I

2009

TABLE OF CONTENTS

MESSAGE FROM THE SECRETARY OF THE AIR FORCE ...................................................................................................II

MESSAGE FROM THE ASSISTANT SECRETARY OF THE AIR FORCE FOR FINANCIAL MANAGEMENT AND COMPTROLLER .. III

MANAGEMENT DISCUSSION AND ANALYSIS

 AIR FORCE HERITAGE ......................................................................................................................................1

 AIR FORCE CORE VALUES ................................................................................................................................2

 AIR FORCE CRITICAL CAPABILITIES ..................................................................................................................2

 AIR FORCE GOALS ...........................................................................................................................................2

 AIR FORCE IN ACTION – FY 2009 ...................................................................................................................3

 REINVIGORATE THE AIR FORCE NUCLEAR ENTERPRISE ...........................................................................3

 PARTNER WITH THE JOINT AND COALITION TEAM TO WIN TODAY’S FIGHT .............................................4

 DEVELOP AND CARE FOR AIRMEN AND THEIR FAMILIES .........................................................................4

 MODERNIZE OUR AGING AIR AND SPACE INVENTORIES, ORGANIZATIONS AND TRAINING ..........................4

 RECAPTURE ACQUISITION EXCELLENCE .................................................................................................5

 AIR FORCE STRUCTURE ....................................................................................................................................6

 AIR FORCE RESOURCES ..................................................................................................................................10

 AIR FORCE MAJOR MANAGEMENT INITIATIVES ................................................................................................11

 CHIEF MANAGEMENT OFFICER ............................................................................................................11

 MANAGEMENT OF AMERICAN RECOVERY AND REINVESTMENT ACT FUNDS ............................................11

 ENERGY AND ENVIRONMENTAL FOCUS ................................................................................................12

 PERSONNEL SERVICES DELIVERY .........................................................................................................13

 FINANCIAL SERVICES DELIVERY ..........................................................................................................13

 EXPEDITIONARY LOGISTICS FOR THE 21ST CENTURY ...............................................................................14

 AIR FORCE FINANCIAL MANAGEMENT ASSURANCES .........................................................................................14

 CHIEF FINANCIAL OFFICER COMPLIANCE ............................................................................................15

 INTERNAL CONTROLS .........................................................................................................................15

 CONTINUOUS IMPROVEMENT ...............................................................................................................16

 PROGRESS TOWARDS AUDITABILITY .....................................................................................................16

AIR FORCE GENERAL FUND

 APPROPRIATIONS ............................................................................................................................................17

 CURRENT AND FUTURE FINANCIAL SYSTEMS - DEFENSE ENTERPRISE ACCOUNTING AND MANAGEMENT SYSTEM ..18

AIR FORCE WORKING CAPITAL FUND

 CONSOLIDATED SUSTAINMENT ACTIVITY GROUP-MAINTENANCE DIVISION .........................................................20

 SUPPLY MANAGEMENT ACTIVITY GROUP-RETAIL ............................................................................................22

FINANCING THE FIGHT ...............................................................................................................................................25

FINANCIAL STATEMENTS

 GENERAL FUND

 PRINCIPAL STATEMENTS .....................................................................................................................29

 NOTES TO THE PRINCIPAL STATEMENTS ...............................................................................................35 

 REQUIRED SUPPLEMENTARY STEWARDSHIP INFORMATION .....................................................................89

 REQUIRED SUPPLEMENTARY INFORMATION ........................................................................................101

 AUDIT OPINION ...............................................................................................................................107 

 WORKING CAPITAL FUND

 PRINCIPAL STATEMENTS ...................................................................................................................117

 NOTES TO THE PRINCIPAL STATEMENTS .............................................................................................123

 REQUIRED SUPPLEMENTARY INFORMATION ........................................................................................161

 AUDIT OPINION ...............................................................................................................................163
II
III

2009
A C-130 Hercules fl ies over the American fl ag at the Iron Mike Memorial Ceremony June 7, 

2009 at La Fiere, France. Hundreds came to honor those who sacrifi ced during D-Day and 

World War II 65 years ago. (U.S. Army photo by Lea Greene)
2009

Air Force Heritage

“The eyes of the world are upon you.”

– Supreme Commander of the Allied Expeditionary Force, 

General Dwight D. Eisenhower

No truer words could describe the profoundly 

historic milestone we celebrate this year: the 65th

anniversary of the 1944 D-Day invasion of France. 

Profound in regard to the universal understanding that the 

outcome of the invasion equated to victory or defeat in the 

war. Impactful in the exponential expansion in Airmen 

and plane numbers as the Air Corps of 1939 (20,000 

Airmen/2,400 aircraft) transitioned into the 1944 Army Air 

Force (2,400,000 Airmen/80,000 aircraft). The Air Force’s 

transformation refl ected a fundamental change in the 

United States’ strategic and tactical approach to warfare. 

The purpose of “Operation Overlord” was clearly stated: to 

emancipate the peoples of Europe and destroy the German 

war machine. The approach – breach the “Atlantic Wall” 

on the coast of Normandy, secure a foothold and bring in 

near limitless resources to achieve full victory. Out of the 

approximate 13,000 aircraft supporting the invasion, 8,722 

were American. American Air Force sorties dropped two 

airborne divisions behind enemy lines, covered convoys 

approaching Normandy beaches, and delivered tons of 

bombs on coastal batteries and enemy troop concentrations. 

Consensus among historians is that Allied air supremacy 

was virtually complete over the approaches to the battle 

area. In the fi rst 24 hours, the Allies landed about 155,000 

troops and controlled 62 miles of French coastline at a cost 

of around 10,000 lives. 

 

Today’s United States Air Force continues to offer the 

capabilities of air and logistical power exhibited during 

D-Day operations. The Air Force continues to sustain joint 

operations across an even more diverse set of geopolitical 

and resourcing imperatives. America’s Air Force is ready to 

fulfi ll the commitments of today and face the challenges of 

tomorrow through strong fi nancial stewardship, continued 

precision and reliability, and dedication to persistent 

Global Vigilance, Reach and Power for the nation.

MANAGEMENT DISCUSSION AND ANALYSIS

1

Landing vehicles and cargo on a Normandy beach, June 1944
The Air Force strategic framework consists of these 

elements:

Our Core Values are:

◆ Integrity First

◆ Service Before Self

◆ Excellence in All That We Do

Our Critical Capabilities are:

◆ Global Vigilance

◆ Global Reach

◆ Global Power

Our Goals are: 

◆ Foster Mutual Respect and Dignity

◆ Sustain Air, Space and Cyberspace Capabilities

◆ Provide Persistent Situational Awareness

◆ Develop Joint and Battle-Ready Airmen

◆ Improve the Total Force Quality of Life

◆ Achieve Open, Transparent Business Practices 

and a Clean Audit

◆ Foster Air Force Smart Operations in the 

21st Century (AFSO21)

Air Force operational success is directly supported 

by the acquisition excellence provided by Air Force 

Financial Management (FM) professionals. Acquisition 

excellence is a capability that allows the United 

States Air Force to acquire and recapitalize platforms 

that enable us to “fl y, fi ght and win in air, space 

and cyberspace.” Equipped with strong leadership 

support and the goals of continuous fi nancial process 

improvement FM personnel will be uninterrupted in 

their service to country and their ability to acquire an 

array of capabilities for Combatant Commanders.

2

(U.S. Air ForcePhoto by TSgt Ben Bloker)
2009

MANAGEMENT DISCUSSION AND ANALYSIS

Air Force in Action—FY 2009 

In the past year, the Air Force has conducted approximately 

61,000 sorties in Operation Iraqi Freedom and over 37,000 

sorties supporting Operation Enduring Freedom, delivering 

over 2 million passengers and 700,000 tons of cargo 

and weaponry. America’s Airmen continue to proudly 

serve their nation and consistently exhibit an unwavering 

commitment to fulfi lling the needs of global Air Force 

operations. Overarching Service priorities relating to 

organizing, training and equipping Airmen to meet the 

needs of our national leadership and our combatant 

commanders continue to be achieved:

◆ Reinvigorate the Air Force Nuclear Enterprise

◆ Partner with the Joint and Coalition Team 

to Win Today’s Fight

◆ Develop and Care for Airmen and Their Families

◆ Modernize our Air and Space Inventories, 

Organizations and Training

◆ Recapture Acquisition Excellence

Reinvigorate the Air Force Nuclear Enterprise

Work continued in 2009 to sustain the safety and reliability 

of our nation’s nuclear capability – one that deters 

aggressors and reassures allies. The Air Force manages 

a large percentage of our nation’s nuclear stockpile and 

is constantly stressing accountability, compliance and 

precision in the nuclear enterprise. Air Force nuclear forces 

are being reorganized to refortify lines of authority for 

nuclear operations. Near-term changes to the Air Force 

Nuclear Enterprise include:

◆ Consolidating all nuclear sustainment matters under 

the Air Force Nuclear Weapons Center

◆ Establishing a new Air Staff nuclear directorate 

responsible for policy oversight and integration 

of our nuclear enterprise activities

◆ Stand up Air Force Global Strike Command 

to consolidate Air Force Intercontinental Ballistic 

Missiles and nuclear capable bombers under 

a single command

3

A B-2 Spirit, 393rd Expeditionary Bomb Squadron, Whiteman AFB, MO and F-15E Strike Eagles, 391 Expeditionary Force Squadron, fl y in formation across the Pacifi c Ocean. (U.S. Air Force photo by TSgt Cecilio Ricardo)
4

Partner with the Joint and Coalition Team 

to Win Today’s Fight 

Global relations and strategic partnerships fortify our 

geographic access and ultimate security around the world. 

Deployed Airmen are partnering with Afghans and Iraqis 

to develop new National Army Air Corps and Air Forces 

for their respective countries. The Air Force is also actively 

engaged in joint programs such as the Joint Strike Fighter 

and communications satellites with allies where longer 

standing relationships exist. In 2009 the Air Force’s 

release of the Global Partnership Strategy will update 

existing Air Force published offi cial security cooperation 

strategies. The new strategy will include classifi ed, nationby-nation strategic plans to help direct the Air Force’s key 

relationships.

Develop and Care for Airmen and Their Families 

Emerging requirements brought about by the constantly 

evolving global political landscape demand an agile 

Air Force that is suffi ciently equipped to respond to the 

operational needs of today and overcome the challenges 

of tomorrow. Air Force leadership is committed to 

providing each Airman with a quality of service that 

materializes into daily operational roles that are meaningful 

and impactful. Enhanced foundational and accelerated 

training opportunities will enable Airmen to support Air 

Force core functions and satisfy combatant commander 

requirements. In addition to sustaining the world’s highest 

quality work force, the Air Force is equally committed 

to meeting the needs of their families. Quality of life 

initiatives such as advanced educational opportunities, 

modernized family housing, and expanded support services 

bolster the family support structures that fortify the 

Air Force’s greatest asset – our Airmen. 

Modernize Our Air and Space Inventories, Organizations 

and Training

Our nation’s air superiority is reliant on maintaining a 

technological advantage over our enemies. To maintain 

its technological advantage, the Air Force continues to 

invest in weapons, platforms and training that increase 

our air superiority and global precision attack capabilities. 

Below are a few examples of modernization efforts that 

will ensure we have the right combination of equipment, 

organizational structure and trained Airmen to deter and 

defeat future threats: 

◆ Replacing the aging KC-135 fl eet remains the 

Air Force’s top acquisition priority

◆ Low-observable characteristics and 5th generation 

designs make the F-22 and F-35 integral 

components of the Air Force’s modernization 

efforts

◆ Laser Joint Direct Attack Munition will enhance 

our capability to strike effi ciently and avoid surface 

threats

◆ Accelerated retirement of our oldest legacy fi ghters 

will eliminate excessive overmatch in our tactical 

fi ghter force (F-15s, F-16s, A-10s) resulting in 

the ability to redistribute billions in funds to 

support growth in priority missions such as aerial 

surveillance systems and ISR support

◆ Sustaining and modernizing air mobility assets 

(C-5s, C-17s, C-130s) ensures the ability to deploy, 

maneuver and sustain large global forces

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Staff Sgt. Frederick Battle from the 820th RED HORSE Squadron is greeted by his wife and daughter upon his 

arrival home after a seven-month deployment in Southwest Asia. (U.S. Air Force photo by A1C Brett Clashman)
2009

MANAGEMENT DISCUSSION AND ANALYSIS

5

◆ Air and Space Operations Centers have been 

established in alignment with each geographic 

combatant commander to integrate air, space, 

cyber and missile defense capabilities into joint 

operations

◆ Cyberspace capabilities are being consolidated 

under the Air Force Space Command to provide 

an enhanced joint capability and provide optimum 

support to our networked force

◆ Terminal Air Controllers are receiving enhanced 

training on fl exible air strike control systems 

like Remote Operated Video Enhanced Receiver 

(ROVER)

Recapture Acquisition Excellence 

As good stewards of taxpayer dollars, the Air Force is 

solidifying an acquisition system that will ensure delivery 

of capabilities to the war fi ghter on time and within budget. 

Recapturing acquisition excellence requires an experienced 

and accountable workforce that is supported by mature 

requirements and a stable budget. The May 2009 release of 

the Air Force’s Acquisition Improvement Plan outlines fi ve 

initiatives that will support the Air Force’s implementation 

of continuous process improvement:

◆ Revitalize the Air Force Acquisition Workforce

◆ Improve Requirements Generation Process

◆ Instill Budget and Financial Discipline

◆ Improve Air Force Major Systems Source 

Selections

◆ Establish Clear Lines of Authority and 

Accountability Within Acquisition Organizations

The Air Force is dedicated to providing our nation with 

the best equipment and capabilities to fl y, fi ght and win 

in air, space and cyberspace. We will develop, organize 

and size our workforce and ensure continuous acquisition 

training and process improvement. The Air Force remains 

committed to our core values: integrity fi rst, service before 

self, and excellence in all we do.

The F-35 Lightning II, also known as the Joint Strike Fighter (JSF). Eglin AFB will be the home of the JSF training facility. (U.S. Air Force photo by Amn Anthony Jennings)
6

Air Force Structure

The command line of the Air Force fl ows from the 

President and the National Command Authority to 

the Secretary of Defense and the Department of the 

Air Force. The Air Force is headed by the Secretary of the 

Air Force (SECAF), with the Chief of Staff reporting to 

the Secretary. Immediately subordinate to the departmental 

headquarters are the Major Air Commands (MAJCOMs), 

Field Operating Agencies (FOAs), Direct Reporting Units 

(DRUs), and the Auxiliary. 

Major Air Commands

MAJCOMs are primarily of two types: operational and 

support. Within the operational commands, the divisions 

are generally defi ned according to purpose or location 

(e.g., combat, movement of people and supplies, or Pacifi c 

and European theaters). The support commands generally 

are organized according to function (e.g., logistic, support, 

or training) and are directly subordinate to Air Force 

Headquarters. A list of the MAJCOMs and their 

missions follows:

Air Force Global Strike Command 

(AFGSC)

Missions: Stood up in August 2009, 

this command is dedicated to nuclear 

deterrence and global strike missions. 

Reestablishes a single organization 

within the Air Force accountable for all aspects of the 

nuclear deterrence mission with responsibility for nuclear 

missiles and nuclear-capable bombers when it reaches 

full capability. The command will have operational 

responsibility for all Intercontinental Ballistic Missile 

(ICBM) forces and B-2 and B-52 bombers. 

Command Personnel: 900

Primary Inventory includes: Intercontinental ballistic 

missiles and Bombers.

Air Combat Command (ACC)

Missions: Operate Air Force 

conventional bombers and Air Force’s 

CONUS-based fi ghter and attack, 

reconnaissance, battle management, 

command and control aircraft, and 

intelligence and surveillance systems. Supply combat 

airpower to America’s warfi ghting commands (Africa 

Command, Central Command, European Command, United 

States Northern Command, Pacifi c Command and United 

States Southern Command); nuclear, conventional, and 

information operations forces to United States Strategic 

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Secretary of the Air Force

 Assistant Secretary of the 

Air Force Secretariat Functions

Air Force Chief of Staff

Air Force Vice Chief of Staff

Air Force Major Commands Staff Functions Air Staff

Under Secretary of the Air Force

(Chief Management Offi cer)

Gen. Norton A. Schwartz, Air Force Chief of Staff, passes the Air Force Global Strike Command guidon to 

Lt. Gen. Frank G. Klotz, commander, during the activation ceremony of the major command. (U.S. Air Force 

photo by SrA Alexandra M. Longfellow)
7

2009

MANAGEMENT DISCUSSION AND ANALYSIS

Command; and air defense forces to North American 

Aerospace Defense Command. Provide support to the 

provisional Air Force Cyber Command.

Command Personnel: 148,000

Primary Aircraft Inventory includes: Bombers, Fighters, 

Intelligence, Surveillance and Reconnaissance (ISR), 

and Trainers.

Air Education and Training Command 

(AETC)

Missions: Recruit, train, and educate 

professional, expeditionary-minded 

Airmen to sustain the combat capability 

of America’s Air Force. Conduct joint, 

readiness, and Air Force security assistance training. 

Provide basic military training, initial and advanced 

technical training, fl ying training, and professional military 

and degree-granting professional education.

Command Personnel: 72,000

Primary Aircraft Inventory includes: Trainers, Fighters, 

Transports, Helicopters, and Tankers. 

Air Force Materiel Command (AFMC)

Missions: Deliver war-winning 

expeditionary capabilities to the 

warfi ghter through development and 

transition of technology, professional 

acquisition management, and world-class 

sustainment of all Air Force weapons systems. Provide 

exacting test and evaluation of all weapons and supporting 

systems.

Command Personnel: 75,000

Primary Aircraft Inventory includes: Bombers, Fighters, 

Transports, Tankers, Helicopters and Trainers.

Air Force Space Command (AFSPC)

Missions: Operate and test the following: 

missile warning radars, sensors, and 

satellites; national space-launch facilities 

and operational boosters; worldwide 

space surveillance radars and optical 

systems; worldwide space environment systems; and 

position, navigation, and timing systems.

Command Personnel: 27,000

Primary Inventory includes: Missile Warning Systems, 

ICBMs, Satellite Systems, and Space Surveillance Systems.

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a A Minotaur I launch from the Mid-Atantic Regional Spaceport at the NASA Wallops Flight Facility, Wallops 

Island, VA of a TacSat-3 satellite. Air Force Space Command’s Space and Missile Systems Center’s Space 

Development and Test Wing at Kirtland AFB, NM, has overall management of the mission. (Image Courtesy of 

Orbital Sciences Corporation) 
8

Air Force Special Operations 

Command (AFSOC)

Missions: Serve as America’s specialized 

air power, providing Air Force special 

operations forces for worldwide 

deployment and assignment to regional 

unifi ed commands. The command’s core tasks have been 

grouped into three mission areas: forward presence and 

engagement, information operations precision employment 

and strike, and special operations forces mobility.

Command Personnel: 19,000

Primary Aircraft Inventory includes: Helicopters, Tankers 

and Special Operations Aircraft.

Air Mobility Command (AMC)

Missions: Provide rapid global mobility 

and sustainment through tactical and 

strategic airlift and aerial refueling for 

U.S. armed forces. Provide special duty 

and operational support aircraft and global humanitarian 

support.

Command Personnel: 132,000

Primary Aircraft Inventory includes: Transports, 

Helicopters, and Tankers.

Pacifi c Air Forces (PACAF)

Missions: Provide ready air and space 

power to promote U.S. interests in the 

Asia-Pacifi c region during peacetime, 

crisis, and war. 

Command Personnel: 43,000

Primary Aircraft Inventory includes: Fighters, Transports, 

and Tankers.

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A CV-22 Osprey aircraft from the 8th Special Operations Squadron at Hurlburt Field, FL, fl ies over Florida’s Emerald Coast. (U.S. Air Force photo by SrA Julianne Showalter)
9

2009

MANAGEMENT DISCUSSION AND ANALYSIS

U.S. Air Forces in Europe (USAFE)

Missions: Deliver airpower options 

to combatant commanders within 

the U.S. European Command area of 

responsibility. Plan, control, support and 

conduct joint, coalition North Atlantic 

Treaty Organization (NATO), and warfi ghting headquarters 

operations in Europe, Asia, and Africa based on taskings 

from EUCOM and/or AFRICOM Commanders. 

Command Personnel: 30,000

Primary Aircraft Inventory includes: Fighters, Transports, 

and Tankers.

Air Force Reserve Command (AFRC)

Missions: Support the active duty 

force. Serve in such missions as fi ghter, 

bomber, airlift, aerial port operations, 

aeromedical evacuation, aerial fi re 

fi ghting, weather reconnaissance, space 

operations, airborne air control, fl ying training, fi ght 

testing, and aerial spraying. Provide support and disaster 

relief in the United States and support national counterdrug 

efforts.

Command Personnel: 71,000

Primary Aircraft Inventory includes: Fighters, Transports, 

and Tankers.

Air National Guard (ANG)

Missions: Provide combat capability 

to the warfi ghter and security for the 

homeland. Protect life and property and 

preserve peace, order, and public safety.

Command Personnel: 108,000

Primary Aircraft Inventory includes: Fighters, Transports, 

and Tankers.

Field Operating Agency (FOA)

An FOA is a subdivision of the Air Force that carries 

out fi eld activities under the operational control of 

a Headquarters U.S. Air Force functional manager. 

FOAs have the same administrative and organizational 

responsibilities as MAJCOMs. Examples of FOAs 

include the Air Force Audit Agency, Air Force Center for 

Environmental Excellence, Air Force Financial Services 

Center, Air Force Services Agency, and Air Force Weather 

Agency, among others. 

Direct Reporting Unit (DRU)

A DRU is a subdivision of the Air Force that is directly 

subordinate to Headquarters Air Force, separate from 

any MAJCOM or FOA because of a unique mission, 

legal requirements, or other factors. DRUs have the same 

administrative and organizational responsibilities as 

MAJCOMs. The DRUs are the Air Force Academy, 

Air Force District of Washington, and Air Force 

Operational Test and Evaluation Center.

Auxiliary

An Air Force auxiliary is an organization 

created by statute that the Secretary 

of the Air Force may use to fulfi ll the 

Air Force’s non-combat programs and 

missions. The Civil Air Patrol (CAP) is 

the only current U.S. Air Force auxiliary.

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Air and Army National Guard members work as a joint unit to deploy the Joint Incident Site Communication 

Capability system during a week-long training exercise. (U.S. Air Force photo by SSgt Nicholas A. McCorkle)
10

Air Force Resources 

The three vital resources to successful accomplishment of 

the Air Force mission are:

◆ Places: A network of bases that refl ect the Air 

Force’s global competencies.

• The Air Force is a global force, spanning 

facilities both in the United States and around 

the world, as shown below.

- CONUS: 68

- OCONUS: 17

◆ People: Trained, motivated, and dedicated. 

• The Air Force consists of over 722,000 military 

and civilian personnel. Aerospace power is a 

proven necessity for victory on land, sea, air, 

space, and cyberspace. The foundation for this 

is our people.

• The reserve component (Air Force Reserve 

and Air National Guard) has become more 

important than ever in sustaining worldwide 

operations. These warriors make possible 

the successful accomplishment of Air Force 

missions.

◆ Systems: Modern weapons platforms that 

integrate air, space, and cyber assets into an 

undefeatable force. 

• Air Force “systems” no longer mean only 

“manned aircraft.” Systems also include 

space launch vehicles, satellites, intelligence, 

surveillance and reconnaissance assets, 

unmanned aerial systems, and the cohesive 

infrastructure to all Air Force systems. All 

Air Force systems are essential assets for 

Air Force people to accomplish the mission.

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AZ

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NV

UT

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WY

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NE

SD

ND

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IL

LA

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TN

OH

FL

GA

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NC

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KY

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Elmendorf AFB PACAF

Eielson AFB PACAF

HI

Hickam AFB PACAF

Brooks AFB AFMC

Randolph AFB AETC

Lackland AFB AETC

Laughlin AFB AETC

Goodfellow AFB AETC

Dyess AFB ACC

Sheppard AFB AETC

Cannon AFB ACC

Holloman AFB ACC

Kirtland AFB AFMC Luke AFB AETC

Davis-Monthan AFB ACC

Los Angeles AFB AFMC

Edwards AFB AFMC

Nellis AFB ACC Vandenberg AFB AFSPC

Travis AFB AMC

Beale AFB ACC

Fairchild AFB AMC

McChord AFB AMC

Mountain Home AFB ACC

Malmstrom AFB AFSPC Minot AFB ACC

Grand Forks AFB AMC

Ellsworth AFB ACC

F.E. Warren AFB AFSPC

Hill AFB AFMC

Peterson AFB AFSPC

Buckley AFB AFSPC

U.S. Air Force Academy DRU Schriever AFB AFSPC

Offutt AFB ACC

McConnell AFB AMC

Whiteman AFB ACC

Scott AFB AMC

Vance AFB AETC

Altus AFB AETC

Tinker AFB AFMC

Little Rock AFB AETC

Barksdale AFB ACC

Keesler AFB AETC

Arnold AFB AFMC

Columbus AFB AETC

Maxwell AFB AETC

Robins AFB AFMC

Moody AFB ACC

Patrick AFB AFSPC

MacDill AFB AMC

Tyndall AFB AETC

Eglin AFB AFMC

Hurlburt AFB AFSOC

Charleston AFB AMC

Shaw AFB ACC

Pope AFB AMC

Seymour Johnson AFB ACC

Langley AFB ACC

Wright-Patterson AFB AFMC

Hanscom AFB AFMC

McGuire AFB AMC

Dover AFB AMC

Bolling AFB DRU

Andrews AFB AMC

Germany

Geilenkirchen AB

Ramstein AB

Rhein-Main AB

Spangdahlem AB

Italy

Aviano AB

Japan

Kadena AB

Misawa AB

Yokota AB

Portugal

Lajes Field

Saudi Arabia

US Mil Training Mission

South Korea

Kunsan AB

Osan AB

Turkey

Incirlik AB

Izmir AB

UK

RAF Lakenheath

RAF Mildenhall

RAF Molesworth

CONUS

OCONUS

Major Active-Duty Air Force Facilities
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2009

MANAGEMENT DISCUSSION AND ANALYSIS

Air Force Major Management 

Initiatives

The Air Force is committed to providing the best 

combination of air, space and cyber power possible within 

available resources. From effective program and fi nancial 

management of American Recovery and Reinvestment 

Act (ARRA) funds to developing renewable energy 

sources, the Air Force continues to implement strategically 

signifi cant programs. The initiatives described below 

provide examples of the Air Force’s successful efforts to 

prevail in today’s operations while investing wisely to meet 

tomorrow’s needs. 

Chief Management Offi cer (CMO)

On June 19, 2009, in accordance with the National 

Defense Authorization Act (NDAA) for Fiscal Year 2009 

(Section 908), the Secretary of the Air Force established 

the Offi ce of Business Transformation to assist the Air 

Force Under Secretary, as Chief Management Offi cer 

(CMO). The Secretary named the Air Force Deputy Chief 

Management Offi cer (DCMO) as Director of Business 

Transformation to head this offi ce. A strong team has 

been formed, with expertise in continuous process 

improvement, strategic planning, project planning, data 

base data element defi nition and other key competencies. 

Air Force governance processes have been modifi ed to 

give appropriate representation to CMO and DCMO in 

leadership forums to support business transformation 

objectives.

Management of American Recovery and Reinvestment 

Act Funds (ARRA)

The Air Force received approximately $1.5 billion in 

Defense-related appropriations through ARRA. With 

a focus on Airmen care, families and environmental 

stewardship, ARRA funds are being used for high 

priority maintenance and repair projects as well as new 

child development centers, military family housing and 

dormitories. To maximize the benefi t of ARRA funding, 

previously conducted facility and requirements studies 

were leveraged to identify and prioritize the locations 

with the greatest need. ARRA funded projects include 

more than 1,500 maintenance and repair projects valued at 

$1.1 billion. Military construction and housing accounts for 

$260 million:

◆ $100 million for four dormitories

◆ $80 million for seven child development centers

◆ $80 million for two military family housing projects 

Supporting Air Force goals to lead Department of 

Defense and National efforts to achieve greater energy 

independence, ARRA funds will also be used to support 

critical military energy effi ciency research programs such 

as fuel-cell, wind, solar and energy security. Additional 

ARRA funds of $17 million are being allocated to the 

Air Force engineers to construct four energy conservation 

investment program projects.

“Investment in Air Force-related projects 

will further President Barack Obama’s goal 

of providing much-needed stimulus to the 

economy while improving quality of life for 

Airmen and their families.” 

- Audrey Davis

 Deputy Assistant Secretary 

of the Air Force for Financial Operations 

Source: TSgt Amaani Lyle, Stimulus Package to Aid Airmen, Air Force Print News Today (March 2009)
12

Energy and Environmental Focus 

The mission of the Air Force – fl y, fi ght and win in air, 

space and cyberspace – is both highly technical and 

energy-intensive. Air Force continues to lead the 

way in environmental stewardship and has begun 

implementing a comprehensive energy strategy that will 

result in a 30% reduction in energy use by FY 2015. The 

energy strategy seeks effi ciencies in the full spectrum of 

energy activities across all operational and support areas 

ranging from developing new weapons systems and 

fuel-effi cient aircraft engines to responsibly managing 

bases and fl ying aircraft. Actively engaged with other 

federal entities and industry the Air Force is adopting and 

sharing best practices and technologies for conservation 

and renewable power development. The Air Force’s 

commendable energy and environmental focus will produce 

verifi able reductions in energy consumption and provide 

alternatives and renewable energy sources that will improve 

our Nation’s energy posture, signifi cantly increase our 

energy independence, and strengthen our energy security.

The Air Force continues to receive accolades and achieve 

top results for their conservation efforts. During a 

May 2009 visit, President Obama cited Nellis Air Force 

Base (AFB), Nevada as “...a shining example of what’s 

possible when we harness the power of clean, renewable 

energy to build a new, fi rmer foundation for economic 

growth.” Air Force was a recipient of three 2009 Secretary 

of Defense Environmental Awards, and was honored by 

Vice President Biden’s commentary touting the Air Force’s 

ability to lead the way in environmental stewardship while 

leading the way in the Nation’s defense. The 14th Civil 

Engineer Squadron Pollution Prevention Team, Columbus 

AFB, Mississippi, won in the “Team/Individual Pollution 

Prevention” category. Vandenberg AFB, California, 

won in the “Installation Cultural Resources” category. 

Environmental Management Division, Hill AFB, Utah, 

won in the “Industrial Installation Environmental Quality” 

category. The Air Force also had a signifi cant number of 

nominees for the 2009 White House Closing the Circle 

(CTC) Awards: Keesler AFB; Randolph AFB; 

Robins AFB; Lackland AFB; Edwards AFB; 

Little Rock AFB; Goodfellow AFB; Laughlin AFB; 

Air Force Weather Headquarters; and 179th Airlift Wing.

“...a shining example of what’s possible 

when we harness the power of clean, 

renewable energy to build a new, fi rmer 

foundation for economic growth.” 

- President Barack Obama

Speaking at Nellis AFB

May 2009

President Obama speaks to the Airmen of Nellis AFB NV during a visit to Las Vegas. The president spoke about 

issues concerning world energy and the importance of solar power. (U.S. Air Force Photo by SrA Brian Ybarbo)
13

2009

MANAGEMENT DISCUSSION AND ANALYSIS

Personnel Services Delivery (PSD)

PSD transformation continues to enable Airmen to 

take care of routine personnel actions online, at their 

convenience, giving back valuable time, mission time, 

to each Airmen. The delivery model is helping to 

redesign personnel services processes through business 

process improvements that eliminate unnecessary steps 

and streamline approval processes, reducing associated 

workload. PSD is also focused on increasing self-service 

capabilities through online and contact centers that provide 

self-service options. Efforts to increase PSD functionality 

are aiding the modernization of Air Force architecture 

and technology that support and integrate web-based 

applications. By automating routine personnel actions, PSD 

enables personnel to focus on strategic advisory services 

for commanders and leaders that will ensure the Air Force’s 

ability to appropriately structure the future force.

Financial Services Delivery (FSD)

FSD cohesively addresses all elements impacting 

customers receiving fi nancial services and seeks to 

optimize all elements of operations including people, 

processes, technology and communications. Integrated 

end-to-end FSD processes establish a new way to deliver 

customer service consistently across all geographies and 

theaters. FSD encompasses all areas of the FM organization 

from bases through the MAJCOMs to the Air Force 

Financial Services Center (AFFSC) at Ellsworth AFB, 

South Dakota, and includes the enabling technologies and 

processes that support how customers receive fi nancial 

services. This effort began in September 2007, with the 

phased consolidation of back-offi ce military pay and travel 

processing for 109 Active and Reserve bases into the 

AFFSC. A 24/7 Contact Center is scheduled to open at the 

AFFSC in FY 2010 along with continued enhancement of 

online service options. 

With the standup of the AFFSC, the FM community 

will ultimately be able to reduce face-to-face customer 

interaction and direct customers to self-service resources 

through the Air Force Portal or the Contact Center as the 

preferred option to initiate inquiries and transactions. From 

the Comptroller Squadron through to the AFFSC, FM 

personnel will have access to uniform processes, consistent 

roles, and a coordinated suite of resources. 

Across FSD, effi ciencies are gained through centralization 

and process improvement, benefi ting the customer 

through quicker, more accurate and more consistent pay 

transactions. Customers receive the same answer whether 

they seek service online, at the AFFSC, or at their local 

Financial Services Offi ce. 

The fi rst phase of Web Self-Service (WSS), the Top 

180 Frequently Asked Questions (FAQs), was launched 

on the Air Force Portal in early FY 2009, and additional 

functionality and new customer resources will continue 

to emerge in FY 2010. WSS provides FAQs, a searchable 

index of questions, and other tools designed to resolve 

pay and travel questions. Looking ahead, the AFFSC 

is intended to provide full integration with Air Force 

Personnel Center and Air Reserve Personnel Center on a 

common technology platform, supporting full customer 

visibility between centers and a range of service options 

through a single point of entry.

 Users log on to the Air Force Portal by using their common access card and personal identifi cation number. 
14

Expeditionary Logistics for the 21st Century (eLog21)

eLog21 is an umbrella strategy that integrates and 

governs logistics transformation initiatives to ensure the 

warfi ghter receives the right support at the right place 

and the right time. This program promotes data sharing, 

collaboration, and better decision-making across the entire 

Air Force supply chain to support the modern-day conduct 

of operations. The Air Force is engaging in multiple 

contingencies simultaneously with a smaller force. eLog21 

provides a fl exible, nimble, scalable logistics process that 

leverages combat support assets and capabilities across the 

breadth of the Air Force. This initiative positively impacts 

the entire logistics enterprise, including the operational 

and training bases, Centralized Repair Facilities, depots, 

deployed operations, product centers, Air Logistics Centers, 

and Air Force industry trading partners. Individuals 

who support the warfi ghter by launching and recovering 

jets, maintaining and overhauling weapon systems or 

equipment, purchasing products and services, managing 

the supply chain, or managing weapon systems will benefi t 

from eLog21. The overall goals of this program are to 

increase equipment availability and reduce operations and 

support cost. eLog21 will provide the following end-state 

capabilities:

◆ Air Force-Wide Logistics Planning

◆ Optimized Resources

◆ Optimized Repair Planning

◆ Total Asset Visibility

◆ Logistics Netcentricity

◆ Data Accuracy

◆ Centralized Asset Management

◆ Predictive Maintenance

Air Force Financial Management 

Assurances

Air Force FM is based on people, processes, and systems. 

This section focuses on the Air Force’s system of internal 

control and emphasizes our compliance with federal 

laws such as the Federal Managers’ Financial Integrity 

B-52 Stratofortress mechanics inspect their aircraft during phase maintenance at Andersen AFB, Guam. The B-52s come here from a forward-deployed location and go into phase maintenance after 300 fl ying hours. The hangar 

can house any type of Air Force aircraft. (U.S. Air Force photo by MSgt Val Gempis)
15

2009

MANAGEMENT DISCUSSION AND ANALYSIS

Act (FMFIA) and the Federal Financial Management 

Improvement Act (FFMIA). The following examples 

illustrate some of the ways the Air Force FM community 

is proactively meeting future challenges and improving 

compliance and effi ciency.

Chief Financial Offi cer (CFO) Compliance

The passage of the CFO Act of 1990 required major federal 

agencies to prepare auditable fi nancial statements for the 

fi rst time. In 1994 the Government Management Reform 

Act (GMRA) extended the CFO Act to include 

agency-wide reports from all major executive branch 

agencies, their components, and for the government as 

a whole. The Government Performance and Results Act 

(GPRA) of 1993 required agencies to systematically 

report on plans and performance. The FFMIA of 1996, 

along with the Clinger-Cohen Act of 1996 (also known 

as the Information Technology Management Reform 

Act), required that agencies install integrated systems that 

comply with federal accounting standards and produce 

auditable fi nancial statements.

Compliance with these laws requires the integration 

of fi nancial and functional processes and systems. The 

annual audit will serve as a report card of how well 

agencies are doing with integrating their processes and 

systems. Auditable fi nancial statements must be prepared 

in accordance with Offi ce of Management and Budget 

Circular A-136, Financial Reporting Requirements. 

Additionally, agencies must follow generally accepted 

accounting principles (GAAP) promulgated by the Federal 

Accounting Standards Advisory Board (FASAB).

The Air Force Financial Improvement Plan is a roadmap to 

accomplish those tasks and actions necessary to obtain an 

unqualifi ed audit opinion on the Air Force General Fund 

and Working Capital Fund fi nancial statements. The plan 

is an Air Force-wide management plan meant to improve 

the quality of information that is needed to make sound 

business decisions. Quality information must be relevant 

and reliable. The overarching goal of the CFO Act is to 

provide leaders and managers, on a routine basis, quality 

information with which to make decisions. An unqualifi ed 

audit opinion attests to the reliability of the Air Force’s 

fi nancial information.

Internal Controls

The Air Force operates a robust Manager’s Internal Control 

Program and employs a comprehensive strategy for the 

continual evaluation of internal controls. This review 
16

system is integrated fully with institutional and program 

assessment techniques used to help ensure that the national 

defense mission and goals of the Department of the 

Air Force are achieved each year. The objectives of the 

system of internal control of the Department of the Air 

Force are to provide reasonable assurance that:

◆ Obligations and costs comply with applicable laws 

◆ Funds, property, and other assets are safeguarded 

against waste, loss, unauthorized use, and 

misappropriation 

◆ Revenues and expenditures applicable to Air Force 

operations are properly recorded and accounted 

for to permit the preparation of accounts and 

reliable fi nancial and statistical reports, and to 

maintain accountability over the assets, including 

nonappropriated fund activities 

◆ Programs, administrative and operating functions 

are effi ciently and effectively carried out in 

accordance with applicable laws and management 

policy 

◆ The internal control process emphasizes prevention 

of waste, fraud, and mismanagement along with 

timely correction of internal control weaknesses

Internal Control Program Accomplishments 

and Highlights

FMFIA implementation in the Air Force rests on a 

solid general control environment supported by positive 

endorsement from top management. FY 2009 was a year 

of strong internal control activity as our fi nancial managers 

continued to integrate their job oversight responsibilities 

with the internal control program’s evaluation procedures. 

Using pervasive technologies, MAJCOMs increased 

distribution of internal control information on their 

force-wide available Web sites.

Internal Controls Over Financial Reporting (ICOFR)

The Offi ce of the Under Secretary of Defense (Comptroller) 

directed that our review of ICOFR encompass DoD priority 

areas. The Air Force evaluated the effectiveness of internal 

controls of those priority areas and key business processes, 

which signifi cantly affect fi nancial reports. This involved 

documenting processes, developing swim-lane fl owcharts, 

performing risk analysis, and testing and analyzing existing 

internal controls. There were no new material weaknesses 

identifi ed during this year’s review effort. We continue 

to track and report on ten existing ICOFR material 

weaknesses that are included in the Secretary’s Annual 

Statement of Assurance. 

Continuous Improvement

This year the Air Force completed a validation of corrective 

actions in the Air Force Financial Improvement Plan (FIP). 

The FIP consolidates all the required actions, establishes 

action offi ces, determines the status, and identifi es 

resources required to produce accurate and timely fi nancial 

information. A by product of this plan is progress toward 

an unqualifi ed opinion goal. The FIP operates under a 

governance structure created to oversee the implementation 

of the plan.

Progress Towards Auditability

The Secretary of the Air Force established an Executive 

Steering Committee (ESC) composed of senior level 

Air Force leaders. This group’s charter states that it will 

meet at least quarterly to ensure the actions incorporated 

in the FIP are effectively implemented. In addition to 

overseeing the FIP, the ESC also provides oversight to 

the Accountability and Financial Management Integrated 

Project Team (A&FM IPT). This work group is responsible 

for resolving the issues and monitoring actions contained 

in the FIP. The integrated project team meets monthly and 

orchestrates the numerous systems and procedural changes 

needed to achieve the above stated goals. It is important to 

note that while the Air Force is currently unable to produce 

fi nancial statements that receive an unqualifi ed audit 

opinion, we are working aggressively toward achieving 

that goal.
17

2009

MANAGEMENT DISCUSSION AND ANALYSIS

The General Fund is the fund into which most 

receipts of the United States Government are 

deposited. Exceptions include receipts from 

specifi c sources required by law to be deposited into other 

designated funds and receipts from appropriations made by 

Congress to carry on the general and ordinary operations 

of the Government. The Notes to the Principal Statements 

provide more detail on the appropriations. The major 

appropriations in the Air Force General Fund and their 

uses are introduced below.

Appropriations

MILITARY PERSONNEL (MILPERS)

This appropriation provides funding for the care and 

feeding of our Airmen. It includes all direct military 

compensation for active duty, reserve, guard, and retired 

personnel including regular pay, allowances, and bonuses. 

Additionally, this appropriation funds all Permanent 

Change of Station (PCS) moves and supports a total force 

(active, reserve and guard) end strength of 507,431. 

OPERATIONS AND MAINTENANCE (O&M)

This appropriation funds key readiness programs critical to 

prepare forces for combat operations and other peacetime 

missions. These include day-to-day operating costs such 

as fl ying hours, depot maintenance, training, spare parts, 

and base operations. The FY 2009 appropriation supported 

84 installations, produced over 1,200 pilots and funded 

approximately 1.4 million fl ying hours while sustaining an 

aircraft fl eet of over 5,500 aircraft. 

PROCUREMENT

This appropriation provides for purchase of aircraft, 

missiles, vehicles, electronic and telecommunications 

equipment, satellite and launch equipment, base 

maintenance and support equipment, and investment-type 

spares. The FY 2009 program supported the purchase of 

up to 93 aircraft including 52 Unmanned Aerial Vehicles 

(UAVs) and 20 F-22 Raptors. 

RESEARCH, DEVELOPMENT, TEST AND 

EVALUATION

This appropriation provides funding for the research and 

development of next generation weapons and platforms 

and for the testing and evaluation of current prototypes 

and upgrades. The Air Force’s top fi ve acquisition 

priorities are the Combat Search and Rescue (CSAR) 

Helicopter; new space systems for early warning, targeting, 

communications, and navigation; the F-35A Joint Strike 

Fighter; the Refueling Tanker and the New Bomber. 

Air Force General Fund

Aircrews perform a prefl ight check on an MQ-9 Reaper before it takes off for a mission in Afghanistan. The 

Reaper is larger and more heavily-armed than the MQ-1 Predator and in addition to its traditional intelligence, 

surveillance and reconnaissance capabilities, is designed to attack time-sensitive targets with persistence and 

precision. (Courtesy photo)
18

MILITARY CONSTRUCTION (MILCON)

This appropriation includes any construction, 

development, conversion, or extension of any kind 

carried out with respect to a military installation. 

Typically this appropriation applies to any projects 

that exceed $1.5 million but can be applicable to 

projects exceeding a $750 thousand threshold. 

A sub-element of this appropriation provides 

funding for family housing construction programs. 

The FY 2009 appropriation supported 54 projects 

in total. 

BASE REALIGNMENT AND CLOSURE (BRAC)

The law authorizes the BRAC accounts to fund 

one-time, nonrecurring costs that are a direct 

result of BRAC-directed base closure or 

realignment actions. Some costs do not qualify 

for BRAC funding as costs resulting from closure 

or realignment. The FY 2009 BRAC program was 

approximately $1.2 billion.

ARRA

In FY 2009, the Air Force received $1.5 billion in ARRA 

funds to stimulate the economy.

Current and Future Financial Systems 

- Defense Enterprise Accounting and 

Management System (DEAMS) 

Our systems enable us to maintain stewardship over 

the resources entrusted to us. DEAMS is key to our 

current and future ability to manage the Air Force’s 

resources. DEAMS was launched in August 2003 as a 

joint initiative between the Air Force, U.S. Transportation 

Command (USTRANSCOM) and the Defense Finance 

and Accounting Service under what is now the Defense 

Department’s Business Transformation Agency. The 

DEAMS mission is to support the Nation’s warfi ghters 

with timely, accurate, and reliable fi nancial information, 

enabling more effi cient and effective decision making 

by DoD managers. DEAMS is reengineering fi nancial 

management activities with a unifi ed enterprise 

architecture, standardized business rules and processes, 

and the fi rst implementation of the new Standard Financial 

Information Structure.

The Air Force is implementing DEAMS through a 

three-increment development approach in fi ve spirals. 

Spiral 1 is a technology demonstration at Scott AFB, 

Illinois, involving USTRANSCOM; Headquarters, 

Air Mobility Command; and Air Force Active Duty, 

Air National Guard and Air Force Reserve tenant 

organizations on or associated with that base. 

Spiral 1 successfully demonstrated an initial commitment 

accounting capability in 2007 while Spiral 2 will deploy 

in late 2009, taking the full Oracle I-Procurement 

functionality to those same units.

Increment 2 will expand DEAMS capability to the 

remaining AMC bases, Surface Deployment and 

Distribution Command (SDDC) and Military Sealift 

Command (MSC) in Spiral 3 and the remaining Air Force 

Major Commands in Spiral 4, except for Air Force Materiel 

Command and Air Force Space Command. Increment 3 

will complete DEAMS deployment to those MAJCOMs 

and throughout the Air Force in 2015. 

When fully fi elded, DEAMS will transform fi nancial 

management and set a new standard for effective and 

effi cient stewardship of our Nation’s Defense resources.
19

2009

MANAGEMENT DISCUSSION AND ANALYSIS

The Air Force Working Capital Fund (AFWCF) 

conducts business in two primary areas: the Consolidated 

Sustainment Activity Group (CSAG) and the Supply 

Management Activity Group-Retail (SMAG-R).

The Consolidated Sustainment Activity Group (CSAG) 

is a new AFWCF business activity. The CSAG 

consolidates the Depot Maintenance Activity Group 

(DMAG) and the Material Support Division (MSD) 

from the Supply Management Activity Group into a 

single business enterprise. This consolidation eliminates 

internal transactions between MSD and DMAG, resulting 

in a more effi cient business enterprise and customer 

support improvements. The mission of CSAG is supply 

management of reparable and consumable items as well as 

maintenance services. Under CSAG, business operations 

formerly known as DMAG are now characterized as the 

Maintenance Division and business operations formerly 

known as MSD are now designated the Supply Division.

Air Force Materiel Command (AFMC) manages more 

than 90 percent of the AFWCF business activity for 

Supply Management and Depot Maintenance activities. 

These functions provide goods and services to the 

Air Force and DoD customers, as well as customers 

outside the DoD (e.g., local and foreign governments). 

Supply Management provides expedited repair, 

replenishment and inventory control for spare parts and 

associated logistics support services to fulfi ll Air Force 

needs during war and peacetime. Depot Maintenance 

provides economical and responsive repair, overhaul and 

modifi cation of aircraft, missiles, engines, other major end 

items and associated components.

In FY 1998 the Air Force was appointed the Executive 

Agent for Transportation Working Capital Fund (TWCF) 

cash. Even though AFWCF manages TWCF’s cash, daily 

operations are managed by the United States Transportation 

Command. As a result, TWCF’s fi nancial statements are 

reported with other Defense Agencies.

The AFWCF allows the Air Force to accomplish the 

following: ensure readiness through reduced support costs, 

stabilized rates and responsive customer service; fl exibility 

to respond to customer support needs in real-world 

situations; focus management attention on net operating 

results, including cost and performance; identify the total 

cost of providing support products and services; and, 

establish strong customer/provider relationships.

Air Force Working Capital Fund

Air Force Materiel Command’s headquarters at Wright-Patterson AFB, OH, manages more than 90 percent of the AFWCF business activity for Supply Management and Depot Maintenance activities.
20

CSAG–Maintenance Division

The Maintenance Division repairs systems and spare parts 

to ensure readiness in peacetime and to provide sustainment 

for combat forces in wartime. This division operates on 

the funds received from its customers through sales of its 

services. In peacetime, the Air Force enhances readiness 

by effi ciently and economically repairing, overhauling 

and modifying aircraft, engines, missiles, components and 

software to meet customer demands. The Maintenance 

Division’s depots have unique skills and equipment 

required to support and overhaul both new, complex 

components as well as aging weapon systems. During 

wartime or contingencies, the depots can surge repair 

operations and realign capacity to support the war fi ghter’s 

immediate needs.

A number of initiatives have begun to ensure the depots are 

poised to fulfi ll war fi ghter mission needs with the 

best product at the best price. These initiatives include 

formal training programs to develop multi-skilled 

“maintenance-ready” technicians and managers, 

benchmarking programs to identify industry leaders in 

various production processes, and the institutionalization 

of lean principles within the workforce. By embedding 

these initiatives into the maintenance culture, reductions are 

being made in shop fl ow days and cost. For example, over 

the last fi ve years Oklahoma Air Logistics Center reduced 

Programmed Depot Maintenance fl ow days for the B-1 by 

30 days (18%). Ogden Air Logistics Center has reduced 

the A-10 wing, F-16 wing, and F-16 stabilizer repair 

fl ow days by 39%, while on-time delivery has improved 

to 100% and 98% for A-10 wings and F-16 wings, 

respectively. Warner Robins Air Logistics Center has 

reduced C-5 aircraft overhaul fl ow days by 103 days (31%), 

freeing up fl oor space for additional workload.

CSAG Maintenance Division is managed by AFMC and 

employs over 22,000 personnel supporting four industrial 

locations. 

CSAG Maintenance sites include:

Ogden Air Logistics Center (OO-ALC), Ogden, UT

Oklahoma City Air Logistics Center (OC-ALC), 

Oklahoma City, OK

Warner Robins Air Logistics Center (WR-ALC), 

Warner Robins, GA

Aerospace Maintenance and Regeneration Group 

(AMARG), Tucson, AZ

CSAG Maintenance Customer Support Performance 

Metrics

Due Date Performance and Quality Defect Rate metrics 

allow managers to assess production schedule and work 

quality. The Due Date Performance (ability of the depot 

to produce aircraft on the promised date) is 85% as of 

March 2009 which is lower than AFMC standard of 95%. 

F-15 and C-130 late deliveries are the driving platforms 

causing the lower than standard delivery performance. 

C-130 late deliveries are mainly driven by over and above 

structural and corrosion issues. The root cause for the F-15s 

stems from the Program Depot Maintenance (PDM) refl ow 

after the grounding in November 2007 and severe corrosion 

issues in the fuel tank areas. The Quality Defect Rate 

(measuring the number of production defects) is .08 defects 

per aircraft as of March 2009 and is lower than the AFMC 

standard of .22 (lower is better). 

CSAG Supply Division

The Supply Division is primarily responsible for 

Air Force-managed, depot-level reparable spares and 

consumable spares unique to the Air Force. Spares are an 

individual part, subassembly, or assembly supplied for 

the maintenance or repair of systems or equipment. In 

addition to management of these inventories, the Supply 

Division provides a wide range of logistics support services 

including requirements forecasting, item introduction, 

cataloging, provisioning, procurement, repair, technical 

support, data management, item disposal, distribution 

management and transportation.

The Supply Division is committed to implementing 

improvements that meet customer demands and lower cost. 

The Air Force is examining new ways of doing business 

and leveraging new technologies to support war fi ghter 

needs. The division is committed to reducing the impact 

of parts obsolescence and material shortage problems 

associated with supporting aircraft fl eets with an average 

age of 24 years. The number of parts that have no qualifi ed 

manufacturing or repair source is expected to increase over 
21

2009

MANAGEMENT DISCUSSION AND ANALYSIS

the next ten years. In addition there are increasing numbers 

of manufacturers not willing to produce and/or repair aging 

spare parts. The Supply Division remains committed to 

re-engineer these parts for which no supplier exists and 

take proactive action to identify future obsolescence issues 

in advance.

Supporting aging weapon systems requires proactive 

management of spare part inventory levels. As weapon 

systems exceed their life expectancy, additional 

maintenance drives increased demands on spare parts 

inventory. An initiative is underway to reduce excess 

on-order and on-hand inventory. Inventory levels were 

reduced by 1.2 million cubic feet in FY 2008. Quarterly 

reviews have been established and metrics are reported to 

the Deputy Chief of Staff for Logistics, Installations and 

Mission Support.

Supply Customer Support Performance Metrics

Mission Incapable (MICAP) and Customer Wait Time 

(CWT) metrics allow managers to assess quality of spares 

support provided and plan corrective action when needed. 

MICAP measures the number of hours a weapon system 

is not available due to non-availability of a spare part 

provided by CSAG Supply or GSD. CWT measures the 

average time elapsed between the customer demand and the 

delivery of a spare part to the customer, measured in days. 

MICAP hours for CSAG Supply managed items improved 

signifi cantly since 1999. CSAG Supply items accrued an 

average of fi ve million MICAP hours during calendar year 

2000. As of March 2009, CSAG Supply MICAP hours are 

1.2 million. CWT is a newer metric but has also shown a 

signifi cant improvement. The monthly average CWT for 

Supply items during 2004 was 7.4 days and has decreased 

to 6.4 days as of March 2009.

An aircraft mechanic removes support brackets from the wings of a preserved KC-135E Stratotanker at the AMARG storage site at Davis-Monthan AFB, AZ. The brackets will be shipped to Tinker AFB, OK, where they will 

be used to bring a broken KC-135R back to fl ying status. The center provides customer services including aircraft regeneration restoring aircraft to fl ying status, limited depot-level maintenance, parts reclamation, historic 

storage and disposal functions. (U.S. Air Force photo by Bennie J. Davis III)
22

Supply Management 

Activity Group–Retail

The Air Force Supply Management Activity Group–Retail 

(SMAG-R) is comprised of three divisions: General 

Support, Medical-Dental, and the United States Air Force 

Academy.

The Supply Management Activity Group-Retail (SMAG-R) 

manages over 1.4 million inventory items including 

weapon system spare parts, medical-dental supplies and 

equipment, and other supply items used in non-weapon 

system applications. The Air Force SMAG-R is a critical 

component in the support of combat readiness by procuring 

materiel and selling it to authorized retail customers. 

Within SMAG-R, the Medical Dental Division inventory 

includes a War Reserve Materiel (WRM) Stockpile. WRM 

provides initial war fi ghting capability until re-supply 

lines can sustain wartime demands for medical and dental 

supplies and equipment.

The Air Force SMAG-R provides a wide range of logistics 

support services including requirements forecasting, item 

introduction, cataloging, provisioning, procurement, 

repair, technical support, data management, item disposal, 

distribution management and transportation. Inventories 

are an integral part of SMAG-R and are maintained by each 

of the divisions in support of customer requirements. The 

SMAG-R objective is to replenish inventories and provide 

supplies to customers in a timely manner within customer 

funding constraints, while maintaining fund solvency.

The General Support Division (GSD) manages nearly 

1.4 million different items, which are procured from 

Defense Logistics Agency (DLA) and General Services 

Administration (GSA). GSD customers use the majority 

of these items to support fi eld and depot maintenance of 

aircraft, ground and airborne communication and electronic 

systems, as well as other sophisticated systems and 

equipment. The General Support Division also manages 

many items related to installation, maintenance, and 

administrative functions. GSD manages stock levels and 

procurement for critical Overseas Contingency Operation 

(OCO) requirements.

The Medical-Dental Division (MDD) manages over 

8,000 different items for 84 Medical Treatment Facilities 

(MTF) worldwide. All supply and equipment requirements 

generated by Air Force treatment facilities are procured 

through this division. The Medical-Dental Division also 

maintains the WRM requirement.

The Air Force Academy Division fi nances the purchase 

of uniforms and uniform accessories for sale to cadets in 

accordance with regulations of the Air Force Academy 

and related statutes. The customer base consists of 

approximately 4,500 cadets who receive distinctive 

uniforms procured from various manufacturing contractors.

More than 1,300 basic cadets salute during their fi rst reveille formation June 26, 2009 at the 

U.S. Air Force Academy. (U.S. Air Force Photo by Mike Kaplan)
23

2009

MANAGEMENT DISCUSSION AND ANALYSIS

Supply Management Activity Group–Retail Metrics

Stockage Effectiveness measures how often the supply 

system is available for immediate sale of those items 

it intends to maintain at base and depot level supply 

locations.

Air Force Working Capital Fund Customers

AFWCF provides support to a variety of customers: 

Air Force Major Commands (including the Air National 

Guard & Air Force Reserves), the Army, the Navy, other 

WCF’s, other government agencies and foreign countries.

Air Force Working Capital Fund Financial 

Performance Measures

AFWCF tracks several metrics to assess fi nancial 

performance. These measures are designed to achieve 

accountability at the appropriate level and also measure 

compliance with AFWCF budget objectives.

AFWCF assesses fi nancial performance using the Net 

Operating Result (NOR) of an activity. The NOR is the 

difference between revenue and expenses, i.e., a 

bottom-line profi t and loss indicator. Revenues are amounts 

earned as a result of normal operations and usually result 

from sale of, or reimbursements for, goods and services 

provided to DoD activities, other federal government 

agencies and the public. Expenses are the resources 

used during an accounting period. Expenses occur from 

rendering services; acquiring, producing or delivering 

goods; or carrying out other mission-related activities. 

The NOR objective of an activity group is to break even 

over a two year period. Actual NOR are compared to the 

budget targets. Budget targets are identifi ed in fi nancial 

performance plans and are used to measure results during 

execution review. Prices are established to achieve this 

objective by recovering or returning prior year losses or 

gains. DoD cash management policy is to maintain the 

minimum cash balance necessary to meet both operational 

requirements and disbursements in support of the capital 

program. Cash generated from operations is the primary 

means of maintaining adequate cash levels. Effective cash 

management is directly dependent on the availability of 

accurate and timely data on cash levels and operational 

results. Cash levels should be maintained to cover 7 to 10 

days of operational costs as well as cash adequate to meet 6 

months of capital disbursements.

Air Force Logistics Initiatives 

eLog21 The Air Force has launched a campaign called 

Expeditionary Logistics for the 21st Century, or “eLog21.” 

This initiative is designed to bring logistics operations into 

the 21st Century by modernizing processes and systems 

with new expeditionary, network-centric, enterprise wide 

processes and systems. As processes continue to improve, 

customers will receive the benefi t of receiving repaired 

weapon systems and spare parts at the right place, right 

time and lowest cost. The Air Force is benchmarking 

against industry to capitalize on best practices used in the 

areas of repair processes, inventory management and cost 

control. Other acquisition reform efforts are underway to 

streamline contracting, strengthen vendor relationships 

and expand the use of electronic interchanges for material 

management.

Two major initiatives included under the umbrella of 

e-Log21 are the Repair Network Integration (RNI), 

formerly Repair Enterprise 21 (RE21), and Air Force 

Global Logistics Support Center (AFGLSC) initiatives.

SMAG-R Stockage Effectiveness

Division FY 2008 FY 2009 FY 2010

General-Support 85% 84% 84%

Medical-Dental 96% 96% 96%

Academy 95% 95% 95%
The vision of RNI is to establish enterprise management of 

the Air Force repair network by utilizing existing depots 

and establishing Centralized Repair Facilities. In addition, 

the repair network will support mission generation and 

sustain weapon systems and equipment.

The AFGLSC is an enterprise network of supply chain 

experts. The AFGLSC merged wholesale (i.e. depot) and 

retail (i.e. base level) supply chain entities into a single 

organization. It now administers the majority of AFWCF 

supply chain processes, technologies, and resources to 

deliver end-to-end warfi ghter support. In addition, the 

AFGLSC manages materiel and its distribution, and 

oversees execution of the supply plan to improve the 

delivery of serviceable spare parts to the warfi ghter. 

The AFGLSC is designed to establish a supply chain 

management capability that provides enterprise planning, 

global command and control and a single focal point in 

support of logistics requirements.

Depot Maintenance Activity Group (DMAG) 

The transition of contract depot maintenance from the 

working capital fund was completed in FY 2008. The 

activity ceased accepting new orders at the end of FY 2008 

and is expected to close out all accounting records by the 

end of FY 2010. This change brings the user and provider 

of contract depot maintenance services closer together and 

removes the WCF from its current role as the “middleman.” 

This action will allow depot managers to dedicate time and 

efforts to organic production.

Expeditionary Combat Support System (ECSS) enables 

the transformation of the AFWCF by replacing the 

majority of legacy systems with a single solution set of 

business processes, software applications, and data. ECSS 

will provide timely, consistent, and accurate information 

to enhance operations. The result will be standardized 

business processes and tools across the entire enterprise, 

regardless of program or site. ECSS takes advantage of 

commercial best practices in driving end-to-end process 

designs and full integration of logistics activities.

The Air Force has formalized the use of functional and 

fi nancial performance plans to assess business operations 

at both Air Force Materiel Command and Air Logistics 

Center levels since FY 1997. Quarterly reviews with the 

Deputy Chief of Staff for Logistics, Installations and 

Mission Support continue to focus management attention 

on cost performance as well as the ability to deliver parts 

and maintenance on time. The Air Force continues to make 

improvements in our fi nancial and reporting structures 

through close cooperation with the Offi ce of the Secretary 

of Defense and the Defense Finance and Accounting 

Service. Financial reporting improvements allow us to 

work closely with customers by having consistent and 

timely data, resulting in the ability to identify discrepancies 

between the accounting system and the logistics feeder 

systems from which data is supplied.

24

Air Force Secretary Michael B. Donley speaks during Air Force Week at the Salt Lake City Capitol building. 

(U.S. Air Force photo by SSgt Desiree N. Palacios)
 “A balanced approach means 

fi nding the right balance between 

prevailing in today’s operations 

with today’s capabilities, while 

simultaneously investing in new 

capabilities and force structure 

to meet tomorrow’s threats.” 

– Michael B. Donley

Secretary of the Air Force 

Financing the Fight 

As the brave Soldiers, Sailors, Airmen and Marines of our 

great nation continue to deploy and operate in a state of 

persistent confl ict, supporting the Overseas Contingency 

Operations, joint operations continue to have critical 

strategic and tactical importance, yielding increased 

capabilities for the war fi ghter. Our Air Force FM 

community directly supports today’s commitments through 

sound fi nancial stewardship and acquisition excellence. 

Our fi nancial management professionals are actively 

positioning the Air Force for success against tomorrow’s 

challenges by refi ning internal business processes and 

systems in order to increase effi ciencies that improve war 

fi ghter effectiveness. 

America’s Air Force draws its strength from its 

outstanding Airmen. Our Airmen’s success is inextricably 

linked to the efforts of our FM community, whose sense of 

purpose and duty is founded in “fi nancing the fi ght.”

25

(U.S. Air Force photo by TSgt Erik Gudmundson)
(U.S. Air Force photo by SSgt Raymond Hoy) 
2009

27

Fiscal Year 2009

Annual Financial Statements
28

Limitations to the Financial Statements

Limitations to the Financial Statements

The principal fi nancial statements have been prepared to report the fi nancial position and results 

of operations of 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 U.S. generally accepted accounting principles promulgated by the Federal 

Accounting Standards Advisory Board, and the formats prescribed by Offi ce of Management 

and Budget, the statements are in addition to the fi nancial reports used to monitor and control 

budgetary resources which are prepared from the same books and records. The statements 

should be read with the realization that they are for a component of the U.S. Government, 

a sovereign entity.
29

2009

The FY 2009 Department of the Air Force General Fund Principal Statements and related 

notes are presented in the format prescribed by the Department of Defense Financial 

Management Regulation 7000.14-R, Volume 6B. The statements and related notes 

summarize fi nancial information for individual activity groups and activities within the 

General Fund for the fi scal year ending September 30, 2009, and are presented on a 

comparative basis with information previously reported for the fi scal year ending 

September 30, 2008.

The following statements comprise the Department of the Air Force General Fund Principal 

Statements:

Consolidated Balance Sheet 

The Consolidated Balance Sheet presents as of September 30, 2009 and 2008 those 

resources owned or managed by the Air Force which are available to provide future 

economic benefi ts (assets); amounts owed by the Air Force that will require payments 

from those resources or future resources (liabilities); and residual amounts retained by 

the Air Force, comprising the difference (net position).

Consolidated Statement of Net Cost

The Consolidated Statement of Net Cost presents the net cost of the Air Force’s operations 

for the years ended September 30, 2009 and 2008. The Air Force’s net cost of operations 

includes the gross costs incurred by the Air Force less any exchange revenue earned from 

Air Force activities.

Consolidated Statement of Changes in Net Position

The Consolidated Statement of Changes in Net Position presents the change in the 

Air Force’s net position resulting from the net cost of Air Force’s operations, budgetary 

fi nancing sources other than exchange revenues, and other fi nancing sources for the 

years ended September 30, 2009 and 2008.

Combined Statement of Budgetary Resources

The Combined Statement of Budgetary Resources presents the budgetary resources 

available to the Air Force during FY 2009 and 2008, the status of these resources at 

September 30, 2009 and 2008, and the outlay of budgetary resources for the years ended 

September 30, 2009 and 2008.

The Principal Statements and related notes have been prepared to report fi nancial position 

pursuant to the requirements of the Chief Financial Offi cers Act of 1990, the Government 

Management Reform Act of 1994, and the Offi ce of Management and Budget’s Circular 

A-136, “Financial Reporting Requirements.”

General Fund 

Principal Statements

Fiscal Year 2009
30 The accompanying notes are an integral part of these fi nancial statements.

General Fund

Principal Statements

CONSOLIDATED BALANCE SHEET

($ in Thousands)

As of September 30, 2009 and 2008

 ASSETS (Note 2)

 Intragovernmental:

 Fund Balance with Treasury (Note 3)

 Investments (Note 4)

 Accounts Receivable (Note 5)

 Other Assets (Note 6)

 Total Intragovernmental Assets

 Cash and Other Monetary Assets (Note 7)

 Accounts Receivable,Net (Note 5)

 Inventory and Related Property,Net (Note 9)

 General Property, Plant and Equipment,Net (Note 10)

 Other Assets (Note 6)

 TOTAL ASSETS

 STEWARDSHIP PROPERTY, PLANT & EQUIPMENT (Note 10)

 LIABILITIES (Note 11)

 Intragovernmental:

 Accounts Payable (Note 12)

 Other Liabilities (Note 15 & 16)

 Total Intragovernmental Liabilities

 Accounts Payable (Note 12)

 Military Retirement and Other Federal

 Employment Benefits (Note 17)

 Environmental and Disposal Liabilities (Note 14)

 Other Liabilities (Note 15 and Note 16)

 TOTAL LIABILITIES

 COMMITMENTS AND CONTINGENCIES (NOTE 16)

 NET POSITION

 Unexpended Appropriations - Other Funds

 Cumulative Results of Operations - Earmarked Funds

 Cumulative Results of Operations - Other Funds

 TOTAL NET POSITION

 TOTAL LIABILITIES AND NET POSITION

2009 Consolidated 2008 Consolidated

 103,310,367 92,909,909 

 1,079 874 

 298,953 271,020 

 212,245 265,591 

 103,822,644 93,447,394 

 98,939 111,976 

 583,340 502,182 

 47,588,282 46,906,666 

 149,759,237 140,230,716 

 11,716,176 11,030,527 

 313,568,618 292,229,461 

 2,583,818 2,002,120 

 2,016,078 1,952,785 

 4,599,896 3,954,905 

 3,278,316 3,810,935 

 1,078,566 1,163,414 

 8,817,194 8,266,375 

 6,201,694 6,379,597 

 23,975,666 23,575,226 

 105,252,117 92,171,366 

 10,432 5,355 

 184,330,403 176,477,514 

 289,592,952 268,654,235 

 313,568,618 292,229,461 

$ $

$ $

$ $

$ $

$ $

$ $

$ $

$ $

$ $

$ $

Restated
The accompanying notes are an integral part of these fi nancial statements. 31

2009

General Fund

Principal Statements

CONSOLIDATED STATEMENT OF NET COST

($ in Thousands)

For the periods ended September 30, 2009 and 2008

 Program Costs

 Gross Costs

 (Less: Earned Revenue)

 Net Program Costs

 Net Cost of Operations

2009 Consolidated 2008 Consolidated

 143,926,714 148,135,576 

(6,141,434) (5,875,708)

 137,785,280 142,259,868 

 137,785,280 142,259,868 

$ $

$ $

$ $

Restated
32 The accompanying notes are an integral part of these fi nancial statements.

General Fund

Principal Statements

CONSOLIDATED STATEMENT OF CHANGES IN NET POSITION 

($ in Thousands) 

For the periods ended September 30, 2009 and 2008 

2009 Eliminations

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

$

$

$

$

$

$

$

$

$

CUMULATIVE RESULTS OF OPERATIONS 

Beginning Balances 

Prior Period Adjustments: 

 Corrections of errors (+/-) 

Beginning balances, as adjusted 

Budgetary Financing Sources: 

 Appropriations used 

 Nonexchange revenue 

 Donations and forfeitures of cash and cash equivalents 

 Transfers-in/out without reimbursement 

 Other budgetary financing sources 

Other Financing Sources: 

 Transfers-in/out without reimbursement (+/-) 

 Imputed financing from costs absorbed by others 

 Other (+/-) 

Total Financing Sources 

Net Cost of Operations (+/-) 

Net Change 

Cumulative Results of Operations 

UNEXPENDED APPROPRIATIONS 

Beginning Balances 

Beginning balances, as adjusted 

Budgetary Financing Sources: 

 Appropriations received 

 Appropriations transferred-in/out 

 Other adjustments (rescissions, etc) 

 Appropriations used 

Total Budgetary Financing Sources 

Unexpended Appropriations 

Net Position 

2009 Earmarked Funds

 5,355 

 0 

 5,355 

 0 

 846 

 7,322 

 0 

 0 

 0 

 0 

 0 

 8,168 

 3,091 

 5,077 

 10,432 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 10,432 

$

$

$

$

$

$

$

$

2009 All Other Funds

 185,017,169 

(8,539,654)

 176,477,515 

 147,746,152 

 0 

 0 

 130,180 

 0 

(124,914)

 725,513 

(2,841,855)

 145,635,076 

 137,782,189 

 7,852,887 

 184,330,402 

 92,171,366 

 92,171,366 

 163,967,087 

 693,628 

(3,833,812)

(147,746,152)

 13,080,751 

 105,252,117 

 289,582,519 

$ 

$ 

$ 

$ 

$ 

$ 

$ 

$ 
The accompanying notes are an integral part of these fi nancial statements. 33

2009

General Fund

Principal Statements

 

2008 Earmarked Funds

 4,546 

 0 

 4,546 

 0 

 1,088 

 2,544 

 0 

 0 

 0 

 0 

 0 

 3,632 

 2,823 

 809 

 5,355 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 5,355 

$

$

$

$

$

$

$

$

$

2008 Eliminations

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

$

$

$

$

$

$

$

$

$

2009 Consolidated

 185,022,524 

(8,539,654)

 176,482,870 

 147,746,152 

 846 

 7,322 

 130,180 

 0 

(124,914)

 725,513 

(2,841,855)

 145,643,244 

 137,785,280 

 7,857,964 

 184,340,834 

 92,171,366 

 92,171,366 

 163,967,087 

 693,628 

(3,833,812)

(147,746,152)

 13,080,751 

 105,252,117 

 289,592,951 

$ 

$ 

$ 

$ 

$ 

$ 

$ 

$ 

 

2008 All Other Funds

 180,315,323 

(8,493,837)

 171,821,486 

 144,550,203 

 0 

 0 

 88,000 

(157)

 322,962 

 628,882 

 1,323,183 

 146,913,073 

 142,257,045 

 4,656,028 

 176,477,514 

 80,465,487 

 80,465,487 

 156,788,176 

 2,662,362 

(3,194,456)

(144,550,203)

 11,705,879 

 92,171,366 

 268,648,880 

$ 

$ 

$ 

$ 

$ 

$ 

$ 

$ 

$ 

2008 Consolidated

 180,319,869 

(8,493,837)

 171,826,032 

 144,550,203 

 1,088 

 2,544 

 88,000 

(157)

 322,962 

 628,882 

 1,323,183 

 146,916,705 

 142,259,868 

 4,656,837 

 176,482,869 

 80,465,487 

 80,465,487 

 156,788,176 

 2,662,362 

(3,194,456)

(144,550,203)

 11,705,879 

 92,171,366 

 268,654,235 

$ 

$ 

$ 

$ 

$ 

$ 

$ 

$ 

Restated Restated 
34 The accompanying notes are an integral part of these fi nancial statements.

COMBINED STATEMENT OF BUDGETARY RESOURCES

($ in Thousands)

For the periods ended September 30, 2009 and 2008

BUDGETARY FINANCING ACCOUNTS

BUDGETARY RESOURCES

Unobligated balance, brought forward, October 1

Recoveries of prior year unpaid obligations

Budget authority

 Appropriation

 Spending authority from offsetting collections

 Earned

 Collected

 Change in receivables from Federal sources

 Change in unfilled customer orders

 Advance received

 Without advance from Federal sources

 Subtotal

Nonexpenditure transfers, net, anticipated and actual

Permanen ly not available

Total Budgetary Resources

Status of Budgetary Resources:

Obligations incurred:

 Direct

 Reimbursable

 Subtotal

Unobligated balance:

 Apportioned

 Exempt from apportionment

 Subtotal

Unobligated balance not available

Total status of budgetary resources

Change in Obligated Balance:

Obligated balance, net

 Unpaid obligations, brought forward, October 1

 Less: Uncollected customer payments

 from Federal sources, brought forward, October 1

 Total unpaid obligated balance

Obligations incurred net (+/-)

Less: Gross outlays

Less: Recoveries of prior year unpaid obliga ions, actual

Change in uncollected customer

 payments from Federal sources (+/-)

Obligated balance, net, end of period

 Unpaid obligations

 Less: Uncollected customer payments

 from Federal sources (-)

 Total, unpaid obligated balance, net, end of period

Net Outlays

Net Outlays:

 Gross outlays

 Less: Offsetting collections

 Less: Distributed Offsetting receipts

 Net Outlays

2009 Combined 2008 Combined

 26,676,890 21,175,345 

 4,093,396 4,602,017 

 163,975,253 156,791,805 

 9,302,479 10,464,416 

 324,746 (354,080)

 147,616 (199,948)

 80,913 38,934 

 173,831,007 166,741,127 

 823,808 2,750,362 

(3,833,813) (3,194,456)

 201,591,288 192,074,395 

$ $

$ $

 162,319,819 155,042,972 

 10,060,121 10,354,532 

 172,379,940 165,397,504 

 26,091,928 24,139,914 

 4,480 3,820 

 26,096,408 24,143,734 

 3,114,940 2,533,157 

 201,591,288 192,074,395 

 67,813,258 60,933,360 

(2,051,639) (2,366,785)

 65,761,619 58,566,575 

 172,379,940 165,397,504 

(160,002,387) (153,915,590)

(4,093,396) (4,602,017)

(405,660) 315,146 

 76,097,415 67,813,257 

(2,457,299) (2,051,639)

 73,640,116 65,761,618 

 160,002,387 153,915,590 

(9,450,094) (10,264,468)

(104,099) (201,497)

 150,448,194 143,449,625 

$ $

$ $

$ $

$ $

General Fund

Principal Statements
35

Notes to the fi nancial statements communicate information essential for fair 

presentation of the fi nancial statements that is not displayed on the face of the 

fi nancial statements.

General Fund 

Fiscal Year 2009

Notes to the Principal Statements
36

General Fund

Notes to the Principal Statements

Note 1. Significant Accounting Policies 

1.A. Basis of Presentation

These financial statements have been prepared to report the financial position and results 

of operations of the Air Force, 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 Air Force in accordance with, and to the extent possible, U.S. generally accepted 

accounting principles (USGAAP) promulgated by the Federal Accounting Standards 

Advisory Board (FASAB); the Office of Management and Budget (OMB) Circular 

A-136, Financial Reporting Requirements; and the Department of Defense (DoD), 

Financial Management Regulation (FMR). The accompanying financial statements 

account for all resources for which the Air Force is responsible unless otherwise noted. 

Information relative to classified assets, programs, and operations is excluded from the 

statements or otherwise aggregated and reported in such a manner that it is not 

discernible. 

The Air Force is unable to fully implement all elements of USGAAP and the 

OMB Circular A-136, due to limitations of financial and nonfinancial management 

processes and systems that support the financial statements. The Air Force derives 

reported values and information for major asset and liability categories largely from 

nonfinancial systems, such as inventory and logistic systems. These systems were 

designed to support reporting requirements for maintaining accountability over assets and 

reporting the status of federal appropriations rather than preparing financial statements in 

accordance with USGAAP. The Air Force continues to implement process and system 

improvements addressing these limitations. 

The DoD currently has 13 auditor identified material weaknesses. Of these the Air Force 

has the following: (1) Financial Management Systems; (2) Fund Balance with Treasury; 

(3) Accounts Receivable; (4) Operating Materiel and Supplies; (5) General Property, 

Plant, and Equipment; (6) Government-Furnished Materiel and Contractor-Acquired 

Materiel; (7) Accounts Payable; (8) Environmental Liabilities; (9) Statement of Net Cost; 

(10) Intragovernmental Eliminations; (11) Other Accounting Entries; and 

(12) Reconciliation of Net Cost of Operations to Budget. 

1.B. Mission of the Reporting Entity

The United States Air Force was created on September 18, 1947, by the National Security 

Act of 1947 and operates under the direction, authority, and control of the Secretary of 

the Air Force. The Air Force’s overall mission is to deliver sovereign options for the 

Defense of the United States of America and its global interests to fly, fight, and win in 

air, space, and cyberspace. The Air Force carries out its mission by adhering to a 

strategic framework of Core Values consisting of Integrity First, Service Before Self, and 

Excellence in All That We Do. In addition, the Air Force is committed to provide Global 
2009

37

General Fund

Notes to the Principal Statements

Vigilance, Global Reach, and Global Power, while defending and protecting the 

United States. 

1.C. Appropriations and Funds

The Air Force receives appropriations and funds as general, working capital (revolving), 

trust, special, and deposit funds. The Air Force uses these appropriations and funds to 

execute its missions and subsequently report on resource usage. 

x General funds are used for financial transactions funded by congressional 

appropriations, including personnel, operations and maintenance, research and 

development, procurement, and military construction. 

x Trust funds contain receipts and expenditures of funds held in trust by the 

government for use in carrying out specific purposes or programs in accordance 

with the terms of the donor, trust agreement, or statute. Special fund accounts are 

used to record government receipts reserved for a specific purpose. Certain trust 

and special funds may be designated as earmarked funds. Earmarked funds are 

financed by specifically identified revenues, required by statute to be used for 

designated activities, benefits or purposes, and remain available over time. 

The Air Force is required to separately account for and report on the receipt, use and 

retention of revenues and other financing sources for earmarked funds. 

x Deposit funds are used to record amounts held temporarily until paid to the 

appropriate government or public entity. They are not Air Force funds, and as such, 

are not available for Air Force’s operations. The Air Force is acting as an agent or a 

custodian for funds awaiting distribution. 

The Air Force is a party to allocation transfers with other federal agencies as a receiving 

(child) entity. Allocation transfers are an entity’s legal delegation of authority to obligate 

budget authority and outlay funds to another entity. The Air Force is a party to allocation 

transfers as the child for the Department of Agriculture. Generally, all financial activity 

related to allocation transfers (e.g. budget authority, obligations, outlays) is reported in 

the financial statements of the parent entity. Exceptions to this general rule apply to 

specific funds for which OMB has directed that all activity be reported in the financial 

statements of the child entity. These exceptions include all U.S. Treasury-Managed Trust 

Funds, Executive Office of the President (EOP), and all other funds specifically 

designated by OMB. 

The Air Force receives allocation transfers for EOP (Foreign Military Sales – Military 

Assistance Program) meeting the OMB exception. Based on an agreement with OMB, 

funds Security Assistance programs are reported separately. 

The accounts used to prepare the financial statements are categorized as either entity or 

nonentity. The Air Force accounts consist of resources that are available for use in the 

operations of the entity. The Air Force is authorized to decide how to use resources in 

entity accounts or may be legally obligated to use these resources to meet entity 
38

General Fund

Notes to the Principal Statements

obligations. Nonentity accounts, on the other hand, consist of assets that are held by an 

entity but that are not available for use in the operations of the entity. The following is a 

list of the major Air Force account numbers and titles (all accounts are entity accounts 

unless otherwise noted): 

Air Force Account Number Title 

57 * 0704 Military Family Housing, Operations and Maintenance (O&M 

and Construction), Air Force 

57 * 0740 Military Family Housing (Construction), Air Force 

57 * 0743 Military Family Housing (Construction), Air Force, 

Recovery Act 

57 * 0745 Military Family Housing, Operations and Maintenance (O&M), 

Air Force 

57 * 0748 Military Family Housing, Operations and Maintenance (O&M), 

Air Force, Recovery Act 

57 * 0810 Environmental Restoration, Air Force 

57 * 1007 Medicare Eligible Retiree Health Fund Contributions, Air Force 

57 * 1008 Medicare Eligible Retiree Health Fund Contributions, Air Force 

Reserve 

57 * 1009 Medicare Eligible Retiree Health Fund Contributions, Air 

National Guard 

57 * 3010 Aircraft Procurement, Air Force 

57 * 3011 Procurement of Ammunition, Air Force 

57 * 3020 Missile Procurement, Air Force 

57 * 3080 Other Procurement, Air Force 

57 * 3300 Military Construction, Air Force 

57 * 3307 Military Construction, Air Force, Recovery Act 

57 * 3400 Operations and Maintenance (O&M), Air Force 

57 * 3404 Operations and Maintenance (O&M), Air Force, Recovery Act 

57 * 3500 Military Personnel, Air Force 

57 * 3600 Research, Development, Testing, and Evaluation (RDT&E), 

Air Force 

57 * 3605 Research, Development, Testing, and Evaluation (RDT&E), 

Air Force, Recovery Act 

57 * 3700 Personnel, Air Force Reserve 

57 * 3730 Military Construction, Air Force Reserve 

57 * 3740 Operations and Maintenance (O&M), Air Force Reserve 

57 * 3744 Operations and Maintenance (O&M), Air Force Reserve, 

Recovery Act 

57 * 3830 Military Construction, Air National Guard 

57 * 3834 Military Construction, Air National Guard, Recovery Act 

57 * 3840 Operations and Maintenance (O&M), Air National Guard 

57 * 3844 Operations and Maintenance (O&M), Air National Guard, 

Recovery Act 

57 * 3850 Personnel, Air National Guard 
2009

39

General Fund

Notes to the Principal Statements

57 X 5095 Wildlife Conservation, etc., Military Reservations, Air Force 

57 X 8418 Air Force Cadet Fund 

57 X 8928 Air Force General Gift Fund 

57 * 3XXX (Incl Nonentity) Budget Clearing Accounts 

57 * 6XXX (Nonentity) Deposit Fund Accounts 

57 **** (Nonentity) Receipt Accounts 

1.D. Basis of Accounting

The Air Force’s financial management systems are unable to meet all full accrual 

accounting requirements. Many of the Air Force’s financial and nonfinancial feeder 

systems and processes were designed and implemented prior to the issuance of 

USGAAP. These systems were not designed to collect and record financial information 

on the full accrual accounting basis as required by USGAAP. Most of the Air Force’s 

financial and nonfinancial legacy systems were designed to record information on a 

budgetary basis. 

The financial statements and supporting trial balances are compiled from the 

underlying financial data and trial balances. The underlying data is largely derived from 

budgetary transactions (obligations, disbursements, and collections), from nonfinancial 

feeder systems, and accruals made for major items such as payroll expenses, accounts 

payable, and environmental liabilities. Some of the lower level trial balances may reflect 

known abnormal balances resulting largely from business and system processes. At 

the consolidated level these abnormal balances may not be evident. Disclosures of 

abnormal balances are made in the applicable footnotes, but only to the extent that the 

abnormal balances are evident at the consolidated level. 

The DoD is determining the actions required to bring its financial and nonfinancial feeder 

systems and processes into compliance with USGAAP. One such action is the current 

revision of accounting systems to record transactions based on the U.S. Standard General 

Ledger (USSGL). Until all Air Force’s financial and nonfinancial feeder systems and 

processes are updated to collect and report financial information as required by 

USGAAP, Air Force’s financial data will be derived from budgetary transactions, data 

from nonfinancial feeder systems, and accruals. 

1.E. Revenues and Other Financing Sources

The Air Force receives congressional appropriations as financing sources for general 

funds that expire annually, on a multi-year basis, or do not expire. When authorized by 

legislation, these appropriations are supplemented by revenues generated by sales of 

goods or services. The Air Force recognizes revenue as a result of costs incurred for 

goods and services provided to other federal agencies and the public. Full cost pricing is 

Air Force’s standard policy for services provided as required by OMB Circular A-25, 

User Charges. The Air Force recognizes revenue when earned within the constraints of 

its current system capabilities. In some instances, revenue is recognized when bills are 

issued. 
40

General Fund

Notes to the Principal Statements

The Air Force does not include nonmonetary support provided by U.S. allies for common 

defense and mutual security in amounts reported in the Statement of Net Cost and the 

Note 21, “Reconciliation of Net Cost of Operations to Budget.” The U.S. has cost 

sharing agreements with countries having a mutual or reciprocal defense agreement, 

where U.S. troops are stationed, or where the U.S. Fleet is in a port. 

1.F. Recognition of Expenses

For financial reporting purposes, DoD policy requires the recognition of operating 

expenses in the period incurred. Current financial and nonfinancial feeder systems were 

not designed to collect and record financial information on the full accrual accounting 

basis. Estimates are made for major items such as payroll expenses, accounts payable, 

environmental liabilities, and unbilled revenue. Some accounts such as civilian pay, 

military pay and accounts payable are presented on the accrual basis of accounting on the 

financial statements, as required by USGAAP. 

In the case of Operating Materiel and Supplies (OM&S), operating expenses are 

generally recognized when the items are purchased. Efforts are underway to transition to 

the consumption method for recognizing OM&S expenses. Under the consumption 

method, OM&S would be reported as expenses when consumed. 

Due to system limitations, in some instances expenditures for capital and other long-term 

assets may be recognized as operating expenses. The Air Force continues to implement 

process and system improvements to address these limitations. 

1.G. Accounting for Intragovernmental Activities

Accounting standards require that an entity eliminate intraentity activity and balances 

from consolidated financial statements in order to prevent overstatement for business 

with itself. However, the Air Force cannot accurately identify intragovernmental 

transactions by customer because Air Force’s systems do not track buyer and seller data 

at the transaction level. Generally, seller entities within the DoD provide 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 are 

adjusted to agree with DoD seller-side balances and are then eliminated. The volume of 

intragovernmental transactions is so large that reconciliations cannot be accomplished 

effectively. The DoD is developing long-term system improvements to ensure accurate 

intragovernmental information, including developing sufficient up-front edits and 

controls. 

The U.S. Treasury’s “Federal Intragovernmental Transactions Accounting Policy Guide” 

and Treasury Financial Manual Part 2 – Chapter 4700, “Agency Reporting Requirements 

for the Financial Report of the United States Government” provide guidance for reporting 

and reconciling intragovernmental balances. While Air Force is unable to fully reconcile 

intragovernmental transactions with all federal agencies, Air Force is able to reconcile 

balances pertaining to investments in federal securities, Federal Employees’ Compensation 
2009

41

General Fund

Notes to the Principal Statements

Act transactions with the Department of Labor, and benefit program transactions with the 

Office of Personnel Management. 

The DoD’s proportionate share of public debt and related expenses of the Federal 

Government is not included. The Federal Government does not apportion debt and its 

related costs to federal agencies. The DoD’s financial statements do not report any public 

debt, interest, or source of public financing, whether from issuance of debt or tax revenues. 

Generally, financing for the construction of DoD facilities is obtained through 

appropriations. To the extent this financing ultimately may have been obtained through 

the issuance of public debt, interest costs have not been capitalized since the 

U.S. Treasury does not allocate such costs to DoD. 

1.H. Transactions with Foreign Governments and International Organizations

Each year, Air Force sells defense articles and services to foreign governments and 

international organizations under the provisions of the Arms Export Control Act of 1976. 

Under the provisions of the Act, DoD has authority to sell defense articles and services to 

foreign countries and international organizations generally at no profit or loss to the 

Federal Government. Payment in U.S. dollars is required in advance. 

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

The Air Force’s monetary resources are maintained in U.S. Treasury accounts. The 

disbursing offices of Defense Finance and Accounting Service (DFAS), the Military 

Departments, the U.S. Army Corps of Engineers (USACE), and the Department of 

State’s financial service centers process the majority of the Air Force’s cash collections, 

disbursements, and adjustments worldwide. Each disbursing station prepares monthly 

reports to the U.S. Treasury on checks issued, electronic fund transfers, interagency 

transfers, and deposits. 

In addition, DFAS sites and USACE Finance Center submit reports to the U.S. Treasury 

by appropriation on interagency transfers, collections received, and disbursements issued. 

The U.S. Treasury records these transactions to the applicable Fund Balance with 

Treasury (FBWT) account. On a monthly basis, Air Force’s FBWT is adjusted to agree 

with the U.S. Treasury accounts. 

1.J. Foreign Currency

Cash is the total of cash resources under the control of DoD which includes coin, paper 

currency, negotiable instruments, and amounts held for deposit in banks and other 

financial institutions. Foreign currency consists of the total U.S. dollar equivalent of both 

purchased and nonpurchased foreign currencies held in foreign currency fund accounts. 

Foreign currency is valued using the U.S. Treasury prevailing rate of exchange. 

The majority of cash and all foreign currency is classified as “nonentity” and is restricted. 

Amounts reported consist primarily of cash and foreign currency held by disbursing 
42

General Fund

Notes to the Principal Statements

officers to carry out their paying, collecting, and foreign currency accommodation 

exchange missions. 

 

The Air Force conducts a significant portion of operations overseas. Congress 

established a special account to handle the gains and losses from foreign currency 

transactions for five general fund appropriations: operations and maintenance, military 

personnel, military construction, family housing operations and maintenance, and family 

housing construction. The gains and losses are calculated as the variance between the 

exchange rate current at the date of payment and a budget rate established at the 

beginning of each fiscal year. Foreign currency fluctuations related to other 

appropriations require adjustments to the original obligation amount at the time of 

payment. The Air Force does not separately identify currency fluctuation transactions. 

1.K. Accounts Receivable

Accounts receivable from other federal entities or the public include: accounts 

receivable, claims receivable, and refunds receivable. Allowances for uncollectible 

amounts due from the public are computed based on the average annual write off over a 

five year period. The DoD 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 in accordance with dispute resolution procedures defined 

in the Intragovernmental Business Rules published in the Treasury Financial Manual at 

http://www.fms.treas.gov/tfm/vol1/07-03.pdf.

1.L. Direct Loans and Loan Guarantees

Not applicable. 

1.M. Inventories and Related Property

The Air Force manages only military or government specific materiel under normal 

conditions. Materiel is a unique term that relates to military force management, and 

includes items such as self-propelled weapons, aircraft, etc., and related spares, repair 

parts, and support equipment. Items commonly used in and available from the 

commercial sector are not managed in Air Force’s materiel management activities. 

Operational cycles are irregular and the military risks associated with stock-out positions 

have no commercial parallel. The Air Force holds materiel based on military need and 

support for contingencies. The DoD is currently developing a methodology to be used to 

account for “inventory held for sale” and “inventory held in reserve for future sale” with 

a completion date of year-end FY 2010 reporting. 

Related property includes OM&S and stockpile materiel. The majority of OM&S, with 

the exception of munitions not held for sale, are valued using the moving average cost 

method. Munitions not held for sale are valued at standard purchase price. The 

Air Force uses both the consumption method and the purchase method of accounting for 

OM&S. Items that are centrally managed and stored, such as ammunition and engines, 

are generally recorded using the consumption method and are reported on the Balance 
2009

43

General Fund

Notes to the Principal Statements

Sheet as OM&S. When current systems cannot fully support the consumption method, 

Air Force uses the purchase method. Under this method, materiel and supplies are 

expensed when purchased. During FY 2009 and FY 2008, Air Force expensed 

significant amounts using the purchase method because the systems could not support the 

consumption method or management deemed that the item was in the hands of the end 

user. This is a material weakness for the DoD and long-term system corrections are in 

process. Once the proper systems are in place, these items will be accounted for under 

the consumption method of accounting. 

The Air Force determined that the recurring high dollar-value of OM&S in need of repair 

is material to the financial statements and requires a separate reporting category. Many 

high dollar items, such as aircraft engines, are categorized as OM&S rather than military 

equipment. 

The Air Force recognizes condemned materiel as “Excess, Obsolete, and Unserviceable.” 

The cost of disposal is greater than the potential scrap value; therefore, the net value of 

condemned materiel is zero. 

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

The Air Force reports investments in U.S. Treasury securities at cost, net of amortized 

premiums or discounts. Premiums or discounts are amortized over the term of the 

investments using the effective interest rate method or another method obtaining similar 

results. The Air Force’s intent is to hold investments to maturity, unless they are needed 

to finance claims or otherwise sustain operations. Consequently, a provision is not made 

for unrealized gains or losses on these securities. 

The Air Force invests in nonmarketable market-based U.S. Treasury securities, which are 

issued to federal agencies by the U.S. Treasury’s Bureau of Public Debt. They are not 

traded on any securities exchange but mirror the prices of particular U.S. Treasury 

securities traded in the government securities market. 

1.O. General Property, Plant and Equipment

The Air Force uses the estimated historical cost for valuing military equipment. The 

DoD identified the universe of military equipment by accumulating information relating 

to program funding and associated military equipment, equipment useful life, program 

acquisitions, and disposals to establish a baseline. The military equipment baseline is 

updated using expenditure, acquisition, and disposal information. 

The DoD’s General Property, Plant, and Equipment (PP&E) capitalization threshold is 

$100 thousand except for real property, which is $20 thousand. The Air Force has not 

fully implemented the threshold for real property; therefore, Air Force is primarily using 

the capitalization threshold of $100 thousand for General PP&E, and most real property. 

With the exception of USACE Civil Works and WCF, General PP&E assets are 

capitalized at historical acquisition cost when an asset has a useful life of two or more 
44

General Fund

Notes to the Principal Statements

years and when the acquisition cost equals or exceeds the DoD’s capitalization threshold. 

The DoD also requires the capitalization of improvements to existing General PP&E 

assets if the improvements equal or exceed the capitalization threshold and extend the 

useful life or increase the size, efficiency, or capacity of the asset. The DoD depreciates 

all General PP&E, other than land, on a straight-line basis. 

When it is in the best interest of the government, the Air Force provides government 

property to contractors to complete contract work. The Air Force either owns or leases 

such property, or it is purchased directly by the contractor for the government based on 

contract terms. When the value of contractor-procured General PP&E meets or exceeds 

the DoD capitalization threshold, federal accounting standards require that it be reported 

on Air Force’s Balance Sheet. 

The DoD developed policy and a reporting process for contractors with government 

furnished equipment that provides appropriate General PP&E information for financial 

statement reporting. The DoD requires Air Force to maintain, in its property systems, 

information on all property furnished to contractors. These actions are structured to 

capture and report the information necessary for compliance with federal accounting 

standards. The Air Force has not fully implemented this policy primarily due to system 

limitations. 

1.P. Advances and Prepayments

When advances are permitted by law, legislative action, or presidential authorization, 

DoD’s policy is to record advances or prepayments in accordance with USGAAP. As 

such, payments made in advance of the receipt of goods and services should be reported 

as an asset on the Balance Sheet. The DoD’s policy is to expense and/or properly 

classify assets when the related goods and services are received. The Air Force has not 

fully implemented this policy primarily due to system limitations. 

1.Q. Leases

Lease payments for the rental of equipment and operating facilities are classified as either 

capital or operating leases. When a lease is essentially equivalent to an installment 

purchase of property (a capital lease), and the value equals or exceeds the current 

capitalization threshold, Air Force records the applicable asset as though purchased, with 

an offsetting liability, and depreciates it. The Air Force records the asset and the liability 

at the lesser of the present value of the rental and other lease payments during the lease 

term (excluding portions representing executory costs paid to the lessor) or the asset’s 

fair market value. The discount rate for the present value calculation is either the lessor’s 

implicit interest rate or the government’s incremental borrowing rate at the inception of 

the lease. The Air Force, as the lessee, receives the use and possession of leased 

property, for example real estate or equipment, from a lessor in exchange for a payment 

of funds. An operating lease does not substantially transfer all the benefits and risk of 

ownership. Payments for operating leases are expensed over the lease term as they 

become payable. 
2009

45

General Fund

Notes to the Principal Statements

Office space and leases entered into by Air Force are the largest component of operating 

leases and are based on costs gathered from existing leases, General Services 

Administration (GSA) bills, and interservice support agreements. Future year projections 

use the Consumer Price Index. 

1.R. Other Assets

Other assets include those assets, such as military and civil service employee pay 

advances, travel advances, and certain contract financing payments that are not reported 

elsewhere on Air Force’s Balance Sheet. 

The Air Force conducts business with commercial contractors under two primary types of 

contracts: fixed price and cost reimbursable. To alleviate the potential financial burden 

on the contractor that long-term contracts can cause, Air Force may provide financing 

payments. Contract financing payments are defined in the Federal Acquisition 

Regulations, Part 32, as authorized disbursements to a contractor prior to acceptance of 

supplies or services by the Government. Contract financing payments clauses are 

incorporated in the contract terms and conditions and may include advance payments, 

performance-based payments, commercial advances and interim payments, progress 

payments based on cost, and interim payments under certain cost-reimbursement 

contracts. It is DoD policy to record certain contract financing payments as other assets. 

The Air Force has fully implemented this policy.

Contract financing payments do not include invoice payments, payments for partial 

deliveries, lease and rental payments, or progress payments based on a percentage or 

stage of completion. The Defense Federal Acquisition Regulation Supplement 

authorizes progress payments based on a percentage or stage of completion only for 

construction of real property, shipbuilding, and ship conversion, alteration, or repair. 

Progress payments based on percentage or stages of completion are reported as 

Construction in Progress. 

1.S. Contingencies and Other Liabilities

The SFFAS No. 5, “Accounting for Liabilities of the Federal Government,” as amended 

by SFFAS No. 12, “Recognition of Contingent Liabilities Arising from Litigation,” 

defines a contingency as an existing condition, situation, or set of circumstances that 

involves an uncertainty as to possible gain or loss. The uncertainty will be resolved when 

one or more future events occur or fail to occur. The Air Force recognizes contingent 

liabilities when past events or exchange transactions occur, a future loss is probable, and 

the loss amount 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 of incurring a loss or 

additional losses. The Air Force’s risk of loss and resultant contingent liabilities arise 

from pending or threatened litigation or claims and assessments due to events such as 

aircraft and vehicle accidents, medical malpractice, property or environmental damages, 

and contract disputes. 
46

General Fund

Notes to the Principal Statements

Other liabilities arise as a result of anticipated disposal costs for Air Force assets. 

Consistent with SFFAS No. 6, “Accounting for Property, Plant, and Equipment,” 

recognition of an anticipated environmental disposal liability begins when the asset is 

placed into service. Based on DoD’s policy, which is consistent with SFFAS No. 5, 

“Accounting for Liabilities of the Federal Government,” nonenvironmental disposal 

liabilities are recognized when management decides to dispose of an asset. The DoD 

recognizes nonenvironmental disposal liabilities for military equipment nuclear-powered 

assets when placed into service. These amounts are not easily distinguishable and are 

developed in conjunction with environmental disposal costs. The Air Force does not 

recognize contingent liabilities associated with nonenvironmental disposals due to 

immateriality. 

1.T. Accrued Leave

The Air Force reports liabilities for military leave and accrued compensatory and annual 

leave for civilians. Sick leave for civilians is expensed as taken. The liabilities are based 

on current pay rates. 

1.U. Net Position

Net Position consists of unexpended appropriations and cumulative results of operations. 

Unexpended Appropriations represent the amounts of budget authority that are 

unobligated and that have not been rescinded or withdrawn. Unexpended appropriations 

also represent amounts obligated for which legal liabilities for payments have not been 

incurred. 

Cumulative Results of Operations represent the net difference between expenses and 

losses and financing sources (including appropriations, revenue, and gains), since 

inception. The cumulative results of operations also include donations and transfers in 

and out of assets that were not reimbursed. 

1.V. Treaties for Use of Foreign Bases

The DoD has the use of land, buildings, and other overseas facilities that are obtained 

through various international treaties and agreements negotiated by the Department of 

State. The Air Force purchases capital assets overseas with appropriated funds; however, 

the host country retains title to the land and capital improvements. Treaty terms 

generally allow Air Force continued use of these properties until the treaties expire. In 

the event treaties or other agreements are terminated, use of the foreign bases is 

prohibited and losses are recorded for the value of any nonretrievable capital assets. The 

settlement due to the U.S. or host nation is negotiated and takes into account the value of 

capital investments and may be offset by the cost of environmental cleanup. 
2009

47

General Fund

Notes to the Principal Statements

1.W. Unexpended Obligations

The Air Force obligates funds to provide goods and services for outstanding orders not 

yet delivered. Unless the title has passed, the financial statements do not reflect a 

liability for payment for goods and services not yet delivered. Unexpended obligations 

includes both obligations for which goods and services have been delivered (title passed) 

and a liability recognized, and obligations for which no delivery has occurred and no 

liability recognized. The balance of unexpended obligations appears immediately before 

net outlays in the Statement of Budgetary Resources, and is referred to as “Total, unpaid 

obligated balances, net, end of period.” 

1.X. Undistributed Disbursements and Collections

Undistributed disbursements and collections represent the difference between 

disbursements and collections matched at the transaction level to specific obligations, 

payables, or receivables in the source systems and those reported by the U.S. Treasury. 

Supported disbursements and collections are evidenced by corroborating documentation.

Unsupported disbursements and collections do not have supporting documentation for the 

transaction and most likely would not meet audit scrutiny. 

The DoD policy is to allocate supported undistributed disbursements and collections 

between federal and nonfederal categories based on the percentage of distributed federal 

and nonfederal accounts payable and accounts receivable. Supported undistributed 

disbursements and collections are then applied to reduce accounts payable and receivable 

accordingly. Unsupported undistributed disbursements are recorded as disbursements 

intransit and reduce nonfederal accounts payable. Unsupported undistributed collections 

are recorded in nonfederal other liabilities. 

1.Y. Significant Events

On October 1, 2008, the Air Force began using the Reliability and Maintainability 

Information system (REMIS) as the official system of record for financial accountability 

for military equipment assets. The conversion from Capital Asset Management 

System-Military Equipment, the previous system of record, to REMIS required a prior 

period adjustment. See Notes 10, 19, 21, and 25 for additional information. 

1.Z. Fiduciary Activities

Fiduciary cash and other assets are not assets of the Air Force and are not recognized on 

the balance sheet. Fiduciary activities are reported on the financial statement note 

schedules. 
48

General Fund

Notes to the Principal Statements

Note 2. Nonentity Assets 

 

As of September 30 2009 2008 Restated

(Amounts in thousands) 

1. Intragovernmental Assets 

 A. Fund Balance with Treasury $ 125,030 $ 101,059 

 B. Accounts Receivable 0 1,430 

 C. Total Intragovernmental Assets $ 125,030 $ 102,489 

 

2. Nonfederal Assets 

 A. Cash and Other Monetary Assets $ 98,939 $ 111,976 

 B. Accounts Receivable 138,516 111,649 

 C. Other Assets 186,225 183,444 

 D. Total Nonfederal Assets $ 423,680 $ 407,069 

 

3. Total Nonentity Assets $ 548,710 $ 509,558 

 

4. Total Entity Assets $ 313,019,908 $ 291,719,903 

5. Total Assets $ 313,568,618 $ 292,229,461 

Relevant Information for Comprehension 

Nonentity assets are assets for which the Air Force maintains stewardship accountability and reporting 

responsibility but are not available for the Air Force’s normal operations. 

Intragovernmental Fund Balance with Treasury represents amounts in Air Force’s deposit fund and two 

suspense fund accounts (Uniformed Services Thrift Savings Plan Suspense and Thrift Savings Plan 

Suspense) that are not available for Air Force use. 

Intragovernmental Accounts Receivable and Nonfederal Accounts Receivable include interest receivable 

that upon collection is remitted to the U.S. Treasury as miscellaneous receipts. 

Nonfederal Cash and Other Monetary Assets represent disbursing officers’ cash and undeposited 

collections as reported on the Statement of Accountability (Standard Form 1219). These assets are held 

by the Air Force disbursing officers as agents of the U.S. Treasury. The nonfederal cash and other 

monetary assets represent a fiduciary capacity held by Air Force disbursing officers as agents for 

U.S. Treasury and are not available for use in operations. 

Nonfederal Other Assets consist of advances to contractors as part of the advance payment pool 

agreements with the Massachusetts Institute of Technology and other nonprofit institutions. These 

agreements are used for the financing of cost-type contracts with nonprofit educational research 

institutions for experimental research and development work when several contracts or a series of 

contracts require financing by advance payments. These funds are not available for use in Air Force 

operations. 
2009

49

General Fund

Notes to the Principal Statements

Note 3. Fund Balance with Treasury 

As of September 30 2009 2008 

(Amounts in thousands) 

1. Fund Balances 

 A. Appropriated Funds $ 103,175,823 $ 92,800,590 

 B. Revolving Funds 0 0

 C. Trust Funds 8,137 6,773 

 D. Special Funds 1,377 1,487 

 E. Other Fund Types 125,030 101,059 

 F. Total Fund Balances $ 103,310,367 $ 92,909,909 

2. Fund Balances Per Treasury Versus Agency 

 A. Fund Balance per Treasury $ 104,651,268 $ 94,578,060 

 B. Fund Balance per Air Force 103,310,367 92,909,909 

3. Reconciling Amount $ 1,340,901 $ 1,668,151 

 

Fund Balance with Treasury 

Other Fund Types include balances in deposit accounts which consist of taxes, small escrow accounts 

and other federal payroll withholding allotments. 

The Air Force shows a reconciling amount of $1.3 billion primarily due to the withdrawal of 

$1.2 billion in cancelling appropriations at the end of fiscal year 2009. These funds are included in 

Fund Balance with Treasury (FBWT) per Treasury but are not included in FBWT per Air Force. 
50

General Fund

Notes to the Principal Statements

Status of Fund Balance with Treasury 

As of September 30 2009 2008 

(Amounts in thousands) 

1. Unobligated Balance 

 A. Available $ 26,096,409 $ 24,143,734 

 B. Unavailable 3,114,938 2,533,156 

2. Obligated Balance not yet Disbursed $ 76,097,415 $ 67,813,258 

 

3. Nonbudgetary FBWT $ 459,967 $ 472,259 

 

4. NonFBWT Budgetary Accounts $ (2,458,362) $ (2,052,498) 

 

5. Total $ 103,310,367 $ 92,909,909 

The Status FBWT reflects the budgetary resources to support the FBWT and is a reconciliation 

between budgetary and proprietary accounts. It primarily consists of unobligated and obligated 

balances. The balances reflect the budgetary authority remaining for disbursement against current or 

future obligations. 

Unobligated Balance is classified as available or unavailable and represents the cumulative amount of 

budgetary authority that has not been set side to cover outstanding obligations. The unavailable 

balance consists primarily of funds invested in U.S. Treasury securities that are temporarily precluded 

from obligation by law. Certain unobligated balances are restricted for future use and are not 

apportioned for current use. Unobligated balances for trust fund accounts are restricted for use by the 

public law that established the funds. 

Obligated Balance not yet Disbursed represents funds that have been obligated for goods and services 

not received, and those received but not paid. 

Nonbudgetary FBWT includes accounts that do not have budgetary authority, such as unavailable 

receipt accounts or clearing accounts. The items reported as Nonbudgetary FBWT comprise the FBWT 

for suspense, deposit and receipt accounts. 

NonFBWT Budgetary Accounts reduces the Status FBWT. The items that comprise the amount 

reported as NonFBWT receipts are from investments and discounts in U.S. Treasury securities, and 

unfilled customer orders without advances. 

Unobligated balances are segregated to show available and unavailable amounts in the note schedule. 

Certain unobligated balances may be restricted to future use and are not apportioned for current use. 

The Unobligated Balance unavailable of $3.1 billion is not available for new obligations since the 

period for new obligations established by law has expired. 
2009

51

General Fund

Notes to the Principal Statements

Note 4. Investments and Related Interest 

As of September 30 2009 

Cost Amortization

Method 

Amortized 

(Premium) / Discount Investments, Net Market Value Disclosure 

(Amounts in thousands) 

1. Intragovernmental 

Securities 

A. Nonmarketable, 

Market-Based 

 1. Military Retirement 

Fund $ 0 $ 0 $ 0 $ 0 

 2. Medicare Eligible 

Retiree Health Care 

Fund 0 0 0 0 

 3. US Army Corps of 

Engineers 0 0 0 0 

 4. Other Funds 1,079 (10) 1,069 1,093 

 5. Total Nonmarketable, 

Market-Based 1,079 ( 10) 1,069 1,093 

 

B. Accrued Interest 10 10 10 

C. Total 

Intragovernmental 

Securities $ 1,089 $ ( 10) $ 1,079 $ 1,103 

2. Other Investments 

A. Total Other 

Investments $ 0 $0 $ 0 N/A

As of September 30 2008 

Cost Amortization 

Method 

Amortized 

(Premium) / Discount Investments, Net Market Value Disclosure 

(Amounts in thousands) 

3. Intragovernmental 

Securities 

A. Nonmarketable, 

Market-Based 

 1. Military Retirement 

Fund $ 0 $ 0 $ 0 $ 0 

 2. Medicare Eligible 

Retiree Health Care 

Fund 0 0 0 0 

 3. US Army Corps of 

Engineers 0 0 0 0 

 4. Other Funds 868 (3) 865 890 

 5. Total Nonmarketable, 

Market-Based 868 ( 3) 865 890 

 

B. Accrued Interest 9 9 9 

C. Total 

Intragovernmental 

Securities $ 877 $ ( 3) $ 874 $ 899 

4. Other Investments 

A. Total Other 

Investments $ 0 $0 $ 0 N/A
52

General Fund

Notes to the Principal Statements

Relevant Information for Comprehension 

The Federal Government does not set aside assets to pay future benefits or other expenditures associated 

with earmarked funds. The cash generated from earmarked funds is deposited in the U.S. Treasury, which 

uses the cash for general Government purposes. The U.S. Treasury securities are issued to the earmarked 

funds as evidence of its receipts and are an asset to the Air Force and a liability to the U.S. Treasury. 

Since the Air Force and the U.S. Treasury are both part of the Federal Government, these assets and 

liabilities offset each other from the standpoint of the Federal Government as a whole. For this reason, 

they do not represent an asset or a liability in the U.S. Governmentwide financial statements. 

The U.S. Treasury securities provide the Air Force with authority to draw upon the U.S. Treasury to make 

future benefit payments or other expenditures. When the Air Force requires redemption of these securities 

to make expenditures, the Government finances the securities out of accumulated cash balances, by raising 

taxes or other receipts, borrowing from the public or repaying less debt, or curtailing other expenditures. 

The Federal Government used the same method to finance all other expenditures. 

Intragovernmental Securities (Other) primarily represents the Air Force Gift Fund investment in 

U.S. Treasury Securities. 

Note 5. Accounts Receivable 

As of September 30 2009 

Gross Amount Due Allowance For Estimated 

Uncollectibles Accounts Receivable, Net 

(Amounts in 

thousands) 

1. Intragovernmental 

Receivables $ 298,953 N/A $ 298,953 

2. Nonfederal 

Receivables (From 

the Public) $ 666,917 $ (83,577) $ 583,340 

3. Total Accounts 

Receivable $ 965,870 $ (83,577) $ 882,293 

As of September 30 2008 

Gross Amount Due Allowance For Estimated 

Uncollectibles Accounts Receivable, Net 

(Amounts in 

thousands) 

1. Intragovernmental 

Receivables $ 271,020 N/A $ 271,020 

2. Nonfederal 

Receivables (From 

the Public) $ 619,412 $ (117,230) $ 502,182 

3. Total Accounts 

Receivable $ 890,432 $ (117,230) $ 773,202 
2009

53

General Fund

Notes to the Principal Statements

Note 6. Other Assets

As of September 30 2009 2008 

(Amounts in thousands) 

 

1. Intragovernmental Other Assets 

 A. Advances and Prepayments $ 212,245 $ 265,591 

 B. Other Assets 0 0

 C. Total Intragovernmental Other Assets $ 212,245 $ 265,591 

 

2. Nonfederal Other Assets 

 A. Outstanding Contract Financing Payments $ 11,446,790 $ 10,775,541 

 B. Advances and Prepayments 83,161 71,542 

 C. Other Assets (With the Public) 186,225 183,444 

 D. Total Nonfederal Other Assets $ 11,716,176 $ 11,030,527 

3. Total Other Assets $ 11,928,421 $ 11,296,118 

Relevant Information for Comprehension 

Nonfederal Other Assets (With the Public) is comprised exclusively of Advance Payment Pool Agreements 

with nonprofit educational institutions. These agreements are funded under cost type contract procedures and 

are mainly for experimental research and development requirements. 

Contract terms and conditions for certain types of contract financing payments convey certain rights to the 

Air Force that protect the contract work from state or local taxation, liens or attachment by the contractor's 

creditors, transfer of property, or disposition in bankruptcy. However, these rights should not be misconstrued 

to mean that ownership of the contractor’s work has transferred to the Federal Government. The Federal 

Government does not have the right to take the work, except as provided in contract clauses related to 

termination or acceptance, and Air Force is not obligated to make payment to the contractor until delivery and 

acceptance. 

The Outstanding Contract Financing Payments balance of $11.4 billion is comprised of $10.8 billion in contract 

financing payments and an additional $577.0 million in estimated future payments that will be paid to the 

contractor upon future delivery and Government acceptance of satisfactory product. See additional discussion 

in Note 15, Other Liabilities. 
54

General Fund

Notes to the Principal Statements

Note 7. Cash and Other Monetary Assets 

As of September 30 2009 2008 

(Amounts in thousands) 

1. Cash $ 83,306 $ 93,046 

2. Foreign Currency 15,633 18,930 

3. Other Monetary Assets 0 0

4. Total Cash, Foreign Currency, & Other 

Monetary Assets $ 98,939 $ 111,976 

Relevant Information for Comprehension 

The amount reported as cash and foreign currency consists primarily of cash held by Disbursing Officers. The 

foreign currency amount reported is valued at U.S. Treasury’s prevailing exchange rate, which is the most 

favorable rate available to the Government for foreign exchange transactions. Foreign currency is primarily 

used to make vendor disbursements and to exchange U.S. dollars for military personnel. 

Cash and foreign currency are nonentity assets and, as such, considered restricted assets that are held by the

Air Force but are not available for use in its operations. These assets are held by the Air Force’s Disbursing 

Officers as agents of U.S. Treasury. The total balance of $99.0 million is restricted. 

Note 8. Direct Loan and/or Loan Guarantee Programs 

Not Applicable 
2009

55

General Fund

Notes to the Principal Statements

Note 9. Inventory and Related Property 

As of September 30 2009 2008 

(Amounts in thousands) 

 

1. Inventory, Net $ 0 $ 0 

2. Operating Materiel & Supplies, Net 47,588,282 46,906,666 

3. Stockpile Materiel, Net 0 0 

4. Total $ 47,588,282 $ 46,906,666 

General Composition of OM&S 

The Operating Materiel and Supplies (OM&S) include weapon systems spares, ammunition, tactical 

missiles, aerial target drones, uninstalled aircraft and cruise missile engines, and uninstalled intercontinental 

ballistic missile motors. 

In addition to the account balances shown in Note 9, the federal accounting standard requires disclosure of 

the amount of OM&S held for future use. Except for an immaterial amount of munitions, the Air Force is 

not holding any items for future use. 

Restrictions on the Use of OM&S 

The Air Force does not maintain any OM&S restricted assets. 

Decision Criteria for Identifying the Category to Which OM&S Items Are Assigned 

The category Held for Use includes all materiel available for issuance. OM&S classified as such is marked 

within each supply or inventory system. 

The category Held for Repair generally includes all economically reparable materiel as defined by the 

Military Standard Transaction Reporting and Accounting Procedures Manual (DoD 4000.25-2-M). 

The category Held as Excess, Obsolete, and Unserviceable includes all materiel that managers determine to 

be more costly to repair than to replace. Items retained for management purposes which are beyond 

economic repair are coded “condemned.” These items are held until proper disposal can be made. Excess, 

Obsolete, and Unserviceable are valued at zero. This allowance results in a zero value to the Air Force. 

The category Held for Repair represents suspended, unserviceable (but reparable) items recorded at Moving 

Average Cost (MAC) or standard price. 

Changes in the Criteria for Identifying the Category to Which OM&S Items Are Assigned 

Under current DoD policy, no allowance is made for serviceable, ready-to-issue, items (category Held for 

Use). An allowance equal to 100% of MAC or standard price, however, is made for the category Excess, 

Obsolete, and Unserviceable. This allowance results in a net book value of zero to the Air Force. Excess, 

Obsolete, and Unserviceable are valued at zero. 
56

General Fund

Notes to the Principal Statements

Operating Materiel and Supplies (OM&S) Value 

The OM&S data reported on the financial statements are derived from logistics systems designed for 

materiel management purposes. Some of these systems do not maintain the historical cost data necessary to 

comply with the valuation requirements of the Statement of Federal Financial Accounting Standards 

(SFFAS) No. 3, “Accounting for Inventory and Related Property.” 

In general, the Air Force uses the consumption method of accounting for OM&S, since OM&S is defined in 

SFFAS No. 3 as materiel that has not yet been issued to the end user. Once issued, the materiel is expensed. 

According to federal accounting standards, the consumption method of accounting should be used to 

account for OM&S unless: (1) the amount of OM&S is not significant, (2) OM&S are in the hands of the 

end user for use in normal operations, or (3) it is cost beneficial to expense OM&S when purchased 

(purchase method). 

Other Air Force Disclosures 

In the past, the Air Force provided only minimal OM&S accounting data that could be used to prepare the 

financial statements but has made considerable strides in improving the systems to provide actual 

transactions for completing the financial statements. However, in some cases, the data provided still 

consists of only beginning and ending balances for each of the asset accounts Held for Use; Excess, 

Obsolete, Unserviceable; and Held for Repair. Without the required additional data (acquisitions, transfers 

in, amounts consumed, transfers out, trading partner data, etc.), DFAS can only report the net change 

between prior period ending balances and the values reported as current period ending balances. 

Inventory, Net

Not Applicable
2009

57

General Fund

Notes to the Principal Statements

Operating Materiel and Supplies, Net 

As of September 30 2009 

OM&S 

Gross Value Revaluation Allowance OM&S, Net Valuation 

Method 

(Amounts in thousands) 

 

1. OM&S Categories 

A. Held for Use $ 36,018,675 $ 0 $ 36,018,675 SP, LAC, MAC 

B. Held for Repair 11,569,607 0 11,569,607 SP, LAC, MAC 

C. Excess, Obsolete, and 

Unserviceable 1,698,500 (1,698,500) 0 NRV 

 

 D. Total $ 49,286,782 $ (1,698,500) $ 47,588,282 

As of September 30 2008 

OM&S 

Gross Value Revaluation Allowance OM&S, Net Valuation 

Method 

(Amounts in 

thousands) 

 

1. OM&S Categories 

A. Held for Use $ 35,828,669 $ 0 $ 35,828,669 SP, LAC, MAC 

B. Held for Repair 11,077,997 0 11,077,997 SP, LAC, MAC 

C. Excess, Obsolete, 

and Unserviceable 1,904,436 (1,904,436) 0 NRV 

 

 D. Total $ 48,811,102 $ (1,904,436) $ 46,906,666 

Legend for Valuation Methods: 

LAC = Latest Acquisition Cost NRV = Net Realizable Value MAC = Moving Average Cost 

SP = Standard Price LCM = Lower of Cost or Market 

AC = Actual Cost O = Other 

Stockpile Materials, Net

Not Applicable
58

General Fund

Notes to the Principal Statements

Note 10. General PP&E, Net 

As of September 30 2009 

Depreciation/ 

Amortization 

Method 

Service 

Life 

Acquisition 

 Value 

(Accumulated 

Depreciation/ 

Amortization) 

Net Book 

 Value 

(Amounts in thousands) 

 

1. Major Asset Classes A. Land N/A N/A $ 401,899 N/A $ 401,899 

 B. Buildings, 

Structures, and 

Facilities S/L 20 Or 40 54,172,092 $ (29,440,064) 24,732,028 

 C. Leasehold 

Improvements S/L lease term 0 0 0 

 D. Software S/L 2-5 Or 10 543,013 (308,150) 234,863 

 E. General 

Equipment S/L 5 or 10 41,527,663 (32,013,234) 9,514,429 

 F. Military Equipment S/L Various 300,284,138 (189,897,273) 110,386,865 

 G. Shipbuilding 

(Construction-inProgress) N/A N/A 0 0 0 

 H. Assets Under 

Capital Lease S/L lease term 393,002 (322,098) 70,904 

 I. Construction-inProgress 

(Excludes Military 

Equipment) N/A N/A 4,418,249 N/A 4,418,249 

 J. Other 0 0 0 

 K. Total General 

PP&E $ 401,740,056 $ (251,980,819) $ 149,759,237 

As of September 30 2008 Restated 

Depreciation/ 

Amortization 

Method 

Service 

Life 

Acquisition 

 Value 

(Accumulated 

Depreciation/ 

Amortization) 

Net Book 

 Value 

(Amounts in thousands) 

 

1. Major Asset Classes A. Land N/A N/A $ 443,879 N/A $ 443,879 

 B. Buildings, 

Structures, and 

Facilities S/L 20 Or 40 49,696,527 $ (28,272,596) 21,423,931 

 C. Leasehold 

Improvements S/L lease term 0 0 0 

 D. Software S/L 2-5 Or 10 517,377 (163,801) 353,576 

 E. General 

Equipment S/L 5 or 10 36,802,784 (28,890,932) 7,911,852 

 F. Military Equipment S/L Various 296,655,662 (190,735,309) 105,920,353 

 G. Shipbuilding 

(Construction-inProgress) N/A N/A 0 0 0 

 H. Assets Under 

Capital Lease S/L lease term 393,002 (303,111) 89,891 

 I. Construction-inProgress (Excludes 

Military Equipment) N/A N/A 4,087,234 N/A 4,087,234 

 J. Other 0 0 0 

 K. Total General 

PP&E $ 388,596,465 $ (248,365,749) $ 140,230,716 

1

 Note 15 for additional information on Capital Leases 

Legend for Valuation Methods: 

S/L = Straight Line N/A = Not Applicable 
2009

59

General Fund

Notes to the Principal Statements

Categories Measure 

Quantity 

As of September 30, 

2008 Additions Deletions As of September 30, 2009 

Buildings and Structures Each 10,250 0 0 10,250 

Archaeological Sites Each 1,848 0 0 1,848 

Museum Collection Items (Objects, Not 

Including Fine Art) Each 117,134 5,162 95 122,201 

Museum Collection Items (Objects, Fine 

Art) Each 10,599 154 0 10,753 

(Acres in Thousands) 

Facility Code Facility Title As of September 30, 

2007 Additions Deletions As of September 30, 

2008

9110 Government Owned Land 1,506 0 5 1,501 

9111 State Owned Land 0 0 0 0 

9120 Withdrawn Public Land 7,593 0 1 7,592 

9130 Licensed and Permitted Land 137 0 1 136 

9140 Public Land 0 0 0 0 

9210 Land Easement 177 0 6 171 

9220 In-leased Land 103 0 11 92 

9230 Foreign Land 309 0 18 291 

Grand Total 9,783 

TOTAL - All Other Lands 2,191 

TOTAL – Stewardship Lands 7,592 

Relevant Information for Comprehension 

General Property, Plant and Equipment (PP&E) 

There are restrictions on the Air Force’s ability to dispose of real property (land and buildings) located 

outside the continental United States. 

The Air Force estimates historical values for capitalized military equipment using departmental internal 

records. Beginning fiscal year (FY) 2009, the Air Force began using the Reliability and Maintainability 

Information System (REMIS) as the official system of record for financial accountability of military 

equipment assets which include trainer aircraft. The conversion from Capital Assets Management System 

Military Equipment (CAMS-ME) to REMIS resulted in a prior period adjustment of $8.5 billion, 

representing net book value, to the beginning balance of FY 2008. 

Other Air Force Disclosures 

The value of the Air Force’s General PP&E real property in the possession of contractors is included in the 

values reported for the major asset classes of Land and Buildings, Structures, and Facilities. The value of 

General PP&E personal property major asset class of Software and Equipment does not include all of the 

General PP&E above the DoD capitalization threshold in the possession of contractors. The Air Force does 

not report the value of equipment purchased directly by the contractor. The Inspector General, DoD, and 

the Air Force are developing new policies and a contractor reporting process to capture General PP&E 

information for future reporting purposes in compliance with generally accepted accounting principles. 
60

General Fund

Notes to the Principal Statements

Heritage Assets and Stewardship Land 

The overall mission of Air Force is to fly, fight and win in air, space and cyberspace, influence events, and 

advance U.S. interests across the full spectrum of military operations. As this mission has been executed, 

Air Force has become a large-scale owner of historic buildings, structures, archaeological sites and artifacts, 

aircraft, other cultural resources, and stewardship land. The protection of the nation’s heritage assets and 

stewardship land is an important aspect of the Air Force’s mission. 

Heritage Assets are PP&E of historical, natural, cultural, educational or artistic significance (e.g. aesthetic); 

or with significant architectural characteristics. Heritage Assets and Stewardship Land are resources that 

protect, restore, enhance, modernize, preserve and sustain mission capability within the Air Force through 

effective planning and management of natural and cultural resources to guarantee access to air, land, and 

water. These assets are resources that are managed to provide multiple use activities for the public benefit. 

This includes actions to comply with requirements such as federal laws, Executive Orders, policies, final 

governing standards, and other binding agreements. Air Force policy is to promote and preserve indefinitely 

the identifiable human, environmental or civic value of these assets. 

Stewardship Land comprises land and land rights other than that acquired for or in connection with General 

PP&E, land acquired via the public domain, or land acquired at no cost. The Air Force Stewardship Land 

consists mainly of mission essential land acquired by donation or devise. Fiscal Year ended 

September 30, 2009 stewardship land data is not yet available due to limitations of the Air Force financial 

and nonfinancial management processes and systems that feed into financial statements. The Air Force 

reported 7,592,100 acres of mission essential land under their administration at the end of FY 2008. 

Air Force policy is to promote and preserve indefinitely the identifiable human, environmental or civic 

value of such land. 

Heritage Assets within the Air Force consist of buildings and structures, archaeological sites, museum 

collection items (objects, not including fine arts), and museum collection items (fine art). 

Buildings and Structures: Buildings and Structures that are listed on, or eligible for listing on the National 

Register of Historic Places, including multi-use Heritage Assets. These buildings and structures are 

maintained by each base’s civil engineering group as part of their overall responsibility. The Air Force 

reported 10,250 buildings and structures on Air Force bases and sites to be heritage assets at the end of 

FY 2008. The timing of this data call is such that Air Force cannot report reconciled FY 2009 buildings and 

structures at the end of FY 2009. 

Archaeological Sites: Sites that have been identified, evaluated, and determined to be eligible for or are 

listed on the National Historical Places in accordance with Section 110 National Historical Preservation Act. 

The Air Force listed 1,848 archeological sites on or eligible for the National Register at the end of FY 2008. 

The timing of this data call is such that Air Force cannot report reconciled FY 2009 archaeological site data 

at the end of FY 2009. 

Museum Collection Items, Objects Not Including Fine Art: The Air Force reported 122,201 museum 

collection items (not including fine art). During FY 2009, 5,162 objects were added to the collections, 

primarily as a result of private donations, transfers from other federal entities, curatorial administrative 

actions, and the documentation of previously unreported artifacts at Air Force Bases worldwide. 

Museum Collection Items, Fine Art: The Air Force has 10,753 fine art museum collections of, which 154 

paintings were received through donations in FY 2009. 
2009

61

General Fund

Notes to the Principal Statements

Assets Under Capital Lease 

As of September 30 2009 2008 

(Amounts in thousands) 

 

1. Entity as Lessee, Assets Under Capital Lease

 A. Land and Buildings $ 393,002 $ 393,002 

 B. Equipment 0 0

 C. Accumulated Amortization (322,098) (303,111)

 D. Total Capital Leases $ 70,904 $ 89,891 
62

General Fund

Notes to the Principal Statements

Note 11. Liabilities Not Covered by Budgetary Resources 

As of September 30 2009 2008 

(Amounts in thousands) 

1. Intragovernmental Liabilities 

A. Accounts Payable $ 0 $0

B. Debt 0 0

C. Other 337,063 823,278 

 D. Total Intragovernmental Liabilities $ 337,063 $ 823,278 

2. Nonfederal Liabilities 

A. Accounts Payable $ 357,871 $ 394,075 

B. Military Retirement and 

 Other Federal Employment Benefits 1,072,388 1,158,232 

C. Environmental Liabilities 7,955,740 7,519,475 

D. Other Liabilities 2,624,364 3,033,988 

 E. Total Nonfederal Liabilities $ 12,010,363 $ 12,105,770 

3. Total Liabilities Not Covered by Budgetary 

Resources $ 12,347,426 $ 12,929,048 

4. Total Liabilities Covered by Budgetary Resources $ 11,628,240 $ 10,646,178 

5. Total Liabilities $ 23,975,666 $ 23,575,226 

Information Related to Liabilities Not Covered by Budgetary Resources 

Liabilities Not Covered by Budgetary Resources are liabilities for which Congressional action is needed 

before budgetary resources can be provided.

The material amounts and sensitive areas included in Total Liabilities Not Covered by Budgetary Resources 

are categorized as not covered because there is no current or immediate appropriation available for 

liquidation. These liabilities will require resources funded from future year appropriations. The Air Force 

fully expects to receive the necessary resources to cover these liabilities in future years. 

Other Intragovernmental Liabilities are primarily comprised of liabilities representing the amount of 

nonentity assets held in a general receipt account or other U.S. Treasury account symbol for transfers to 

other entities, and the amount of the Federal Employees’ Compensation Act (FECA) liability billed to the 

agency by Department of Labor for FECA payments made on the agency’s behalf. 

Other Nonfederal Liabilities are primarily comprised of the amounts recorded for unpaid leave earned to 

which an employee is entitled upon separation and for contingent liabilities which are probable and 

measurable and will require resources funded from future years’ appropriations. 

Military Retirement and Other Federal Employment Benefits consists of various employee actuarial 

liabilities not due and payable during the current fiscal year. These liabilities primarily consist of the 
2009

63

General Fund

Notes to the Principal Statements

amount recorded by employer agencies for the actuarial present value of future FECA benefits provided to 

federal employees or their beneficiaries as a result of work related deaths, disability, or occupational 

disease. Refer to Note 17, Military Retirement and Other Federal Employment Benefits, for additional 

details and disclosures. 

Note 12. Accounts Payable 

As of September 30 2009 

Accounts Payable Interest, Penalties, and 

Administrative Fees Total 

(Amounts in thousands) 

 

1. Intragovernmental 

Payables $ 2,583,818 $ N/A $ 2,583,818 

2. Nonfederal Payables 

(to the Public) 3,278,316 0 3,278,316 

 

3. Total $ 5,862,134 $ 0 $ 5,862,134 

As of September 30 2008 

Accounts Payable Interest, Penalties, and 

Administrative Fees Total 

(Amounts in thousands) 

 

1. Intragovernmental 

Payables $ 2,002,120 $ N/A $ 2,002,120 

2. Nonfederal Payables 

(to the Public) 3,810,464 471 3,810,935 

 

3. Total $ 5,812,584 $ 471 $ 5,813,055 

Relevant Information for Comprehension 

Accounts Payable include amounts owed to federal and nonfederal entities for goods and services received 

by Air Force. The Air Force’s systems do not track intragovernmental transactions by customer at the 

transaction level. Buyer-side accounts payable are adjusted to agree with internal seller-side accounts 

receivable. Accounts Payable was adjusted by accruing additional accounts payable and expenses. 

Note 13. Debt

Not Applicable
64

General Fund

Notes to the Principal Statements

Note 14. Environmental Liabilities and Disposal Liabilities 

As of September 30 2009 2008 

(Amounts in thousands)

 

1. Environmental Liabilities--Nonfederal 

A. Accrued Environmental Restoration Liabilities 

1. Active Installations—Installation Restoration 

Program (IRP) and Building Demolition and Debris 

Removal (BD/DR) $ 3,350,133 $ 3,625,577 

2. Active Installations—Military Munitions Response 

Program (MMRP) 1,674,291 1,392,442 

3. Formerly Used Defense Sites—IRP and BD/DR 0 0 

4. Formerly Used Defense Sites--MMRP 0 0 

 

B. Other Accrued Environmental Liabilities—Non-BRAC 

1. Environmental Corrective Action 189,250 179,748 

2. Environmental Closure Requirements 1,252,339 1,129,889 

3. Environmental Response at Operational Ranges 0 0 

4. Asbestos 888,960 428,602 

 5. Non-Military Equipment 34,175 28,716 

 6. Other 0 0 

 

C. Base Realignment and Closure Installations 

1. Installation Restoration Program 1,372,805 1,402,008 

2. Military Munitions Response Program 4,230 2,398 

3. Environmental Corrective Action / Closure 

Requirements 14,609 37,920 

4. Asbestos 0 0 

 5. Non-Military Equipment 0 0 

 6. Other 0 0 

 

D. Environmental Disposal for Military Equipment / 

Weapons Programs 

1. Nuclear Powered Military Equipment / Spent 

Nuclear Fuel 0 0 

2. Non-Nuclear Powered Military Equipment 36,402 39,075 

3. Other National Defense Weapons Systems 0 0 

4. Other 0 0 

 

E. Chemical Weapons Disposal Program 

1. Chemical Demilitarization - Chemical Materials 

Agency (CMA) 0 0 

2. Chemical Demilitarization - Assembled Chemical 

Weapons Alternatives (ACWA) 0 0 

3. Other 0 0 

 

2. Total Environmental Liabilities $ 8,817,194 $ 8,266,375 

Other Information Related to Environmental Liabilities 

An environmental liability is a probable and measurable future outflow or expenditure of resources that 

exist as of the financial reporting date for environmental cleanup costs resulting from past transactions or 

events. The Air Force acknowledges that liabilities can change for environmental cleanup costs to include 

(1) costs associated with environmental restoration of sites funded under the Air Force portion of the 

Defense Environmental Restorations Program (DERP), (2) corrective actions funded with other than DERP, 

Base Realignment and Closure (BRAC), and (3) environmental costs associated with future closure or 

disposal of facilities, equipment, asbestos, and weapon systems. These costs include researching and 

determining the existence of hazardous waste, removing, containing, and/or disposing of hazardous waste 
2009

65

General Fund

Notes to the Principal Statements

from property, or material and/or property that consist of hazardous waste at the time of shutdown or 

disposal of the asset. Cleanup costs may include, but are not limited to, decontamination, decommissioning, 

site restoration, site monitoring, closure, and post closure costs related to Air Force operations that result in 

hazardous waste. 

The unrecognized portion of the estimated total cleanup costs associated with general, property, plant, and 

equipment is $373.0 million. 

Applicable Laws and Regulations for Cleanup Requirements 

The Air Force is required to clean up contamination resulting from past waste disposal practices, leaks, 

spills and other past activity, which has created a public human health or environmental risk. Air Force 

does this in coordination with regulatory agencies, and if applicable, with other responsible parties. The 

Air Force is also required to recognize closure, post closure and disposal costs for its Property, Plant and 

Equipment (PP&E) and environmental corrective action costs for current operations. The Air Force is 

responsible for tracking and reporting all required environmental information related to environmental 

restoration and corrective action, closure and disposal costs of PP&E, and environmental costs related to 

BRAC actions that have taken place in prior years. Applicable laws and regulations for cleanup 

requirements: 

(a) Comprehensive Environmental Response, Compensation, and Liability Act 

(b) Superfund Amendments and Reauthorization Act 

(c) Clean Water Act 

(d) Safe Drinking Water Act 

(e) Clean Air Act 

(f) Resource Conservation and Recovery Act (RCRA) 

(g) Toxic Substances Control Act 

(h) Medical Waste Tracking Act 

(i) Atomic Energy Act 

(j) Nuclear Waste Policy Act 

(k) Low Level Radioactive Waste Policy Amendment Act 

Types of Environmental Liabilities Identified 

The Air Force has environmental liabilities for cleanup requirements for active installations: Installation 

Restoration Program, Building Demolition and Debris Removal, Military Munitions Response Program, and 

Environmental Corrective Action. The Air Force also has environmental liabilities for cleanup requirements 

at BRAC installations. Finally, the Air Force has identified environmental liabilities for closure and 

disposal of PP&E to include facilities, general equipment, asbestos, and weapon systems. All clean-up is 

done in coordination with regulatory agencies, other responsible parties, and current property owners. 

Methods for Assigning Estimated Total Cleanup Costs to Current Operating Periods 

The Air Force uses engineering estimates and independently validated models to estimate environmental 

cleanup costs. The models are either developed within the Remedial Action Cost Engineering 

Requirements application, or a historic comparable project, a specific bid, or an independent government 

cost estimate is referenced for the current project. The Air Force validates the models in accordance with 

DoD Instruction 5000.61 and primarily uses the models to estimate environmental cleanup costs based on 

data received during a preliminary assessment and initial site investigation. The Air Force primarily uses 
66

General Fund

Notes to the Principal Statements

engineering estimates after obtaining data during the remedial investigation/feasibility phase of the 

environmental project. 

Once the environmental cleanup cost estimates are complete, Air Force will comply with accounting 

standards to assign costs to current operating periods. The Air Force Accrued Environmental Restoration 

Liabilities is accounted for as a totally self contained program. All direct and indirect costs of the program 

are captured and reported. The Air Force has already expensed the costs for cleanup associated with 

General PP&E placed into service prior to October 1, 1997, unless the costs are intended to be recovered 

through user charges. If the costs are recovered through user charges, then the Air Force expenses the 

associated environmental cost systematically over the life of the assets. 

The accounting standards also require environmental liabilities recognized for closure and disposal 

requirements. Air Force has closure requirements or disposal liabilities at active installations. Closure and 

disposal liabilities for facilities (including landfills), asbestos, general equipment and weapon systems are 

estimated for the applicable inventory of real property, general equipment and weapon systems. Air Force 

uses a set of historical disposal factors to estimate the environmental disposal liability for each asset and the 

estimated closure and monitoring cost for landfills. The current liability for these classes of assets is 

determined from the related disposal programs including the resources expected to be expended in the next 

year from prior and future budgets. 

For General PP&E placed into service after September 30, 1997, the Air Force expenses the associated 

environmental costs systematically over the life of the asset. The Air Force expenses the full cost to clean 

up contamination for Stewardship PP&E at the time the asset is placed into service. 

The Air Force uses two methods for systematic recognition: physical capacity for operating landfills, and 

life expectancy in years for all other assets. 

Nature of Estimates and the Disclosure of Information Regarding Possible Changes Due to Inflation, 

Deflation, Technology, or Applicable Laws and Regulations 

The Air Force is not aware of any pending changes to reported values of Environmental Liabilities but 

recognizes that changes may occur in the future due to changes in laws, regulations, changes in agreements 

with regulatory agencies, and advances in technology. 

Uncertainty Regarding the Accounting Estimates Used to Calculate the Reported Environmental 

Liabilities 

Environmental liabilities for the Air Force are based on accounting estimates which require certain 

judgments and assumptions to be made by management. The Air Force believes the estimates are 

reasonable based upon the information available at the time of calculation. Actual results may vary 

materially from the accounting estimates if agreements with regulatory agencies require remediation to a 

different degree than anticipated when the estimate was calculated. The liabilities can be further impacted if 

further investigation discovers contamination different from that which was known at the time of the 

estimate. Air Force financial statements would be affected to the extent there are material differences 

between these estimates and actual costs. There are areas in which management judgment in selecting any 

available alternative could produce a materially different result. 
2009

67

General Fund

Notes to the Principal Statements

In addition to the liabilities reported above, the Air Force has the potential to incur costs for restoration 

initiatives in conjunction with returning overseas Defense facilities to host nations. The Air Force is unable 

to provide a reasonable estimate at this time because the extent of restoration required is not known. 
68

General Fund

Notes to the Principal Statements

Note 15. Other Liabilities 

As of September 30 2009 

Current 

Liability 

Noncurrent 

Liability Total 

(Amounts in thousands) 

1. Intragovernmental 

A. Advances from Others $ 840,562 $ 0 $ 840,562 

B. Deposit Funds and 

Suspense Account 

Liabilities 334,937 0 334,937 

C. Disbursing Officer Cash 287,368 0 287,368 

D. Judgment Fund Liabilities 0 0 0 

E. FECA Reimbursement to 

the Department of Labor 130,959 171,766 302,725 

F. Custodial Liabilities 0 140,886 140,886 

 G. Employer Contribution and 

 Payroll Taxes Payable 74,790 0 74,790 

 H. Other Liabilities 34,810 0 34,810 

I. Total Intragovernmental 

Other Liabilities $ 1,703,426 $ 312,652 $ 2,016,078 

 

2. Nonfederal 

A. Accrued Funded Payroll 

and Benefits $ 2,326,474 $ 0 $ 2,326,474 

B. Advances from Others 33,655 0 33,655 

C. Deferred Credits 0 0 0 

D. Deposit Funds and 

Suspense Accounts 125,295 0 125,295 

E. Temporary Early 

Retirement Authority 0 0 0 

F. Nonenvironmental 

Disposal Liabilities 

(1) Military Equipment 

(Nonnuclear) 0 0 0 

(2) Excess/Obsolete 

Structures 0 0 0 

(3) Conventional 

Munitions Disposal 0 0 0 

G. Accrued Unfunded Annual 

Leave 2,459,699 0 2,459,699 

H. Capital Lease Liability 7,358 93,006 100,364 

 I. Contract Holdbacks 111,281 0 111,281 

J. Employer Contribution and 

 Payroll Taxes Payable 236,706 0 236,706 

 K. Contingent Liabilities 577,272 152,889 730,161 

 L. Other Liabilities 78,059 0 78,059 

 

M. Total Nonfederal Other 

Liabilities $ 5,955,799 $ 245,895 $ 6,201,694 

 

3. Total Other Liabilities $ 7,659,225 $ 558,547 $ 8,217,772 
2009

69

General Fund

Notes to the Principal Statements

As of September 30 2008 

Current 

Liability 

Noncurrent 

Liability Total 

(Amounts in thousands) 

1. Intragovernmental 

A. Advances from Others $ 694,789 $ 0 $ 694,789 

B. Deposit Funds and 

Suspense Account 

Liabilities 371,200 0 371,200 

C. Disbursing Officer Cash 297,209 0 297,209 

D. Judgment Fund Liabilities 0 0 0 

E. FECA Reimbursement to 

the Department of Labor 130,059 171,153 301,212 

F. Custodial Liabilities 0 194,800 194,800 

 G. Employer Contribution and 

 Payroll Taxes Payable 63,176 0 63,176 

 H. Other Liabilities 30,399 0 30,399 

I. Total Intragovernmental 

Other Liabilities $ 1,586,832 $ 365,953 $ 1,952,785 

 

2. Nonfederal 

A. Accrued Funded Payroll 

and Benefits $ 2,032,464 $ 0 $ 2,032,464 

B. Advances from Others 136,825 0 136,825 

C. Deferred Credits 0 0 0 

D. Deposit Funds and 

Suspense Accounts 101,064 0 101,064 

E. Temporary Early 

Retirement Authority 0 0 0 

F. Nonenvironmental 

Disposal Liabilities 

(1) Military Equipment 

(Nonnuclear) 0 0 0 

(2) Excess/Obsolete 

Structures 0 0 0 

(3) Conventional 

Munitions Disposal 0 0 0 

G. Accrued Unfunded Annual 

Leave 2,272,149 0 2,272,149 

H. Capital Lease Liability 0 130,091 130,091 

 I. Contract Holdbacks 131,506 0 131,506 

J. Employer Contribution and 

 Payroll Taxes Payable 297,742 0 297,742 

 K. Contingent Liabilities 533,208 744,245 1,277,453 

 L. Other Liabilities 303 0 303 

 

M. Total Nonfederal Other 

Liabilities $ 5,505,261 $ 874,336 $ 6,379,597 

 

3. Total Other Liabilities $ 7,092,093 $ 1,240,289 $ 8,332,382 
70

General Fund

Notes to the Principal Statements

Relevant Information for Comprehension 

Intragovernmental Other Liabilities represent government contributions for employee benefits and 

unemployment compensation. 

Nonfederal Other Liabilities reflects accrued interest liability for Air Force contract payments. 

Contingent Liabilities includes $577.3 million related to contracts authorizing progress payments based on 

cost as defined in the Federal Acquisition Regulation (FAR). In accordance with contract terms, specific 

rights to the contractors’ work vests with the Federal Government when a specific type of contract financing 

payment is made. This action protects taxpayer funds in the event of contract nonperformance. These rights 

should not be misconstrued as rights of ownership. The Air Force is under no obligation to pay contractors 

for amounts greater than the amounts authorized in contracts until delivery and government acceptance. Due 

to the probability the contractors will complete their efforts and deliver satisfactory products, and because the 

amount of potential future payments are estimable, the Air Force has recognized a contingent liability for 

estimated future payments which are conditional pending delivery and government acceptance. 

 Total contingent liabilities for progress payments based on cost represent the difference between the 

estimated costs incurred to date by contractors and amounts authorized to be paid under progress payments 

based on cost provisions within the FAR. Estimated contractor-incurred costs are calculated by dividing the 

cumulative unliquidated progress payments based on cost by the contract-authorized progress payment rate. 

The balance of unliquidated progress payments based on cost is deducted from the estimated total 

contractor-incurred costs to determine the contingency amount. 

Estimation Methodology 

The Air Force General Counsel, through legal determination, assesses and categorizes all contingent legal 

liability cases that equal or exceed the materiality threshold set by Department of Defense Inspector General 

(DoDIG). For the remaining cases falling below the dollar materiality threshold set by DoDIG, they are 

considered in aggregate, if the total amount of the cases equal or exceed the established materiality threshold. 

The Air Force General Counsel also solicits case data through quarterly data calls from the Air Force JAC 

(Judge Advocate Civil Lawsuits and Litigation Directorate). Air Force financial management personnel use 

the solicited case data, which includes the current reporting year and each of the prior two years, to estimate 

the amounts of probable and reasonably possible contingent liabilities. See Note 16 for detailed disclosure of 

contingent liabilities. 

Air Force financial management personnel use a three year prior case analysis spreadsheet which was 

developed by the Air Force Audit Agency to calculate and estimate the amount of contingent 

liabilities (probable and reasonably possible) for reporting or disclosing in the quarterly financial 

statements. In cases where Air Force General Counsel discloses that a judgment has been awarded 

against the Air Force, these amounts will be reported on the Balance Sheet and within this note. 
2009

71

General Fund

Notes to the Principal Statements

Capital Lease Liability 

As of September 30 2009 

Asset Category 

Land and 

Buildings Equipment Other Total 

(Amounts in thousands) 

1. Future Payments Due 

A. 2010 38,478 0 0 38,478 

B. 2011 36,786 0 0 36,786 

C. 2012 13,088 0 0 13,088 

D. 2013 9,462 0 0 9,462 

E. 2014 8,688 0 0 8,688 

F. After 5 Years 8,688 0 0 8,688 

 

G. Total Future Lease 

Payments Due $ 115,190 $ 0 $ 0 $ 115,190 

H. Less: Imputed 

Interest Executory 

Costs 14,825 0 0 14,825 

 

I. Net Capital Lease 

Liability $ 100,365 $ 0 $ 0 $ 100,365 

2. Capital Lease Liabilities Covered by Budgetary Resources $ 88,894 

3. Capital Lease Liabilities Not Covered by Budgetary Resources $ 11,471 

As of September 30 2008 

Asset Category 

Land and 

Buildings Equipment Other Total 

(Amounts in thousands) 

1. Future Payments Due 

A. 2009 38,478 0 0 38,478 

B. 2010 38,478 0 0 38,478 

C. 2011 36,786 0 0 36,786 

D. 2012 13,088 0 0 13,088 

E. 2013 9,462 0 0 9,462 

F. After 5 Years 17,376 0 0 17,376 

 

G. Total Future Lease 

Payments Due $ 153,668 $ 0 $ 0 $ 153,668 

H. Less: Imputed 

Interest Executory 

Costs 23,577 0 0 23,577 

 

I. Net Capital Lease 

Liability $ 130,091 $ 0 $ 0 $ 130,091 

2. Capital Lease Liabilities Covered by Budgetary Resources $ 112,802 

3. Capital Lease Liabilities Not Covered by Budgetary Resources $ 17,289 
72

General Fund

Notes to the Principal Statements

Note 16. Commitments and Contingencies 

The Air Force is a party in various administrative proceedings and legal actions related to claims for 

environmental damage, equal opportunity matters, and contractual bid protests. 

The Air Force has accrued contingent liabilities for legal actions where the Secretary of the Air Force 

General Counsel (SAF/GC) considers an adverse decision probable and the amount of loss measurable. In 

the event of an adverse judgment against the Government, some of the liabilities may be payable from the 

U.S. Treasury Judgment Fund. The Air Force records Judgment Fund liabilities in Note 12, Accounts 

Payable; and Note 15, Other Liabilities. 

Claims and litigation from Civil Law having a reasonably possible liability are estimated at $3.1 billion. 

Neither past payments nor the current contingent liability estimate provides a basis for accurately projecting 

the results of any individual lawsuit or claim. Since monetary judgments paid to civil litigants come from a 

judgment fund administrated by U.S. Treasury, it is uncertain that claims will become a liability to the 

Air Force.

The amounts disclosed for litigation claims and assessments are fully supportable and must agree with 

Air Force’s legal representation letters and management summary schedule. 

The amount of undelivered orders for open contracts citing cancelled appropriations which remain unfilled 

or unreconciled for which the Air Force may incur a contractual commitment for payment is $525.4 million. 

The Air Force is a party in numerous individual contracts that contain clauses, such as price escalation, 

award fee payments, or dispute resolution, that may or may not result in a future outflow of expenditures. 

Currently, Air Force does not have a systemic process by which it captures or assesses these potential 

contingent liabilities; therefore, the amounts reported may not fairly present the Air Force’s contingent 

liabilities. 

The estimated probable liability amount of $730.2 million was recognized in Note 15 as contingent 

liabilities. 

The recognized contingent liability includes $577.3 million in estimated future contract financing payments 

that will be paid to contractors upon delivery and government acceptance. See Note 15 for additional 

details. 

In addition, Air Force recognized the total estimated probable liability for claims and litigation against the 

Air Force handled by the Civil Law and Litigation Directorate, as of September 30, 2009, valued at 

$152.9 million, and included in Contingent Liabilities nonfederal. As of September 30, 2009, the Air Force 

was party to 11,978 claims and litigation actions. This liability dollar amount recorded in the financial 

statements is an estimate based on the weighted average payout rate for the previous three years. There are 

only two types of cases where U.S. Treasury will seek reimbursements from the affected agency, the 

Contract Dispute Act cases and select Federal Government personnel disciplinary matters. 
2009

73

General Fund

Notes to the Principal Statements

The SAF/GC developed the estimating methodology for the contingent liabilities recognized in Note 15. 

In cases where SAF/GC disclosed that a judgment has been awarded against the Air Force, these amounts 

were reported on the Balance Sheet and within Note 15. 

 

Note 17. Military Retirement and Other Federal Employment Benefits 

As of September 30 2009 

Liabilities 

Assumed

Interest

Rate (%) 

(Less: Assets Available to Pay 

Benefits) Unfunded Liabilities 

(Amounts in thousands) 

1. Pension and Health 

Actuarial Benefits 

A. Military Retirement 

Pensions $ 0 $ 0 $ 0

B. Military Retirement 

Health Benefits 0 0 0

C. Military MedicareEligible Retiree 

Benefits 0 0 0

D. Total Pension and 

Health Actuarial 

Benefits $ 0 $ 0 $ 0 

2. Other Actuarial 

Benefits 

A. FECA $ 1,072,389 $ 0 $ 1,072,389

B. Voluntary Separation 

Incentive Programs 0 0 0

C. DoD Education 

Benefits Fund 0 0 0

D. Total Other Actuarial 

Benefits $ 1,072,389 $ 0 $ 1,072,389 

3. Other Federal 

Employment Benefits $ 6,177 $ (6,177) $ 0

4. Total Military 

Retirement and Other 

Federal Employment 

Benefits: $ 1,078,566 $ (6,177) $ 1,072,389 

 Actuarial Cost Method Used: 

 Assumptions: 

 Market Value of Investments in Market-based and Marketable Securities: 
74

General Fund

Notes to the Principal Statements

As of September 30 2008 

Liabilities 

Assumed

Interest

Rate (%) 

(Less: Assets Available to Pay 

Benefits) Unfunded Liabilities 

(Amounts in thousands) 

1. Pension and Health 

Actuarial Benefits 

A. Military Retirement 

Pensions $ 0 $ 0 $ 0

B. Military Retirement 

Health Benefits 0 0 0

C. Military MedicareEligible Retiree 

Benefits 0 0 0

D. Total Pension and 

Health Actuarial 

Benefits $ 0 $ 0 $ 0 

2. Other Actuarial 

Benefits 

A. FECA $ 1,158,232 $ 0 $ 1,158,232

B. Voluntary Separation 

Incentive Programs 0 0 0

C. DoD Education 

Benefits Fund 0 0 0

D. Total Other Actuarial 

Benefits $ 1,158,232 $ 0 $ 1,158,232 

3. Other Federal 

Employment Benefits $ 5,182 $ (5,182) $ 0

4. Total Military 

Retirement and Other 

Federal Employment 

Benefits: $ 1,163,414 $ (5,182) $ 1,158,232 

 Actuarial Cost Method Used: 

 Assumptions: 

 Market Value of Investments in Market-based and Marketable Securities: 

Relevant Information for Comprehension 

Programs for which actuarial benefits are computed include the Federal Employees’ Compensation Act 

(FECA), the expected liability for death, disability, medical, and miscellaneous costs for approved 

compensation cases, and a component for incurred unreported claims. 

FECA liability is determined using a method that utilizes historical benefit payment patterns to predict 

the ultimate payments. The projected annual benefit payments are then discounted to present value using

the Office of Management and Budget’s economic assumptions for 10-year U.S. Treasury notes and

bonds.
2009

75

General Fund

Notes to the Principal Statements

Interest rate assumptions utilized for discounting were as follows: 

Discount Rates

 4.223% in Year 1 

 4.715% in Year 2 

 and thereafter 

To adjust more specifically for the effects of inflation on the liability for future workers’ compensation 

benefits, wage inflation factors (Cost of Living Adjustments (COLAs)) and medical inflation factors 

(Consumer Price Index Medical (CPIMs)) were applied to the calculation of projected future benefits.

The actual rates for these factors for the charge back year (CBY) 2009 were also used to adjust the 

methodology’s historical payments to current year constant dollars.

The compensation COLAs and CPIMs used in the projections for various CBYs were as follows: 

CBY COLA CPIM

2009 N/A N/A 

2010 0.47% 3.42% 

2011 1.40% 3.29% 

2012 1.50% 3.48% 

2013 1.80% 3.71%

2014 + 2.00% 3.71% 

The model’s resulting projections were analyzed to ensure that the estimates were reliable. Analysis was 

based on four tests: (1) a sensitivity analysis of the model to economic assumptions, (2) a comparison of 

the percentage change in the liability amount by agency to the percentage change in the actual 

incremental payments, (3) a comparison of the incremental paid losses per case (a measure of caseseverity) in CBY 2009 to the average pattern observed during the most current three charge back years, 

and (4) a comparison of the estimated liability per case in FY 2009 projection to the average pattern for 

the projections of the most recent three years.

The Air Force’s actuarial liability for workers’ compensation benefits is developed and provided by 

Department of Labor at the end of each fiscal year. There is no change on a quarterly basis. 

Other Federal Employment Benefits is comprised of additional post employment benefits due and 

payable to military personnel. 
76

General Fund

Notes to the Principal Statements

Note 18. General Disclosures Related to the Statement of Net Cost 

Intragovernmental Costs and Exchange Revenue

As of September 30 2009 2008 Restated 

(Amounts in thousands) 

 

1. Intragovernmental Costs $ 33,832,898 $ 33,664,673 

2. Public Costs 110,093,815 114,470,903 

3. Total Costs $ 143,926,713 $ 148,135,576 

 

4. Intragovernmental Earned Revenue $ (4,138,542) $ (4,937,405) 

5. Public Earned Revenue (2,002,892) (938,303) 

6. Total Earned Revenue $ (6,141,434) $ (5,875,708) 

 

7. Net Cost of Operations $ 137,785,279 $ 142,259,868 

Relevant Information for Comprehension 

Intragovernmental costs and revenue are related to transactions made between two reporting entities within 

the Federal Government. 

The Statement of Net Cost (SNC) represents the net cost of programs and organizations of the Federal 

Government supported by appropriations or other means. The intent of SNC is to provide gross and net cost 

information related to the amount of output or outcome for a given program or organization administered by 

a responsible reporting entity. The DoD’s current processes and systems do not capture and report 

accumulated costs for major programs based upon the performance measures as required by the Government 

Performance and Results Act. The DoD is in the process of reviewing available data and developing a cost 

reporting methodology as required by the Statement of Federal Financial Accounting Standards (SFFAS) 

No. 4, “Managerial Cost Accounting Concepts and Standards for the Federal Government,” as amended by 

SFFAS No. 30, “Inter-entity Cost Implementation.” 

Public costs and revenues are exchange transactions made between the reporting entity and a nonfederal 

entity. 

The Air Force’s systems do not track intragovernmental transactions by customer at the transaction level. 

Buyer-side expenses are adjusted to agree with internal seller-side revenue. Expenses are generally adjusted 

by accruing additional accounts payable and expenses. 

The Air Force does not meet accounting standards because information presented is based on budgetary 

obligations, disbursements, and collection transactions, as well as nonfinancial feeder systems, adjusted to 

record known accruals for major items such as payroll expenses, accounts payable, and environmental 

liabilities. 
2009

77

General Fund

Notes to the Principal Statements

The Air Force’s accounting systems generally do not capture information relative to heritage assets 

separately and distinctly from normal operations. 

Beginning FY 2009, the Air Force began using the Reliability and Maintainability Information System 

(REMIS) as the official system of record for financial accountability of military equipment assets. The 

conversion from Capital Asset Management System Military Equipment (CAMS-ME) to REMIS resulted in 

a prior period adjustment $8.5 billion, of which $45.8 million was for additional depreciation unrecognized 

in FY 2008. See Note 26 for additional information. 

Note 19. Disclosures Related to the Statement of Changes in Net Position 

Relevant Information for Comprehension 

The Appropriations Received on the Statement of Changes in Net Position (SCNP) does not agree 

with Appropriations Received on the Statement of Budgetary Resources (SBR) in the amount of 

$8.2 million. The difference is due to additional resources included in the Appropriations Received on 

the SBR. Refer to note 20 for additional details. 

The eliminations column on SCNP will reflect zero dollars. In the SCNP, all offsetting balances 

(i.e. transfers-in and transfers-out, revenues, and expenses) for intradepartmental activity between earmarked 

and other (nonearmarked) funds are reported on the same lines. This results in an eliminations column, 

which appears to contain no balances. In reality, the column contains all appropriate elimination entries, but 

all net to zero within each respective line, except for intraentity imputed financing costs. 

Beginning FY 2009, the Air Force began using the Reliability and Maintainability Information System 

(REMIS) as the official system of record for financial accountability of military equipment assets. The 

conversion from Capital Asset Management System Military Equipment (CAMS-ME) to REMIS resulted in 

a prior period adjustment of $8.5 billion, representing net book value, to the beginning balance of FY 2008 

cumulative results of operations. See Note 26 for additional information. 
78

General Fund

Notes to the Principal Statements

Note 20. Disclosures Related to the Statement of Budgetary Resources 

As of September 30 2009 2008 

(Amounts in thousands)

 

1. Net Amount of Budgetary Resources Obligated for 

Undelivered Orders at the End of the Period $ 79,201,453 $ 70,594,923 

 

2. Available Borrowing and Contract Authority at the End of 

the Period 0 0 

Apportionment Categories 

Funds are apportioned by three categories: (1) Category A is apportioned quarterly, (2) Category B 

is apportioned by activity or project, and (3) Exempt are funds not subject to apportionment. The 

amounts of direct and reimbursable obligations incurred are stated in the table. 

Category A Category B Exempt 

Direct $89.3 billion $72.9 billion $6.7 million 

Reimbursable $6.1 billion $4.0 billion $0.6 million 

Intraentity Transactions 

The Statement of Budgetary Resources (SBR) includes intraentity transactions because the statements 

are presented as combined. 

Permanent Indefinite Appropriations 

Permanent indefinite appropriations are as follows (see Note 23 for additional information): 

x Department of the Air Force General Gift Fund [10 USC 2601(b)] 

x Wildlife Conservation Fund [16 USC 670(a)] 

x Air Force Cadet Fund [37 USC 725(s)] 

Legal limitations and time restrictions on the use of unobligated appropriation balances such as 

upward adjustments are provided under Public Law. 

Appropriations Received 

The Appropriations Received line item on the Statement of Changes in Net Position differs from that 

reported on SBR because Appropriations Received on the Statement of Changes in Net Position do 

not include dedicated appropriations and earmarked receipts. Dedicated appropriations and 

earmarked receipts are accounted for as either nonexchange revenue or donations and forfeitures of 

cash and cash equivalents. This resulted in an $8.2 million difference. 
2009

79

General Fund

Notes to the Principal Statements

Note 21. Reconciliation of Net Cost of Operations to Budget 

Resources Used to Finance Activities:

Budgetary Resources Obligated: 

1. Obligations incurred $ 172,379,940 $ 165,397,504 

2. Less: Spending authority from offsetting 

 collections and recoveries (-) 

(13,949,150) (14,551,339) 

3. Obligations net of offsetting collections 

 and recoveries 

$ 158,430,790 $ 150,846,165 

4. Less: Offsetting receipts (-) (104,099) (201,497) 

5. Net obligations $ 158,326,691 $ 150,644,668 

Other Resources: 

6. Donations and forfeitures of property 0 0

7. Transfers in/out without reimbursement (+/-) (124,914) 322,962 

8. Imputed financing from costs absorbed by others 725,513 628,882 

9. Other (+/-) (2,841,855) 1,323,184 

10. Net other resources used to finance activities $ (2,241,256) $ 2,275,028 

11. Total resources used to finance activities $ 156,085,435 $ 152,919,696 

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 (-) $ (8,606,530) $ (6,483,468) 

 12b. Unfilled Customer Orders 228,532 (161,014) 

13. Resources that fund expenses recognized in prior 

 Periods (-) 

(845,421) (86,602) 

14. Budgetary offsetting collections and receipts that 

 do not affect Net Cost of Operations 

104,099 201,497 

15. Resources that finance the acquisition of assets (-) (29,521,992) (18,749,096) 

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 (+/-) 2,966,770 (1,646,144) 

17. Total resources used to finance items not part 

 of the Net Cost of Operations 

$ (35,674,542) $ (26,924,827) 

18. Total resources used to finance the Net Cost 

 of Operations 

$ 120,410,893 $ 125,994,869 

As of September 30 2009 2008 Restated

(Amounts in thousands)
80

General Fund

Notes to the Principal Statements

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 Period:

19. Increase in annual leave liability $ 187,550 $ 75,316 

20. Increase in environmental and disposal liability 550,819 1,367,508 

21. Upward/Downward reestimates of credit subsidy 

 expense (+/-) 

0 0

22. Increase in exchange revenue receivable from 

 the public (-) 

0 0

23. Other (+/-) 137,812 533,952 

24. Total components of Net Cost of Operations that 

 will Require or Generate Resources in future 

 periods 

$ 876,181 $ 1,976,776 

Components not Requiring or Generating Resources: 

25. Depreciation and amortization $ 18,297,128 $ 11,597,672 

26. Revaluation of assets or liabilities (+/-) 1,265,504 4,323,066 

27. Other (+/-) 

 27a. Trust Fund Exchange Revenue 0 0

 27b. Cost of Goods Sold 0 0

 27c. Operating Material and Supplies Used 25,371,357 22,597,444 

 27d. Other (28,435,783) (24,229,959) 

28. Total Components of Net Cost of Operations that 

 will not Require or Generate Resources 

$ 16,498,206 $ 14,288,223 

29. Total components of Net Cost of Operations 

 that will not Require or Generate Resources in 

 the current period 

$ 17,374,387 $ 16,264,999 

30. Net Cost of Operations $ 137,785,280 $ 142,259,868 

Relevant Information for Comprehension 

Due to Air Force financial system limitations, budgetary data is not in agreement with proprietary expenses 

and assets capitalized. The difference between budgetary and proprietary data is a previously identified 

deficiency. The amount of the adjustment to the note schedule to bring it into balance with the Statement of 

Net Cost is $508.1 million, in the Other Components Not Requiring or Generating Resources category. 

The following note schedule lines are presented as combined instead of consolidated due to intraagency 

budgetary transactions not being eliminated: 

As of September 30 2009 2008 Restated

(Amounts in thousands)
2009

81

General Fund

Notes to the Principal Statements

x Obligations Incurred 

x Less: Spending Authority from Offsetting Collections and Recoveries 

x Obligations Net of Offsetting Collections and Recoveries 

x Less: Offsetting Receipts 

x Net Obligations 

x Undelivered Orders 

x Unfilled Customer Orders 

Other Resources Used to Finance Activities consists of other losses to adjust intragovernmental transfers in. 

Other Resources Used to Finance Items Not Part of the Net Cost of Operations is comprised of losses to 

adjust intragovernmental transfers in order to reconcile buyer and seller transfers. 

Other Components of the Net Cost of Operations that will not Require or Generate Resources in the Current 

Period includes adjustments to the contingent legal liability. 

Other Components not Requiring or Generating Resources represents net changes in Operating Materiel and 

Supplies during the period. 

Beginning FY 2009, the Air Force began using the Reliability and Maintainability Information System 

(REMIS) as the official system of record for financial accountability of military equipment assets. The 

conversion from Capital Asset Management System Military Equipment (CAMS-ME) to REMIS resulted in 

a prior period adjustment $8.5 billion, of which $45.8 million was for additional depreciation unrecognized 

in FY 2008. See Note 26 for additional information. 

Note 22. Disclosures Related to Incidental Custodial Collections 

The Air Force collected $65.2 million of incidental custodial revenues generated primarily from collection 

of accounts receivable related to cancelled accounts. These funds are not available for use by Air Force. 

At the end of each fiscal year, the accounts are closed and the balances rendered to the U.S. Treasury. 
82

General Fund

Notes to the Principal Statements

Note 23. Earmarked Funds 

2009 

BALANCE SHEET

As of September 30 

(Amounts in thousands) 

Military Retirement 

Fund 

Medicare Eligible 

Retiree Health Care 

Fund 

Other Earmarked 

Funds Eliminations Total 

ASSETS 

Fund balance with 

Treasury $ 0 $ 0 $ 9,515 $ 0 $ 9,515

Investments 0 0 1,079 0 1,079

Accounts and Interest 

Receivable 0 0 1 0 1

Other Assets 0 0 5 0 5

Total Assets $ 0 $ 0 $ 10,600 $ 0 $ 10,600

LIABILITIES and NET 

POSITION

Military Retirement 

Benefits and Other Federal 

Employment Benefits $ 0 $ 0 $ 0 $ 0 $ 0

Other Liabilities 0 0 168 0 168

Total Liabilities $ 0 $ 0 $ 168 $ 0 $ 168

 

Unexpended 

Appropriations 0 0 0 0 0

Cumulative Results of 

Operations 0 0 10,432 0 10,432

 

Total Liabilities and Net 

Position $ 0 $ 0 $ 10,600 $ 0 $ 10,600

STATEMENT OF NET 

COST

For the period ended 

September 30 

Program Costs $ 0 $ 0 $ 3,721 $ 0 $ 3,721

Less Earned Revenue 0 0 (630) 0 ( 630)

Net Program Costs $ 0 $ 0 $ 3,091 $ 0 $ 3,091

Less Earned Revenues 

Not Attributable to 

Programs 0 0 0 0 0

Net Cost of Operations $ 0 $ 0 $ 3,091 $ 0 $ 3,091
2009

83

General Fund

Notes to the Principal Statements

2009 

STATEMENT OF 

CHANGES IN NET 

POSITION

For the period ended 

September 30 

Military Retirement 

Fund 

Medicare Eligible 

Retiree Health Care 

Fund 

Other Earmarked 

Funds Eliminations Total 

Net Position Beginning of 

the Period $ 0 $ 0 $ 5,355 $ 0 $ 5,355

Net Cost of Operations 0 0 3,091 0 3,091

Budgetary Financing 

Sources 0 0 8,168 0 8,168

Other Financing Sources 0 0 0 0 0

 

Change in Net Position $ 0 $ 0 $ 5,077 $ 0 $ 5,077

 

Net Position End of 

Period $ 0 $ 0 $ 10,432 $ 0 $ 10,432
84

General Fund

Notes to the Principal Statements

2008 

BALANCE SHEET

As of September 30 

(Amounts in thousands) 

Military Retirement Fund 

Medicare Eligible 

Retiree Health Care 

Fund 

Other Earmarked 

Funds Eliminations Total 

ASSETS 

Fund balance with 

Treasury $ 0 $ 0 $ 8,260 $ 0 $ 8,260

Investments 0 0 874 0 874

Accounts and Interest 

Receivable 0 0 1 0 1

Other Assets 0 0 4 0 4

Total Assets $ 0 $ 0 $ 9,139 $ 0 $ 9,139

LIABILITIES and NET 

POSITION

Military Retirement 

Benefits and Other 

Federal Employment 

Benefits $ 0 $ 0 $ 0 $ 0 $ 0

Other Liabilities 0 0 3,784 0 3,784

Total Liabilities $ 0 $ 0 $ 3,784 $ 0 $ 3,784

 

Unexpended 

Appropriations 0 0 0 0 0

Cumulative Results of 

Operations 0 0 5,355 0 5,355

 

Total Liabilities and Net 

Position $ 0 $ 0 $ 9,139 $ 0 $ 9,139

STATEMENT OF NET 

COST

For the period ended 

September 30 

Program Costs $ 0 $ 0 $ 12,867 $ 0 $ 12,867

Less Earned Revenue 0 0 (10,044) 0 (10,044)

Net Program Costs $ 0 $ 0 $ 2,823 $ 0 $ 2,823

Less Earned Revenues 

Not Attributable to 

Programs 0 0 0 0 0

Net Cost of Operations $ 0 $ 0 $ 2,823 $ 0 $ 2,823
2009

85

General Fund

Notes to the Principal Statements

2008 

STATEMENT OF 

CHANGES IN NET 

POSITION

For the period ended 

September 30 

Military Retirement 

Fund 

Medicare Eligible 

Retiree Health Care 

Fund 

Other Earmarked 

Funds Eliminations Total 

Net Position Beginning 

of the Period $ 0 $ 0 $ 4,549 $ 0 $ 4,549

 

Net Cost of Operations 0 0 2,823 0 2,823

Budgetary Financing 

Sources 0 0 3,629 0 3,629

Other Financing 

Sources 0 0 0 0 0

 

Change in Net Position $ 0 $ 0 $ 806 $ 0 $ 806

 

Net Position End of 

Period $ 0 $ 0 $ 5,355 $ 0 $ 5,355

Earmarked Funds 

Department of the Air Force General Gift Fund [10 USC 2601 (b)] 

The Department of the Air Force General Gift Fund accepts, holds, and administers any gift, device, or 

bequest of real or personal property, made on the condition that it is used for the benefit (or in connection 

with the establishment, maintenance, or operation) of a school, hospital, library, museum, or cemetery under 

the Air Force’s jurisdiction. The fund is available to such institutions or organizations subject to the terms 

of the gift, device, or bequest. 

Conditional gifts are invested in U.S. Treasury securities, and any interest earned on these securities is 

accumulated in the fund. 

Wildlife Conservation Fund [16 USC 670 (a)] 

The Wildlife Conservation Fund provides for (1) the conservation and rehabilitation of natural resources on 

military installations; (2) the sustainable multipurpose use of the resources which include hunting, fishing, 

trapping, and nonconsumptive uses; and (3) the public access to military installations to facilitate its use, 

subject to safety requirements and military security. The fund is available to carry out these programs and 

other such expenses that may be necessary for the purpose of the cited statute. 

Consisting of both appropriated and nonappropriated funding, this fund gives installation commanders the 

authority to collect fees from the sale of hunting and fishing permits. 

Air Force Cadet Fund [37 USC 725 (s)] 

The Air Force Cadet Fund is maintained for the benefit of Air Force Academy cadets. Disbursements are 

made for the personal services of cadets such as laundry, arts, and athletics while collections are received 

from the same cadets at least equal to any disbursements made. 

The Air Force General Gift Fund and Wildlife Conservation Fund are trust funds. The Air Force Cadet 

Fund is classified as a special fund. All three funds utilize receipt and expenditure accounts in accounting 

for and reporting the funds. 
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Notes to the Principal Statements

Note 24. Fiduciary Activities 

Schedule of Fiduciary Activity 

For the period ended September 30 2009 

(Amounts in thousands) 

1. Fiduciary net assets, beginning of year $ 17,561 

2. Fiduciary revenues 0

3. Contributions 36,902 

4. Investment earnings 2,124

5. Gain (Loss) on disposition of investments, net 0

6. Administrative and other expenses 0

7. Distributions to and on behalf of beneficiaries (31,143) 

8. Increase/(Decrease) in fiduciary net assets $ 7,883 

9. Fiduciary net assets, end of period $ 25,444 

Schedule of Fiduciary Net Assets 

For the period ended September 30 2009 

(Amounts in thousands) 

FIDUCIARY ASSETS 

1. Cash and cash equivalents $ 25,444 

2. Investments 0

3. Other Assets 0

0

FIDUCIARY LIABILITIES 

4. Less: LIABILITIES $ 0.00

5. TOTAL FIDUCIARY NET ASSETS $ 25,444 

Relevant Information for Comprehension 

A fiduciary relationship may exist anytime a Federal Government entity collects or receives, and holds or makes 

disposition of assets in which a non-federal individual or entity has an ownership interest that the Federal 

Government must uphold. The relationship is based on statute or other legal authority and the fiduciary activity 

must be in furtherance of that relationship. The Air Force’s fiduciary activities primarily consist of the 

Savings Deposit Program (SDP). SDP was established to provide members of the uniformed services serving in a 

designated combat zone the opportunity to build their financial savings.
2009

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Notes to the Principal Statements

As of September 30 2009 

Asset Category 

Land and Buildings Equipment Other Total 

(Amounts in thousands) 

 

1. ENTITY AS LESSEEOperating Leases 

Future Payments Due 

 Fiscal Year 

 2010 45,601 0 105,563 151,164 

 2011 46,969 0 109,786 156,755 

 2012 48,378 0 114,177 162,555 

 2013 49,829 0 118,744 168,573 

 2014 51,324 0 123,494 174,818 

 After 5 Years 52,864 0 0 52,864 

 

 Total Future Lease 

Payments Due $ 294,965 $ 0 $ 571,764 $ 866,729

Relevant Information for Comprehension 

Leases in the land and buildings category include costs for operating leased housing facilities for active duty 

Air Force in the United States and overseas. Section 801 Family Housing Program leases are not included in 

this category. 

Other leases consist of Air Force vehicle leases from the General Services Administration and commercial 

lessors located in Europe, Southwest Asia, and the United States. 

Note 25. Other Disclosures 

Note 26. Restatements 

Beginning FY 2009, the Air Force began using the Reliability and Maintainability Information System 

(REMIS) as the official system of record for financial accountability of military equipment assets. The 

conversion from Capital Asset Management System-Military Equipment (CAMS-ME) to REMIS 

resulted in a prior period adjustment of $8.5 billion, representing net book value, to the beginning 

balance of FY 2008 Cumulative Results of Operations. Statements affected by the adjustment are the 

Balance Sheet, Statement of Net Cost, and Statement of Changes in Net Position. 
 

(Defense Dept. photo by TSgt Jerry Morrison) 
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Fiscal Year 2009

Required Supplementary 

Stewardship Information
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 STEWARDSHIP INVESTMENTS 

Stewardship investments are substantial investments made by DoD for the benefit of the nation, 

but are not physical assets owned by DoD. Stewardship investments include expenses incurred 

for federally financed, but not federally owned physical property (Nonfederal Physical Property) 

and federally financed research and development (Research and Development). 

NONFEDERAL PHYSICAL PROPERTY 

Nonfederal Physical Property investments are expenses included in calculating net cost incurred 

by the reporting entity for the purchase, construction or major renovation of physical property 

owned by state and local governments. The expenses include the costs identified for major 

additions, alterations and replacements, purchases of major equipment, and purchases or 

improvements of other nonfederal assets. In addition, Nonfederal Physical Property Investments 

include federally-owned physical property transferred to state and local governments. 

NONFEDERAL PHYSICAL PROPERTY 

Yearly Investment in State and Local Governments 

For the Current and Four Preceding Fiscal Years 

($ in millions) 

Categories FY 2009 FY 2008 FY 2007 FY 2006 FY 2005

1. Transferred Assets: 

 National Defense Mission Related 

2. Funded Assets: 

0 0 0 00

 National Defense Mission Related $13.0 $19.6 $2.8 $8.5 $8.3 

 Totals $13.0 $19.6 $2.8 $8.5 $8.3 

The Air National Guard investments in Nonfederal Physical Property are strictly through the 

Military Construction Cooperative Agreements (MCCAs). These agreements involve the 

transfer of money only and allow joint participation with States, Counties, and Airport 

Authorities for construction or repair of airfield pavements and facilities required to support the 

flying mission assigned at these civilian airfields. 

Investment values included in this report are based on Nonfederal Physical Property outlays 

(expenditures). Outlays are used because current DoD systems are unable to capture and 

summarize costs in accordance with the USGAAP requirements. 
2009

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RESEARCH AND DEVELOPMENT 

Research and Development investments are incurred in the search for new or refined knowledge 

and ideas, 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.

Categories FY 2009 FY 2008 FY 2007 FY 2006 FY 2005

1. Basic Research $418 $389 $383 $374 $373

2. Applied Research $1,051 $1,032 $1,034 $919 1,069

3. Development:

 Advanced Technology Development $611 $937 $970 $924 635

 Advanced Component Development 

 and Prototypes 2,022 $2,423 $2,310 $2,185 $1,769

 System Development and Demonstration 3,542 $3,654 $4,094 $4,572 $4,332

 Research, Development, Test and Evaluation

 Management Support 1,296 $1,323 $1,286 $1,381 $1,125

 Operational Systems Development $12,459 $11,481 $11,579 $11,021 14,793

4. Totals $23,775 $21,910 $21,523 $22,095 $20,463

INVESTMENTS IN RESEARCH AND DEVELOPMENT

 For the Current and Four Preceding Fiscal Years

Yearly Investment in Research and Development

 ($ in millions)

Basic Research is the systematic study to gain knowledge or understanding of the fundamental 

aspects of phenomena and of observable facts without specific applications, processes, or 

products in mind. Basic Research involves the gathering of a fuller knowledge or understanding 

of the subject under study. Major outputs are scientific studies and research papers. 

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 practicality of proposed solutions and determining their parameters. 

Major outputs are scientific studies, investigations, research papers, hardware components, 

software codes, and limited construction of, or part of, a weapon system, to include nonsystem 

specific development efforts. 

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 the following five stages: 

1. Advanced Technology Development is the systematic use of the knowledge or 

understanding gained from research directed towards proof of technological visibility and 
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assessment of operational and productivity rather than the development of hardware for service 

use. This 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 weapon systems finalized for complete operational and 

developmental testing. 

4. Research, Development (R&D), Test and Evaluation 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, 

operations 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. 

The following are representative program examples for each of the above major categories: 

Basic Research: 

A team of Air Force-supported researchers has developed a novel technique that aligns maps 

with satellite imagery; the new method automatically identifies a set of control points that 

registers a map with an image. This technique automatically extracts the road intersections on a 

map and uses the layout of those intersections to find the corresponding area on the satellite 

imagery currently used by various agencies to create context and situational awareness for better 

and faster decision-making. 

Air Force-funded researchers have produced an anti-reflective nanostructure surface using 

arrayed silicon nanotips. The silicon nanotip surface mimics the naturally formed surfaces found 

on many plants and animals. The color on butterfly wings, camouflage for cicadas, and night 

vision for moths are all made possible by tiny surface structures that absorb certain wavelengths 

of light. Researchers are expanding on the anti-reflective properties of moth eyes to make better 

protective skins for U.S. Air Force unmanned aerial vehicles. The current findings allow 

researchers to add broadband anti-reflection and quasi-omni-directional anti-reflection to the list 

of properties that show promise for Air Force optical defensive applications.
2009

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Applied Research: 

The Air Force has developed and demonstrated the ability to combine two sensors onto a single 

chip that provides an infrared focal plane array imager with both spectral tunability and 

polarimetric sensing. Combining these two sensors on a single chip cuts the size, weight, and 

power requirements by more than half and could significantly reduce production costs to build a 

focal plane array camera four times larger than current systems. This added resolution will give 

the warfighter a better ability to acquire targets. 

The Air Force achieved photonic industry “firsts” with its highly integrated photonic devices for 

on-board communications systems. These firsts are: first integrated erbium doped waveguide 

amplifier and pump laser; first athermal arrayed waveguide grating; and first 32-channel 

pre-amped receiver array. These devices reduce the size, weight, and power consumption and 

increase the network capacity of on-board communications systems for avionics and satellite 

platforms. 

Advanced Technology Development: 

The Air Force’s Advanced Composite Cargo Aircraft is a proof-of-concept technology 

demonstrator for advanced composite manufacturing processes in a full-scale, certified aircraft. 

The demonstrator program, with the aircraft utilizing composite materials as the 

predominant/primary structure, achieved a detailed, fabrication-ready design in five months 

using advanced analytical modeling tools. The first flight of the demonstrator aircraft occurred 

in 25 months. The advances in materials were at an unprecedented scale for the aerospace 

industry by successfully curing the largest known aircraft composite structure in the world. The 

overall larger, higher performance airframe structure at the same weight indicates ~20% weight 

savings are possible for equivalent structures. 

An Air Force-led, multi-agency collaboration recently launched a new satellite that can provide 

imagery to in-theater combatant commanders within ten minutes of collection to help keep 

warfighters a step ahead of their adversaries. Launched aboard an Air Force Minotaur I rocket 

on May 19, 2009 from NASA’s Wallops Flight Facility on the coast of Virginia, Tactical 

Satellite-3 (TacSat-3) has exceeded expectations with all systems performing well. Its primary 

payload, the Advanced Responsive Tactically-effective Military Imaging Spectrometer sensor 

has already provided high-resolution imagery to a ground station via a high-bandwidth data link. 

TacSat-3 is a collaboration involving the Air Force Research Laboratory, the Army Space and 

Missile Defense Command, the Department of Defense's Operationally Responsive Space 

Office, the Office of Naval Research, the National Geospatial-Intelligence Agency, and the 

Air Force’s Space Development and Test Wing. 

As part of efforts to reduce the U.S. military's reliance on foreign energy sources, the Air Force 

continued certification of the alternative jet fuel blend of JP-8 with up to 50% synthetic kerosene 

produced by the Fischer-Tropsch (FT) process. The FT process can use coal, natural gas, 

biomass or a combination of them to produce liquid fuel, and will provide potential sources for 

jet fuel in addition to petroleum. The FT certification effort is part of the Pentagon’s Assured 

Fuel Initiative, in which the Air Force plans to certify all of its systems which use jet fuel to be 
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able to use the FT blend by early 2011. Certified aircraft include the F-15, F-22, B-52, C-17 and 

B-1. In addition, the fuel blend has also been flight tested further on the T-38, C-5 and C-130. 

Field service evaluations to identify longer term effects of the blended fuel were successfully 

completed on a pair of F-15 aircraft and nearing completion on a representative example of 

USAF’s fueling infrastructure with no negative effects found. Based on extensive laboratory 

testing, the Occupational, Environmental Health Working Group has determined the 

Occupational Exposure Limit of the blended fuel will be the same as JP-8. The Air Force 

collaborated with the FAA and Industry in the development and final approval by ASTM 

International of a new commercial specification for aviation fuel allowing up to 50% FT 

synthetic kerosene in commercial Jet A and Jet A-1 fuels (ASTM D-7566, "Aviation Turbine 

Fuel Containing Synthesized Hydrocarbons"- September 1, 2009). Based on the approved 

standard, the Air Force initiated certification of its Commercial Derivative Aircraft. In addition, 

the Air Force began planning and fuel acquisition for a certification program for another nearterm potential non-petroleum fuel blend; its blend stocks are derived from biological fats and 

oils. This class of fuel blend stocks is termed Hydroprocessed Renewable Jet (HRJ) fuel, which, 

when blended up to 50% with JP-8, will provide the Air Force with sustainable options for 

reducing the use of petroleum fuels. 

The Air Force developed improved turbine engine life-management tools that integrate 

state-of-the-art material analysis, enhanced non-destructive evaluation, and data management as 

a comprehensive life management system. Component cost avoidance is estimated to exceed 

$300 million for the F100/F110 engine series alone. 

The Air Force developed a custom-molded, noise-attenuating earplug that enables seamless 

voice communications to and from radios, while electronically passing all outside environmental 

sounds to the operator at safe levels. The Joint Unmanned Combat Air Systems (J-UCAS) 

program was terminated in December 2005. The Air Force continued to advocate the Air Force 

Research Library (AFRL) Automated Air Refueling (AAR) program, which continues to make 

historic progress. The AAR program consists of a combination of simulation and flight tests in 

order to develop the appropriate requirements and system design for Unmanned Aerial Vehicle 

(UAV) refueling, which may also be applied to manned refueling. Phase I of the AAR 

demonstration program was completed with great success. In September 2007, the AAR 

Positions and Pathways Flight Test successfully demonstrated automated maneuvering with over 

eight hours of hands-off formation flight, including movement from the observation position (off 

the wing of the tanker) to pre-contact position, to the contact position, and then back. 

February 2008 saw a successful four-ship Concept of Operations (CONOPs) simulation 

involving Air Mobility Command operators in the loop. AFRL kicked off AAR Phase II in June 

2008 by issuing solicitations for an overall Phase II integrating contractor and a Precision GPS 

developer; selection of the winning bidders occurred 1st Quarter, FY 2009. 
2009

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Demonstration and Validation (Advanced Component Development and Prototypes): 

The Air Force’s Advanced Component Development and Prototypes programs are comprised of 

system specific advanced technology integration efforts accomplished in an operational 

environment to help expedite transition from the effort. In FY 2004, the Air Force successfully 

demonstrated Fighter Aircraft Command and Control Enhancement (FACE). FACE provides an 

improved, beyond-line-of-sight (BLOS) command and control link with fighter aircraft by 

integrating Iridium telephone communications equipment with existing aircraft communications 

equipment. BLOS capability has traditionally been provided by low-density, high-demand 

airborne platforms acting as communications relays. FACE provides relief for these overworked 

assets, while allowing combatant commanders to maintain positive control of the battle space. 

FACE has been approved for deployment to Afghanistan through the Air Force's Rapid 

Response Process, and has the potential for extensive use in virtually any area of responsibility, 

including Homeland Defense.

In FY 2005, the Air Force restructured and refocused the Space Radar (SR) program (formerly 

Space Based Radar) to address congressional concerns with technical risk, affordability, and 

DoD-IC integration. In January 2005 the Secretary of Defense and the Director of Central 

Intelligence signed a joint memo designating the SR program as the single space radar capability 

for the nation. In May 2007, the Deputy Secretary of Defense and the Principal Deputy Director 

of National Intelligence signed the Joint Radar Enterprise Memorandum, agreeing to a joint 

funding arrangement, acquisition strategy, and management structure. The details of this 

arrangement are being captured in the Joint Radar Enterprise Management Plan. The SR Initial 

Capabilities Document (ICD) was approved by the IC Mission Requirements Board (MRB) in 

December 2005 and the DoD Joint Requirements Oversight Council (JROC) in January 2006. 

The Capability Development Document is being prepared in parallel with the SR system concept 

of operations (CONOPS); both are on track for MRB and JROC approval in 1st Quarter, 

FY 2009. The SR program implemented a demonstration framework approach to system 

development. This approach will further technology maturity risk reduction and CONOPS 

experimentation through a mix of space, air, and land-based demonstration activities that will 

maximize existing assets. The SR program continues to make significant advancement towards 

the System Requirements Review milestone. The SR program will provide day/night, allweather global surface moving target indications (MTI), Search and Rescue (SAR), and highresolution terrain information (HRTI) capabilities from a space-based platform. Initial launch 

capability is planned for 4th Quarter, FY 2016. 

System Development and Demonstration: 

The F-35 Joint Strike Fighter (JSF) program is developing a family of strike fighter aircraft for 

the Air Force, Navy, Marine Corps and our allies, with maximum commonality among the 

variants to minimize life cycle costs. The Air Force Conventional Takeoff and Landing (CTOL) 

variant will be a multi-role, primary air-to-ground aircraft to replace the F-16 and A-10, and 

complement the F-22. While the F-22 will establish air dominance, the F-35 with its 

combination of stealth, large internal payloads and multi-spectral avionics will provide persistent 

stealth and precision engagement to future battle space. The F-35 is in the eighth year of a 
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13-year Engineering and Manufacturing Development (EMD) effort. Significant program 

accomplishments in FY 2009 include: 

x 9 flight and ground test aircraft delivered (4 CTOL, 4 Short Takeoff and Vertical 

Landing (STOVL), 1 Combat Vehicle (CV)) 

x 7 flight test aircraft being built (2 STOVL, 3 CTOL, 2 CV) 

x 3 ground test aircraft being built (1 STOVL, 2 CV) 

x Over 100 flights on 3 test aircraft 

x Low Rate Initial Production (LRIP) Lot 3 contracts for 7 AF CTOLs & 7 Navy 

STOVLs awarded to Lockheed on June 2, 2009 and P&W on July 22, 2009 

x Service Acquisition Executive (SAE) leadership transitioned from Navy to 

Air Force April 2009 

Predator (MQ-1) UAV Program: 

The MQ-1 Predator UAV program is developing the capability to instantaneously derive and 

disseminate JDAM-quality coordinates from the aimpoint of its electro-optical/infra-red (EO/IR) 

full motion video sensor. Sensor improvements include development of a precise attitude 

reference system coupled with an off-the-shelf two color eye-safe laser rangefinder/designator 

plus development of an accurately timed metadata system. Aircraft will be modified with a new 

guidance system incorporating differential GPS. Fielding is scheduled to begin in FY 2011. 

Follow-on development will provide instantaneous JDAM-quality data for all pixels within the 

EO/IR image. 

Global Hawk (RQ-4) Test Program: 

In FY 2009 the Global Hawk flight test program was restructured to alleviate concurrent test and 

flight acceptance by moving flight acceptance to Beale AFB leaving Edwards AFB to 

concentrate on flight test. The first Block 40 aircraft will be delivered to Edwards AFB in 2009 

to support developmental flight test. RTIP sensor testing continues flights on the Proteus aircraft 

while RTIP core mode (SAR Spot/Swath and GMTI modes) development is complete and 

deferred modes (Concurrent and High Range Resolution) development is still in progress. In 

support of JUON 336, Battle Field Airborne Communications Node (BACN) development and 

flight testing has been accelerated on Block 20 aircraft in order to provide this much needed 

support to the warfighter on a 24/7 basis. 
2009

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The Airborne Warning and Control System (AWACS) aircraft continues to modernize its 

mission capabilities to remain an effective airborne battle management and surveillance system 

for command and control of combat forces. The Block 40/45 Upgrade improves the quality and 

timeliness of sensor data for shooters, improves combat identification, supports a Single 

Integrated Air Picture (SIAP) through multi-sensor integration, improves the AWACS 

contribution to Time Critical Targeting via Data Link Infrastructure, improves electronic 

support, measures processing, and enables more effective, faster upgrades via an open system, 

Ethernet-based architecture. Block 40/45 awarded a Low Rate Initial Production contract for 

hardware on the first aircraft in July 2009. The Navigation Warfare (NAVWAR) effort satisfies 

a Chairman Joint Chiefs of Staff Instruction for Global Positioning Satellite (GPS) users and 

incorporates new technology into the navigation sensor. NAVWAR completed a first article 

inspection in April 2009, installed Embedded GPS Inertial units in operational aircraft in 

May 2009, and awarded a follow-on production contract in June 2009. Production and fielding 

will continue through 2009 and 2010. The Next Generation Identification Friend or Foe 

(NGIFF) effort provides AWACS with a secure Mode 5 capability. NGIFF completed Risk 

Reduction efforts and awarded an EMD contract for the Block 30/35 version of the modification 

in February 2009, and anticipates awarding the EMD contract for the Block 40/45 version of the 

modification later in 2009. 

Research, Development, Test and Evaluation Management Support: 

The Air Force’s Research, Development, Test and Evaluation (RDT&E) Management Support 

efforts include projects directed toward support of installations and operations required for 

general research and development use. The projects include test ranges, maintenance support of 

laboratories, operation and maintenance of test aircraft, and studies and analyses in support of the 

research and development program. An example of Air Force RDT&E management support is 

the Major Test and Evaluation Investment program, which funds the planning, improvements 

and modernization for three national asset test centers having over $10 billion of unique test 

facilities/capabilities operated and maintained by the Air Force for the DoD test and evaluation 

missions, and is available to others having a requirement for their unique capabilities. 

Many efforts are contained within the Air Force Test and Evaluation (T&E) RDT&E program. 

Three examples include the Digital Integrated Air Defense System (DIADS), Magnetic 

Levitation (Maglev), and High Performance Computing (HPC). 

DIADS was designed with proprietary hardware and software to simulate a hostile Integrated Air 

Defense System (IADS) that was becoming expensive to maintain and update. To overcome this 

issue DIADS was converted to a Linux software and personal computer (PC) base that provides 

users with an open architecture system and portability. Portability benefited the F-35 when 

Lockheed Martin Aeronautics Company mandated use of SUSE Linux software for 

Developmental Testing (DT) and Operational Testing (OT). SUSE contains an indemnification 

clause that without open architecture, serious cost/schedule implications could have resulted. 

With open architecture, DIADS was easily ported from Red Hat Linux to SUSE Linux without 

any code changes. This minimized the amount of testing and Validation &Verification (V&V) 

work needed. Using open architecture and PCs benefit DIADS by providing long-term 
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flexibility and sustainability because DIADS would become unsupportable if the proprietary 

hardware/software company ceased to exist. 

Additionally, DIADS performance increased 20 times from running on proprietary software to 

running on Linux. This increase successfully supported F-22 Follow-on Operational Test & 

Evaluation (OT&E) Increment 3.1 which has a large scenario that is approximately five times 

larger than that used previously in terms of radar, C2, and weapons system players to run in real 

time. The proprietary software also presented a start-up time issue for the F-22 Initial OT&E 

scenario at the Air Combat Simulator that would have impacted test execution by making the test 

infeasible. 

Use of open architecture and PCs has made DIADS a more capable system and less expensive to 

operate and update. 

A Maglev system has been developed to provide increased acceleration and maximum speed 

while overcoming the harsh vibration environment encountered by a sled sliding on the current 

steel track at Holloman AFB, NM. This harsh vibration precludes testing sensitive missile 

hardware. The concept of magnetic levitation has been successfully demonstrated in three tests, 

one of which set a world land speed record of 423 miles per hour on a quarter mile track. The 

sled was mounted on a single slot guideway beam with two magnets. Shaped like a “T” the 

payload rides on top of the sled and the keel fits between the walls on each side. The 

superconducting magnets, mounted on each side of the keel, levitate the sled by interacting with 

copper rails embedded in a concrete guideway. Levitation eliminates friction, and when the sled 

is propelled down the guideway/track, the harsh vibration experienced on the steel track is 

eliminated. The Maglev goal is to reach a speed of Mach 9. 

The ability to predict performance has greatly advanced over the past few years as was 

demonstrated in the most recent test, when the sled came to stop within 15 feet of the predicted 

stop point. This is a very significant accomplishment, since accurate prediction models for 

magnetic forces were non-existent a few years ago. Some anomalies were observed with the 

design, but the tests proved the reliability of the magnet design, the procedures and software for 

cooling/charging the magnets. System design is being refined to improve roll stability with the 

use of a second guideway. Predictions are that roll stability will improve 50 times with a dual 

guideway. A 6 Degree-of-Freedom model for the new 4 magnet sled is being developed to more 

accurately predict forces the sled will experience. Additionally, an aero analysis is being 

accomplished to predict forces the magnets will exert on the guideway beam. Understanding 

these forces will ensure the best possible guideway and sled are designed. 

The Arnold Engineering and Development Center (AEDC) has begun operating a Silicon 

Graphics International HPC System that will be shared with the Air Force Seek Eagle program 

office (AFSEO) at Eglin AFB, FL. The computer’s capabilities are powerful computational and 

modeling tools that will help both organizations solve complex physics problems typically 

encountered in weapons stores separation test environments. AEDC is chiefly responsible for 

modeling, simulation and wind-tunnel testing of systems while AFSEO conducts flight testing, 

integrates systems and reports results to warfighters. Additionally, the computer will resolve 
2009

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complicated geometries of internal weapons bays, weapon launches and inlet and engine 

combinations that can generate irregular airflow as well as severe acoustic and complex aerothermodynamic conditions. The computer will also be used to support computational fluid 

dynamics work for the F-35, Small-Diameter Bomb and Joint Direct Attack Munition. 

Operational Systems Development: 

The Air Force’s operational system efforts include projects in support of development 

acquisition programs or upgrades in SDD. The F-22 Raptor program continued full rate 

production, and will maintain its role as the key enabler of joint air dominance through an 

incremental modernization program funded through Operational Systems Development 

activities. Through FY 2009 145 aircraft have been delivered. The modernization program will 

enhance the air vehicle, engine, and training systems to improve F-22A weapons, 

communications, and Intelligence Surveillance Reconnaissance (ISR) capabilities to further 

enhance Global Strike capabilities. Increment 2 is now resident in delivered aircraft and 

represents the first upgrade over initial operational capability. FY 2009 activities included 

development of the Increment 3 suite. A Capability Requirements Review (CRR) for Increment 

3.2 focused on dramatically improving the F-22A Raptor’s Air-to-Air and Air-to-Ground attack 

capabilities with AIM-9X, AIM-120D, full, Small Diameter Bomb capability, electronic 

protection updates, and an F-22/F-35/B-2 interoperable tactical datalink. 

The Advanced Medium Range Air-to-Air Missile (AMRAAM) Phase 3 (AIM-120C-7) was 

approved for fielding in December 2007. Production for this variant began in 4th Quarter, 

FY 2004, and was completed in 3rd Quarter, FY 2009. The AIM-120C-7 provides a major 

upgrade over the AIM-120C-6 guidance section, particularly in the use of circular processor 

cards over previously used rectangular cards. These cards provide significant space savings 

within the missile for added capability, in addition to providing greater processing power. 

AMRAAM Phase 4 (AIM-120D) builds on the AIM-120C-7 capability and is progressing. This 

new AIM-120D missile will add a GPS/INU and a 2-way Data Link to enhance accuracy and 

control, and thus, increase weapon effectiveness. In addition, the AIM-120D will have increased 

range and third party targeting which expands the High Off-boresight launch envelope. The 

SDD contract was awarded in December 2003. Captive flight testing has been initiated on the 

F/A-18C/D and F-15C/D. EMD is scheduled to complete in September 2009 with the 

completion of the Functional Configuration Audit (FCA). Proof-of-design units and proof-ofmanufacturing units are being used to support simulation/integration labs, production test 

equipment development, and ground and flight tests. Production for AIM-120D started in 

2nd Quarter, FY 2009 and will continue through FY 2024. 

The Small Diameter Bomb II (SDB II) program is a joint Air Force/Navy interest program that 

will use a tri-mode seeker and weapon data link to fill a critical capability gap by providing a 

stand-off, target classification and in-weather capability against moving targets. The SDB II A 

weapon program will retain the SDB I legacy capability against fixed surface target, improved 

GPS anti-jam capability and denied sanctuary of weather for adversary moving targets. The 

42-month Risk Reduction competition between two contractors that commenced in May 2006 to 
100

General Fund

Required Supplementary Stewardship Information

mature critical technologies for an all-up-round design will end in October 2009. Following the 

Risk Reduction Phase, a single contractor will be selected in 2nd Quarter, FY 2010 to complete 

an approximate 80 month EMD contract with production options. Milestone B is scheduled for 

3rd Quarter, FY 2010. Production for SDB II is scheduled to start 1st Quarter, FY 2013 and 

continue through FY 2023. Required Assets Available on the F-15E is planned for FY 2014. 

The SDB I Focused Lethality Munition (FLM), a variant of SDB I, is a Joint Capabilities 

Technology Development (JCTD) program that effectively demonstrates the military utility for 

prosecuting high-value targets by generating near-field blast effects in a high collateral risk 

environment. The SDB I FLM has a composite-cased warhead with a Multi-phase Blast 

Explosive to reduce fragmentation effects while increasing blast effects. This low colletaral 

damage warhead was integrated into the SDB I weapon. The Military Utility Assessment was 

successfully completed in June 2008 with positive feedback in all areas. The assessment 

supports SDB I FLM’s potential to fill a capability gap of engaging targets within 60 feet of 

collateral concerns. The FLM capability will increase combatant commanders’ strike options, 

particularly in an urban environment, while decreasing collateral damage risk. This JCTD fully 

leverages the SDB I program to facilitate rapid acquisition, with delivery of 50 residual assets in 

February 2008. An additional 100 residual assets will be delivered to the warfighter during 

3rd Quarter, FY 2010. 
2009

101

General Fund

Fiscal Year 2009

Required Supplementary Information
102

General Fund

Required Supplementary Information

Statement of Disaggregated Budgetary Resources

As of September 30, 2009 and 2008 ($ in thousands)

Other

Research, 

Development, 

Test & 

Evaluation

Operation and 

Maintenance

BUDGETARY FINANCING ACCOUNTS

BUDGETARY RESOURCES:

Unobligated balance, brought forward, October 1 $ 5,131 $ 5,342,251 $ 1,547,718

Recoveries of prior year unpaid obligations 99 541,330 2,336,509

Budget authority

 Appropriation 504,443 27,391,855 56,611,107

 Spending authority from offsetting collections

 Earned

 Collected 634 3,302,232 4,973,027

 Change in receivables from Federal sources 0 43,307 277,958

 Change in unfi lled customer orders

 Advance received 0 140,669 52,016

 Without advance from Federal sources 0 22,405 80,681

 Subtotal $ 505,077 $ 30,900,468 $ 61,994,789

Nonexpenditure transfers, net, anticipated and actual (495,477) (267,912) 701,086

Permanently not available (1,018) (905,666) (2,086,305)

Total Budgetary Resources $ 13 812 $ 35 610 471 $ 64 493 797

STATUS OF BUDGETARY RESOURCES:

Obligations incurred:

 Direct $ 7,647 $ 28,358,597 $ 56,801,984

 Reimbursable 630 3,539,707 5,698,906

 Subtotal $ 8,277 $ 31,898,304 $ 62,500,890

Unobligated balance:

 Apportioned 1,055 3,374,053 380,396

 Exempt from apportionment 4,480 0 0

 Subtotal $ 5,535 $ 3,374,053 $ 380,396

Unobligated balance not available 0 338,114 1,612,511

Total status of budgetary resources $ 13,812 $ 35,610,471 $ 64,493,797

CHANGE IN OBLIGATED BALANCE:

Obligated balance, net

 Unpaid obligations, brought forward, October 1 $ 4,206 $ 9,337,076 $ 23,104,777

 Less: Uncollected customer payments from Federal sources, brought

 forward, October 1 0 (688,140) (1,340,582)

 Total unpaid obligated balance $ 4,206 $ 8,648,936 $ 21,764,195

Obligations incurred net (+/-) $ 8,278 $ 31,898,304 $ 62,500,890

Less: Gross outlays (7,341) (29,548,229) (56,765,245)

Obligated balance transferred, net payments from Federal sources (+/-)

Less: Recoveries of prior year unpaid oblligations, actual $ (99) $ (541,330) $ (2,336,509)

Change in uncollected customer payments from Federal sources (+/-) 0 (65,712) (358,639)

Obligated balance, net, end of period

 Unpaid obligations 5,043 11,145,820 26,503,914

 Less: Uncollected customer payments (+/-) from Federal sources (-) 0 (753,852) (1,699,222)

 Total, unpaid obligated balance, net, end of period 5,043 10,391,968 24,804,692

NET OUTLAYS

Net Outlays:

 Gross outlays $ 7,341 $ 29,548,229 $ 56,765,245

 Less: Offsetting collections (634) (3,442,900) (5,025,043)

 Less: Distributed Offsetting receipts (104,099)0 0

 Net Outlays $ (97,392) $ 26,105,329 $ 51,740,202
2009

103

General Fund

Required Supplementary Information

Procurement Military

Personnel

Military

Construction / 

Family Housing

2009

Combined

2008

Combined

$ 17,030,767 $ 161,904 $ 2,589,119 $ 26,676,890 $ 21,175,345

835,023 323,009 57,336 4,093,396 4,602,017

43,772,117 33,282,504 2,413,227 163,975,253 156,791,805

601,854 418,800 5,931 9,302,479 10,464,416

6,254 (2,624) (150) 324,746 (354,080)

(48,808) 0 3,739 147,616 (199,948)

(25,862) 3,690 0 80,913 38,934

$ 44,305,555 $ 33,702,370 $ 2,422,747 $ 173,831,007 $ 166,741,127

655,225 247,586 (16,700) 823,808 2,750,362

(695,274) (122,921) (22,629) (3,833,813) (3,194,456)

$ 62,131,296 $ 34,312,038 $ 5,029,873 $ 201,591,288 $ 192,074,395

$ 40,845,578 $ 33,551,159 $ 2,754,854 $ 162,319,819 $ 155,042,972

406,153 407,018 7,707 10,060,121 10,354,532

$ 41,251,731 $ 33,958,177 $ 2,762,561 $ 172,379,940 $ 165,397,504

20,102,099 8,997 2,225,329 26,091,928 24,139,914

0 0 0 4,480 3,820

$ 20,102,099 $ 8.997 $ 2,225,329 $ 26,096,408 $ 24,143,734

777,465 344,865 41,984 3,114,940 2,533,157

$ 62 131 295 $ 34 312 039 $ 5 029 874 $ 201 591 288 $ 192 074 395

$ 30,197,966 $ 2,405,765 $ 2,763,468 $ 67,813,258 $ 60,933,360

(110,393) 87,626 (150) (2,051,639) (2,366,785)

$ 30,087,573 $ 2,493,391 $ 2,763,318 $ 65,761,619 $ 58,566,575

$ 41,251,731 $ 33,958,177 $ 2,762,561 $ 172,379,940 $ 165,397,504

(38,118,396) (33,533,767) (2,029,409) (160,002,387) (153,915,590)

$ (835,023) $ (323,099) $ (57,336) $ (4,093,396) $ (4,602,017)

19,608 (1,067) 150 (405,660) 315,146

32,496,279 2,507,076 3,439,283 76,097,415 67,813,257

(90,785) 86,560 0 (2,457,299) (2,051,639)

32,405,494 2,593,636 3,439,283 73,640,116 65,761,618

$ 38,118,396 $ 33,533,767 $ 2,029,409 $ 160,002,387 $ 153,915,590

(553,046) (418,800) (9,670) (9,450,094) (10,264,468)

0 0 0 (104,099) (201,497)

$ 37,565,350 $ 33,114,967 $ 2,019,739 $ 150,448,194 $ 143,449,625
104

General Fund

Required Supplementary Information

DISAGGREGATED STATEMENT OF BUDGETARY RESOURCES 

The Air Force has performance measures based on missions and outputs. The Air Force is 

unable to accumulate costs for major programs based on those performance measures because 

its financial processes and systems were not designed to collect and report this type of cost 

information. Until the processes and systems are upgraded, the Air Force will break out 

programs by major appropriation groupings. 

HERITAGE ASSETS AND STEWARDSHIP LAND 

The Air Force now reports Heritage Assets and Stewardship Land in Note 10 of its financial statements. 

REAL PROPERTY DEFERRED MAINTENANCE

Real Property Deferred Maintenance

For Fiscal Year Ended September 30, 2009

(In Millions of Dollars)

Property Type Current Fiscal Year (CFY)

1. Plant Replacement 

Value

2. Required Work 

(Deferred Maintenance)

3. Percentage

1. Category 1: Buildings, 

Structures, and Utilities

(Enduring Facilities) $234,191 $17,678 8%

2. Category 2: Buildings, 

Structures, and Utilities

(Excess Facilities or 

Planned for Replacement) 

$17,028

 

 

 $18 <1%

3. Category 3: Buildings, 

Structures, and Utilities 

(Heritage Assets) $9,790 $927 9%

Use of Q-Rating versus Facilities Sustainment Model (FSM) to reflect Deferred 

Sustainment 

The use of Q-Rating as a basis for calculated deferred maintenance is not prudent. The 

Service’s Q-Rating database has not sufficiently matured compared with the FSM dataset. 

At this stage of Q-Rating planning and development, facility Q-Ratings cannot be readily tied to 

actual obligations nor do they provide a consistent service-wide metric based on commercial 

standards. 

 Based on previous submissions, the use of FSM to benchmark facility requirements has proven 

itself in the Air Force Corporate Structure (AFCS) process by yielding data constancy and high 

fidelity. FSM can be linked to actual obligations, is consistent across the services, and uses 

commercial standards in its development, which provides the stability and credibility needed to 

defend program funding requirements in AFCS. 
2009

105

General Fund

Required Supplementary Information

 The inclusion of the “A” factor to represent “acceptable operating condition” is not currently 

valid. At this time, there is no dataset which can be used to underpin target Q-Rating 

percentages or to identify acceptable operating conditions for specific Air Force facilities. 

At A=100%, the FY 2009 accumulated deferred sustainment based on Q-Ratings is 

$17.7 billion as noted above. Although a backlog of $17.7 billion obviously appears 

significant, this considerably large requirement adds little value to AFCS decision-making 

process. From our experience, AFCS will immediately question such a large backlog if used to 

defend our budget shortfalls. Variable "A" factors would need to be developed to make the 

proposed deferred maintenance concept feasible. 

Strategically, the use of annual deferred sustainment maintenance based on FSM has already 

proven to be successful in defending our budgets through AFCS. In FY 2008, the annual 

deferred sustainment maintenance based on FSM was at a reasonable level of $385.0 million.

 

Military Equipment Deferred 

Maintenance 

For Fiscal Year Ended 

September 30, 2009 

 (In Millions of Dollars) 

Major 

Categories 

OP30

Amounts Adjustments Total 

1. Aircraft $638 $0 $638 

2 Automotive 

Equipment $0 $0 $0 

3. Combat 

Vehicles $0 $0 $0 

4. Construction 

Equipment $0 $0 $0 

5. Electronic and Communications Systems $142 $0 $142 

6. Missiles $1 $0 $1 

7.Ships $0 $0 $0 

8. Ordnance Weapons and 

Munitions $0 $0 $0 

9. General Purpose Equipment $0 $0 $0 

10. All Other Items Not Identified to Above Categories $311 $1,299 $1,610 

Total $1,092 $1,299 $2,391 

The figures presented are projected deferred maintenance amounts for FY 2009 as reported in 

the FY 2011 Program Budget Review OP-30 budget exhibits. FY 2009 Overseas Contingency 

Operations supplemental actual is not available. Adjustment totals includes Deferred Funding 

for Contract Logistics Support which may include more than just maintenance. These totals 

presently cannot be broken out by major categories.
(U.S. Air Force Photo by SrA Brian Kimball)
2009

107

General Fund

Fiscal Year 2009

Audit Opinion
General Fund

Audit Opinion

108
2009

General Fund

Audit Opinion

109
110

General Fund

Audit Opinion
2009

111

General Fund

Audit Opinion
General Fund

Audit Opinion

112
2009

General Fund

Audit Opinion

113
General Fund

Audit Opinion

114
2009

General Fund

Audit Opinion

115
116

General Fund

Audit Opinion
117

The FY 2009 Department of the Air Force Working Capital Fund Principal Statements 

and related notes are presented in the format prescribed by the Department of Defense 

Financial Management Regulation 7000.14-R, Volume 6B. The statements and related notes 

summarize fi nancial information for individual activity groups and activities within the 

Working Capital Fund for the fi scal year ending September 30, 2009, and are presented on 

a comparative basis with information previously reported for the fi scal year ending 

September 30, 2008.

The following statements comprise the Department of the Air Force Working Capital Fund 

Principal Statements:

Consolidated Balance Sheet

The Consolidated Balance Sheet presents as of September 30, 2009 and 2008 those 

resources owned or managed by the Air Force which are available to provide future 

economic benefi ts (assets); amounts owed by the Air Force that will require payments 

from those resources or future resources (liabilities); and residual amounts retained by 

the Air Force, comprising the difference (net position).

Consolidated Statement of Net Cost

The Consolidated Statement of Net Cost presents the net cost of the Air Force’s operations 

for the years ended September 30, 2009 and 2008. The Air Force’s net cost of operations 

includes the gross costs incurred by the Air Force less any exchange revenue earned from 

Air Force activities.

Consolidated Statement of Changes in Net Position

The Consolidated Statement of Changes in Net Position presents the change in the 

Air Force’s net position resulting from the net cost of Air Force’s operations, budgetary 

fi nancing sources other than exchange revenues, and other fi nancing sources for the years 

ended September 30, 2009 and 2008.

Combined Statement of Budgetary Resources

The Combined Statement of Budgetary Resources presents the budgetary resources 

available to the Air Force during FY 2009 and 2008, the status of these resources at 

September 30, 2009 and 2008, and the outlay of budgetary resources for the years ended 

September 30, 2009 and 2008.

The Principal Statements and related notes have been prepared to report fi nancial position 

pursuant to the requirements of the Chief Financial Offi cers Act of 1990, the Government 

Management Reform Act of 1994, and the Offi ce of Management and Budget’s Circular 

A-136, “Financial Reporting Requirements.”

Working Capital Fund

Principal Statements

Fiscal Year 2009

2009
118 The accompanying notes are an integral part of these fi nancial statements.

Working Capital Fund

Principal Statements

CONSOLIDATED BALANCE SHEET

($ in Thousands)

As of September 30, 2009 and 2008

 ASSETS (Note 2)

 Intragovernmental:

 Fund Balance with Treasury (Note 3)

 Accounts Receivable (Note 5)

 Other Assets (Note 6)

 Total Intragovernmental Assets

 Accounts Receivable,Net (Note 5)

 Inventory and Related Property,Net (Note 9)

 General Property, Plant and Equipment,Net (Note 10)

 Other Assets (Note 6)

 TOTAL ASSETS

 STEWARDSHIP PROPERTY, PLANT & EQUIPMENT (Note 10)

 LIABILITIES (Note 11)

 Intragovernmental:

 Accounts Payable (Note 12)

 Other Liabilities (Note 15 & 16)

 Total Intragovernmental Liabilities

 Accounts Payable (Note 12)

 Military Retirement and Other Federal

 Employment Benefits (Note 17)

 Other Liabilities (Note 15 and Note 16)

 TOTAL LIABILITIES

 COMMITMENTS AND CONTINGENCIES (NOTE 16)

 NET POSITION

 Unexpended Appropriations - Other Funds

 Cumulative Results of Operations - Other Funds

 TOTAL NET POSITION

 TOTAL LIABILITIES AND NET POSITION

2009 Consolidated 2008 Consolidated

 697,367 959,598 

 718,662 786,751 

 420 618 

 1,416,449 1,746,967 

 152,109 117,894 

 30,059,338 30,256,598 

 1,293,737 1,164,386 

 402,703 388,677 

 33,324,336 33,674,522 

 153,539 94,776 

 13,531 86,302 

 167,070 181,078 

 796,397 817,558 

 193,710 217,337 

 496,773 624,331 

 1,653,950 1,840,304 

 1,016 1,248 

 31,669,370 31,832,970 

 31,670,386 31,834,218 

 33,324,336 33,674,522 

$ $

$ $

$ $

$ $

$ $

$ $

$ $

$ $

$ $

Restated
2009

The accompanying notes are an integral part of these fi nancial statements. 119

Working Capital Fund

Principal Statements

CONSOLIDATED STATEMENT OF NET COST

($ in Thousands)

For the periods ended September 30, 2009 and 2008

 Program Costs

 Gross Costs

 (Less: Earned Revenue)

 Net Program Costs

 Net Cost of Operations

2009 Consolidated 2008 Consolidated

 10,534,391 10,727,152 

(10,380,069) (10,784,910)

 154,322 (57,758)

 154,322 (57,758)

$ $

$ $

$ $

Restated
120 The accompanying notes are an integral part of these fi nancial statements.

Working Capital Fund

Principal Statements

Air Force Working Capital Fund 

CONSOLIDATED STATEMENT OF CHANGES IN NET POSITION 

($ in Thousands) 

For the periods ended September 30, 2009 and 2008 

CUMULATIVE RESULTS OF OPERATIONS 

Beginning Balances 

Prior Period Adjustments: 

 Corrections of errors (+/-) 

Beginning balances, as adjusted 

Budgetary Financing Sources: 

 Appropriations used 

 Transfers-in/out without reimbursement 

Other Financing Sources: 

 Transfers-in/out without reimbursement (+/-) 

 Imputed financing from costs absorbed by others 

 Other (+/-) 

Total Financing Sources 

Net Cost of Operations (+/-) 

Net Change 

Cumulative Results of Operations 

UNEXPENDED APPROPRIATIONS 

Beginning Balances 

Beginning balances, as adjusted 

Budgetary Financing Sources: 

 Appropriations received 

 Other adjustments (rescissions, etc) 

 Appropriations used 

Total Budgetary Financing Sources 

Unexpended Appropriations 

Net Position 

2009 Eliminations

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0

 0 

 0 

 0 

 0 

$

$

$

$

$

$

$

$

$

2009 Earmarked Funds

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

$

$

$

$

$

$

$

$

$

2009 All Other Funds

 35,253,245 

(3,420,275)

 31,832,970 

 61,697 

(251,274)

(64,772)

 151,466 

 93,605 

(9,278)

 154,322 

(163,600)

 31,669,370 

 1,248 

 1,248 

 61,465 

 0 

(61,697)

(232)

 1,016 

 31,670,386 

$ 

$ 

$ 

$ 

$ 

$ 

$ 

$ 

$ 
2009

The accompanying notes are an integral part of these fi nancial statements. 121

Working Capital Fund

Principal Statements

2008 Earmarked Funds

 0 

 0 

 0 

 0 

 0 

 0

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

$

$

$

$

$

$

$

$

$

2008 Eliminations

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

 0 

$

$

$

$

$

$

$

$

$

2009 Consolidated

 35,253,245 

(3,420,275)

 31,832,970 

 61,697 

(251,274)

(64,772)

 151,466 

 93,605 

(9,278)

 154,322 

(163,600)

 31,669,370 

 1,248 

 1,248 

 61,465 

 0 

(61,697)

(232)

 1,016 

 31,670,386 

$ 

$ 

$ 

$ 

$ 

$ 

$ 

$ 

$ 

2008 All Other Funds

 35,516,871 

(3,187,305)

 32,329,566 

 69,073 

(88,000)

(47,477)

 144,150 

(632,100)

(554,354)

(57,758)

(496,596)

 31,832,970 

 4,558 

 4,558 

 66,458 

(695)

(69,073)

(3,310)

 1,248 

 31,834,218 

$ 

$ 

$ 

$ 

$ 

$ 

$ 

$ 

$ 

2008 Consolidated

 35,516,871 

(3,187,305)

 32,329,566 

 69,073 

(88,000)

(47,477)

 144,150 

(632,100)

(554,354)

(57,758)

(496,596)

 31,832,970 

 4,558 

 4,558 

 66,458 

(695)

(69,073)

(3,310)

 1,248 

 31,834,218 

$ 

$ 

$ 

$ 

$ 

$ 

$ 

$ 

$ 

Restated Restated 
122 The accompanying notes are an integral part of these fi nancial statements.

COMBINED STATEMENT OF BUDGETARY RESOURCES

($ in Thousands)

For the periods ended September 30, 2009 and 2008

BUDGETARY FINANCING ACCOUNTS

BUDGETARY RESOURCES

Unobligated balance, brought forward, October 1

Recoveries of prior year unpaid obligations

Budget authority

 Appropriation

 Contract authority

 Spending authority from offsetting collections

 Earned

 Collected

 Change in receivables from Federal sources

 Change in unfilled customer orders

 Advance received

 Without advance from Federal sources

 Subtotal

Nonexpenditure transfers, net, anticipated and actual

Permanently not available

Total Budgetary Resources

Status of Budgetary Resources:

Obligations incurred:

 Reimbursable

 Subtotal

Unobligated balance:

 Apportioned

 Exempt from apportionment

 Subtotal

Total status of budgetary resources

Change in Obligated Balance:

Obligated balance, net

 Unpaid obligations, brought forward, October 1

 Less: Uncollected customer payments

 from Federal sources, brought forward, October 1

 Total unpaid obligated balance

Obligations incurred net (+/-)

Less: Gross outlays

Less: Recoveries of prior year unpaid obligations, actual

Change in uncollected customer

 payments from Federal sources (+/-)

Obligated balance, net, end of period

 Unpaid obligations

 Less: Uncollected customer payments

 from Federal sources (-)

 Total, unpaid obligated balance, net, end of period

Net Outlays

Net Outlays:

 Gross outlays

 Less: Offsetting collections

 Net Outlays

2009 Combined 2008 Combined

 343,595 1,073,782 

 89,013 0 

 61,465 66,458 

 7,255,839 6,633,730 

 11,599,508 11,677,265 

(62,179) 407,049 

(98,643) (77,781)

(247,280) (241,364)

 18,508,710 18,465,357 

(251,274) (88,000)

(7,078,077) (8,139,473)

 11,611,967 11,311,666 

$ $

$ $

 11,238,329 10,968,071 

 11,238,329 10,968,071 

 0 343,595 

 373,638 0 

 373,638 343,595 

 11,611,967 11,311,666 

 7,946,887 8,883,865 

(4,010,572) (3,844,887)

 3,936,315 5,038,978 

 11,238,329 10,968,071 

(11,573,286) (11,905,048)

(89,013) 0 

 309,459 (165,685)

 7,522,917 7,946,888 

(3,701,113) (4,010,572)

 3,821,804 3,936,316 

 11,573,286 11,905,048 

(11,500,865) (11,599,484)

 72,421 305,564 

$ $

$ $

$ $

Working Capital Fund

Principal Statements
123

Notes to the fi nancial statements communicate information essential for fair presentation 

of the fi nancial statements that is not displayed on the face of the fi nancial statements.

Working Capital Fund 

Fiscal Year 2009

Notes to the Principal Statements

2009
124

Working Capital Fund

Notes to the Principal Statements

Note 1. Significant Accounting Policies 

1.A. Basis of Presentation

 These financial statements have been prepared to report the financial position and results 

of operations of the Air Force Working Capital Fund (AFWCF), 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 AFWCF in accordance with, and to the extent possible, 

U.S. generally accepted accounting principles (USGAAP) promulgated by the Federal 

Accounting Standards Advisory Board (FASAB); the Office of Management and Budget 

(OMB) Circular A-136, Financial Reporting Requirements; and the Department of 

Defense (DoD), Financial Management Regulation (FMR). The accompanying financial 

statements account for all resources for which the AFWCF is responsible unless 

otherwise noted. 

The AFWCF is unable to fully implement all elements of USGAAP and the OMB 

Circular A-136, due to limitations of financial and nonfinancial management processes 

and systems that support the financial statements. The AFWCF derives reported values 

and information for major asset and liability categories largely from nonfinancial 

systems, such as inventory and logistic systems. These systems were designed to support 

reporting requirements for maintaining accountability over assets and reporting the status 

of federal appropriations rather than preparing financial statements in accordance with 

USGAAP. The AFWCF continues to implement process and system improvements 

addressing these limitations.

The AFWCF currently has eight auditor identified financial statement material 

weaknesses: (1) financial and nonfinancial feeder systems do not contain an adequate 

audit trail for the proprietary and budgetary accounts, (2) AFWCF may have material 

amounts of account adjustments that are not adequately supported, (3) AFWCF cannot 

accurately identify all intragovernmental transactions by customer, which is required for 

eliminations when preparing consolidated financial statements, (4) the value of the 

AFWCF government furnished and contractor acquired materiel and equipment may not 

be accurately reported, (5) AFWCF General Property, Plant, and Equipment (PP&E) may 

not be accurately valued, (6) operating materiels and supplies (OM&S) are not reflected 

at historical cost, (7) cost of goods sold and work in progress are not recorded in 

accordance with the Statement of Federal Financial Accounting Standards (SFFAS) 

No. 3, Accounting for Inventory and Related Property, and (8) supply management 

systems do not provide sufficient audit trails to confirm and value the in transit inventory 

reported as part of inventory held for sale on the Consolidated Balance Sheet. 

1.B. Mission of the Reporting Entity

The United States Air Force was created on September 18, 1947, by the National Security 

Act of 1947. The National Security Act Amendments of 1949 established the DoD and 

made the Air Force a department within DoD. The overall mission of the United States 

Air Force is to fly, fight and win...in air, space and cyberspace. Our priorities are: 

(1) reinvigorate the Air Force nuclear enterprise, (2) partner with the Joint and Coalition 

team to win today’s fight, (3) develop and care for Airmen and their families, 
2009

125

Working Capital Fund

Notes to the Principal Statements

(4) modernize our air and space inventories, organizations, and training, and 

(5) recapture acquisition excellence. 

The stock and industrial revolving fund accounts were created by the National Security 

Act of 1947, as amended in 1949 and codified in United States Code 10 Section 2208. 

The revolving funds were established as a means to more effectively control the cost of 

work performed by DoD. The DoD began operating under the revolving fund concept on 

July 1, 1951. 

Effective FY 2009, AFWCF operations consist of two major activity groups: 

Consolidated Sustainment Activity Group (CSAG) and the Supply Management Activity 

Group - Retail (SMAG-R). All AFWCF CSAG and SMAG-R activities establish rates 

based on full cost recovery. If an operating loss or gain is incurred, the activity will make 

the appropriate adjustment in following years’ prices to recoup the loss or return the gain 

to their customers. 

The mission of the CSAG is supply management of reparable and consumable items, and 

maintenance activities. CSAG combines the activities of the previous Material Support 

Division (MSD) of the Supply Management Activity Group and the Depot Maintenance 

Activity Group (DMAG). Under CSAG, business operations formerly known as DMAG 

are now related to the Maintenance Division. Likewise, business operations formerly 

known as MSD are now referred to as the Supply Division. 

Supply Division activities of CSAG are authorized to procure and manage reparable and 

consumable items for which the Air Force is the Inventory Control Point. The Supply 

Division manages more than 106 thousand items that are generally related to weapon 

systems and ground support, and include both depot level reparables and non-depot level 

reparables. 

Maintenance Division activities of CSAG are authorized to perform: (a) overhaul, 

conversion, reclamation, progressive maintenance, modernization, software development, 

storage, modification, and repair of aircraft, missiles, engines, accessories, components, 

and equipment; (b) the manufacture of parts and assemblies required to support the 

foregoing; and (c) the furnishing of other authorized services or products for the 

Air Force and other agencies of the DoD. As directed by the Air Force Materiel 

Command or higher authority, the Maintenance Division may furnish the above 

mentioned products or services to agencies of other departments or instrumentalities of 

the U.S. Government, and to private parties and other agencies, as authorized by law. 

The SMAG-R consists of three business divisions: General Support Division (GSD), 

Medical-Dental Division, and Air Force Academy Division. GSD procures and manages 

over 1.5 million consumable supply items related to maintenance, flying hour program, 

and installation functions. The majority are used in support of field and depot 

maintenance of aircraft, ground and airborne communication systems, and other support 

systems and equipment. The Medical-Dental Division procures and manages over 7,000 

medical supply items and equipment necessary to maintain an effective Air Force Health 
126

Working Capital Fund

Notes to the Principal Statements

Care system for the active military, retirees and their dependents. The Air Force 

Academy Division procures and manages a retail inventory of uniforms, academic 

supplies and other recurring issue requirements for the Cadet Wing of the United States 

Air Force Academy. Inventory procurement is only for mandatory items as determined 

by the Cadet Uniform Board.

1.C. Appropriations and Funds

The AFWCF receives appropriations and funds as general and working capital 

(revolving) funds. The AFWCF uses these appropriations and funds to execute its 

missions and subsequently report on resource usage. 

Working Capital Funds (WCF) received funding to establish an initial corpus through an 

appropriation or a transfer of resources from existing appropriations or funds. The corpus 

finances operations and transactions that flow through the fund. The WCF resources the 

goods and services sold to customers on a reimbursable basis and maintains the corpus. 

Reimbursable receipts fund future operations and generally are available in their entirety 

for use without further congressional action. At various times, Congress provides 

additional appropriations to supplement WCF as an infusion of cash when revenues are 

inadequate to cover costs within the corpus. 

1.D. Basis of Accounting

The AFWCF financial management systems are unable to meet all full accrual 

accounting requirements. Many of the AFWCF financial and nonfinancial feeder 

systems and processes were designed and implemented prior to the issuance of 

USGAAP. These systems were not designed to collect and record financial information 

on the full accrual accounting basis as required by USGAAP. Most of AFWCF’s 

financial and nonfinancial legacy systems were designed to record information on a 

budgetary basis.

The financial statements and supporting trial balances are compiled from the underlying 

financial data and trial balances of the sub-entities. The underlying data is largely 

derived from budgetary transactions (obligations, disbursements, and collections), from 

nonfinancial feeder systems, and accruals made for major items such as payroll expenses, 

accounts payable, and environmental liabilities. Some of the sub-entity level trial 

balances may reflect known abnormal balances resulting largely from business and 

system processes. At the consolidated level these abnormal balances may not be evident. 

Disclosures of abnormal balances are made in the applicable footnotes, but only to the 

extent that the abnormal balances are evident at the consolidated level. 

The DoD is determining the actions required to bring its financial and nonfinancial 

feeder systems and processes into compliance with USGAAP. One such action is the 

current revision of accounting systems to record transactions based on the 

U.S. Standard General Ledger (USSGL). Until all AFWCF’s financial and nonfinancial 

feeder systems and processes are updated to collect and report financial information as 

required by USGAAP, AFWCF’s financial data will be derived from budgetary 

transactions data from nonfinancial feeder systems, and accruals. 
2009

127

Working Capital Fund

Notes to the Principal Statements

1.E. Revenues and Other Financing Sources

The CSAG Maintenance Division recognizes revenue according to the percentage of 

completion method. The CSAG Supply Division and SMAG-R recognize revenue based 

on flying hours executed and the sale of inventory items. 

1.F. Recognition of Expenses

For financial reporting purposes, DoD policy requires the recognition of operating 

expenses in the period incurred. Current financial and nonfinancial feeder systems were 

not designed to collect and record financial information on the full accrual accounting 

basis. Estimates are made for major items such as payroll expenses, accounts payable, 

and unbilled revenue. In the case of Operating Materiel and Supplies (OM&S), the 

consumption method is used. Under the consumption method, OM&S is reported as 

expenses when consumed. Due to system limitations, in some instances expenditures for 

capital and other long-term assets may be recognized as operating expenses. The 

AFWCF continues to implement process and system improvements to address these 

limitations.

1.G. Accounting for Intragovernmental Activities

Accounting standards require that an entity eliminates intraentity activity and balances 

from consolidated financial statements in order to prevent overstatement for business 

with itself. However, the AFWCF cannot accurately identify intragovernmental 

transactions by customer because AFWCF’s systems do not track buyer and seller data 

at the transaction level. Generally, seller entities within the DoD provide 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 are 

adjusted to agree with DoD seller-side balances and are then eliminated. The volume of 

intragovernmental transactions is so large that reconciliations cannot be accomplished 

effectively. The DoD is developing long-term system improvements to ensure accurate 

intragovernmental information, including developing sufficient up-front edits and 

controls, eliminating the need for reconciliations.

The U.S. Treasury’s Federal Intragovernmental Transactions Accounting Policy Guide 

and Treasury Financial Manual Part 2 – Chapter 4700, Agency Reporting Requirements 

for the Financial Report of the United States Government, provide guidance for 

reporting and reconciling intragovernmental balances. While AFWCF is unable to fully 

reconcile intragovernmental transactions with all federal agencies, AFWCF is able to 

reconcile balances pertaining to Federal Employees’ Compensation Act transactions 

with the Department of Labor, and benefit program transactions with the Office of 

Personnel Management. 

The DoD’s proportionate share of public debt and related expenses of the Federal 

Government is not included. The Federal Government does not apportion debt and its 

related costs to federal agencies. The DoD’s financial statements do not report any 

public debt, interest or source of public financing, whether from issuance of debt or tax 

revenues. 
128

Working Capital Fund

Notes to the Principal Statements

Generally, financing for the construction of DoD facilities is obtained through 

appropriations. To the extent this financing ultimately may have been obtained through 

the issuance of public debt, interest costs have not been capitalized since the 

U.S. Treasury does not allocate such costs to DoD. 

1.H. Transactions with Foreign Governments and International Organizations

Each year, AFWCF sells defense articles and services to foreign governments and 

international organizations under the provisions of the Arms Export Control Act of 1976. 

Under the provisions of the Act, DoD has authority to sell defense articles and services to 

foreign countries and international organizations generally at no profit or loss to the 

Federal Government. Payment in U.S. dollars is required in advance.

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

The AFWCF’s monetary resources are maintained in U.S. Treasury accounts. The 

disbursing offices of Defense Finance and Accounting Service (DFAS), the Military 

Departments, the U.S. Army Corps of Engineers (USACE), and the Department of 

State’s financial service centers process the majority of the AFWCF’s cash collections, 

disbursements, and adjustments worldwide. Each disbursing station prepares monthly 

reports to the U.S. Treasury on checks issued, electronic fund transfers, interagency 

transfers, and deposits. 

In addition, DFAS sites and USACE Finance Center submit reports to the 

U.S. Treasury by appropriation on interagency transfers, collections received, and 

disbursements issued. The U.S. Treasury records these transactions to the applicable 

Fund Balance with Treasury (FBWT) account. On a monthly basis, AFWCF’s FBWT 

is adjusted to agree with the U.S. Treasury accounts. 

1.J. Foreign Currency

Not applicable. 

1.K. Accounts Receivable

Accounts receivable from other federal entities or the public include: accounts 

receivable, claims receivable, and refunds receivable. Based upon analysis of past 

collection experience, AFWCF does not recognize allowances for uncollectible accounts 

due from the public. AFWCF policy is that all Nonfederal Receivables (From the Public) 

are collected. The DoD 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 in accordance with dispute resolution procedures defined 

in the Intragovernmental Business Rules published in the Treasury Financial Manual at 

http://www.fms.treas.gov/tfm/vol1/07-03.pdf.

1.L. Direct Loans and Loan Guarantees

Not applicable. 
2009

129

Working Capital Fund

Notes to the Principal Statements

1.M. Inventories and Related Property

The AFWCF values approximately 99% of its resale inventory using the moving 

average cost method and reports the remaining 1% of resale inventories at an 

approximation of historical cost using latest acquisition cost adjusted for holding gains 

and losses. The latest acquisition cost method is used because legacy inventory systems 

were designed for materiel management rather than accounting. Although these 

systems provide visibility and accountability over inventory items, they do not maintain 

historical cost data necessary to comply with SFFAS No. 3, Accounting for Inventory 

and Related Property. Additionally, these systems cannot produce financial 

transactions using the USSGL, as required by the Federal Financial Management 

Improvement Act of 1996 (PL 104-208). The AFWCF is continuing to transition the 

balance of the inventories to the moving average cost method through the use of new 

inventory systems. Most transitioned balances, however, were not baselined to 

auditable historical cost and remain noncompliant with SFFAS No. 3. 

The AFWCF manages only military or government-specific materiel under normal 

conditions. Materiel is a unique term that relates to military force management, and 

includes items such as ships, tanks, self-propelled weapons, aircraft, etc., and related 

spares, repair parts, and support equipment. Items commonly used in and available from 

the commercial sector are not managed in AFWCF’s materiel management activities. 

Operational cycles are irregular and the military risks associated with stock-out positions 

have no commercial parallel. The AFWCF holds materiel based on military need and 

support for contingencies. The DoD is currently developing a methodology to be used to 

account for “inventory held for sale” and “inventory held in reserve for future sale” with 

a completion date of year-end FY 2010 reporting. 

Related property includes OM&S which is valued at purchase price. The AFWCF uses 

the consumption method of accounting for OM&S. 

The AFWCF recognizes condemned materiel as "Excess, Obsolete, and Unserviceable." 

The cost of disposal is greater than the potential scrap value; therefore, the net value of 

condemned materiel is zero.

Inventory available and purchased for resale includes consumable spare and repair parts 

and repairable items owned and managed by AFWCF. This inventory is retained to 

support military or national contingencies. Inventory held for repair is damaged 

inventory that requires repair to make suitable for sale. Often, it is more economical to 

repair these items rather than to procure them. The AFWCF often relies on weapon 

systems and machinery no longer in production. As a result, AFWCF supports a process 

that encourages the repair and rebuilding of certain items. This repair cycle is essential to 

maintaining a ready, mobile, and armed military force. Work in process balances include 

(1) costs related to the production or servicing of items, including direct material, direct 

labor, and applied overhead; (2) the value of finished products or completed services that 

are yet to be placed in service; and (3) munitions in production and depot maintenance 

work with its associated costs incurred in the delivery of maintenance services. 
130

Working Capital Fund

Notes to the Principal Statements

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

Not applicable. 

1.O. General Property, Plant and Equipment

The DoD’s General Property, Plant, and Equipment (PP&E) capitalization threshold is 

$100 thousand except for real property, which is $20 thousand. The AFWCF has not 

fully implemented the threshold for real property; and therefore is primarily using the 

capitalization threshold of $100 thousand for General PP&E, and most real property. 

With the exception of USACE Civil Works and WCF, General PP&E assets are 

capitalized at historical acquisition cost when an asset has a useful life of two or more 

years and when the acquisition cost equals or exceeds DoD’s capitalization threshold. 

The DoD also requires the capitalization of improvements to existing General PP&E 

assets if the improvements equal or exceed the capitalization threshold and extend the 

useful life or increase the size, efficiency, or capacity of the asset. The DoD depreciates 

all General PP&E, other than land, on a straight-line basis. 

The WCF capitalizes all General PP&E used in the performance of their mission. These 

capitalized assets are categorized as General PP&E, whether or not it meets the definition 

of any other General PP&E categories.

When it is in the best interest of the government, the AFWCF provides government 

property to contractors to complete contract work. The AFWCF either owns or leases 

such property, or it is purchased directly by the contractor for the government based on 

contract terms. When the value of contractor-procured General PP&E meets or exceeds 

the DoD capitalization threshold, federal accounting standards require that it be reported 

on AFWCF’s Balance Sheet.

The DoD developed policy and a reporting process for contractors with government 

furnished equipment that provides appropriate General PP&E information for financial 

statement reporting. The DoD requires AFWCF to maintain, in their property systems, 

information on all property furnished to contractors. These actions are structured to 

capture and report the information necessary for compliance with federal accounting 

standards. The AFWCF has not fully implemented this policy primarily due to system 

limitations. 

1.P. Advances and Prepayments

When advances are permitted by law, legislative action, or presidential authorization, 

DoD’s policy is to record advances or prepayments in accordance with USGAAP. As 

such, payments made in advance of the receipt of goods and services should be reported 

as an asset on the Balance Sheet. The DoD’s policy is to expense and/or properly 

classify assets when the related goods and services are received. The AFWCF has 

implemented this policy. 

1.Q. Leases

Not applicable. 
2009

131

Working Capital Fund

Notes to the Principal Statements

1.R. Other Assets

Other assets includes those assets, such as military and civil service employee pay 

advances, travel advances, and certain contract financing payments that are not reported 

elsewhere on AFWCF’s Balance Sheet. 

The AFWCF conducts business with commercial contractors under two primary types of 

contracts: fixed price and cost reimbursable. To alleviate the potential financial burden 

on the contractor that long-term contracts can cause, AFWCF may provide financing 

payments. Contract financing payments are defined in the Federal Acquisition 

Regulations, Part 32, as authorized disbursements to a contractor prior to acceptance of 

supplies or services by the Government. Contract financing payments clauses are 

incorporated in the contract terms and conditions and may include advance payments, 

performance-based payments, commercial advances and interim payments, progress 

payments based on cost, and interim payments under certain cost-reimbursement 

contracts. It is DoD policy to record certain contract financing payments as other assets.

The AFWCF has not fully implemented this policy primarily due to system limitations. 

Contract financing payments do not include invoice payments, payments for partial 

deliveries, lease and rental payments, or progress payments based on a percentage or 

stage of completion. The Defense Federal Acquisition Regulation Supplement authorizes 

progress payments based on a percentage or stage of completion only for construction of 

real property, shipbuilding, and ship conversion, alteration, or repair. Progress payments 

based on percentage or stage of completion are reported as Construction in Progress. 

1.S. Contingencies and Other Liabilities

The SFFAS No. 5, Accounting for Liabilities of the Federal Government, as amended by 

SFFAS No. 12, Recognition of Contingent Liabilities Arising from Litigation, defines a 

contingency as an existing condition, situation, or set of circumstances that involves an 

uncertainty as to possible gain or loss. The uncertainty will be resolved when one or 

more future events occur or fail to occur. The AFWCF recognizes contingent liabilities 

when past events or exchange transactions occur, a future loss is probable, and the loss 

amount 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 of incurring a loss or 

additional losses. The AFWCF’s risk of loss and resultant contingent liabilities arise 

from pending or threatened litigation or claims and assessments due to events such as 

aircraft, ship and vehicle accidents; medical malpractice; property or environmental 

damages; and contract disputes. 

1.T. Accrued Leave

The AFWCF reports liabilities for military leave and accrued compensatory and annual 

leave for civilians. Sick leave for civilians is expensed as taken. The liabilities are based 

on current pay rates.

1.U. Net Position

Net Position consists of unexpended appropriations and cumulative results of operations. 
132

Working Capital Fund

Notes to the Principal Statements

Unexpended Appropriations represent the amounts of budget authority that are 

unobligated and have not been rescinded or withdrawn. Unexpended appropriations also 

represent amounts obligated for which legal liabilities for payments have not been 

incurred. 

Cumulative Results of Operations represent the net difference between expenses and 

losses, and financing sources (including appropriations, revenue, and gains), since 

inception. The cumulative results of operations also include donations and transfers in 

and out of assets that were not reimbursed.

1.V. Treaties for Use of Foreign Bases

Not applicable. 

1.W. Unexpended Obligations

The AFWCF obligates funds to provide goods and services for outstanding orders not yet 

delivered. Unless the title has passed, the financial statements do not reflect liability for 

payment for goods and services not yet delivered. Unexpended obligations includes both 

obligations for which goods and services have been delivered (title passed) and a liability 

recognized, and obligations for which no delivery has occurred and no liability 

recognized. The balance of unexpended obligations appears immediately before net 

outlays in the Statement of Budgetary Resources, and is referred to as “Total, unpaid 

obligated balances, net, end of period.” 

1.X. Undistributed Disbursements and Collections

Undistributed disbursements and collections represent the difference between 

disbursements and collections matched at the transaction level to specific obligations, 

payables, or receivables in the source systems and those reported by the U.S. Treasury. 

Supported disbursements and collections are evidenced by corroborating documentation. 

Unsupported disbursements and collections do not have supporting documentation for the 

transaction and most likely would not meet audit scrutiny. 

The DoD policy is to allocate supported undistributed disbursements and collections 

between federal and nonfederal categories based on the percentage of distributed federal 

and nonfederal accounts payable and accounts receivable. Supported undistributed 

disbursements and collections are then applied to reduce accounts payable and receivable 

accordingly. Unsupported undistributed disbursements are recorded as disbursements 

intransit and reduce nonfederal accounts payable. Unsupported undistributed collections 

are recorded in nonfederal other liabilities. 

1.Y. Significant Events

The AFWCF processed two prior period adjustments (PPA) totaling $3.4 billion for 

material errors associated with inventory. 

The first PPA in the amount of $1.7 billion was processed due to a material error 

occurring when components of kits in the Standard Base Supply System (SBSS) were 

transferred from Readiness Spares Packages (RSP) and War Readiness Material (WRM) 
2009

133

Working Capital Fund

Notes to the Principal Statements

to Peace Time Operating (POS) stock. The resulting financial transactions were coded 

incorrectly causing the subject inventory to be treated financially as a lateral shipment of 

inventory instead of an inventory reclassification within the Consolidated Sustainment 

Activity Group-Supply Division (CSAG-Supply) Inventory. Therefore, AF inventory 

was inadvertently double counted and an inappropriate gain was recorded in the Standard 

Material Accounting System (SMAS). We have documented 76,120 erroneous 

transactions totaling $1.7 billion for FY 2004 – 2007 that were treated in this manner. 

The second PPA in the amount of $1.7 billion was processed due to a material error 

where receipts from repair contractors were coded incorrectly for CSAG-Supply Working 

Capital Inventory. AFMC Inventory was double counted and a gain was recorded when 

the receipt was not coded to relieve the In-Transit Inventory account at the time Air Force 

inventory was received back from the repair contractor. We have documented 23,367 

erroneous transactions totaling $1.7 billion for FY 2001 – 2008 that were treated in this 

manner. 

1.Z. Fiduciary Activities

Not Applicable 
134

Working Capital Fund

Notes to the Principal Statements

Note 2. Nonentity Assets 

 

As of September 30 2009 2008

(Amounts in thousands) 

1. Intragovernmental Assets 

 A. Fund Balance with Treasury $ 0 $ 0 

 B. Accounts Receivable 0 0 

 C. Total Intragovernmental Assets $ 0 $ 0 

 

2. Nonfederal Assets 

 A. Cash and Other Monetary Assets $ 0 $ 0 

 B. Accounts Receivable 425 0 

 C. Other Assets 0 0 

 D. Total Nonfederal Assets $ 425 $ 0 

 

3. Total Nonentity Assets $ 425 $ 0 

 

4. Total Entity Assets $ 33,323,911 $ 33,674,522 

5. Total Assets $ 33,324,336 $ 33,674,522 

Asset accounts are categorized as either entity or nonentity. Entity accounts consist of resources 

that are available for use in the operations of the entity. The AFWCF is authorized to decide how to 

use resources in entity accounts. The AFWCF may be legally obligated to use these resources to 

meet entity obligations. 

Nonentity assets are assets for which the AFWCF maintains stewardship accountability and 

reporting responsibility, but are not available for the AFWCF’s normal operations. 

These nonentity assets are interest/penalties/administrative fees that will be forwarded to the 

General Fund of the Treasury upon collection. 
2009

135

Working Capital Fund

Notes to the Principal Statements

Note 3. Fund Balance with Treasury 

As of September 30 2009 2008 

(Amounts in thousands) 

1. Fund Balances 

 A. Appropriated Funds $ 0 $ 0

 B. Revolving Funds 697,367 959,598 

 C. Trust Funds 0 0 

 D. Special Funds 0 0

 E. Other Fund Types 0 0

 F. Total Fund Balances $ 697,367 $ 959,598 

2. Fund Balances Per Treasury Versus Agency 

 A. Fund Balance per Treasury $ 1,409,119 $ 1,384,148 

 B. Fund Balance per AFWCF 697,367 959,598 

3. Reconciling Amount $ 711,752 $ 424,550 

 

The reconciling amount represents $711.8 million for the United States Transportation Command 

(USTC), which is reported by the U.S. Treasury as part of the AFWCF. However, for the purposes of 

Audited Financial Statements (AFS), USTC is included with the Other Defense Organizations reporting 

which is separate from the AFWCF. Therefore, USTC funds are not included in the AFWCF AFS.
136

Working Capital Fund

Notes to the Principal Statements

Note 4. Investment and Related Interest 

The AFWCF has no Investment and Related Interest. 

Status of Fund Balance with Treasury 

As of September 30 2009 2008 

(Amounts in thousands) 

1. Unobligated Balance 

 A. Available $ 373,638 $ 343,595 

 B. Unavailable 0 0

2. Obligated Balance not yet Disbursed $ 7,522,917 $ 7,946,888 

 

3. Nonbudgetary FBWT $ 0 $ 0 

 

4. NonFBWT Budgetary Accounts $ (7,199,188) $ (7,330,885) 

 

5. Total $ 697,367 $ 959,598 

The Status of Fund Balance with Treasury (FBWT) reflects the budgetary resources to support the 

FBWT and is a reconciliation between budgetary and proprietary accounts. It primarily consists of 

unobligated and obligated balances. The balances reflect the budgetary authority remaining for 

disbursement against current or future obligations. 

Unobligated Balance is classified as available or unavailable and represents the cumulative amount 

of budgetary authority that has not been set aside to cover outstanding obligations. Certain 

unobligated balances are restricted for future use and are not apportioned for current use.

Obligated balance not yet disbursed represents funds that have been obligated for goods and 

services not received, and those received but not paid. 

Nonbudgetary FBWT includes accounts that do not have budgetary authority, such as unavailable 

receipt accounts or clearing accounts. AFWCF has no Nonbudgetary FBWT. 

NonFBWT Budgetary Accounts reduces the Status of FBWT such as contract authority, accounts 

receivable, as well as the unfilled orders without advance from customers. 

Unobligated balances are segregated to show available and unavailable amounts in the note 

schedule. Certain unobligated balances may be restricted to future use and are not apportioned for 

current use. There are no restrictions on the Unobligated Balance. 
2009

137

Working Capital Fund

Notes to the Principal Statements

Note 5. Accounts Receivable 

As of September 30 2009 

Gross Amount Due Allowance For Estimated 

Uncollectibles Accounts Receivable, Net 

(Amounts in 

thousands) 

1. Intragovernmental 

Receivables $ 718,662 N/A $ 718,662 

2. Nonfederal 

Receivables (From 

the Public) $ 152,109 $ 0 $ 152,109 

 

3. Total Accounts 

Receivable $ 870,771 $ 0 $ 870,771 

As of September 30 2008 

Gross Amount Due Allowance For Estimated 

Uncollectibles Accounts Receivable, Net 

(Amounts in 

thousands) 

1. Intragovernmental 

Receivables $ 786,751 N/A $ 786,751 

2. Nonfederal 

Receivables (From 

the Public) $ 117,894 $ 0 $ 117,894 

 

3. Total Accounts 

Receivable $ 904,645 $ 0 $ 904,645 
138

Working Capital Fund

Notes to the Principal Statements

Note 6. Other Assets

As of September 30 2009 2008 

(Amounts in thousands) 

 

1. Intragovernmental Other Assets 

 A. Advances and Prepayments $ 420 $ 618

 B. Other Assets 0 0

 C. Total Intragovernmental Other Assets $ 420 $ 618 

2. Nonfederal Other Assets 

 A. Outstanding Contract Financing Payments $ 179,766 $ 148,718 

 B. Advances and Prepayments 78,619 57,987 

 C. Other Assets (With the Public) 144,318 181,972 

 D. Total Nonfederal Other Assets $ 402,703 $ 388,677 

3. Total Other Assets $ 403,123 $ 389,295 

Contract terms and conditions for certain types of contract financing payments convey certain rights 

to the AFWCF that protect the contract work from state or local taxation, liens or attachment by the 

contractor's creditors, transfer of property, or disposition in bankruptcy; however, these rights should 

not be misconstrued to mean that ownership of the contractor’s work has transferred to the Federal 

Government. The Federal Government does not have the right to take the work, except as provided 

in contract clauses related to termination or acceptance, and AFWCF is not obligated to make 

payment to the contractor until delivery and acceptance.

The Contract Financing Payments balance of $179.8 million is comprised of $155.6 million in 

contract financing payments and an additional $24.2 million in estimated future payments that will 

be paid to the contractor upon future delivery and Government acceptance of a satisfactory product. 

(See additional discussion in Note 15, Other Liabilities).

The Nonfederal Other Assets – Other Assets (With the Public) balance of $144.3 million is 

comprised primarily of $143.9 million for Supply Management Activity Group’s assets returned to 

vendors for which credit is pending. There will be no dollar payments received for this credit but 

vendor billings will be offset. 

Note 7. Cash and Other Monetary Assets 

The AFWCF has no Cash and Other Monetary Assets. 

Note 8. Direct Loan and Loan Guarantees 

The AFWCF has no Direct Loan and/or Loan Guarantee Programs. 
2009

139

Working Capital Fund

Notes to the Principal Statements

Note 9. Inventory and Related Property 

As of September 30 2009 2008 

(Amounts in thousands) 

 

1. Inventory, Net $ 29,915,921 $ 30,063,021 

2. Operating Materiel & Supplies, Net 143,417 193,577 

3. Stockpile Materiel, Net 0 0 

4. Total $ 30,059,338 $ 30,256,598 

The AFWCF processed two prior period adjustments (PPA) totaling $3.4 billion for correction of 

material errors associated with inventory. 

The first PPA in the amount of $1.7 billion was processed due to a material error occurring when 

components of kits in the Standard Base Supply System (SBSS) were transferred from Readiness Spares 

Packages (RSP) and War Readiness Material (WRM) to Peace Time Operating (POS) stock. The resulting 

financial transactions were coded incorrectly causing the subject inventory to be treated financially as a 

lateral shipment of inventory instead of an inventory reclassification within the Consolidated Sustainment 

Activity Group-Supply Division (CSAG-Supply) Inventory. Therefore, AF inventory was inadvertently 

double counted and an inappropriate gain was recorded in the Standard Material Accounting System 

(SMAS). We have documented 76,120 erroneous transactions totaling $1.7 billion for FY 2004 – 2007 that 

were treated in this manner. 

The second PPA in the amount of $1.7 billion was processed due to a material error where receipts from 

repair contractors were coded incorrectly for CSAG-Supply Working Capital Inventory. AFMC Inventory 

was double counted and a gain was recorded when the receipt was not coded to relieve the In-Transit 

Inventory account at the time Air Force inventory was received back from the repair contractor. We have 

documented 23,367 erroneous transactions totaling $1.7 billion for FY 2001 – 2008 that were treated in this 

manner. 

The effects of these PPAs on the financial statements are reflected in Note 26, Restatements.

Restated
140

Working Capital Fund

Notes to the Principal Statements

Inventory, Net

As of September 30 2009 

Inventory, 

Gross Value Revaluation Allowance Inventory, Net Valuation 

Method 

(Amounts in thousands) 

1. Inventory Categories 

 A. Available and 

Purchased for 

Resale $ 19,339,696 $ (1,462) 19,338,234 LAC,MAC 

 B. Held for Repair 14,885,175 (4,348,938) 10,536,237 LAC,MAC 

 C. Excess, Obsolete, 

and Unserviceable 186,549 (186,549) 0 NRV 

 D. Raw Materiel 0 0 0 MAC,SP,LAC

 E. Work in Process 41,450 0 41,450 AC 

 

 F. Total $ 34,452,870 $ (4,536,949) 29,915,921 

As of September 30 2008 Restated

Inventory, 

Gross Value Revaluation Allowance Inventory, Net Valuation 

Method 

(Amounts in thousands) 

1. Inventory Categories 

 A. Available and 

Purchased for 

Resale $ 19,646,199 $ (10,479) 19,635,720 LAC,MAC 

 B. Held for Repair 14,439,808 (4,145,848) 10,293,960 LAC,MAC 

 C. Excess, Obsolete, 

and Unserviceable 472,249 (472,249) 0 NRV 

 D. Raw Materiel 0 0 0 MAC,SP,LAC

 E. Work in Process 133,341 0 133,341 AC 

 

 F. Total $ 34,691,597 $ (4,628,576) 30,063,021 

Legend for Valuation Methods: 

LAC = Latest Acquisition Cost NRV = Net Realizable Value MAC = Moving Average Cost 

SP = Standard Price LCM = Lower of Cost or Market 

AC = Actual Cost O = Other 

Restrictions

There are no restrictions on the use, sale, or disposition of inventory except for War Reserve 

Materiel and nuclear related spare parts. 

General Composition of Inventory

Inventory includes weapon system consumable and reparable parts, base supply items, and medicaldental supplies. Inventory is tangible personal property that is held for sale or held for repair for 
2009

141

Working Capital Fund

Notes to the Principal Statements

eventual sale, in the process of production for sale, or to be consumed in the production of goods 

for sale or in the provision of services for a fee. 

Definitions

Inventory Available and Purchased for Resale includes consumable and reparable parts owned and 

managed by AFWCF. 

Inventory Held for Repair is damaged inventory that requires repair to make it suitable for sale. 

Many of the inventory items are more economical to repair than to procure. In addition, because 

AFWCF often relies on weapon systems and machinery no longer in production, AFWCF supports 

a process that encourages the repair and rebuilding of certain items. This repair cycle is essential to 

maintaining a ready, mobile, and armed military force. 

Excess, Obsolete, and Unserviceable inventory consists of obsolete, excess to requirements, or 

items that cannot be economically repaired and are awaiting disposal. 

Work in Process balances include costs related to the production or servicing of items, including 

direct material, direct labor, applied overhead, and other direct costs. Work in Process also includes 

the value of finished products or completed services pending the submission of bills to the 

customer. 
142

Working Capital Fund

Notes to the Principal Statements

Operating Materiel and Supplies, Net 

As of September 30 2009 

OM&S 

Gross Value Revaluation Allowance OM&S, Net Valuation 

Method 

(Amounts in thousands) 

 

1. OM&S Categories 

A. Held for Use $ 143,417 $ 0 $ 143,417 SP, LAC, MAC 

B. Held for Repair 0 0 0 SP, LAC, MAC 

C. Excess, Obsolete, and 

Unserviceable 0 0 0 NRV 

 

 D. Total $ 143,417 $ 0 $ 143,417 

As of September 30 2008 

OM&S 

Gross Value Revaluation Allowance OM&S, Net Valuation 

Method 

(Amounts in 

thousands) 

 

1. OM&S Categories 

A. Held for Use $ 193,577 $ 0 $ 193,577 SP, LAC, MAC 

B. Held for Repair 0 0 0 SP, LAC, MAC 

C. Excess, Obsolete, 

and Unserviceable 0 0 0 NRV 

 

 D. Total $ 193,577 $ 0 $ 193,577 

Legend for Valuation Methods: 

LAC = Latest Acquisition Cost NRV = Net Realizable Value MAC = Moving Average Cost 

SP = Standard Price LCM = Lower of Cost or Market 

AC = Actual Cost O = Other 

General Composition of Operating Materiel and Supplies

Operating Materiel and Supplies (OM&S) includes consumable parts and supplies used to 

remanufacture spare parts and repair weapons systems.

Restrictions

There are no restrictions on the use, sale, or disposition of OM&S. 

Definition

Held for Use includes consumable parts and supplies. 

Stockpile Materials, Net

Not Applicable 
2009

143

Working Capital Fund

Notes to the Principal Statements

Note 10. General PP&E, Net 

As of September 30 2009 

Depreciation/

Amortization

Method 

Service

Life

Acquisition 

 Value 

(Accumulated 

Depreciation/

Amortization)

Net Book 

 Value 

(Amounts in thousands) 

 

1. Major Asset Classes A. Land N/A N/A $ 0 N/A $ 0

 B. Buildings, 

Structures, and 

Facilities S/L 20 Or 40 974,901 $ (671,482) 303,419

 C. Leasehold 

Improvements S/L lease term 0 0 0

 D. Software S/L 2-5 Or 10 1,137,415 (909,880) 227,535

 E. General 

Equipment S/L 5 or 10 2,351,361 (1,645,858) 705,503

 F. Military Equipment S/L Various 0 0 0

 G. Shipbuilding 

(Construction-inProgress) N/A N/A 0 0 0

 H. Assets Under 

Capital Lease S/L lease term 0 0 0

 I. Construction-inProgress

(Excludes Military 

Equipment) N/A N/A 57,280 N/A 57,280

 J. Other 0 0 0

 K. Total General 

PP&E $ 4,520,957 $ (3,227,220) $ 1,293,737

As of September 30 2008 

Depreciation/

Amortization

Method 

Service

Life

Acquisition 

 Value 

(Accumulated 

Depreciation/

Amortization)

Net Book 

 Value 

(Amounts in thousands) 

 

1. Major Asset Classes A. Land N/A N/A $ 0 N/A $ 0

 B. Buildings, 

Structures, and 

Facilities S/L 20 Or 40 932,320 $ (673,436) 258,884

 C. Leasehold 

Improvements S/L lease term 0 0 0

 D. Software S/L 2-5 Or 10 1,097,939 (831,623) 266,316

 E. General 

Equipment S/L 5 or 10 2,157,924 (1,573,174) 584,750

 F. Military Equipment S/L Various 0 0 0

 G. Shipbuilding 

(Construction-inProgress) N/A N/A 0 0 0

 H. Assets Under 

Capital Lease S/L lease term 0 0 0

 I. Construction-inProgress (Excludes 

Military Equipment) N/A N/A 54,436 N/A 54,436

 J. Other 0 0 0

 K. Total General 

PP&E $ 4,242,619 $ (3,078,233) $ 1,164,386

1

 Note 15 for additional information on Capital Leases 

Legend for Valuation Methods: 

S/L = Straight Line N/A = Not Applicable 

AFWCF does not have any restrictions on the use or convertibility of General PP&E. 
144

Working Capital Fund

Notes to the Principal Statements

Note 11. Liabilities Not Covered by Budgetary Resources 

As of September 30 2009 2008 

(Amounts in thousands) 

 

1. Intragovernmental Liabilities 

A. Accounts Payable $ 0 $ 0 

B. Debt 0 0

C. Other 0 0 

 D. Total Intragovernmental Liabilities $ 0 $ 0 

 

2. Nonfederal Liabilities 

A. Accounts Payable $ 0 $ 0 

B. Military Retirement and 

 Other Federal Employment Benefits 193,709 217,337 

C. Environmental Liabilities 0 0 

D. Other Liabilities 0 28,376 

 E. Total Nonfederal Liabilities $ 193,709 $ 245,713 

 

3. Total Liabilities Not Covered by Budgetary 

Resources $ 193,709 $ 245,713 

 

4. Total Liabilities Covered by Budgetary Resources $ 1,460,241 $ 1,594,591 

 

5. Total Liabilities $ 1,653,950 $ 1,840,304 

Liabilities not covered by budgetary resources are liabilities for which congressional action is 

needed before budgetary resources can be provided. 

Military Retirement and Other Federal Employment Benefits consists of various employee actuarial 

liabilities not due and payable during the current fiscal year. These liabilities primarily consist of 

$193.7 million for Federal Employee’s Compensation Act. Refer to Note 17, Military Retirement 

and Other Federal Employment Benefits, for additional details and disclosures. 

Assets Under Capital Lease

The AFWCF has no Assets Under Capital Lease.
2009

145

Working Capital Fund

Notes to the Principal Statements

Note 12. Accounts Payable 

As of September 30 2009 

Accounts Payable Interest, Penalties, and 

Administrative Fees Total

(Amounts in thousands) 

 

1. Intragovernmental 

Payables $ 153,539 $ N/A $ 153,539 

2. Nonfederal Payables 

(to the Public) 796,397 0 796,397 

 

3. Total $ 949,936 $ 0 $ 949,936 

As of September 30 2008 

Accounts Payable Interest, Penalties, and 

Administrative Fees Total

(Amounts in thousands) 

 

1. Intragovernmental 

Payables $ 94,776 $ N/A $ 94,776 

2. Nonfederal Payables 

(to the Public) 817,558 0 817,558 

 

3. Total $ 912,334 $ 0 $ 912,334 

Accounts Payable include amounts owed to federal and nonfederal entities for goods and services 

received by AFWCF. The AFWCF’s systems do not track intragovernmental transactions by 

customer at the transaction level. Buyer-side accounts payable are adjusted to agree with internal 

seller-side accounts receivable. Accounts payable were adjusted by reclassifying amounts between 

federal and nonfederal accounts payable.

Note 13. Debt 

The AFWCF has no Debt.

Note 14. Environmental Liabilities and Disposal Liabilities 

The AFWCF has no Environmental Liabilities and Disposal Liabilities. 
146

Working Capital Fund

Notes to the Principal Statements

Note 15. Other Liabilities 

As of September 30 2009 

Current 

Liability

Noncurrent 

Liability Total

(Amounts in thousands) 

1. Intragovernmental 

A. Advances from Others $ (1,004) $ 0 $ (1,004) 

B. Deposit Funds and 

Suspense Account 

Liabilities 0 0 0 

C. Disbursing Officer Cash 0 0 0 

D. Judgment Fund Liabilities 0 0 0 

E. FECA Reimbursement to 

the Department of Labor 0 0 0 

F. Custodial Liabilities 425 0 425 

 G. Employer Contribution and 

 Payroll Taxes Payable 14,110 0 14,110 

 H. Other Liabilities 0 0 0 

I. Total Intragovernmental 

Other Liabilities $ 13,531 $ 0 $ 13,531 

 

2. Nonfederal 

A. Accrued Funded Payroll 

and Benefits $ 169,070 $ 0 $ 169,070 

B. Advances from Others 26,297 0 26,297 

C. Deferred Credits 0 0 0 

D. Deposit Funds and 

Suspense Accounts 0 0 0 

E. Temporary Early 

Retirement Authority 0 0 0 

F. Nonenvironmental 

Disposal Liabilities 

(1) Military Equipment 

(Nonnuclear) 0 0 0 

(2) Excess/Obsolete 

Structures 0 0 0 

(3) Conventional 

Munitions Disposal 0 0 0 

G. Accrued Unfunded Annual 

Leave 0 0 0 

H. Capital Lease Liability 0 0 0 

 I. Contract Holdbacks 3,352 0 3,352 

J. Employer Contribution and 

 Payroll Taxes Payable 0 0 0 

 K. Contingent Liabilities 0 24,176 24,176 

 L. Other Liabilities 273,878 0 273,878 

M. Total Nonfederal Other 

Liabilities $ 472,597 $ 24,176 $ 496,773 

3. Total Other Liabilities $ 486,128 $ 24,176 $ 510,304 
2009

147

Working Capital Fund

Notes to the Principal Statements

As of September 30 2008 

Current 

Liability

Noncurrent 

Liability Total

(Amounts in thousands) 

1. Intragovernmental 

A. Advances from Others $ 74,062 $ 0 $ 74,062 

B. Deposit Funds and 

Suspense Account 

Liabilities 0 0 0 

C. Disbursing Officer Cash 0 0 0 

D. Judgment Fund Liabilities 0 0 0 

E. FECA Reimbursement to 

the Department of Labor 0 0 0 

F. Custodial Liabilities 0 0 0 

 G. Employer Contribution and 

 Payroll Taxes Payable 12,240 0 12,240 

 H. Other Liabilities 0 0 0 

I. Total Intragovernmental 

Other Liabilities $ 86,302 $ 0 $ 86,302 

 

2. Nonfederal 

A. Accrued Funded Payroll 

and Benefits $ 151,662 $ 0 $ 151,662 

B. Advances from Others 24,926 0 24,926 

C. Deferred Credits 0 0 0 

D. Deposit Funds and 

Suspense Accounts 0 0 0 

E. Temporary Early 

Retirement Authority 0 0 0 

F. Nonenvironmental 

Disposal Liabilities 

(1) Military Equipment 

(Nonnuclear) 0 0 0 

(2) Excess/Obsolete 

Structures 0 0 0 

(3) Conventional 

Munitions Disposal 0 0 0 

G. Accrued Unfunded Annual 

Leave 0 0 0 

H. Capital Lease Liability 0 0 0 

 I. Contract Holdbacks 1,990 0 1,990 

J. Employer Contribution and 

 Payroll Taxes Payable 0 0 0 

 K. Contingent Liabilities 0 21,955 21,955 

 L. Other Liabilities 423,798 0 423,798 

M. Total Nonfederal Other 

Liabilities $ 602,376 $ 21,955 $ 624,331 

3. Total Other Liabilities $ 688,678 $ 21,955 $ 710,633 
148

Working Capital Fund

Notes to the Principal Statements

AFWCF has an abnormal balance on line 1.A. Intragovernmental Advances from Others in the 

amount of $1.0 million that occurred in the 4th Quarter, FY 2009. The abnormal balance was 

caused by an overliquidation of a previous progress billing. Research has been initiated to 

determine the root cause and anticipate the analysis to be completed and balance corrected during

1st Quarter, FY 2010. 

The majority of the Nonfederal Other Liabilities balance is comprised of $225.9 million for 

Contract Depot Maintenance Activity Group’s accrued material and labor liabilities. 

Contingent liabilities include $24.2 million related to contracts authorizing progress payments 

based on cost as defined in the Federal Acquisition Regulation (FAR). In accordance with contract 

terms, specific rights to the contractors’ work vests with the Federal Government when a specific 

type of contract financing payment is made. This action protects taxpayer funds in the event of 

contract nonperformance. These rights should not be misconstrued as the rights of ownership. 

The AFWCF is under no obligation to pay the contractor for amounts greater than the amounts 

authorized in the contract until delivery and Government acceptance. Due to the probability the 

contractors will complete their efforts and deliver satisfactory products, and because the amount of 

potential future payments are estimable, the AFWCF has recognized a contingent liability for 

estimated future payments which are conditional pending delivery and Government acceptance. 

Total contingent liabilities for progress payments based on cost represent the difference between 

the estimated costs incurred to date by contractors and amounts authorized to be paid under 

progress payments based on cost provisions within the FAR. Estimated contractor-incurred costs 

are calculated by dividing the cumulative unliquidated progress payments based on cost by the 

contract-authorized progress payment rate. The balance of unliquidated progress payments based 

on cost is deducted from the estimated total contractor-incurred costs to determine the contingency 

amount. 

Capital Lease Liability

The AFWCF has no Capital Lease Liability.
2009

149

Working Capital Fund

Notes to the Principal Statements

Note 16. Commitments and Contingencies 

The AFWCF is a party in various administrative proceedings and legal actions, related to claims 

for environmental damage, equal opportunity matters, and contractual bid protests. 

The AFWCF’s Office of the General Counsel considers the possibility of the AFWCF sustaining 

any losses on these legal actions to be remote. 

The AFWCF is a party in numerous individual contracts that contain clauses, such as price 

escalation, award fee payments, or dispute resolution, that may result in a future outflow of 

expenditures. Currently, AFWCF has limited automated system processes by which it captures 

or assesses these potential contingent liabilities; therefore no associated liabilities are recognized 

or disclosed. 

Note 17. Military Retirement and Other Federal Employment Benefits 

As of September 30 2009 

Liabilities 

Assumed 

Interest 

Rate (%) 

(Less: Assets Available to Pay 

Benefits) Unfunded Liabilities 

(Amounts in thousands) 

 

1. Pension and Health 

Actuarial Benefits 

A. Military Retirement 

Pensions $ 0 $ 0 $ 0 

B. Military Retirement 

Health Benefits 0 0 0 

C. Military MedicareEligible Retiree 

Benefits 0 0 0 

D. Total Pension and 

Health Actuarial 

Benefits $ 0 $ 0 $ 0 

 

2. Other Actuarial 

Benefits 

A. FECA $ 193,710 $ 0 $ 193,710 

B. Voluntary Separation 

Incentive Programs 0 0 0 

C. DoD Education 

Benefits Fund 0 0 0 

D. Total Other Actuarial 

Benefits $ 193,710 $ 0 $ 193,710 

 

3. Other Federal 

Employment Benefits $ 0 $ 0 $ 0 

 

4. Total Military 

Retirement and Other 

Federal Employment 

Benefits: $ 193,710 $ 0 $ 193,710 

 Actuarial Cost Method Used: 

 Assumptions: 

 Market Value of Investments in Market-based and Marketable Securities: 
150

Working Capital Fund

Notes to the Principal Statements

As of September 30 2008 

Liabilities 

Assumed 

Interest 

Rate (%) 

(Less: Assets Available to Pay 

Benefits) Unfunded Liabilities 

(Amounts in thousands) 

 

1. Pension and Health 

Actuarial Benefits 

A. Military Retirement 

Pensions $ 0 $ 0 $ 0 

B. Military Retirement 

Health Benefits 0 0 0 

C. Military MedicareElig ble Retiree 

Benefits 0 0 0 

D. Total Pension and 

Health Actuarial 

Benefits $ 0 $ 0 $ 0 

 

2. Other Actuarial 

Benefits 

A. FECA $ 217,337 $ 0 $ 217,337 

B. Voluntary Separation 

Incentive Programs 0 0 0 

C. DoD Education 

Benefits Fund 0 0 0 

D. Total Other Actuarial 

Benefits $ 217,337 $ 0 $ 217,337 

 

3. Other Federal 

Employment Benefits $ 0 $ 0 $ 0 

 

4. Total Military 

Retirement and Other 

Federal Employment 

Benefits: $ 217,337 $ 0 $ 217,337 

 Actuarial Cost Method Used: 

 Assumptions: 

 Market Value of Investments in Market-based and Marketable Securities: 

Federal Employees Compensation Act (FECA) 

The AFWCF actuarial liability for workers’ compensation benefits is developed by the Department 

of Labor and is updated at the end of each fiscal year. The liability includes the estimated liability 

for death, disability, medical, and miscellaneous costs for approved compensation cases, plus a 

component for incurred but not reported claims. The liability is determined using a method that 

utilizes historical benefit payment patterns related to a specific incurred period to predict the 

ultimate payments. The projected annual benefit payments are discounted to present value using 

the Office of Management and Budget’s (OMB’s) economic assumptions for 10-year Treasury 

notes and bonds. Cost of living adjustments (COLAs) and consumer price index medical (CPIM) 

factors are applied to the calculation of projected future benefits. 

Air Force Working Capital Fund 

The liability for future workers’ compensation (FWC) benefits includes the expected liability for 

death, disability, medical, and miscellaneous costs for approved compensation cases, plus a 

component for incurred but not reported claims. The liability is determined using a method that 

utilizes historical benefit payment patterns related to a specific incurred period to predict the 
2009

151

Working Capital Fund

Notes to the Principal Statements

ultimate payments related to that period. Consistent with past practice, these projected annual 

benefits payments have been discounted to present value using the OMB’s economic assumptions 

for 10-year Treasury notes and bonds. Interest rate assumptions utilized for discounting were as 

follows: 

2009

4.223% in Year 1 

4.715% in Year 2 

and thereafter 

To provide more specifically for the effects of inflation on the liability for future workers’ 

compensation benefits, wage inflation factors (COLAs) and medical inflation factors (CPIMs) were 

applied to the calculation of projected future benefits. The actual rates for these factors for the 

charge back year (CBY) 2009 were also used to adjust the methodology’s historical payments to 

current year constant dollars. 

The compensation COLAs and CPIMs used in the projections for various CBY were as follows: 

CBY COLA CPIM

2009 N/A N/A 

2010 0.47% 3.42% 

2011 1.40% 3.29% 

2012 1.50% 3.48% 

2013 1.80% 3.71% 

2014+ 2.00% 3.71% 

The model’s resulting projections were analyzed to insure that the estimates were reliable. The 

analysis was based on four tests: (1) a sensitivity analysis of the model to economic assumptions, 

(2) a comparison of the percentage change in the liability amount by agency to the percentage 

change in the actual incremental payments, (3) a comparison of the incremental paid losses per case 

(a measure of case-severity) in CBY 2009 to the average pattern observed during the most current 

three charge back years, and (4) a comparison of the estimated liability per case in the 2009 

projection to the average pattern for the projections of the most recent three years. 
152

Working Capital Fund

Notes to the Principal Statements

Note 18. General Disclosures Related to the Statement of Net Cost 

Intragovernmental Costs and Exchange Revenue 

As of September 30 2009 2008 

(Amounts in thousands) 

 

1. Intragovernmental Costs $ 2,293,064 $ 4,292,130 

2. Public Costs 8,241,327 6,435,022 

3. Total Costs $ 10,534,391 $ 10,727,152 

 

4. Intragovernmental Earned Revenue $ (10,030,681) $ (10,176,218) 

5. Public Earned Revenue (349,388) (608,692) 

6. Total Earned Revenue $ (10,380,069) $ (10,784,910) 

 

7. Net Cost of Operations $ 154,322 $ (57,758) 

Intragovernmental costs and revenue are related to transactions made between two reporting entities 

within the Federal Government. 

Public costs and revenues are exchange transactions made between the reporting entity and a 

nonfederal entity. 

The AFWCF’s systems do not track intragovernmental transactions by customer at the transaction 

level. Buyer-side expenses are adjusted to agree with internal seller-side revenues. Expenses are 

generally adjusted by reclassifying amounts between federal and nonfederal expenses. 

The Statement of Net Cost (SNC) represents the net cost of programs and organizations of the 

Federal Government supported by appropriations or other means. The intent of SNC is to provide 

gross and net cost information related to the amount of output or outcome for a given program or 

organization administered by a responsible reporting entity. The DoD’s current processes and 

systems generally do not capture and report accumulated costs for major programs based upon the 

performance measures as required by the Government Performance and Results Act. The DoD is in 

the process of reviewing available data and developing a cost reporting methodology as required by 

the Statement of Federal Financial Accounting Standards (SFFAS) No. 4, “Managerial Cost 

Accounting Concepts and Standards for Federal Government,” as amended by SFFAS No. 30, 

“Inter-entity Cost Implementation.” 

The AFWCF records transactions on an accrual basis. The AFWCF may not have all the actual 

costs and revenues input into the system in time for reporting. Accrual estimates based upon 

budget information, historical data, and current data not yet input are made as required by generally 

accepted accounting principles. These estimates reverse as actual costs or revenues are recorded. 

Restated
2009

153

Working Capital Fund

Notes to the Principal Statements

The AFWCF processed two prior period adjustments (PPA) totaling $3.4 billion for material errors 

associated with inventory. 

The first PPA in the amount of $1.7 billion was processed due to a material error occurring when 

components of kits in the Standard Base Supply System (SBSS) were transferred from Readiness 

Spares Packages (RSP) and War Readiness Material (WRM) to Peace Time Operating (POS) stock.

The resulting financial transactions were coded incorrectly causing the subject inventory to be 

treated financially as a lateral shipment of inventory instead of an inventory reclassification within 

the Consolidated Sustainment Activity Group-Supply Division (CSAG-Supply) Inventory.

Therefore, AF inventory was inadvertently double counted and an inappropriate gain was recorded 

in the Standard Material Accounting System (SMAS). We have documented 76,120 erroneous 

transactions totaling $1.7 billion for FY 2004 – 2007 that were treated in this manner. 

The second PPA in the amount of $1.7 billion was processed due to a material error where receipts 

from repair contractors were coded incorrectly for CSAG-Supply Working Capital Inventory. 

AFMC Inventory was double counted and a gain was recorded when the receipt was not coded to 

relieve the In-Transit Inventory account at the time Air Force inventory was received back from the 

repair contractor. We have documented 23,367 erroneous transactions totaling $1.7 billion for 

FY 2001 – 2008 that were treated in this manner. 

The processing of these PPAs resulted in a prior period adjustment of $3.4 billion, of which

$233.0 million affected the FY 2008 Gross Costs ending balance. The effects of these PPAs on the 

financial statements are reflected in Note 26, Restatements. 
154

Working Capital Fund

Notes to the Principal Statements

Note 19. Disclosures Related to the Statement of Changes in Net Position 

Other Financing Sources, Other is comprised of: 

1. A $62.5 million adjusting entry that increased Real Property balance and nonexchange gain 

presented as Other Financing Sources on the Statement of Changes in Net Position due to a one 

time adjustment processed in the 1st Quarter, FY 2009 to adjust the balance on the AFWCF 

financial statements to match that of the Automated Civil Engineer System - Real Property 

(ACES-RP). 

2. A $54.9 million adjusting entry that increased Equipment balance and nonexchange gain 

presented as Other Financing Sources on the Statement of Changes in Net Position due to an 

adjustment processed in the 4th Quarter, FY 2009 to adjust the balances on the AFWCF financial 

statements to agree with the Defense Industrial Financial Management System (DIFMS) and the 

Air Force Equipment Management System (AFEMS). 

3. A ($23.9) million reclassification from an exchange loss presented on the Statement of Net 

Cost of Operations to a nonexchange loss presented as Other Financing Sources on the Statement 

of Changes in Net Position due to property transfers for which a trading partner could not be 

identified. 

The AFWCF processed two prior period adjustments (PPA) totaling $3.4 billion for material errors 

associated with inventory. 

1. The first PPA in the amount of $1.7 billion was processed due to a material error occurring 

when components of kits in the Standard Base Supply System (SBSS) were transferred from 

Readiness Spares Packages (RSP) and War Readiness Material (WRM) to Peace Time Operating 

(POS) stock. The resulting financial transactions were coded incorrectly causing the subject 

inventory to be treated financially as a lateral shipment of inventory instead of an inventory 

reclassification within the Consolidated Sustainment Activity Group-Supply Division

(CSAG-Supply) Inventory. Therefore, AF inventory was inadvertently double counted and an 

inappropriate gain was recorded in the Standard Material Accounting System (SMAS). We have 

documented 76,120 erroneous transactions totaling $1.7 billion for FY 2004 – 2007 that were 

treated in this manner. 

2. The second PPA in the amount of $1.7 billion was processed due to a material error where 

receipts from repair contractors were coded incorrectly for CSAG-Supply Working Capital 

Inventory. AFMC Inventory was double counted and a gain was recorded when the receipt was 

not coded to relieve the In-Transit Inventory account at the time Air Force inventory was received 

back from the repair contractor. We have documented 23,367 erroneous transactions totaling 

$1.7 billion for FY 2001 – 2008 that were treated in this manner. 

3. The processing of these PPAs resulted in a prior period adjustment of $3.4 billion. The effects 

of these PPAs on the financial statements are reflected in Note 26, Restatements. 
2009

155

Working Capital Fund

Notes to the Principal Statements

Note 20. Disclosures Related to the Statement of Budgetary Resources 

As of September 30 2009 2008 

(Amounts in thousands)

 

1. Net Amount of Budgetary Resources Obligated for 

Undelivered Orders at the End of the Period $ 6,276,148 $ 6,596,132 

 

2. Available Borrowing and Contract Authority at the End of 

the Period 0 0 

All of AFWCF obligations are reimbursable obligations in apportionment category B. 

The Statement of Budgetary Resources (SBR) includes intraentity transactions because the 

statements are presented as combined. 
156

Working Capital Fund

Notes to the Principal Statements

Note 21. Reconciliation of Net Cost of Operations to Budget 

Resources Used to Finance Activities: 

Budgetary Resources Obligated: 

1. Obligations incurred $ 11,238,329 $ 10,968,071 

2. Less: Spending authority from offsetting 

 collections and recoveries (-) 

(11,280,419) (11,765,169) 

3. Obligations net of offsetting collections 

 and recoveries 

$ (42,090) $ (797,098) 

4. Less: Offsetting receipts (-) 0 0

5. Net obligations $ (42,090) $ (797,098) 

Other Resources: 

6. Donations and forfeitures of property 0 0

7. Transfers in/out without reimbursement (+/-) (64,772) (47,477) 

8. Imputed financing from costs absorbed by others 151,466 144,150 

9. Other (+/-) 93,605 (632,100) 

10. Net other resources used to finance activities $ 180,299 $ (535,427) 

11. Total resources used to finance activities $ 138,209 $ (1,332,525) 

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 (-) $ 319,984 $ 600,220 

 12b. Unfilled Customer Orders (345,924) (319,145) 

13. Resources that fund expenses recognized in prior 

 Periods (-) 

(52,004) (11,609) 

14. Budgetary offsetting collections and receipts that 

 do not affect Net Cost of Operations 

0 0

15. Resources that finance the acquisition of assets (-) (5,012,188) (4,945,969) 

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 (+/-) (28,833) 679,577 

17. Total resources used to finance items not part 

 of the Net Cost of Operations 

$ (5,118,965) $ (3,996,926) 

18. Total resources used to finance the Net Cost 

 of Operations 

$ (4,980,756) $ (5,329,451) 

As of September 30 2009 2008

(Amounts in thousands)

Restated
2009

157

Working Capital Fund

Notes to the Principal Statements

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 Period:

19. Increase in annual leave liability $ 0 $ 0

20. Increase in environmental and disposal liability 0 0

21. Upward/Downward reestimates of credit subsidy 

 expense (+/-) 

0 0

22. Increase in exchange revenue receivable from 

 the public (-) 

0 0

23. Other (+/-) 0 46

24. Total components of Net Cost of Operations that 

 will Require or Generate Resources in future

 periods 

$ 0 $ 46 

Components not Requiring or Generating Resources: 

25. Depreciation and amortization $ 161,990 $ 132,208 

26. Revaluation of assets or liabilities (+/-) 917,325 1,077,513 

27. Other (+/-) 

 27a. Trust Fund Exchange Revenue 0 0

 27b. Cost of Goods Sold 7,846,612 5,888,617 

 27c. Operating Material and Supplies Used 78,280 0

 27d. Other (3,869,129) (1,826,691) 

28. Total Components of Net Cost of Operations that 

 will not Require or Generate Resources 

$ 5,135,078 $ 5,271,647 

29. Total components of Net Cost of Operations 

 that will not Require or Generate Resources in 

 the current period 

$ 5,135,078 $ 5,271,693 

30. Net Cost of Operations $ 154,322 $ (57,758) 

Due to the AFWCF’s financial system limitations, budgetary data is not in agreement with 

proprietary expenses and assets capitalized. The difference between budgetary and proprietary 

data is a previously identified deficiency.

Resources That Finance the Acquisition of Assets is adjusted in order to align the note schedule 

with the amount reported on the Statement of Net Cost. This adjustment of $72.0 million 

(absolute value) was made in Finance the Acquisition of Assets category. 

As of September 30 2009 2008

(Amounts in thousands)

Restated
158

Working Capital Fund

Notes to the Principal Statements

The following schedule lines are presented as combined instead of consolidated due to 

intraagency budgetary transactions not being eliminated: 

x Obligations Incurred 

x Less: Spending Authority from Offsetting Collections and Recoveries 

x Obligations Net of Offsetting Collections and Recoveries 

x Less: Offsetting Receipts 

x Net Obligations 

x Undelivered Orders 

x Unfilled Customer Orders 

The majority of Resources Used to Finance Activities, Other line is comprised of: 

1. A $62.5 million adjusting entry that increased Real Property balance and nonexchange 

gain presented as Other Financing Sources on the Statement of Changes in Net Position 

due to a one time adjustment processed in the 1st Quarter, FY 2009 to adjust the balance 

on the AFWCF financial statements to match that of the Automated Civil Engineer 

System - Real Property (ACES-RP). 

2. A $54.9 million adjusting entry that increased Equipment balance and nonexchange 

gain presented as Other Financing Sources on the Statement of Changes in Net Position 

due to an adjustment processed in the 3rd Quarter, FY 2009 to adjust the balances on the 

AFWCF financial statements to agree with the Defense Industrial Financial Management 

System (DIFMS) and the Air Force Equipment Management System (AFEMS).

3. A ($23.9) million reclassification from an exchange loss presented on the Statement of 

Net Cost of Operations to a nonexchange loss presented as Other Financing Sources on 

the Statement of Changes in Net Position due to property transfers for which a trading 

partner could not be identified. 

The majority of Other resources or adjustments to net obligated resources that do not affect Net 

Cost of Operations is comprised of: 

1. A $62.5 million adjusting entry that increased Real Property balance and nonexchange 

gain presented as Other Financing Sources on the Statement of Changes in Net Position 

due to a one time adjustment processed in the 1st Quarter, FY 2009 to adjust the balance 

on the AFWCF financial statements to match that of the Automated Civil Engineer 

System - Real Property (ACES-RP) 

2. A $54.9 million adjusting entry that increased Equipment balance and nonexchange 

gain presented as Other Financing Sources on the Statement of Changes in Net Position 

due to an adjustment processed in the 3rd Quarter, FY 2009 to adjust the balances on the 

AFWCF financial statements to agree with the Defense Industrial Financial Management 

System (DIFMS) and the Air Force Equipment Management System (AFEMS). 

3. A ($23.9) million reclassification from an exchange loss presented on the Statement of 

Net Cost of Operations to a nonexchange loss presented as Other Financing Sources on 

the Statement of Changes in Net Position due to property transfers for which a trading 

partner could not be identified.
2009

159

Working Capital Fund

Notes to the Principal Statements

4. ($64.8) million represents property transfers to other DoD agencies. 

The majority of Other Components not Requiring or Generating Resources is comprised of 

$3.9 billion for Depot Maintenance Activity Group work-in-process offsets.

Note 22. Disclosures Related to Incidental Custodial Collections 

The AFWCF collects incidental custodial revenues generated primarily from these nonentity 

interest/penalties/administrative fees and distributes them to the General Fund of the Treasury. 

Note 23. Earmarked Funds 

The AFWCF has no Earmarked Funds. 

Note 24. Fiduciary Activities 

AFWCF has no Fiduciary Activities. 

Note 25. Other Disclosures 

The AFWCF has no Other Disclosures. 
Working Capital Fund

Notes to the Principal Statements

Note 26. Restatements 

The AFWCF processed two prior period adjustments (PPA) totaling $3.4 billion for material errors 

associated with inventory. 

The first PPA in the amount of $1.7 billion was processed due to a material error occurring 

when components of kits in the Standard Base Supply System (SBSS) were transferred from 

Readiness Spares Packages (RSP) and War Readiness Material (WRM) to Peace Time 

Operating (POS) stock. The resulting financial transactions were coded incorrectly causing the 

subject inventory to be treated financially as a lateral shipment of inventory instead of an 

inventory reclassification within the Consolidated Sustainment Activity Group-Supply Division 

(CSAG-Supply) Inventory. Therefore, AF inventory was inadvertently double counted and an 

inappropriate gain was recorded in the Standard Material Accounting System (SMAS). We have 

documented 76,120 erroneous transactions totaling $1.7 billion for FY 2004 – 2007 that were 

treated in this manner. 

The second PPA in the amount of $1.7 billion was processed due to a material error where 

receipts from repair contractors were coded incorrectly for CSAG-Supply Working Capital 

Inventory. AFMC Inventory was double counted and a gain was recorded when the receipt was 

not coded to relieve the In-Transit Inventory account at the time Air Force inventory was 

received back from the repair contractor. We have documented 23,367 erroneous transactions 

totaling $1.7 billion for FY 2001 – 2008 that were treated in this manner. 

Correction of these errors resulted in the following line items in the 2008 financial statements: 

a. CONSOLIDATED BALANCE SHEET 

i. Inventory and Related Property, Net: $3.4 billion 

ii. Total Assets: $3.4 billion 

iii. Cumulative Results of Operations - Other Funds: $3.4 billion 

iv. Total Net Position: $3.4 billion 

v. Total Liabilities and Net Position: $3.4 billion 

b. CONSOLIDATED STATEMENT OF NET COST 

i. Gross Costs: ($233.0) million 

ii. Net Program Costs: ($233.0) million 

iii. Net Cost of Operations: ($233.0) million 

c. CONSOLIDATED STATEMENT OF CHANGES IN NET POSITION 

i. Corrections of errors (+/-): $3.2 billion 

ii. Net Cost of Operations (+/-): ($233.0) million 

iii. Net Position: $3.4 billion 

160
161

2009

Working Capital Fund 

Fiscal Year 2009

Required Supplementary Information
162

Working Capital Fund

Required Supplementary Information

Statement of Disaggregated Budgetary Resources

As of September 30, 2009 and 2008 ($ in thousands)

Working

Capital Fund

2009

Combined

2008 

Combined

BUDGETARY FINANCING ACCOUNTS

BUDGETARY RESOURCES

Unobligated balance, brought forward, October 1 $ 343,595 $ 343,595 $ 1,073,782

Recoveries of prior year unpaid obligations 89,013 89,013 0

Budget authority

 Appropriation 61,465 61,465 66,458

 Contract authority 7,255,839 7,255,839 6,633,730

 Spending authority from offsetting collections

 Earned

 Collected 11,599,508 11,599,508 11,677,265

 Change in receivables from Federal sources (62,179) (62,179) 407,049

 Change in unfi lled customer orders

 Advance received (98,643) (98,643) (77,781)

 Without advance from Federal sources (247,280) (247,280) (241,364)

 Subtotal $ 18,508,710 $ 18,508,710 $ 18,465,357

Nonexpenditure transfers, net, anticipated and actual (251,274) (251,274) (88,000)

Permanently not available (7,078,077) (7,078,077) (8,139,473)

Total Budgetary Resources $ 11,611,967 $ 11,611,967 $ 11,311,666

STATUS OF BUDGETARY RESOURCES:

Obligations incurred:

 Reimbursable 11,238,329 11,238,329 10,968,071

 Subtotal 11,238,329 11,238,329 10,968,071

Unobligated balance:

 Apportioned 0 0 343,595

 Exempt from apportionment 373,638 373,638 0

 Subtotal 373,638 373,638 343,595

Total status of budgetary resources $ 11,611,967 $ 11,611,967 $ 11,311,666

CHANGE IN OBLIGATED BALANCE:

Obligated balance, net

 Unpaid obligations, brought forward, October 1 $ 7,946,887 $ 7,946,887 $ 8,883,865

 Less: Uncollected customer payments from Federal sources,

 brought forward, October 1 

(4,010,572) (4,010,572) (3,844,887)

 Total unpaid obligated balance 3,936,315 3,936,315 5,038,978

Obligations incurred net (+/-) 11,238,329 11,238,329 $ 10,968,071

Less: Gross outlays (11,573,286) (11,905,048) (11,905,048)

Obligated balance transferred, net payments from Federal sources (+/-)

Less: Recoveries of prior year unpaid oblligations, actual $ (89,013) $ (89,013) $ 0

Change in uncollected customer payments from Federal sources (+/-) 309,459 309,459 (165,685)

Obligated balance, net, end of period

 Unpaid obligations 7,522,917 7,522,917 7,946,888

 Less: Uncollected customer payments (+/-) from Federal sources (-) (3,701,113) (3,701,113) (4,010,572)

 Total, unpaid obligated balance, net, end of period 3,821,804 3,821,804 3,936,316

NET OUTLAYS

Net Outlays:

 Gross outlays 11,573,286 11,573,286 11,905,048

 Less: Offsetting collections (11,500,865) (11,500,865) (11,599,484)

 Net Outlays $ 72,421 $ 72,421 $ 305,564
163

Working Capital Fund 

Fiscal Year 2009

Audit Opinion
164

Working Capital Fund

Audit Opinion
2009

165

Working Capital Fund

Audit Opinion
166

Working Capital Fund

Audit Opinion
2009

167

Working Capital Fund

Audit Opinion
168

Working Capital Fund

Audit Opinion
2009

169

Working Capital Fund

Audit Opinion
170

Working Capital Fund

Audit Opinion
2009

171

Working Capital Fund

Audit Opinion
172

Working Capital Fund

Audit Opinion

( U.S. Air Force Photo by SrA Matthew Smith)