colspan="2">58,938</td>
<td>$</td>
<td>20,799</td>
</tr>
<tr class="even">
<td colspan="2"><strong>2. Non-Federal Payables (to the
Public):</strong></td>
<td>$</td>
<td>46,545</td>
<td>$</td>
<td>0</td>
<td>$</td>
<td colspan="2">46,545</td>
<td>$</td>
<td>44,724</td>
</tr>
<tr class="odd">
<td colspan="2"><strong>3. Total</strong></td>
<td>$</td>
<td>105,483</td>
<td>$</td>
<td>0</td>
<td>$</td>
<td colspan="2">105,483</td>
<td>$</td>
<td>65,523</td>
</tr>
</tbody>
</table>

**Definition**

Intragovernmental accounts payable consists of amounts owed to other
federal agencies for goods or services ordered and received but not yet
paid. Interest, penalties and administrative fees are not applicable to
intragovernmental payables. Non-federal payables (to the Public) are
payments due to non-federal entities.

**Fluctuation and/or Abnormalities**

Intragovernmental payable balance of \$58,938 thousand increased by
\$38,140 thousand, or 184 percent from 4^th^ Quarter, FY 2002. Missile
Defense Agency's (MDA) trading partners reported a significant increase
in accounts receivable that adjusted MDA's accounts payable. Seller
Activity this Reporting Period:

Payables to Navy General Funds increased \$7,618

Payables Army General Funds decreased (5,216)

Payables to Air Force General Funds increased 7,947

## Payables to Office of Secretary of Defense General Funds increased 25,021

### Payables to Others increased 2,770

Variance between periods \$38,140

**Other Information**

# [Intragovernmental Eliminations]{.underline}

For the majority of intraagency sales, MDA's accounting systems do not
capture trading partner data at the transaction level in a manner that
facilitates trading partner aggregations. Therefore, MDA was unable to
reconcile intragovernmental accounts payable to the related
intragovernmental accounts receivable that generated the payable.

The Department of Defense (DoD) summary level seller accounts
receivables were compared to MDA's accounts payable. An adjustment was
posted to MDA's accounts payable based on the comparison with the
accounts receivable of the DoD Components providing goods and services
to MDA. Positive differences were treated as unrecognized accounts
payable and MDA's accounts payable were adjusted accordingly.

The Department intends to develop long-term systems improvements that
will include sufficient up-front edits and controls to eliminate the
need for after-the-fact reconciliations. The volume of intragovernmental
transactions is so large that after-the-fact reconciliation cannot be
accomplished with the existing or foreseeable resources.

####  {#section-23}

#### [Other MDA Disclosures]{.underline}

MDA interest paid for FY 2003 reported on the trial balance is \$6
thousand. MDA and the Defense Finance and Accounting Service (DFAS) will
review interest paid reporting process to ensure that total interest
paid is properly reflected on the trial balances.

# [Note Reference]{.underline}

See Note Disclosure 1. G. **-** Significant Accounting Policies for
additional discussion on financial reporting requirements and DoD
policies governing accounting for Intragovernmental Activities.

For Regulatory Discussion on Accounts Payable see, DoD Financial
Management Regulation, Volume 6B, Chapter 10, paragraph 1014.

+----------------------------+-----------------------------------------+
| Note 13.                   | ######## Not Applicable                 |
+----------------------------+-----------------------------------------+

+--------------------------+-------------------------------------------+
| Note 14.                 | ######## Not Applicable                   |
+--------------------------+-------------------------------------------+

<table>
<colgroup>
<col style="width: 15%" />
<col style="width: 8%" />
<col style="width: 23%" />
<col style="width: 0%" />
<col style="width: 0%" />
<col style="width: 2%" />
<col style="width: 9%" />
<col style="width: 2%" />
<col style="width: 12%" />
<col style="width: 2%" />
<col style="width: 3%" />
<col style="width: 7%" />
<col style="width: 2%" />
<col style="width: 10%" />
</colgroup>
<tbody>
<tr class="odd">
<td><strong>Note 15.A.</strong></td>
<td colspan="10"><p id="other-liabilities" class="heading"><strong>Other
Liabilities</strong> </p></td>
<td colspan="3"></td>
</tr>
<tr class="even">
<td colspan="3"></td>
<td colspan="9"></td>
<td colspan="2"><mark></mark></td>
</tr>
<tr class="odd">
<td colspan="5"></td>
<td colspan="7"></td>
<td colspan="2"></td>
</tr>
<tr class="even">
<td colspan="4"></td>
<td colspan="3" rowspan="2"><p>Current</p>
<p>Liability</p></td>
<td colspan="2" rowspan="2"><p>Noncurrent</p>
<p>Liability</p></td>
<td colspan="3" rowspan="2">Total</td>
<td colspan="2" rowspan="2">Total</td>
</tr>
<tr class="odd">
<td colspan="2"></td>
<td colspan="2"></td>
</tr>
<tr class="even">
<td colspan="4"><strong>1. Intragovernmental:</strong></td>
<td colspan="2"></td>
<td></td>
<td colspan="2"></td>
<td></td>
<td colspan="2"></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td colspan="4">A. Advances from Others</td>
<td colspan="2">$</td>
<td>0</td>
<td>$</td>
<td>0</td>
<td>$</td>
<td colspan="2">0</td>
<td>$</td>
<td>7,626</td>
</tr>
<tr class="even">
<td colspan="4">B. Deferred Credits</td>
<td colspan="2"></td>
<td>0</td>
<td></td>
<td>0</td>
<td></td>
<td colspan="2">0</td>
<td></td>
<td>0</td>
</tr>
<tr class="odd">
<td colspan="4"><p>C. Deposit Funds and Suspense Account</p>
<p>Liabilities</p></td>
<td colspan="2"></td>
<td>0</td>
<td></td>
<td>0</td>
<td></td>
<td colspan="2">0</td>
<td></td>
<td>0</td>
</tr>
<tr class="even">
<td colspan="4">D. Resources Payable to Treasury</td>
<td colspan="2"></td>
<td>0</td>
<td></td>
<td>0</td>
<td></td>
<td colspan="2">0</td>
<td></td>
<td>11,356</td>
</tr>
<tr class="odd">
<td colspan="4">E. Disbursing Officer Cash</td>
<td colspan="2"></td>
<td>0</td>
<td></td>
<td>0</td>
<td></td>
<td colspan="2">0</td>
<td></td>
<td>0</td>
</tr>
<tr class="even">
<td colspan="4">F. Nonenvironmental Disposal Liabilities:</td>
<td colspan="2"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td colspan="2"></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td colspan="4">(1) National Defense PP&amp;E (Nonnuclear)</td>
<td colspan="2"></td>
<td>0</td>
<td></td>
<td>0</td>
<td></td>
<td colspan="2">0</td>
<td></td>
<td>0</td>
</tr>
<tr class="even">
<td colspan="4">(2) Excess/Obsolete Structures</td>
<td colspan="2"></td>
<td>0</td>
<td></td>
<td>0</td>
<td></td>
<td colspan="2">0</td>
<td></td>
<td>0</td>
</tr>
<tr class="odd">
<td colspan="4">(3) Conventional Munitions Disposal</td>
<td colspan="2"></td>
<td>0</td>
<td></td>
<td>0</td>
<td></td>
<td colspan="2">0</td>
<td></td>
<td>0</td>
</tr>
<tr class="even">
<td colspan="4">(4) Other</td>
<td colspan="2"></td>
<td>0</td>
<td></td>
<td>0</td>
<td></td>
<td colspan="2">0</td>
<td></td>
<td>0</td>
</tr>
<tr class="odd">
<td colspan="4">G. Accounts Payable-- Cancelled Appropriations</td>
<td colspan="2"></td>
<td>6,971</td>
<td></td>
<td>0</td>
<td></td>
<td colspan="2">6,971</td>
<td></td>
<td>0</td>
</tr>
<tr class="even">
<td colspan="4">H . Judgment Fund Liabilities</td>
<td colspan="2"></td>
<td>0</td>
<td></td>
<td>0</td>
<td></td>
<td colspan="2">0</td>
<td></td>
<td>0</td>
</tr>
<tr class="odd">
<td colspan="4">I. FECA Reimbursement to the Department of Labor</td>
<td colspan="2"></td>
<td>0</td>
<td></td>
<td>0</td>
<td></td>
<td colspan="2">0</td>
<td></td>
<td>0</td>
</tr>
<tr class="even">
<td colspan="4">J. Capital Lease Liability</td>
<td colspan="2"></td>
<td>0</td>
<td></td>
<td>0</td>
<td></td>
<td colspan="2">0</td>
<td></td>
<td>0</td>
</tr>
<tr class="odd">
<td colspan="4">K. Other Liabilities</td>
<td colspan="2"></td>
<td>309</td>
<td></td>
<td>1</td>
<td></td>
<td colspan="2">310</td>
<td></td>
<td>309</td>
</tr>
<tr class="even">
<td colspan="4">L. Total Intragovernmental Other Liabilities</td>
<td colspan="2">$</td>
<td>7,280</td>
<td>$</td>
<td>1</td>
<td>$</td>
<td colspan="2">7,281</td>
<td>$</td>
<td>19,291</td>
</tr>
</tbody>
</table>

<table>
<colgroup>
<col style="width: 24%" />
<col style="width: 24%" />
<col style="width: 2%" />
<col style="width: 0%" />
<col style="width: 10%" />
<col style="width: 2%" />
<col style="width: 12%" />
<col style="width: 2%" />
<col style="width: 8%" />
<col style="width: 2%" />
<col style="width: 10%" />
</colgroup>
<tbody>
<tr class="odd">
<td colspan="2"></td>
<td colspan="9"></td>
</tr>
<tr class="even">
<td colspan="2"></td>
<td colspan="7"></td>
<td colspan="2"></td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td colspan="3"><p>Current</p>
<p>Liability</p></td>
<td colspan="2"><p>Noncurrent</p>
<p>Liability</p></td>
<td colspan="2">Total</td>
<td colspan="2">Total</td>
</tr>
<tr class="even">
<td colspan="2"><strong>2. Non-Federal:</strong></td>
<td></td>
<td colspan="2"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td colspan="2">A. Accrued Funded Payroll and Benefits</td>
<td>$</td>
<td colspan="2">1,878</td>
<td>$</td>
<td>0</td>
<td>$</td>
<td>1,878</td>
<td>$</td>
<td>3,226</td>
</tr>
<tr class="even">
<td colspan="2">B. Advances from Others</td>
<td></td>
<td colspan="2">0</td>
<td></td>
<td>0</td>
<td></td>
<td>0</td>
<td></td>
<td>0</td>
</tr>
<tr class="odd">
<td colspan="2">C. Deferred Credits</td>
<td></td>
<td colspan="2">0</td>
<td></td>
<td>0</td>
<td></td>
<td>0</td>
<td></td>
<td>0</td>
</tr>
<tr class="even">
<td colspan="2">D. Loan Guarantee Liability</td>
<td></td>
<td colspan="2">0</td>
<td></td>
<td>0</td>
<td></td>
<td>0</td>
<td></td>
<td>0</td>
</tr>
<tr class="odd">
<td colspan="2">E. Liability for Subsidy Related to Undisbursed
Loans</td>
<td></td>
<td colspan="2">0</td>
<td></td>
<td>0</td>
<td></td>
<td>0</td>
<td></td>
<td>0</td>
</tr>
<tr class="even">
<td colspan="2">F. Deposit Funds and Suspense Accounts</td>
<td></td>
<td colspan="2">0</td>
<td></td>
<td>0</td>
<td></td>
<td>0</td>
<td></td>
<td>0</td>
</tr>
<tr class="odd">
<td colspan="2">G. Temporary Early Retirement Authority</td>
<td></td>
<td colspan="2">0</td>
<td></td>
<td>0</td>
<td></td>
<td>0</td>
<td></td>
<td>0</td>
</tr>
<tr class="even">
<td colspan="2">H. Nonenvironmental Disposal Liabilities:</td>
<td></td>
<td colspan="2"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td colspan="2">(1) National Defense PP&amp;E (Nonnuclear)</td>
<td></td>
<td colspan="2">0</td>
<td></td>
<td>0</td>
<td></td>
<td>0</td>
<td></td>
<td>0</td>
</tr>
<tr class="even">
<td colspan="2">(2) Excess/Obsolete Structures</td>
<td></td>
<td colspan="2">0</td>
<td></td>
<td>0</td>
<td></td>
<td>0</td>
<td></td>
<td>0</td>
</tr>
<tr class="odd">
<td colspan="2">(3) Conventional Munitions Disposal</td>
<td></td>
<td colspan="2">0</td>
<td></td>
<td>0</td>
<td></td>
<td>0</td>
<td></td>
<td>0</td>
</tr>
<tr class="even">
<td colspan="2">(4) Other</td>
<td></td>
<td colspan="2">0</td>
<td></td>
<td>0</td>
<td></td>
<td>0</td>
<td></td>
<td>2,103</td>
</tr>
<tr class="odd">
<td colspan="2">I. Accounts Payable--Cancelled Appropriations</td>
<td></td>
<td colspan="2">1,096</td>
<td></td>
<td>883</td>
<td></td>
<td>1,979</td>
<td></td>
<td>9,936</td>
</tr>
<tr class="even">
<td colspan="2">J. Accrued Unfunded Annual Leave</td>
<td></td>
<td colspan="2">7,662</td>
<td></td>
<td>0</td>
<td></td>
<td>7,662</td>
<td></td>
<td>4,187</td>
</tr>
<tr class="odd">
<td colspan="2">K. Accrued Entitlement Benefits for Military Retirees
and Survivors</td>
<td></td>
<td colspan="2">0</td>
<td></td>
<td>0</td>
<td></td>
<td>0</td>
<td></td>
<td>0</td>
</tr>
<tr class="even">
<td colspan="2">L. Capital Lease Liability</td>
<td></td>
<td colspan="2">0</td>
<td></td>
<td>0</td>
<td></td>
<td>0</td>
<td></td>
<td>0</td>
</tr>
<tr class="odd">
<td colspan="2">M. Other Liabilities</td>
<td></td>
<td colspan="2">376</td>
<td></td>
<td>0</td>
<td></td>
<td>376</td>
<td></td>
<td>238</td>
</tr>
<tr class="even">
<td colspan="2">N. Total Non-Federal Other Liabilities</td>
<td>$</td>
<td colspan="2">11,012</td>
<td>$</td>
<td>883</td>
<td>$</td>
<td>11,895</td>
<td>$</td>
<td>19,690</td>
</tr>
<tr class="odd">
<td colspan="2"><strong>3</strong>. <strong>Total Other</strong>
<strong>Liabilities:</strong></td>
<td colspan="2">$</td>
<td>18,292</td>
<td>$</td>
<td>884</td>
<td>$</td>
<td>19,176</td>
<td>$</td>
<td>38,981</td>
</tr>
</tbody>
</table>

**Fluctuations and/or Abnormalities**

[Total Intragovernmental Other Liabilities]{.underline}

Decreased by \$12,010 thousand, or 62 percent. The decrease is a result
of a reclassification and a reversal of accounts payable. In FY 2003,
joint tri-annual reviews identified that the \$11,356 thousand resources
payable to Treasury of the United States (TUS) reported at the end of FY
2002 were unsupportable. The Defense Finance and Accounting Service
(DFAS) reversed these unsupportable payables during 4^th^ Quarter FY
2003.

Of the \$7,626 thousand reported as advances from others, at the end of
FY 2002, \$6,971 thousand was reclassified to accounts payable --
cancelled appropriations.

[Total Non-Federal Other Liabilities]{.underline}

Decreased by \$7,794 thousand, or 40 percent. The majority of the
decrease is attributable to a \$7,960 thousand decrease in accounts
payable -- cancelled appropriations. In FY 2003, cancelled accounts
payables were liquidated, thus reducing the total non-federal other
liabilities.

**Other Information**

Other Liabilities

+-------------------------------------------+------------+-------------+
| ######### Types                           | **FY       | **FY 2002** |
|                                           | 2003**     |             |
+-------------------------------------------+------------+-------------+
| **Intragovernmental -- Other              |            |             |
| Liabilities**                             |            |             |
+-------------------------------------------+------------+-------------+
| Retirement                                | \$165      | \$232       |
+-------------------------------------------+------------+-------------+
| Health Benefits                           | \$85       | \$75        |
+-------------------------------------------+------------+-------------+
| VSIP                                      | \$57       | ### No      |
|                                           |            | t Available |
+-------------------------------------------+------------+-------------+
| ## Other                                  | \$3        | \$2         |
+-------------------------------------------+------------+-------------+
| **Total**                                 | **\$310**  | **\$309**   |
+-------------------------------------------+------------+-------------+
|                                           |            |             |
+-------------------------------------------+------------+-------------+
| # Non-Federal --Other Liabilities         |            |             |
+-------------------------------------------+------------+-------------+
| # **Accrued Payroll -- Civili             | \$256      | \$238       |
| an -- Employer Share -- Fringe Benefits** |            |             |
+-------------------------------------------+------------+-------------+
| # **O                                     | \$119      | \$0         |
| ther Liabilities** {#other-liabilities-1} |            |             |
+-------------------------------------------+------------+-------------+
| **Total**                                 | **\$375**  | **\$238**   |
+-------------------------------------------+------------+-------------+
|                                           |            |             |
+-------------------------------------------+------------+-------------+
| ####### **Total**                         | **\$685**  | **\$547**   |
+-------------------------------------------+------------+-------------+

Line 2.M. Other Liabilities - increased by \$138 thousand, or 58
percent. This increase is attributable to nonentity cancelled accounts
receivable contra account (SGL 2990), which totaled \$119 thousand.

[Nonenvironmental Disposal Liability Disclosure]{.underline}

The FY 2002 amount of \$2,103 thousand was erroneously recorded on line
2.H 4 as a nonenvironmental disposal liability. This amount should have
been mapped to line 2.M. In addition, \$2,088 thousand of this amount
relates to an abnormal accounts payable -- cancelled appropriations (See
Note Disclosure 2. -- Nonentity and Entity Assets).

#### Note Reference

See Note Disclosure 1. S. **-** Significant Accounting Policies for
additional discussion on financial reporting requirements and Department
of Defense (DoD) policies governing Contingencies and Other Liabilities.

For Regulatory Discussion on Other Liabilities see, DoD Financial
Management Regulation, Volume 6B, Chapter 10, paragraph 1017.

+------------------+---------------------------------------------------+
| **Note 16.**     | ######## **Commitments and Contingencies**        |
+------------------+---------------------------------------------------+

##  {#section-24}

## **Other Information**

# Probable and estimable unsettled litigation and claims against Missile Defense Agency (MDA) would be recognized, if they exist, as a liability and expense for the full amount of the expected loss. The cases reported as pending litigation by our legal counsel did not meet the loss provision and disclosure criteria outlined in Statement of Federal Financial Accounting Standard (SFFAS) No. 5 and SFFAS No. 12. Accordingly, MDA has not recorded or disclosed any contingent liabilities.

**Note Reference**

See Note Disclosure 1. S. **-** Significant Accounting Policies for
additional discussion on financial reporting requirements and Department
of Defense (DoD) policies governing Contingencies and Other Liabilities.

For Regulatory Discussion on Commitments and Contingencies see, DoD
Financial Management Regulation, Volume 6B, Chapter 10, paragraph 1018.

+---------------------------+------------------------------------------+
| Note 17.                  | ######## Not Applicable                  |
+---------------------------+------------------------------------------+

+-------------+--------------------------------------------------------+
| **Note      | ######## **Unexpended Appropriations**                 |
| 18.**       |                                                        |
+-------------+--------------------------------------------------------+

  ---------------------------- -- ---- ------------------ ---- -----------------
                                                               

                                                               

                                                               

  **1. Unexpended                                              
  Appropriations:**                                            

  A. Unobligated, Available       \$   713,233            \$   1,038,061

  B. Unobligated, Unavailable          28,391                  (76,414)

  C. Unexpended Obligations            3,041,212               3,374,952

  D. Total Unexpended             \$   3,782,836          \$   4,336,599
  Appropriations                                               

                                                               
  ---------------------------- -- ---- ------------------ ---- -----------------

**Fluctuation and/or Abnormalities**

Unexpended Obligations, reported as a component of Unexpended
Appropriations, include Undelivered Orders-Obligations, Unpaid for
\$3,564,119 thousand; Undelivered Orders-Obligations, Prepaid/Advanced
for \$867 thousand; Downward Adjustments of Prior Year Unpaid
Undelivered Orders-Obligations, Recoveries for \$(547,479) thousand; and
Upward Adjustments of Prior Year Undelivered Orders-Obligations --Unpaid
for \$23,706 thousand. This amount is distinct from Line 12 on the
Statement of Financing, which includes the change during the fiscal year
for all undelivered orders obligations against budget authority from all
sources.

Unexpended appropriation balances found on the Missile Defense Agency
(MDA) general ledger have been adjusted to reflect the reporting of
undistributed disbursements between Treasury of the United States (TUS)
records and field level reporting activities.

Unobligated, Unavailable \$28,391 thousand - The abnormal condition
totaling (\$76,414) thousand reflected for FY 2002, relates to a
correcting adjustment that posted twice by mistake. During FY 2003, the
responsible accounting activity corrected the double posting, which
adjusted disbursements and obligations for contract HQ0006890003.

+-----------+----------------------------------------------------------+
| **Note**  | **General Disclosures Related to the Statement of Net    |
| **19.A**  | Cost**                                                   |
+-----------+----------------------------------------------------------+
|           |                                                          |
+-----------+----------------------------------------------------------+
| **Flu     |                                                          |
| ctuations |                                                          |
| and/or    |                                                          |
| Abnorm    |                                                          |
| alities** |                                                          |
|           |                                                          |
| (Line 1A, |                                                          |
| 1B and    |                                                          |
| Line 1D)  |                                                          |
| The net   |                                                          |
| change    |                                                          |
| between   |                                                          |
| FY 2002   |                                                          |
| and FY    |                                                          |
| 2003      |                                                          |
| c         |                                                          |
| orrelates |                                                          |
| to the    |                                                          |
| increase  |                                                          |
| in budget |                                                          |
| authority |                                                          |
| between   |                                                          |
| FY 2001   |                                                          |
| and FY    |                                                          |
| 2002.     |                                                          |
| Increases |                                                          |
| in        |                                                          |
| ac        |                                                          |
| quisition |                                                          |
| programs  |                                                          |
| in FY     |                                                          |
| 2002      |                                                          |
| resulted  |                                                          |
| in        |                                                          |
| increases |                                                          |
| in        |                                                          |
| operating |                                                          |
| expenses  |                                                          |
| in FY     |                                                          |
| 2003 that |                                                          |
| are in    |                                                          |
| alignment |                                                          |
| with the  |                                                          |
| normal    |                                                          |
| execution |                                                          |
| of        |                                                          |
| ac        |                                                          |
| quisition |                                                          |
| program   |                                                          |
| life      |                                                          |
| cycles    |                                                          |
| for major |                                                          |
| missile   |                                                          |
| defense   |                                                          |
| capa      |                                                          |
| bilities. |                                                          |
| During    |                                                          |
| the year  |                                                          |
| of        |                                                          |
| i         |                                                          |
| nception, |                                                          |
| operating |                                                          |
| expenses  |                                                          |
| are       |                                                          |
| generally |                                                          |
| a smaller |                                                          |
| p         |                                                          |
| ercentage |                                                          |
| of the    |                                                          |
| contract  |                                                          |
| obl       |                                                          |
| igations, |                                                          |
| but a     |                                                          |
| su        |                                                          |
| bstantial |                                                          |
| increase  |                                                          |
| normally  |                                                          |
| occurs    |                                                          |
| during    |                                                          |
| the       |                                                          |
| second    |                                                          |
| and       |                                                          |
| s         |                                                          |
| ubsequent |                                                          |
| years.    |                                                          |
|           |                                                          |
| **Other   |                                                          |
| Info      |                                                          |
| rmation** |                                                          |
|           |                                                          |
| [         |                                                          |
| Statement |                                                          |
| of Net    |                                                          |
| Cost]{.u  |                                                          |
| nderline} |                                                          |
|           |                                                          |
| The       |                                                          |
| Con       |                                                          |
| solidated |                                                          |
| Statement |                                                          |
| of Net    |                                                          |
| Cost      |                                                          |
| (SONC) in |                                                          |
| the       |                                                          |
| federal   |                                                          |
| g         |                                                          |
| overnment |                                                          |
| is unique |                                                          |
| because   |                                                          |
| its       |                                                          |
| p         |                                                          |
| rinciples |                                                          |
| are       |                                                          |
| driven on |                                                          |
| unde      |                                                          |
| rstanding |                                                          |
| the net   |                                                          |
| cost of   |                                                          |
| programs  |                                                          |
| and/or    |                                                          |
| orga      |                                                          |
| nizations |                                                          |
| that the  |                                                          |
| federal   |                                                          |
| g         |                                                          |
| overnment |                                                          |
| supports  |                                                          |
| through   |                                                          |
| appro     |                                                          |
| priations |                                                          |
| or other  |                                                          |
| means.    |                                                          |
| This      |                                                          |
| statement |                                                          |
| provides  |                                                          |
| gross and |                                                          |
| net cost  |                                                          |
| in        |                                                          |
| formation |                                                          |
| that can  |                                                          |
| be        |                                                          |
| related   |                                                          |
| to the    |                                                          |
| amount of |                                                          |
| output or |                                                          |
| outcome   |                                                          |
| for a     |                                                          |
| given     |                                                          |
| program   |                                                          |
| and/or    |                                                          |
| org       |                                                          |
| anization |                                                          |
| adm       |                                                          |
| inistered |                                                          |
| by a      |                                                          |
| re        |                                                          |
| sponsible |                                                          |
| reporting |                                                          |
| entity.   |                                                          |
|           |                                                          |
| ##        |                                                          |
| Reporting |                                                          |
|  Entities |                                                          |
|           |                                                          |
| The       |                                                          |
| amounts   |                                                          |
| presented |                                                          |
| in the    |                                                          |
| SoNC are  |                                                          |
| based on  |                                                          |
| ob        |                                                          |
| ligations |                                                          |
| and       |                                                          |
| disb      |                                                          |
| ursements |                                                          |
| and       |                                                          |
| therefore |                                                          |
| may not   |                                                          |
| in all    |                                                          |
| cases     |                                                          |
| report    |                                                          |
| actual    |                                                          |
| accrued   |                                                          |
| costs.    |                                                          |
| Missile   |                                                          |
| Defense   |                                                          |
| Agency    |                                                          |
| (MDA)     |                                                          |
| generally |                                                          |
| records   |                                                          |
| tra       |                                                          |
| nsactions |                                                          |
| on a cash |                                                          |
| basis and |                                                          |
| not an    |                                                          |
| accrual   |                                                          |
| basis as  |                                                          |
| is        |                                                          |
| required  |                                                          |
| by        |                                                          |
| generally |                                                          |
| accepted  |                                                          |
| a         |                                                          |
| ccounting |                                                          |
| pr        |                                                          |
| inciples. |                                                          |
| T         |                                                          |
| herefore, |                                                          |
| MDA's     |                                                          |
| systems   |                                                          |
| do not    |                                                          |
| capture   |                                                          |
| actual    |                                                          |
| costs. As |                                                          |
| such,     |                                                          |
| in        |                                                          |
| formation |                                                          |
| presented |                                                          |
| in the    |                                                          |
| SoNC is   |                                                          |
| based on  |                                                          |
| budgetary |                                                          |
| obl       |                                                          |
| igations, |                                                          |
| disbu     |                                                          |
| rsements, |                                                          |
| and       |                                                          |
| c         |                                                          |
| ollection |                                                          |
| tran      |                                                          |
| sactions, |                                                          |
| as well   |                                                          |
| as input  |                                                          |
| from      |                                                          |
| non-      |                                                          |
| financial |                                                          |
| feeder    |                                                          |
| systems;  |                                                          |
| sub       |                                                          |
| sequently |                                                          |
| adjusted  |                                                          |
| to record |                                                          |
| known     |                                                          |
| accruals  |                                                          |
| for major |                                                          |
| items     |                                                          |
| such as   |                                                          |
| payroll   |                                                          |
| expenses, |                                                          |
| accounts  |                                                          |
| payable,  |                                                          |
| and       |                                                          |
| envi      |                                                          |
| ronmental |                                                          |
| lia       |                                                          |
| bilities. |                                                          |
+-----------+----------------------------------------------------------+

[Intragovernmental Revenue]{.underline}

The MDA's accounting systems do not capture trading partner data at the
transaction level in a manner that facilitates trading partner
aggregations. Therefore, MDA was unable to reconcile intragovernmental
revenue balances with its trading partners. The Department intends to
develop long-term systems improvements that will include sufficient
up-front edits and controls to eliminate the need for after-the-fact
reconciliations. The volume of intragovernmental transactions is so
large that after-the-fact reconciliation can not be accomplished with
the existing or foreseeable resources.

[Intragovernmental Operating Expenses]{.underline}

MDA's operating expenses were adjusted based on a comparison between
MDA's accounts payable and the Department of Defense (DoD) summary level
seller accounts receivable. An adjustment was posted to accounts payable
and operating expenses to reflect unrecognized accounts payable and
operating expenses. The operating expenses of MDA were adjusted
downwards in the amount of \$96,413 thousand.

**Note Reference**

For Regulatory Discussion on Intragovernmental Revenue and Expense see,
DoD Financial Management Regulation, Volume 6B, Chapter 10, paragraph
102125.

+---------------------------------+------------------------------------+
| Note 19.B.                      | ######## Not Applicable            |
+---------------------------------+------------------------------------+

+---------------------------------+------------------------------------+
| Note 19.C.                      | ######## Not Applicable            |
+---------------------------------+------------------------------------+

+-----------+----------------+---+-----------------+---+---+-------------+---+
| **Note    | ##             |   |                 |   |   |             |   |
| 19.D.**   | ###### **Imput |   |                 |   |   |             |   |
|           | ed Expenses**  |   |                 |   |   |             |   |
+-----------+----------------+---+-----------------+---+---+-------------+---+
|           |                |   |                 |   |   |             |   |
+-----------+----------------+---+-----------------+---+---+-------------+---+
|           |                |   |                 |   |   |             |   |
+-----------+----------------+---+-----------------+---+---+-------------+---+
|           |                |   |                 |   |   |             |   |
+-----------+----------------+---+-----------------+---+---+-------------+---+
| 1\.       |                | \ | 2,456           | \ |   | 1,636       |   |
| Civilian  |                | $ |                 | $ |   |             |   |
| (e.g.,C   |                |   |                 |   |   |             |   |
| SRS/FERS) |                |   |                 |   |   |             |   |
| R         |                |   |                 |   |   |             |   |
| etirement |                |   |                 |   |   |             |   |
+-----------+----------------+---+-----------------+---+---+-------------+---+
| 2\.       |                |   | 1,919           |   |   | 1,543       |   |
| Civilian  |                |   |                 |   |   |             |   |
| Health    |                |   |                 |   |   |             |   |
+-----------+----------------+---+-----------------+---+---+-------------+---+
| 3\.       |                |   | 11              |   |   | 8           |   |
| Civilian  |                |   |                 |   |   |             |   |
| Life      |                |   |                 |   |   |             |   |
| Insurance |                |   |                 |   |   |             |   |
+-----------+----------------+---+-----------------+---+---+-------------+---+
| 4\.       |                |   | 0               |   |   | 0           |   |
| Military  |                |   |                 |   |   |             |   |
| R         |                |   |                 |   |   |             |   |
| etirement |                |   |                 |   |   |             |   |
| Pension   |                |   |                 |   |   |             |   |
+-----------+----------------+---+-----------------+---+---+-------------+---+
| 5\.       |                |   | 0               |   |   | 0           |   |
| Military  |                |   |                 |   |   |             |   |
| R         |                |   |                 |   |   |             |   |
| etirement |                |   |                 |   |   |             |   |
| Health    |                |   |                 |   |   |             |   |
+-----------+----------------+---+-----------------+---+---+-------------+---+
| 6\.       |                |   | 0               |   |   | 0           |   |
| Judgment  |                |   |                 |   |   |             |   |
| Fund      |                |   |                 |   |   |             |   |
+-----------+----------------+---+-----------------+---+---+-------------+---+
| 7\. Total |                | \ | 4,386           | \ |   | 3,187       |   |
| Imputed   |                | $ |                 | $ |   |             |   |
| Expenses  |                |   |                 |   |   |             |   |
+-----------+----------------+---+-----------------+---+---+-------------+---+
|           |                |   |                 |   |   |             |   |
+-----------+----------------+---+-----------------+---+---+-------------+---+

**Fluctuations and Abnormalities**

The net change between FY 2003 and FY 2002 imputed expenses relating to
Civil Service Retirement System (CSRS) and Federal Employees Retirement
System (FERS) is due to an overall 47 percent increase to the Missile
Defense Agency's (MDA) annual gross basic pay. The net change between FY
2003 and FY 2002 imputed expenses relating to Civilian Health and Life
Insurance is due to an overall 15 percent increase of MDA's enrollees,
and increases in premiums.

**Note Reference**

For Regulatory Discussion on Imputed Expense see, Department of Defense
Financial Management Regulation, Volume 6B, Chapter 10, paragraph
102110.

+--------------------------------+-------------------------------------+
| Note 19.E-19.H.                | ######## Not Applicable             |
+--------------------------------+-------------------------------------+

+-------------+--------------------------------------------------------+
| **Note      | ######## **Intragovernmental Revenue and Expense**     |
| 19.I.**     |                                                        |
+-------------+--------------------------------------------------------+

**Other Information**

[Intragovernmental Revenue]{.underline}

The Missile Defense Agency's (MDA) accounting systems do not capture
trading partner data at the transaction level in a manner that
facilitates trading partner aggregations. Therefore, MDA was unable to
reconcile intragovernmental revenue balances with its trading partners.
The Department intends to develop long-term systems improvements that
will include sufficient up-front edits and controls to eliminate the
need for after-the-fact reconciliations. The volume of intragovernmental
transactions is so large that after-the-fact reconciliation can not be
accomplished with the existing or foreseeable resources.

[Intragovernmental Operating Expenses]{.underline}

The MDA's operating expenses were adjusted based on a comparison between
MDA's accounts payable and the Department of Defense (DoD) summary level
seller accounts receivables. An adjustment was posted to accounts
payable and operating expenses to reflect unrecognized accounts payable
and operating expenses. The operating expenses of MDA were adjusted
downwards in the amount of \$96,413 thousand.

**Note Reference**

For Regulatory Discussion on Intragovernmental Revenue and Expense see,
DoD Financial Management Regulation, Volume 6B, Chapter 10, paragraph
102125.

+---------------------------------+------------------------------------+
| Note 19.J.                      | ######## Not Applicable            |
+---------------------------------+------------------------------------+

+---------+------------------------------------------------------------+
| **Note  | ######## **Disclos                                         |
| 20.**   | ures Related to the Statement of Changes in Net Position** |
+---------+------------------------------------------------------------+

+----------------------------+---+------+---+--------+---+--------+---+--------+
|                            | C |      | U |        | C |        | U |        |
|                            | u |      | n |        | u |        | n |        |
|                            | m |      | e |        | m |        | e |        |
|                            | u |      | x |        | u |        | x |        |
|                            | l |      | p |        | l |        | p |        |
|                            | a |      | e |        | a |        | e |        |
|                            | t |      | n |        | t |        | n |        |
|                            | i |      | d |        | i |        | d |        |
|                            | v |      | e |        | v |        | e |        |
|                            | e |      | d |        | e |        | d |        |
|                            |   |      |   |        |   |        |   |        |
|                            | R |      | A |        | R |        | A |        |
|                            | e |      | p |        | e |        | p |        |
|                            | s |      | p |        | s |        | p |        |
|                            | u |      | r |        | u |        | r |        |
|                            | l |      | o |        | l |        | o |        |
|                            | t |      | p |        | t |        | p |        |
|                            | s |      | r |        | s |        | r |        |
|                            | o |      | i |        | o |        | i |        |
|                            | f |      | a |        | f |        | a |        |
|                            |   |      | t |        |   |        | t |        |
|                            | O |      | i |        | O |        | i |        |
|                            | p |      | o |        | p |        | o |        |
|                            | e |      | n |        | e |        | n |        |
|                            | r |      | s |        | r |        | s |        |
|                            | a |      |   |        | a |        |   |        |
|                            | t |      |   |        | t |        |   |        |
|                            | i |      |   |        | i |        |   |        |
|                            | o |      |   |        | o |        |   |        |
|                            | n |      |   |        | n |        |   |        |
|                            | s |      |   |        | s |        |   |        |
+----------------------------+---+------+---+--------+---+--------+---+--------+
|                            |   |      |   |        |   |        |   |        |
+----------------------------+---+------+---+--------+---+--------+---+--------+
|                            |   |      |   |        |   |        |   |        |
+----------------------------+---+------+---+--------+---+--------+---+--------+
|                            |   |      |   |        |   |        |   |        |
+----------------------------+---+------+---+--------+---+--------+---+--------+
|                            |   |      |   |        |   |        |   |        |
+----------------------------+---+------+---+--------+---+--------+---+--------+
| 1.  Prior Period           |   |      |   |        |   |        |   |        |
|     Adjustments Increases  |   |      |   |        |   |        |   |        |
|     (Decreases) to Net     |   |      |   |        |   |        |   |        |
|     Position               |   |      |   |        |   |        |   |        |
|                            |   |      |   |        |   |        |   |        |
| Beginning Balance:         |   |      |   |        |   |        |   |        |
+----------------------------+---+------+---+--------+---+--------+---+--------+
|                            |   |      |   |        |   |        |   |        |
+----------------------------+---+------+---+--------+---+--------+---+--------+
| A. Changes in Accounting   | \ | 0    | \ | 0      | \ | 0      | \ | 0      |
| Standards                  | $ |      | $ |        | $ |        | $ |        |
+----------------------------+---+------+---+--------+---+--------+---+--------+
| B.  Errors and Omissions   |   | 0    |   | 0      |   | 0      |   | 0      |
|     in Prior Year          |   |      |   |        |   |        |   |        |
|                            |   |      |   |        |   |        |   |        |
| > Accounting Reports       |   |      |   |        |   |        |   |        |
+----------------------------+---+------+---+--------+---+--------+---+--------+
| C. Other Prior Period      |   | 0    |   | 0      |   | 0      |   | 0      |
| Adjustments                |   |      |   |        |   |        |   |        |
+----------------------------+---+------+---+--------+---+--------+---+--------+
| D. Total Prior Period      | \ | 0    | \ | 0      | \ | 0      | \ | 0      |
| Adjustments                | $ |      | $ |        | $ |        | $ |        |
+----------------------------+---+------+---+--------+---+--------+---+--------+
|                            |   |      |   |        |   |        |   |        |
+----------------------------+---+------+---+--------+---+--------+---+--------+
| 2\. Imputed Financing:     |   |      |   |        |   |        |   |        |
+----------------------------+---+------+---+--------+---+--------+---+--------+
| A. Civilian CSRS/FERS      | \ | 2    | \ | 0      | \ | 1,636  | \ | 0      |
| Retirement                 | $ | ,456 | $ |        | $ |        | $ |        |
+----------------------------+---+------+---+--------+---+--------+---+--------+
| B. Civilian Health         |   | 1    |   | 0      |   | 1,543  |   | 0      |
|                            |   | ,919 |   |        |   |        |   |        |
+----------------------------+---+------+---+--------+---+--------+---+--------+
| C. Civilian Life Insurance |   | 11   |   | 0      |   | 8      |   | 0      |
+----------------------------+---+------+---+--------+---+--------+---+--------+
| D. Military Retirement     |   | 0    |   | 0      |   | 0      |   | 0      |
| Pension                    |   |      |   |        |   |        |   |        |
+----------------------------+---+------+---+--------+---+--------+---+--------+
| E. Military Retirement     |   | 0    |   | 0      |   | 0      |   | 0      |
| Health                     |   |      |   |        |   |        |   |        |
+----------------------------+---+------+---+--------+---+--------+---+--------+
| F. Judgment Fund           |   | 0    |   | 0      |   | 0      |   | 0      |
+----------------------------+---+------+---+--------+---+--------+---+--------+
| G. Total Imputed Financing | \ | 4    | \ | 0      | \ | 3,187  | \ | 0      |
|                            | $ | ,386 | $ |        | $ |        | $ |        |
+----------------------------+---+------+---+--------+---+--------+---+--------+

**Other Information**

## Other MDA Disclosures

[Imputed Financing]{.underline}: The amounts remitted to Office of
Personnel Management (OPM) by and for employees covered by the Civil
Service Retirement System (CSRS), Federal Employee Retirement System
(FERS), Federal Employees Health Benefits Program (FEHB) and the Federal
Employee Group Life Insurance Program (FEGLI) do not fully cover the
Government\'s cost to provide these benefits. An imputed cost is
recognized as the difference between the Government\'s cost of providing
these benefits to the employee contributions made by and for them. The
imputed financing cost factors are provided by the OPM to the Office of
the Under Secretary of Defense (Personnel and Readiness) (OUSD(P&R)) and
DFAS. DFAS provides civilian employees' base salary and number of
employees electing health benefits by reporting entity to the OUSD(P&R).
The OUSD(P&R) computes and validates the imputed expenses for civilian
employees' retirement and other benefits and provides it to the
reporting components.

**Note Reference**

For Regulatory Disclosure Related to The Statement of Changes in Net
Position" see, FMR, Volume 6B, Chapter 10, paragraph 1022.

+------------+-----------------+---+-----------------+----+-------------+
| **Note     | ######## **D    |   |                 |    |             |
| 21.A.**    | isclosures Rela |   |                 |    |             |
|            | ted to the Stat |   |                 |    |             |
|            | ement of Budget |   |                 |    |             |
|            | ary Resources** |   |                 |    |             |
+------------+-----------------+---+-----------------+----+-------------+
|            |                 |   |                 |    |             |
+------------+-----------------+---+-----------------+----+-------------+
|            |                 |   |                 |    |             |
+------------+-----------------+---+-----------------+----+-------------+
|            |                 |   |                 |    |             |
+------------+-----------------+---+-----------------+----+-------------+
| 1.  Net    |                 | \ | 3,054,892       | \$ | 3,373,880   |
|     Amount |                 | $ |                 |    |             |
|     of     |                 |   |                 |    |             |
|            |                 |   |                 |    |             |
|  Budgetary |                 |   |                 |    |             |
|            |                 |   |                 |    |             |
|  Resources |                 |   |                 |    |             |
|            |                 |   |                 |    |             |
|  Obligated |                 |   |                 |    |             |
|     for    |                 |   |                 |    |             |
|     U      |                 |   |                 |    |             |
| ndelivered |                 |   |                 |    |             |
|     Orders |                 |   |                 |    |             |
|     at the |                 |   |                 |    |             |
|     End of |                 |   |                 |    |             |
|     the    |                 |   |                 |    |             |
|     Period |                 |   |                 |    |             |
+------------+-----------------+---+-----------------+----+-------------+
| 1.         |                 |   | 0               |    | 0           |
|  Available |                 |   |                 |    |             |
|            |                 |   |                 |    |             |
|  Borrowing |                 |   |                 |    |             |
|     and    |                 |   |                 |    |             |
|            |                 |   |                 |    |             |
|   Contract |                 |   |                 |    |             |
|            |                 |   |                 |    |             |
|  Authority |                 |   |                 |    |             |
|     at the |                 |   |                 |    |             |
|     End of |                 |   |                 |    |             |
|     the    |                 |   |                 |    |             |
|     Period |                 |   |                 |    |             |
+------------+-----------------+---+-----------------+----+-------------+
|            |                 |   |                 |    |             |
+------------+-----------------+---+-----------------+----+-------------+
|            |                 |   |                 |    |             |
+------------+-----------------+---+-----------------+----+-------------+

**Other Information**

[Apportionment Categories]{.underline}

Office of Management & Budget (OMB) 01-09 section 9.27 specifically
requires disclosure of the amount of direct and reimbursable obligations
incurred against amounts apportioned under category A, B, and exempt
from apportionment. This disclosure should agree with the aggregate of
the related information as reported on the agency\'s year-end SF 133s
and lines 8A and 8B in the Statement of Budgetary Resources. Lines 8A
and 8B on the Statement of Budgetary Resources disagrees with the SF 133
by \$489 thousand. The issue is being researched aggressively by the
Missile Defense Agency (MDA) and the Defense Finance and Accounting
Service (DFAS).

[Other MDA Disclosures]{.underline}

The MDA's unobligated balances of budget authority as of September 30,
2003 is \$960,926 thousand. The amount consists of \$118,328 thousand of
procurement appropriations, \$832,968 thousand of Research, Development,
Testing &Evaluation (RDT&E) appropriations and \$9,630 thousand of
military construction appropriations.

## Undistributed Disbursements

Undistributed disbursements are the difference between
disbursements/collections recorded at the detailed level to a specific
obligation, payable, or receivable in the activity field records, versus
those reported by the Treasury of the United States (TUS) via the
reconciled DD 1329 and DD1400 reports. This should agree with the
undistributed reported on accounting reports (SF 133/ (M) 1002/ (M)
1307). Intransit payments are payments that have been made for other
agencies or entities that have not been recorded in their accounting
records. These payments are applied to the entities' outstanding
undelivered orders at year-end. Undelivered Orders were adjusted
downward in the amount of \$19,826 thousand to accommodate these
payments.

###### [Undelivered Orders]{.underline}

Undelivered Orders presented in the Statement of Budgetary Resources
includes Undelivered Orders-Unpaid for both direct and reimbursable
funds.

## Spending Authority from Offsetting Collections

Adjustments in funds that are temporarily not available pursuant to
Public Law, and those that are permanently not available (included in
the \"Adjustments\" line on the Statement of Budgetary Resources), are
not included in the \"Spending Authority From Offsetting Collections and
Adjustments\" line on the Statement of Budgetary Resources or the
\"Spending Authority for Offsetting Collections and Adjustments\" line
on the Statement of Financing.

For Regulatory Disclosure Related to The Statement of Budgetary
Resources see, Department of Defense Financial Management Regulation
(DoD FMR), Volume 6B, Chapter 10, paragraph 1023.

<table>
<colgroup>
<col style="width: 14%" />
<col style="width: 21%" />
<col style="width: 2%" />
<col style="width: 11%" />
<col style="width: 2%" />
<col style="width: 11%" />
<col style="width: 2%" />
<col style="width: 11%" />
<col style="width: 0%" />
<col style="width: 1%" />
<col style="width: 1%" />
<col style="width: 19%" />
</colgroup>
<tbody>
<tr class="odd">
<td><strong>Note 21.B.</strong></td>
<td colspan="11"><p
id="disclosures-related-to-problem-disbursements-in-transit-disbursements-and-suspensebudget-clearing-accounts"
class="heading"><strong>Disclosures Related to Problem Disbursements,
In-transit Disbursements and Suspense/Budget Clearing
Accounts</strong></p></td>
</tr>
<tr class="even">
<td colspan="12"></td>
</tr>
<tr class="odd">
<td colspan="2"></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td>(Decrease)/Increase</td>
</tr>
<tr class="even">
<td colspan="2"></td>
<td></td>
<td>2001</td>
<td></td>
<td></td>
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td>from to</td>
</tr>
<tr class="odd">
<td colspan="12"></td>
</tr>
<tr class="even">
<td colspan="2"><ol type="1">
<li><p>Total Problem Disbursements</p></li>
</ol>
<p>A. Absolute Unmatched Disbursements</p></td>
<td>$</td>
<td>19,270</td>
<td>$</td>
<td>55,817</td>
<td>$</td>
<td>58,959</td>
<td colspan="2">$</td>
<td colspan="2">3,142</td>
</tr>
<tr class="odd">
<td colspan="2">B. Negative Unliquidated Obligations</td>
<td></td>
<td>6,444</td>
<td></td>
<td>5,398</td>
<td></td>
<td>5,139</td>
<td colspan="2"></td>
<td colspan="2">( 259)</td>
</tr>
<tr class="even">
<td colspan="2">2. Total In-transit Disbursements, Net</td>
<td>$</td>
<td>182,824</td>
<td>$</td>
<td>92,979</td>
<td>$</td>
<td>60,997</td>
<td colspan="2">$</td>
<td colspan="2">(31,982)</td>
</tr>
</tbody>
</table>

### Definitions

Absolute value is the sum of the positive values of debit and credit
transactions without regard to the sign.

Unmatched Disbursements (UMDs) occur when payments do not match to a
corresponding obligation in the accounting system.

Negative Unliquidated Obligations (NULOs) occur when payments have a
valid obligation but the payment is greater than the amount of the
obligation recorded in the official accounting system. These payments
use available funds for valid receiving reports on delivered goods and
services under valid contracts.

In-Transits represent the net value of disbursements and collections
made by a DoD disbursing activity on behalf of an accountable activity
that are not yet posted in an accounting system.

The MDA has \$489 thousand in aged (over 120 days old) UMDs, \$417
thousand in aged (over 120 days old) NULOs, and \$2,704 thousand in aged
in-transit disbursements that represent disbursements of MDA funds that
have been reported by a disbursing station to the TUS but have not yet
been precisely matched against the specific source obligation giving
rise to the disbursements. For the most part, these payments have been
made using available funds and based on valid receiving reports for
goods and services delivered under valid contracts. The problem
disbursements and in-transit disbursements arise when the MDA's various
contracting, disbursing, and accounting systems fail to match the data
necessary to properly account for the disbursement transactions in all
applicable accounting systems. The MDA has efforts underway to improve
the systems and to resolve all previous problem disbursements and
process all in-transit disbursements.

For Regulatory Disclosure Related to "Disclosures Related to Problem
Disbursements, In-transit Disbursements and Suspense/Budget Clearing
Accounts" see, DoD FMR, Volume 6B, Chapter 10, paragraph 102305.

#### Other Information

The total problem disbursements and in-transit disbursements were
mistakenly understated during September FY 2001 and FY 2002. For
comparative purposes the amounts above have been restated to include the
total problem disbursements and in-transits disbursements.

+-------------+--------------------------------------------------------+
| **Note      | ########                                               |
| 22.**       |  **Disclosures Related to the Statement of Financing** |
+-------------+--------------------------------------------------------+

## **Other Information** 

### [Other Material Changes]{.underline}

Budgetary data is not in agreement with proprietary expenses and costs.
This causes a difference in the reporting of Net Cost of Operations
between Line 4 on the Statement of Net Cost and Line 30 on the Statement
of Financing. Missile Defense Agency (MDA) adjusted line 27, "Components
Not Requiring or Generating Resources-Other," by \$175,533 thousand on
the Statement of Financing to reconcile with the Statement of Net Cost.
The differences between MDA\'s budgetary and proprietary data have been
previously identified as a reporting deficiency.

**Note Reference**

For regulatory disclosure related to the Statement of Financing see,
Department of Defense Financial Management Regulation, Volume 6B,
Chapter 10, paragraph 1024.

+-------------------+--------------------------------------------------+
| Note 23.          | ######## Not Applicable                          |
+-------------------+--------------------------------------------------+

+-------------------+--------------------------------------------------+
| Note 24.A.        | ######## Not Applicable                          |
+-------------------+--------------------------------------------------+

+-------------------+--------------------------------------------------+
| **Note 24.B.**    | ######## **Other Disclosures**                   |
+-------------------+--------------------------------------------------+

# [Comparative Data]{.underline}

The financial statements and accompanying notes to the financial
statements report the financial position as of September 30, 2003, and
the results of operations for the FY then ended. Fluctuations between
the FY 2003 and the FY 2002 annual financial statements are explained
within the notes to the financial statements.

#  {#section-25}

#  {#section-26}

[Military Costs]{.underline}

The Missile Defense Agency (MDA) reports the following military costs
for FY 2003:

Military Salaries & Benefits: \$ 13,295 thousand

Military end strength end of September 2003:

On-Board Authorized

Officers 120 134

Enlisted 12 13

FY 2003 ANNUAL FINANCIAL STATEMENTS

#  {#section-27}

Department of Defense

Missile Defense Agency

![](media/image1.png){width="1.75in" height="1.6909722222222223in"}

![](media/image2.png){width="1.25in" height="1.2444444444444445in"}

#  {#section-28}

#  {#section-29}

#  {#section-30}

# Supporting Consolidating/Combining Statements

  -------------------------------- ----------------- -------------- ---------------- ----------- ---------- ------------ ----------------- ---- ---------------- ----------------
  **Missile Defense Agency**                                                                                                                                     

  **CONSOLIDATING BALANCE SHEET**                                                                                                                                

  **As of September 30, 2003 and                                                                                                                                 
  2002**                                                                                                                                                         

  **(Amounts in thousands)**                                                                                                                                     

  ** **                            **Procurement -   **Research,    **Military       **MDA                  **Combined   **Elimination**        **2003           **2002
                                   MDA**             Development    Construction -   Component              Total**                             Consolidated**   Consolidated**
                                                     Test &         MDA**            Level**                                                                     
                                                     Evaluation -                                                                                                
                                                     MDA**                                                                                                       

  **1. ASSETS (Note 2)**                                                                                                                                         

         A. Intragovernmental:                                                                                                                                   

               1. Fund Balance                                                                                                                                   
  with Treasury (Note 3)                                                                                                                                         

                   a.  Entity      1,108,566         2,733,242      34,728           \$          0          3,876,536    \$                0    3,876,536        4,432,137

                   b. Non-Entity   0                 0              0                            0          0                              0    0                0
  Seized Iraqi Cash                                                                                                                                              

                   c.              0                 0              0                            0          0                              0    0                0
  Non-Entity-Other                                                                                                                                               

               2.                  0                 0              0                            0          0                              0    0                0
  Investments (Note 4)                                                                                                                                           

               3. Accounts         0                 11,723         0                            \(5\)      11,718                         0    11,718           8,635
  Receivable (Note 5)                                                                                                                                            

               4. Other            0                 0              0                            121        121                            0    121              1,806
  Assets (Note 6)                                                                                                                                                

               5. Total            1,108,566         2,744,965      34,728           \$          116        3,888,375    \$                0    3,888,375        4,442,578
  Intragovernmental Assets                                                                                                                                       

         B. Cash and Other         0                 0              0                            0          0                              0    0                0
  Monetary Assets (Note 7)                                                                                                                                       

         C. Accounts               0                 336            0                            0          336                            0    336              2,237
  Receivable (Note 5)                                                                                                                                            

         D. Loans Receivable (Note 0                 0              0                            0          0                              0    0                0
  8)                                                                                                                                                             

         E. Inventory and Related  0                 0              0                            0          0                              0    0                0
  Property (Note 9)                                                                                                                                              

         F. General Property,      0                 0              0                            0          0                              0    0                0
  Plant and Equipment (Note 10)                                                                                                                                  

         G. Investments (Note 4)   0                 0              0                            0          0                              0    0                0

         H. Other Assets (Note 6)  125,011           14,507         0                            0          139,518                        0    139,518          37,483

  **2. TOTAL ASSETS**              1,233,577         2,759,808      34,728           \$          116        4,028,229    \$                0    4,028,229        4,482,298

  **3. LIABILITIES (Note 11)**                                                                                                                                    

         A. Intragovernmental:                                                                                                                                   

               1. Accounts         3,231             5,620          20               \$          50,067     58,938       \$                0    58,938           20,799
  Payable (Note 12)                                                                                                                                              

               2. Debt (Note 13)   0                 0              0                            0          0                              0    0                0

               3. Environmental    0                 0              0                            0          0                              0    0                0
  Liabilities (Note 14)                                                                                                                                          

               4. Other            0                 7,928          0                            \(647\)    7,281                          0    7,281            19,291
  Liabilities (Note 15 & Note 16)                                                                                                                                

               5. Total            3,231             13,548         20               \$          49,420     66,219       \$                0    66,219           40,090
  Intragovernmental Liabilities                                                                                                                                  

         B. Accounts Payable (Note 589               46,226         43               \$          \(313\)    46,545                         0    46,545           44,724
  12)                                                                                                                                                            

         C. Military Retirement    0                 0              0                            0          0                              0    0                0
  Benefits and Other                                                                                                                                             

              Employment-Related                                                                                                                                 
  Actuarial                                                                                                                                                      

  Liabilities (Note 17)                                                                                                                                          

         D. Environmental          0                 0              0                            0          0                              0    0                0
  Liabilities (Note 14)                                                                                                                                          

         E. Loan Guarantee         0                 0              0                            0          0                              0    0                0
  Liability (Note 8)                                                                                                                                             

         F. Other                  723               11,167         5                            0          11,895                         0    11,895           19,690
  Liabilities (Note 15 & Note 16)                                                                                                                                

        G. Debt Held by            0                 0              0                            0          0                              0    0                0
  Public (Note 13)                                                                                                                                               

  **4. TOTAL LIABILITIES**         4,543             70,941         68               \$          49,107     124,659      \$                0    124,659          104,504

  **5. NET POSITION**                                                                                                                                            

         A. Unexpended             1,106,868         2,690,299      34,660           \$          (48,991)   3,782,836                      0    3,782,836        4,336,599
  Appropriations (Note 18)                                                                                                                                       

         B. Cumulative Results of  122,166           (1,432)        0                            0          120,734                        0    120,734          41,195
  Operations                                                                                                                                                     

  **6. TOTAL NET POSITION**        1,229,034         2,688,867      34,660           \$          (48,991)   3,903,570    \$                0    3,903,570        4,377,794

  **7. TOTAL LIABILITIES AND NET   1,233,577         2,759,808      34,728           \$          116        4,028,229    \$                0    4,028,229        4,482,298
  POSITION**                                                                                                                                                     
  -------------------------------- ----------------- -------------- ---------------- ----------- ---------- ------------ ----------------- ---- ---------------- ----------------

  ------------------- ----------------- -------------- ---------------- ----------- ------------ ----------------- ---- ---------------- ----------------
  **Missile Defense                                                                                                                      
  Agency**                                                                                                                               

  **CONSOLIDATING                                                                                                                        
  STATEMENT OF NET                                                                                                                       
  COST**                                                                                                                                 

  **As of September                                                                                                                      
  30, 2003 and 2002**                                                                                                                    

  **(Amounts in                                                                                                                          
  thousands)**                                                                                                                           

                                                                                                                                         

  ** **               **Procurement -   **Research,    **Military       **MDA       **Combined   **Elimination**        **2003           **2002
                      MDA**             Development    Construction -   Component   Total**                             Consolidated**   Consolidated**
                                        Test &         MDA**            Level**                                                          
                                        Evaluation -                                                                                     
                                        MDA**                                                                                            

  **1. Program                                                                                                                           
  Costs**                                                                                                                                

           A.         3,739             690,144        6,592            (122,285)   578,190      \$                0    578,190          245,580
  Intragovernmental                                                                                                                      
  Gross Costs                                                                                                                            

           B. (Less:  0                 (20,430)       0                7,992       (12,438)                       0    (12,438)         (2,468)
  Intragovernmental                                                                                                                      
  Earned Revenue)                                                                                                                        

           C.         3,739             669,714        6,592            (114,293)   565,752      \$                0    565,752          243,112
  Intragovernmental                                                                                                                      
  Net Costs                                                                                                                              

           D. Gross   530,914           6,469,978      2,195            163,284     7,166,371                      0    7,166,371        5,750,912
  Costs With the                                                                                                                         
  Public                                                                                                                                 

           E. (Less:  0                 \(1\)          0                0           \(1\)                          0    \(1\)            0
  Earned Revenue From                                                                                                                    
  the Public)                                                                                                                            

           F. Net     530,914           6,469,977      2,195            163,284     7,166,370    \$                0    7,166,370        5,750,912
  Costs With the                                                                                                                         
  Public                                                                                                                                 

           G. Total   534,653           7,139,691      8,787            48,991      7,732,122    \$                0    7,732,122        5,994,024
  Net Cost                                                                                                                               

                                                                                                                                         

  **2. Cost Not       0                 0              0                0           0                              0    0                0
  Assigned to                                                                                                                            
  Programs**                                                                                                                             

  **3. (Less: Earned                                                                                                                     
  Revenue Not                                                                                                                            
  Attributable**                                                                                                                         

  **To Programs)**    0                 0              0                0           0                              0    0                0

  **4. Net Cost of    534,653           7,139,691      8,787            48,991      7,732,122    \$                0    7,732,122        5,994,024
  Operations**                                                                                                                           
  ------------------- ----------------- -------------- ---------------- ----------- ------------ ----------------- ---- ---------------- ----------------

  --------------------------- ----------------- -------------- ---------------- ----------- ---------- ------------- ----------------- --- ---------------- ----------------
  **Missile Defense Agency**                                                                                                                                

  **CONSOLIDATING STATEMENT                                                                                                                                 
  OF CHANGES IN NET                                                                                                                                         
  POSITION**                                                                                                                                                

  **As of September 30, 2003                                                                                                                                
  and 2002**                                                                                                                                                

  **(Amounts in thousands)**                                                                                                                                

  ** **                       **Procurement -   **Research,    **Military       **MDA                  **Combined    **Elimination**       **2003           **2002
                              MDA**             Development    Construction -   Component              Total**                             Consolidated**   Consolidated**
                                                Test &         MDA**            Level**                                                                     
                                                Evaluation -                                                                                                
                                                MDA**                                                                                                       

  **A. UNEXPENDED                                                                                                                                           
  APPROPRIATIONS**                                                                                                                                          

  **1.  Beginning Balances**  989,797           3,327,793      19,009           \$          0          4,336,599     \$                0   4,336,599        2,884,124

  **2.  Prior period          0                 0              0                            0          0                               0   0                0
  adjustments (+/-)**                                                                                                                                       

  **3.  Beginning Balances,   989,797           3,327,793      19,009                       0          4,336,599                       0   4,336,599        2,884,124
  as adjusted**                                                                                                                                             

  **4.  Budgetary Financing                                                                                                                                 
  Sources:**                                                                                                                                                

          4.A.                489,239           6,824,068      24,850                       0          7,338,157                       0   7,338,157        7,734,099
  Appropriations received                                                                                                                                   

          4.B.                174,000           (73,992)       \(220\)                      0          99,788                          0   99,788           0
  Appropriations                                                                                                                                            
  transferred-in/out (+/-)                                                                                                                                  

          4.C.  Other         (11,111)          (110,399)      \(192\)                      0          (121,702)                       0   (121,702)        (165,917)
  adjustments (rescissions,                                                                                                                                 
  etc) (+/-)                                                                                                                                                

          4.D.                (535,058)         (7,277,172)    (8,787)                      (48,991)   (7,870,008)                     0   (7,870,008)      (6,115,707)
  Appropriations used                                                                                                                                       

          4.E.  Nonexchange   0                 0              0                            0          0                               0   0                0
  revenue                                                                                                                                                   

          4.F.  Donations and                                                                                                                               
  forfeitures of cash and                                                                                                                                   
  cash                                                                                                                                                      

  Equivalents                 0                 0              0                            0          0                               0   0                0

         4.G.                 0                 0              0                            0          0                               0   0                0
  Transfers-in/out without                                                                                                                                  
  reimbursement (+/-)                                                                                                                                       

         4.H.  Other          0                 0              0                            0          0                               0   0                0
  budgetary financing                                                                                                                                       
  sources (+/-)                                                                                                                                             

  **5.  Other Financing                                                                                                                                     
  Sources:**                                                                                                                                                

          5.A.  Donations and 0                 0              0                            0          0                               0   0                0
  forfeitures of property                                                                                                                                   

          5.B.                0                 0              0                            0          0                               0   0                0
  Transfers-in/out without                                                                                                                                  
  reimbursement (+/-)                                                                                                                                       

          5.C.  Imputed                                                                                                                                     
  financing from costs                                                                                                                                      
  absorbed                                                                                                                                                  

  by others                   0                 0              0                            0          0                               0   0                0

          5.D.  Other (+/-)   0                 0              0                            0          0                               0   0                0

  **6.    Total Financing     117,070           (637,495)      15,651                       (48,991)   (553,765)                       0   (553,765)        1,452,475
  Sources**                                                                                                                                                 

  **7.    Net Cost of         0                 0              0                            0          0                               0   0                0
  Operations (+/-)**                                                                                                                                        

  **8.    Ending Balances**   1,106,867         2,690,298      34,660           \$          (48,991)   3,782,834     \$                0   3,782,834        4,336,599
  --------------------------- ----------------- -------------- ---------------- ----------- ---------- ------------- ----------------- --- ---------------- ----------------

  --------------------------- ----------------- -------------- ---------------- ----------- -------- ------------ ----------------- --- ---------------- ----------------
  **Missile Defense Agency**                                                                                                                             

  **CONSOLIDATING STATEMENT                                                                                                                              
  OF CHANGES IN NET                                                                                                                                      
  POSITION**                                                                                                                                             

  **As of September 30, 2003                                                                                                                             
  and 2002**                                                                                                                                             

  **(Amounts in thousands)**                                                                                                                             

  ** **                       **Procurement -   **Research,    **Military       **MDA                **Combined   **Elimination**       **2003           **2002
                              MDA**             Development    Construction -   Component            Total**                            Consolidated**   Consolidated**
                                                Test &         MDA**            Level**                                                                  
                                                Evaluation -                                                                                             
                                                MDA**                                                                                                    

  **B. CUMULATIVE RESULTS OF                                                                                                                             
  OPERATIONS**                                                                                                                                           

  **1.  Beginning Balances**  21,503            19,696         \(4\)            \$          0        41,195       \$                0   41,195           69,498

  **2.  Prior period          0                 0              0                            0        0                              0   0                0
  adjustments (+/-)**                                                                                                                                    

  **3.  Beginning Balances,   21,503            19,696         \(4\)                        0        41,195                         0   41,195           69,498
  as adjusted**                                                                                                                                          

  **4.  Budgetary Financing                                                                                                                              
  Sources:**                                                                                                                                             

          4.A.                0                 0              0                            0        0                              0   0                0
  Appropriations received                                                                                                                                

          4.B.                0                 0              0                            0        0                              0   0                0
  Appropriations                                                                                                                                         
  transferred-in/out (+/-)                                                                                                                               

          4.C.  Other         0                 0              0                            0        0                              0   0                0
  adjustments (rescissions,                                                                                                                              
  etc) (+/-)                                                                                                                                             

          4.D.                535,058           7,277,172      8,787                        48,991   7,870,008                      0   7,870,008        6,115,707
  Appropriations used                                                                                                                                    

          4.E.  Nonexchange   0                 \(1\)          0                            0        \(1\)                          0   \(1\)            0
  revenue                                                                                                                                                

          4.F.  Donations and                                                                                                                            
  forfeitures of cash and                                                                                                                                
  cash                                                                                                                                                   

  equivalents                 0                 0              0                            0        0                              0   0                0

         4.G.                 0                 0              0                            0        0                              0   0                0
  Transfers-in/out without                                                                                                                               
  reimbursement (+/-)                                                                                                                                    

         4.H.  Other          100,259           5,099          (10,477)                     0        94,881                         0   94,881           (131,033)
  budgetary financing                                                                                                                                    
  sources (+/-)                                                                                                                                          

  **5.  Other Financing                                                                                                                                  
  Sources:**                                                                                                                                             

          5.A.  Donations and 0                 0              0                            0        0                              0   0                0
  forfeitures of property                                                                                                                                

          5.B.                0                 (168,092)      10,481                       0        (157,611)                      0   (157,611)        (22,140)
  Transfers-in/out without                                                                                                                               
  reimbursement (+/-)                                                                                                                                    

          5.C.  Imputed                                                                                                                                  
  financing from costs                                                                                                                                   
  absorbed                                                                                                                                               

  by others                   0                 4,386          0                            0        4,386                          0   4,386            3,188

          5.D.  Other (+/-)   0                 0              0                            0        0                              0   0                0

  **6.    Total Financing     635,317           7,118,564      8,791                        48,991   7,811,663                      0   7,811,663        5,965,722
  Sources**                                                                                                                                              

  **7.    Net Cost of         534,653           7,139,691      8,787                        48,991   7,732,122                      0   7,732,122        5,994,024
  Operations (+/-)**                                                                                                                                     

  **8.    Ending Balances**   122,167           (1,431)        0                \$          0        120,736      \$                0   120,736          41,196
  --------------------------- ----------------- -------------- ---------------- ----------- -------- ------------ ----------------- --- ---------------- ----------------

  ------------------------ ----------------- -------------- ---------------- ------- ----------- ------------ ------------
  **Missile Defense                                                                                           
  Agency**                                                                                                    

  **COMBINING STATEMENT OF                                                                                    
  BUDGETARY RESOURCES**                                                                                       

  **As of September 30,                                                                                       
  2003 and 2002**                                                                                             

  **(Amounts in                                                                                               
  thousands)**                                                                                                

  ** **                    **Procurement -   **Research,    **Military       ** **   **MDA       **2003       **2002
                           MDA**             Development    Construction -           Component   Combined**   Combined**
                                             Test &         MDA**                    Level**                  
                                             Evaluation -                                                     
                                             MDA**                                                            

  **BUDGETARY FINANCING                                                                                       
  ACCOUNTS**                                                                                                  

  **BUDGETARY RESOURCES**                                                                                     

                                                                                                              

  1.  Budget Authority:                                                                                       

       1a.  Appropriations 489,239           6,824,068      24,850           \$      0           7,338,157    7,694,332
  received                                                                                                    

       1b.  Borrowing      0                 0              0                        0           0            0
  authority                                                                                                   

       1c.  Contract       0                 0              0                        0           0            0
  authority                                                                                                   

       1d.  Net            174,000           (93,857)       0                        0           80,143       0
  transfers ()                                                                                                

       1e.  Other          0                 0              0                        0           0            0

                                                                                                              

  2.  Unobligated balance:                                                                                    

       2a.  Beginning of   118,328           832,968        9,629                    0           960,925      617,025
  period                                                                                                      

       2b.  Net transfers, 0                 19,865         \(220\)                  0           19,645       39,767
  actual ()                                                                                                   

        2c.  Anticipated   0                 0              0                        0           0            0
  Transfers balances                                                                                          

                                                                                                              

  3\. Spending authority                                                                                      
  from offsetting                                                                                             
  collections:                                                                                                

       3a.  Earned         0                 0              0                        0           0            0

            1.  Collected  0                 13,637         0                        0           13,637       34,938

            2.  Receivable 0                 \(175\)        0                        0           \(175\)      (32,471)
  from Federal sources                                                                                        

       3b.  Change in      0                 0              0                        0           0            0
  unfilled customer orders                                                                                    

            1.  Advance    0                 \(128\)        0                        0           \(128\)      7,600
  received                                                                                                    

            2.  Without    0                 1,720          0                        0           1,720        3,535
  advance from Federal                                                                                        
  sources                                                                                                     

       3c. Anticipated for                                                                                    
  the rest of year,                                                                                           
  without                                                                                                     

  advances                 0                 0              0                        0           0            0

       3d.  Transfers from 0                 0              0                        0           0            0
  trust funds                                                                                                 

       3e.  Subtotal       0                 15,054         0                        0           15,054       13,602

  4.  Recoveries of prior  10,627            537,428        2,044                    0           550,099      329,983
  year obligations                                                                                            

                                                                                                              

  5.  Temporarily not                                                                                         
  available pursuant to                                                                                       

  Public Law               0                 0              0                        0           0            0

  6.  Permanently not      (11,111)          (110,399)      \(192\)                  0           (121,702)    (189,896)
  available                                                                                                   

                                                                                                              

  7.  Total Budgetary      781,083           8,025,127      36,111           \$      0           8,842,321    8,504,813
  Resources                                                                                                   
  ------------------------ ----------------- -------------- ---------------- ------- ----------- ------------ ------------

  ------------------------ ----------------- -------------- ---------------- ------- ----------- ------------ ------------
  **Missile Defense                                                                                           
  Agency**                                                                                                    

  **COMBINING STATEMENT OF                                                                                    
  BUDGETARY RESOURCES**                                                                                       

  **As of September 30,                                                                                       
  2003 and 2002**                                                                                             

  **(Amounts in                                                                                               
  thousands)**                                                                                                

  ** **                    **Procurement -   **Research,    **Military       ** **   **MDA       **2003       **2002
                           MDA**             Development    Construction -           Component   Combined**   Combined**
                                             Test &         MDA**                    Level**                  
                                             Evaluation -                                                     
                                             MDA**                                                            

  STATUS OF BUDGETARY                                                                                         
  RESOURCES                                                                                                   

  8.  Obligations                                                                                             
  incurred:                                                                                                   

       8a.  Direct         463,448           7,600,576      21,789           \$      0           8,085,813    7,553,542

       8b.  Reimbursable   0                 14,885         0                        0           14,885       (10,376)

       8c.  Subtotal       463,448           7,615,461      21,789                   0           8,100,698    7,543,166

  9.  Unobligated balance:                                                                                    

       9a.  Apportioned    312,907           386,050        14,276                   0           713,233      1,038,061

       9b.  Exempt from    0                 0              0                        0           0            0
  apportionment                                                                                               

       9c.  Other          \(1\)             0              \(1\)                    0           \(2\)        0
  available                                                                                                   

  10\. Unobligated         4,729             23,616         47                       0           28,392       (76,414)
  Balances Not Available                                                                                      

  11\. Total, Status of    781,083           8,025,127      36,111           \$      0           8,842,321    8,504,813
  Budgetary Resources                                                                                         

                                                                                                              

  RELATIONSHIP OF                                                                                             
  OBLIGATIONS TO                                                                                              

  OUTLAYS:                                                                                                    

  12\. Obligated Balance,  870,975           2,392,044      9,722            \$      0           3,272,741    2,523,027
  Net - beginning of                                                                                          
  period                                                                                                      

  13.  Obligated Balance   0                 0              0                        0           0            0
  transferred, net (+/-)                                                                                      

  14.  Obligated Balance,                                                                                     
  Net - end of period:                                                                                        

       14a.  Accounts      0                 (11,940)       0                        0           (11,940)     (12,115)
  receivable                                                                                                  

       14b.  Unfilled                                                                                         
  customer order from                                                                                         
  Federal                                                                                                     

  sources                  0                 (12,570)       0                        0           (12,570)     (10,851)

       14c.  Undelivered   789,232           2,294,214      20,338                   (49,759)    3,054,025    3,371,862
  orders                                                                                                      

       14d.  Accounts      3,820             54,285         68                       49,759      107,932      72,643
  payable                                                                                                     

  15.  Outlays:                                                                                               

       15a.  Disbursements 530,743           7,144,543      9,061                    0           7,684,347    6,343,606

       15b.  Collections   0                 (13,508)       0                        0           (13,508)     (42,538)

       15c.  Subtotal      530,743           7,131,035      9,061                    0           7,670,839    6,301,068

  16.  Less:  Offsetting   0                 0              0                        0           0            0
  receipts                                                                                                    

  17.  Net Outlays         530,743           7,131,035      9,061            \$      0           7,670,839    6,301,068
  ------------------------ ----------------- -------------- ---------------- ------- ----------- ------------ ------------

  -------------------------- --------------- -------------- ---------------- ----------- -------- ----------- -------------
  **Missile Defense Agency**                                                                                  

  **COMBINING STATEMENT OF                                                                                    
  FINANCING**                                                                                                 

  **As of September 30, 2003                                                                                  
  and 2002**                                                                                                  

  **(Amounts in thousands)**                                                                                  

                                                                                                              

  ** **                      Procurement -   Research,      Military         MDA                  2003        2002 Combined
                             MDA             Development    Construction -   Component            Combined    
                                             Test &         MDA              Level                            
                                             Evaluation -                                                     
                                             MDA                                                              

  **Resources Used to                                                                                         
  Finance Activities:**                                                                                       

  Budgetary Resources                                                                                         
  Obligated                                                                                                   

  1.  Obligations incurred   463,448         7,615,461      21,789           \$          0        8,100,698   7,543,166

  2.  Less: Spending         (10,627)        (552,481)      (2,044)                      0        (565,152)   (343,585)
  authority from offsetting                                                                                   
  collections                                                                                                 

       and recoveries (-)                                                                                     

  3.  Obligations net of     452,821         7,062,980      19,745                       0        7,535,546   7,199,581
  offsetting collections and                                                                                  
  recoveries                                                                                                  

  4.  Less: Offsetting       0               0              0                            0        0           0
  receipts (-)                                                                                                

  5.  Net obligations        452,821         7,062,980      19,745                       0        7,535,546   7,199,581

                                                                                                              

  Other Resources                                                                                             

  6.   Donations and         0               0              0                            0        0           0
  forfeitures of property                                                                                     

  7.   Transfers in/out      0               (168,092)      10,481                       0        (157,611)   0
  without reimbursement ()                                                                                    

  8.   Imputed financing     0               4,386          0                            0        4,386       3,188
  from costs absorbed by                                                                                      
  others                                                                                                      

  9.   Other ()              0               0              0                            0        0           0

  10\. Net other resources   0               (163,706)      10,481                       0        (153,225)   3,188
  used to finance activities                                                                                  

  **11.  Total resources     452,821         6,899,274      30,226                       0        7,382,321   7,202,769
  used to finance                                                                                             
  activities**                                                                                                

                                                                                                              

  **Resources Used to                                                                                         
  Finance Items not Part**                                                                                    

  **of the Net Cost of                                                                                        
  Operations**                                                                                                

  12.  Change in budgetary                                                                                    
  resources obligated for                                                                                     
  goods,                                                                                                      

         services and                                                                                         
  benefits ordered but not                                                                                    
  yet provided                                                                                                

         12a.  Undelivered   82,237          49,919         (10,958)                     48,991   170,189     (1,080,620)
  Orders (-)                                                                                                  

         12b.  Unfilled      0               1,591          0                            0        1,591       11,135
  Customer Orders                                                                                             

  13.  Resources that fund   0               (5,371)        0                            0        (5,371)     0
  expenses recognized in                                                                                      
  prior periods                                                                                               

  14.  Budgetary offsetting  0               0              0                            0        0           0
  collections and receipts                                                                                    
  that                                                                                                        

        do not affect net                                                                                     
  cost of operations                                                                                          

  15.  Resources that        0               0              0                            0        0           0
  finance the acquisition of                                                                                  
  assets                                                                                                      

  16.  Other resources or                                                                                     
  adjustments to net                                                                                          
  obligated                                                                                                   

         resources that do                                                                                    
  not affect net cost of                                                                                      
  operations                                                                                                  

        16a.  Less:  Trust                                                                                     
  or Special Fund Receipts                                                                                    
  Related to                                                                                                  

  Exchange in the Entity\'s  0               0              0                            0        0           0
  Budget (-)                                                                                                  

        16b.  Other ()       0               0              0                            0        0           0

  **17.  Total resources     82,237          46,139         (10,958)                     48,991   166,409     (1,069,485)
  used to finance items                                                                                       
  not **                                                                                                      

  **       part of the net                                                                                    
  cost of operations**                                                                                        

  **18.  Total resources     535,058         6,945,413      19,268                       48,991   7,548,730   6,133,284
  used to finance the net                                                                                     
  cost of operations**                                                                                        
  -------------------------- --------------- -------------- ---------------- ----------- -------- ----------- -------------

  -------------------------- --------------- -------------- ---------------- ------- ----------- ----------- -----------
  **Missile Defense Agency**                                                                                 

  **COMBINING STATEMENT OF                                                                                   
  FINANCING**                                                                                                

  **As of September 30, 2003                                                                                 
  and 2002**                                                                                                 

  **(Amounts in thousands)**                                                                                 

                                                                                                             

  ** **                      Procurement -   Research,      Military         ** **   MDA         2003        2002
                             MDA             Development    Construction -           Component   Combined    Combined
                                             Test &         MDA                      Level                   
                                             Evaluation -                                                    
                                             MDA                                                             

  Components of the Net Cost                                                                                 
  of Operations                                                                                              

  that will not Require or                                                                                   
  Generate Resources                                                                                         

  in the Current Period:                                                                                     

                                                                                                             

  Components Requiring or                                                                                    
  Generating                                                                                                 

  Resources in Future                                                                                        
  Periods:                                                                                                   

  19.  Increase in annual    0               0              0                        0           0           0
  leave liability                                                                                            

  20.  Increase in           0               0              0                        0           0           0
  environmental and disposal                                                                                 
  liability                                                                                                  

  21.  Upward/Downward                                                                                       
  reestimates of credit                                                                                      
  subsidy                                                                                                    

  expense ()                 0               0              0                        0           0           0

  22.  Increase in exchange                                                                                  
  revenue receivable from                                                                                    
  the                                                                                                        

  public (-)                 0               0              0                        0           0           0

  23.  Other ()              723             7,138          0                        0           7,861       3,844

  24.  Total components of   723             7,138          0                        0           7,861       3,844
  Net Cost of Operations                                                                                     
  that                                                                                                       

         will require or                                                                                     
  generate resources in                                                                                      
  future periods                                                                                             

                                                                                                             

  Components not Requiring                                                                                   
  or Generating Resources:                                                                                   

                                                                                                             

  25.  Depreciation and      0               0              0                        0           0           0
  amortization                                                                                               

  26.  Revaluation of assets 0               0              0                        0           0           0
  or liabilities ()                                                                                          

  27.  Other ()              (1,128)         187,142        (10,481)                 0           175,533     (143,102)

  28.  Total components of   (1,128)         187,142        (10,481)                 0           175,533     (143,102)
  Net Cost of Operations                                                                                     
  that                                                                                                       

        will not require or                                                                                  
  generate resources                                                                                         

  29.   Total components of                                                                                  
  net cost of operations                                                                                     
  that                                                                                                       

         will not require or                                                                                 
  generate resources in the                                                                                  

  current period             \(405\)         194,280        (10,481)                 0           183,394     139,258

                                                                                                             

  30.  Net Cost of           534,653         7,139,693      8,787                    48,991      7,732,124   5,994,026
  Operations                                                                                                 
  -------------------------- --------------- -------------- ---------------- ------- ----------- ----------- -----------

FY 2003 ANNUAL FINANCIAL STATEMENTS

Department of Defense

Missile Defense Agency

![](media/image1.png){width="1.75in" height="1.6909722222222223in"}

![](media/image2.png){width="1.25in" height="1.2444444444444445in"}

#  {#section-31}

#  {#section-32}

#  {#section-33}

# Required Supplementary Stewardship Information

**Investments in Research and Development, Testing & Evaluation
(RDT&E):**

+-----------------------------+-------+------+------+--------+-------+
| ### MISSILE DEFENSE AGENCY  |       |      |      |        |       |
|                             |       |      |      |        |       |
| **INVESTMENTS IN RESEARCH   |       |      |      |        |       |
| AND DEVELOPMENT**           |       |      |      |        |       |
|                             |       |      |      |        |       |
| **Yearly Investment in      |       |      |      |        |       |
| Research and Development**  |       |      |      |        |       |
|                             |       |      |      |        |       |
| **For Fiscal Years 1999     |       |      |      |        |       |
| through 2003**              |       |      |      |        |       |
|                             |       |      |      |        |       |
| **(In Millions of           |       |      |      |        |       |
| Dollars**)                  |       |      |      |        |       |
+-----------------------------+-------+------+------+--------+-------+
| ##  Categories              | ##    | #### | #### | #### F | ##    |
|                             | ## FY |  FY  |  FY  | Y 2002 | ## FY |
|                             |  1999 | 2000 | 2001 |        |  2003 |
+-----------------------------+-------+------+------+--------+-------+
| **1. Applied Research**     | 2     | 4    | 4    | 0      | 0     |
+-----------------------------+-------+------+------+--------+-------+
| **2. Development**          |       |      |      |        |       |
+-----------------------------+-------+------+------+--------+-------+
| **Advanced Technology       | 2     | 1    | 12   | 76     | 78    |
| Development**               |       |      |      |        |       |
+-----------------------------+-------+------+------+--------+-------+
| **Demonstration and         | -94   | 12   | 76   | 2185   | 3252  |
| Validation**                |       |      |      |        |       |
+-----------------------------+-------+------+------+--------+-------+
| **Engineering and           | 1     | 4    | 30   | 341    | 705   |
| Manufacturing**             |       |      |      |        |       |
|                             |       |      |      |        |       |
| **Development**             |       |      |      |        |       |
+-----------------------------+-------+------+------+--------+-------+
| **RDT&E Management          | 0     | 1    | 31   | 70     | 41    |
| Support**                   |       |      |      |        |       |
+-----------------------------+-------+------+------+--------+-------+
| **Operational Systems       | 0     | 0    | 0    | 0      | 0     |
| Development**               |       |      |      |        |       |
+-----------------------------+-------+------+------+--------+-------+
|                             |       |      |      |        |       |
+-----------------------------+-------+------+------+--------+-------+
| #####  Totals               | -89   | 22   | 153  | 2672   | 4076  |
+-----------------------------+-------+------+------+--------+-------+

Investment in RDT&E refers to those expenses incurred in the search for
new or refined knowledge and ideas and for the application or use of
such knowledge and ideas for the development of new or improved products
and processes with the expectation of maintaining or increasing national
economic productive capacity or yielding other future benefits. Reported
amounts are not cumulative, are in millions of dollars and represent
only investments incurred for the year shown in the appropriate column.
RDT&E costs disclosed in this reports are derived from RDT&E outlays
reflected in budget execution 1002 reports "Appropriation Status by
Fiscal Year Program and Sub accounts." Costs for each year represent
total outlays (expenditures) against all outstanding appropriations paid
during the reporting period.

**[RDT& E is composed of:]{.underline}**

**1. Applied Research** is the systematic study to gain knowledge or
understanding necessary for determining the means by which a recognized
and specific need may be met. It is the practical application of such
knowledge or understanding for the purpose of meeting a recognized need.
This research points toward specific military needs with a view toward
developing and evaluating the feasibility and practicability of proposed
solutions and determining their parameters. Major outputs are scientific
studies, investigations, and research papers, hardware components,
software codes, and limited construction of, or part of, a weapon system
to include nonsystem specific development efforts. Applied Research
correlates to Budget Activity 2.

This program element invests in an aggressive program of high leverage
technologies that yield markedly improved capabilities across a selected
range of boost phase methods and terminal defense interceptors, advanced
target sensors and innovative science. Beginning in FY02 funding was
moved to the MDA Program Budget Activity 3 to facilitate BMD system
capability evolution, allow timely responses and reactions to changes in
the BMD program, and provide the programmatic agility to mitigate
unforeseen consequences.

Examples of Applied Research programs conducted by MDA:

**[Statutory and Mandated Programs]{.underline}**

This task explores innovative concepts pursuant to PL 102-564 (Small
Business Research and Development Enhancement Act of 1992), which
mandates a two-phase competition for small businesses with innovative
technologies that can also be commercialized. The Small Business
Innovation Research (SBIR) and the Small Business Technology Transfer
(STTR) programs awarded Phase I and Phase II SBIR Awards and Phase I and
II STTR awards to various firms.

**[Innovative Science and Technology (IST)]{.underline}**

Program investments are provided for high-risk technologies that could
significantly change how MDA develops future systems. Investments were
provided to continue various development on 1) sensing, imaging,
ranging, discrimination, 2) phenomenology studies and boost phase
intercept handover, 3) electronic and photonic materials and devices and
wide band gap technology, 4) information processing and computing
technologies, 5) directed energy, non-linear optical devices and
processes, 6) Miniature Interceptor Technology (MIT) propulsion and kill
enhancement and, 7) power generation and conditioning and thermal
management. This project also invested on proof-of-concept research and
matures novel technologies for transition to advanced development. Other
Applied Research projects more closely aligned with existing MDA
Surveillance, and Battle Management, Command, Control, Communications,
Computers and Intelligence (BMC4I) technology efforts. Investments in
this program also continued to provide test bed for advance sensor
demonstration and to provide coverage for national missions including
for example, NASA's Cassini probe (launch critical), Navy TMT-2 and
TTV-1 and THAAD.

**2. Development** takes what has been discovered or learned from basic
and applied research and uses it to establish technological feasibility,
assessment of operability, and production capability. Development is
comprised of five stages defined below:

1.  Advanced Technology Development is the systematic use of the
    knowledge or understanding gained from research directed toward the
    proof of technological feasibility and assessment of operational and
    producibility rather than the development of hardware for service
    use. Employs demonstration activities intended to prove or test a
    technology or method.

2.  Advanced Component Development and Prototypes evaluates integrated
    technologies in as realistic an operating environment as possible to
    assess the performance or cost reduction potential of advanced
    technology. Programs in this phase are generally system specific.
    Major outputs of Advanced Component Development and Prototypes are
    hardware and software components, or complete weapon systems, ready
    for operational and developmental testing and field use.

3.  System Development and Demonstration concludes the program or
    project and prepares it for production. It consists primarily of
    preproduction efforts, such as logistics and repair studies. Major
    outputs are weapons systems finalized for complete operational and
    developmental testing.

4.  RDT&E Management Support is support for installations and operations
    for general research and development use. This category includes
    costs associated with test ranges, military construction maintenance
    support for laboratories, operation and maintenance of test aircraft
    and ships, and studies and analyses in support of the R&D program.

5.  Operational Systems Development is concerned with development
    projects in support of programs or upgrades still in engineering and
    manufacturing development, which have received approval for
    production, for which production funds have been budgeted in
    subsequent fiscal years.

Examples of RDT&E Development conducted by MDA:

**[Ballistic Missile Defense Midcourse Defense Segment]{.underline}**:

The Midcourse Defense Segment (MDS) provides a "hit-to-kill" capability
to counter ballistic missiles in the midcourse stage of flight. In this
capacity, the MDS provides the midcourse defense layer of the overall
Ballistic Missile Defense System (BMDS) (via ground-based system element
(referred to as Ground-Based Midcourse Defense (GMD) and a sea-based
system element (referred to as Aegis Ballistic Missile Defense (Aegis
BMD) formerly referred to as Sea-based Midcourse Defense (SMD). This
program provides for the initial development and construction of a
multi-part Ballistic Missile Defense System (BMDS) Test Bed, each part
having independent utility to demonstrate midcourse capabilities.

The MDS develops and demonstrates increasingly robust technologies and
capabilities to enable incremental improvements and block upgrades to
the BMDS over time and incorporates: 1) countermeasures mitigation; 2)
use of Combined Test Forces; 3) expanded engagement conditions; 4)
additional targets and interceptor test launch sites; 5) multiple
engagement scenarios; 6) expanded test range/engagement areas; and 7)
improved test infrastructure.

The GMD System Element of the MDS consists of two major efforts 1)
development and construction of the initial GMD parts of the BMDS Test
Bed and, 2) development of capabilities to detect, track, intercept and
defeat ballistic missile threats to the U.S. during the midcourse phase
of flight as well as GMD improvements to the BMDS Test Beds. During FY
2002, efforts initiated in acquisition of interceptors with spare boost
vehicles, common silos components and command launch equipment and other
associated tooling and test equipment for Ft. Greely.

## Ballistic Missile Defense System (BMDS) Segment

The missile defense program has transitioned from an element-centric to
a system-centric focus, and from a requirements-based to a
capability-based, Block delivery approach. The objective of this
approach is to acquire a single, integrated layered Ballistic Missile
Defense System (BMDS) that provides multiple engagement opportunities
along the entire flight path of threat ballistic missiles.

The primary projects for FY 2002 include: BM/C2, Communications, Targets
& Countermeasures, Systems Engineering and Integration (SE&I), Test and
Evaluation (T&E), and Producibility & Manufacturing Technology.
Successful performance of these projects is necessary for fielding a
multi-layered, evolutionary system for defense in depth against the full
spectrum of ballistic missile threats.

The BMDS BM/C2 will substantially enhance BMDS effectiveness beyond that
achievable by stand-alone systems and provides a flexible, integrated
architecture to plan, direct, control and monitor missile defense
activities.

The Communications project consolidates, refines requirements, and
develops upgrades to existing communication systems (hardware and
software) that are being developed for the BMDS-it is the key and
critical enabler to integration of the BMDS BM/C2.

The Targets & Countermeasures provides capability-based ballistic
missile targets, countermeasures and target system support.

The SE&I project provides the overall systems engineering development
and integration of the BMDS. SE&I activities provide the engineering
core competency, modeling facilities, and integrative engineering
development efforts needed to technically manage and field the
capability-based BMDS.

Test & Evaluation (T&E) provides consolidated BMDS-wide T&E capabilities
and Resources required to allow for cohesive facilitation, management,
and execution of test activities.

Producibility and Manufacturing Technology provides manufacturing
technologies and implementation strategies that benefit the BMDS.

The SE&I mission is to define and manage the layered BMDS and provide
the collaborative, layered and detailed system engineering and
integration required across the entire spectrum of BMDS war fighter
capabilities.

During FY 2002, the BMD segment provided for System Engineering and
Architecture (SE&A), comprised of a Missile Defense National Team for
System Engineering and Integration (MDNTS), to design and integrate the
BMD elements into a single integrated and layered BMDS architecture. The
Team provided support to establish the overall BMDS capabilities,
allocates capability specifications, defines and develops the BMDS Block
Plans, develops new/alternative concepts and conducts trade studies to
support system evolution and risk mitigation, and develops standards and
orchestrate activities across all BMDS elements to ensure Systems
Integration. The MDNT will develop and verify BMDS level designs and
products for all ground, sea, air and space-based elements through the
use of models and the BMDS Test Beds. The flow-down of BMD System
Capability Specifications resulting from MDNT efforts in SE&I and BM/c2
will guide the integration of elements into the BMD system, the BMDS
BM/C2 architecture and the BMDS Test Bed. This Team also provides
support focused BMD efforts such as Project Hercules and Targets and
Countermeasures as well as producing quick reaction assessments for the
Director of potential impacts to BMDS capabilities.

The BMD segment also provided for other projects such as: Target Booster
Development and Logistics, continued development and integration of
realistic measures into BMD targets, to include the development and
characterization of countermeasures and penetration aids, development of
advanced concepts to prove their viability and maintain cognizance over
leading edge concepts that could contribute to evolutionary and
revolutionary BMD capability enhancements.

FY 2002 ANNUAL FINANCIAL STATEMENTS (AFS)

Department of Defense

Missile Defense Agency

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#  {#section-34}

#  {#section-35}

#  {#section-36}

# Required Supplementary Information

+--------------------+---------+--------+------+------+-------+-----+
| **Required         |         |        |      |      |       |     |
| Supplemental       |         |        |      |      |       |     |
| Information - Part |         |        |      |      |       |     |
| A**                |         |        |      |      |       |     |
+--------------------+---------+--------+------+------+-------+-----+
| **AT97 - Other     |         |        |      |      |       |     |
| Defense            |         |        |      |      |       |     |
| Organizations      |         |        |      |      |       |     |
| General Funds**    |         |        |      |      |       |     |
+--------------------+---------+--------+------+------+-------+-----+
| **Under Secretary  |         |        |      |      |       |     |
| of Defense         |         |        |      |      |       |     |
| (Acquisition,      |         |        |      |      |       |     |
| Technology, and    |         |        |      |      |       |     |
| Logistics)**       |         |        |      |      |       |     |
+--------------------+---------+--------+------+------+-------+-----+
| **Missile Defense  |         |        |      |      |       |     |
| Agency**           |         |        |      |      |       |     |
+--------------------+---------+--------+------+------+-------+-----+
|                    |         |        |      |      |       |     |
+--------------------+---------+--------+------+------+-------+-----+
| **Schedule, Part A | **T     | **Fund | **   | **L  | **Inv | **O |
| DoD                | reasury | B      | Acco | oans | estme | the |
| Intragovernmental  | I       | alance | unts | Rece | nts** | r** |
| Asset Balances.**  | ndex:** | with   | Rece | ivab |       |     |
|                    |         | Trea   | ivab | le** |       |     |
| **(Amounts in      |         | sury** | le** |      |       |     |
| Thousands)**       |         |        |      |      |       |     |
+--------------------+---------+--------+------+------+-------+-----+
| Executive Office   | 11      |        | \$11 |      |       |     |
| of the President   |         |        | ,639 |      |       |     |
+--------------------+---------+--------+------+------+-------+-----+
| Department of the  | 20      | \$3,8  |      |      |       |     |
| Treasury           |         | 76,537 |      |      |       |     |
+--------------------+---------+--------+------+------+-------+-----+
| Army General Fund  | 21      |        |      |      |       | \$  |
|                    |         |        |      |      |       | 110 |
+--------------------+---------+--------+------+------+-------+-----+
| Air Force General  | 57      |        | (\   |      |       |     |
| Fund               |         |        | $13) |      |       |     |
+--------------------+---------+--------+------+------+-------+-----+
| Other Defense      |         |        |      |      |       |     |
| Organizations      |         |        |      |      |       |     |
+--------------------+---------+--------+------+------+-------+-----+
| General Funds      | 97      |        | \$93 |      |       |     |
+--------------------+---------+--------+------+------+-------+-----+
| Army Working       | 97-4    |        |      |      |       | \$5 |
| Capital Fund       | 930.001 |        |      |      |       |     |
+--------------------+---------+--------+------+------+-------+-----+
| Air Force Working  | 97-4    |        |      |      |       | \$6 |
| Capital Fund       | 930.003 |        |      |      |       |     |
+--------------------+---------+--------+------+------+-------+-----+
| **Totals**         |         | \$     | \$11 |      |       | \$  |
|                    |         | 3,8    | ,719 |      |       | 121 |
|                    |         | 76,537 |      |      |       |     |
+--------------------+---------+--------+------+------+-------+-----+

+------------------------------+---------+------+--------------+-----+
| **Required Supplemental      |         |      |              |     |
| Information - Part B**       |         |      |              |     |
+------------------------------+---------+------+--------------+-----+
| **AT97 - Other Defense       |         |      |              |     |
| Organizations General        |         |      |              |     |
| Funds**                      |         |      |              |     |
+------------------------------+---------+------+--------------+-----+
| **Under Secretary of Defense |         |      |              |     |
| (Acquisition, Technology,    |         |      |              |     |
| and Logistics)**             |         |      |              |     |
+------------------------------+---------+------+--------------+-----+
| **Missile Defense Agency**   |         |      |              |     |
+------------------------------+---------+------+--------------+-----+
|                              |         |      |              |     |
+------------------------------+---------+------+--------------+-----+
| **Schedule, Part B DoD       | **T     | **   | **Debt       | **O |
| Intragovernmental Entity     | reasury | Acco | s/Borrowings | the |
| Liabilities**                | I       | unts | From Other   | r** |
|                              | ndex:** | P    | Agencies**   |     |
| **(Amounts in Thousands)**   |         | ayab |              |     |
|                              |         | le** |              |     |
+------------------------------+---------+------+--------------+-----+
| Navy General Fund            | 17      | \$7  |              |     |
|                              |         | ,714 |              |     |
+------------------------------+---------+------+--------------+-----+
| Army General Fund            | 21      | \$13 |              |     |
|                              |         | ,593 |              |     |
+------------------------------+---------+------+--------------+-----+
| Office of Personnel          | 24      |      |              | \$  |
| Management                   |         |      |              | 309 |
+------------------------------+---------+------+--------------+-----+
| Air Force General Fund       | 57      | \$10 |              |     |
|                              |         | ,451 |              |     |
+------------------------------+---------+------+--------------+-----+
| Other Defense Organizations  | 97      | \$26 |              |     |
| General Funds                |         | ,395 |              |     |
+------------------------------+---------+------+--------------+-----+
| Other Defense Organizations  | 97-4930 | \    |              |     |
| Working Capital Funds        |         | $482 |              |     |
+------------------------------+---------+------+--------------+-----+
| Army Working Capital Fund    | 97-4    | \    |              |     |
|                              | 930.001 | $290 |              |     |
+------------------------------+---------+------+--------------+-----+
| Air Force Working Capital    | 97-4    | \$14 |              |     |
| Fund                         | 930.003 |      |              |     |
+------------------------------+---------+------+--------------+-----+
| The General Fund of the      | 99      |      |              | \   |
| Treasury                     |         |      |              | $6, |
|                              |         |      |              | 972 |
+------------------------------+---------+------+--------------+-----+
| **Totals**                   |         | \$58 |              | \   |
|                              |         | ,939 |              | $7, |
|                              |         |      |              | 281 |
+------------------------------+---------+------+--------------+-----+

+-----------------------------------------+-------------+--------------+
| **Required Supplemental Information -   |             |              |
| Part C**                                |             |              |
+-----------------------------------------+-------------+--------------+
| **AT97 - Other Defense Organizations    |             |              |
| General Funds**                         |             |              |
+-----------------------------------------+-------------+--------------+
| **Under Secretary of Defense            |             |              |
| (Acquisition, Technology, and           |             |              |
| Logistics)**                            |             |              |
+-----------------------------------------+-------------+--------------+
| **Missile Defense Agency**              |             |              |
+-----------------------------------------+-------------+--------------+
|                                         |             |              |
+-----------------------------------------+-------------+--------------+
| **Schedule, Part C DoD                  | **Treasury  | **Earned     |
| Intragovernmental Revenue and Related   | Index:**    | Revenue**    |
| Costs**                                 |             |              |
|                                         |             |              |
| **(Amounts in Thousands)**              |             |              |
+-----------------------------------------+-------------+--------------+
| Executive Office of the President       | 11          | \$3,127      |
+-----------------------------------------+-------------+--------------+
| Navy General Fund                       | 17          | \$5,326      |
+-----------------------------------------+-------------+--------------+
| Army General Fund                       | 21          | \$496        |
+-----------------------------------------+-------------+--------------+
| Other Defense Organizations General     | 97          | \$2,907      |
| Funds                                   |             |              |
+-----------------------------------------+-------------+--------------+
| Other Defense Organizations Working     | 97-4930     | \$1          |
| Capital Funds                           |             |              |
+-----------------------------------------+-------------+--------------+
| Navy Working Capital Fund               | 97-4930.002 | \$582        |
+-----------------------------------------+-------------+--------------+
| The General Fund of the Treasury        | 99          | (\$1)        |
+-----------------------------------------+-------------+--------------+
| **Totals**                              |             | \$12,438     |
+-----------------------------------------+-------------+--------------+

+---------------------------------+------------+---------+-----------+
| **Required Supplemental         |            |         |           |
| Information - Part E**          |            |         |           |
+---------------------------------+------------+---------+-----------+
| **AT97 - Other Defense          |            |         |           |
| Organizations General Funds**   |            |         |           |
+---------------------------------+------------+---------+-----------+
| **Under Secretary of Defense    |            |         |           |
| (Acquisition, Technology, and   |            |         |           |
| Logistics)**                    |            |         |           |
+---------------------------------+------------+---------+-----------+
| **Missile Defense Agency**      |            |         |           |
+---------------------------------+------------+---------+-----------+
|                                 |            |         |           |
+---------------------------------+------------+---------+-----------+
| **Schedule, Part E DoD          | **Treasury | **Tr    | **        |
| Intragovernmental**             | Index:**   | ansfers | Transfers |
|                                 |            | In**    | Out**     |
+---------------------------------+------------+---------+-----------+
| **Non-Exchange Revenues**       |            |         |           |
|                                 |            |         |           |
| **(Amounts in Thousands)**      |            |         |           |
+---------------------------------+------------+---------+-----------+
| (Amounts in Thousands)          |            |         |           |
+---------------------------------+------------+---------+-----------+
|                                 |            |         |           |
+---------------------------------+------------+---------+-----------+
| Army General Fund               | 21         | \       | \$168,092 |
|                                 |            | $10,481 |           |
+---------------------------------+------------+---------+-----------+
| **Totals**                      |            | \       | \$168,092 |
|                                 |            | $10,481 |           |
+---------------------------------+------------+---------+-----------+