United States Air Force 2005

Annual Financial Statements

Financing the Fight

Message from the Secretary of the Air Force . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .ii

Message from the Assistant Secretary of the Air Force, Financial Management and Comptroller . . . . . .iii

Management Discussion and Analysis

Air Force in Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1

Air Force Organizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2

Major Commands, Direct Reporting Units, Field Operating Agencies . . . . . . . . . . . . . . . . . . . .2

General Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3

Quality People/Force Shaping . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3

Operational Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5

Financing the Fight . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7

Financial Management Transformation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7

Working Capital Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8

Supply Management Activity Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10

Depot Maintenance Activity Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12

Information Services Activity Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13

Financing the Future Fight . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14

Financial Statements

General Fund

Principal Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17

Footnotes to the Principal Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25

Consolidating and Combining Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .69

Required Supplementary Stewardship Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .81

Required Supplementary Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .93

Audit Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .101

Working Capital Fund

Principal Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .109

Footnotes to the Principal Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .117

Consolidating and Combining Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .149

Required Supplementary Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .161

Audit Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .167

i

2005 Annual Financial Statement

Table of Contents
SECRETARY OF THE AIR FORCE

WASHINGTON DC

October 2005

Message from the

Acting Secretary of the Air Force

I am pleased and proud to report that in Fiscal Year 2005 the Airmen of the United States Air Force responded

with excellence to the many challenges our nation faces. Whether in the Global War on Terrorism, in defending

our homeland, in humanitarian and peacekeeping operations, or in ensuring the readiness of the world’s greatest

air and space power, the nation’s Airmen were magnificent.

FY2005 saw almost 31,000 Airmen deployed to Southwest Asia, where they continue to fly more than 200 

sorties a day over Iraq and Afghanistan. Our Airmen are part of a cohesive team, integral to the joint and 

combined forces taking the fight to those who threaten democracy. In addition to Operations IRAQI FREEDOM

and ENDURING FREEDOM, they also continue to protect the nation as part of Operation NOBLE EAGLE.

The nation can be equally proud of our Air Force response to other global events. Within hours of Southeast Asia’s

terrible tsunami, Air Force aircraft and Airmen were enroute to the region, with supplies and skilled expertise at the

ready for delivery to the most hard hit and remote regions of Asia. Within days, our Airmen delivered over 120

tons of relief supplies using the full range of Air Force assets from heavy airlifters to agile helicopters.

In the first two weeks after hurricane Katrina devastated the Gulf Coast, the Air Force flew thousands of relief

missions and guaranteed air access to New Orleans and Keesler AFB near Biloxi, MS. Air Force rescue missions

saved thousands of stranded victims, evacuated thousands of the injured and even flew mosquito eradication 

missions to stem the spread of disease.

A key enabler of these Air Force efforts and services remains our financial management team, proud stewards 

of the country’s resources, confidently entrusted with our Air Force finances. In addition to improving daily 

services to our Airmen, they continue implementing the FY05-10 Air Force Financial Management Strategic Plan.

The Plan provides strategic vision, improved support to our warfighters, and better information reliability, 

integration and visibility in our financial management.

These financial statements illustrate the success of the Air Force over the past year, as well as specific financial

management accomplishments. The publication of our financial statements complies with a requirement of the

Chief Financial Officers Act, and the financial information addresses both our General Fund and Working Capital

Fund activities.

The service of our financial managers has been nothing short of outstanding. Rest assured, their innovation, 

dedication and professionalism will remain the bedrock for Air Force capabilities long into the future. They are

“financing the fight,” and providing stellar contributions to America’s air and space power.

ii

United States Air Force
DEPARTMENT OF THE AIR FORCE

WASHINGTON DC

OFFICE OF THE ASSISTANT SECRETARY

October 2005

Message from the 

Assistant Secretary of the Air Force,

Financial Management and Comptroller

I share with tremendous pride the sentiments expressed by the Secretary in our Air Force financial management

professionals. In Fiscal Year 2005, we continued our support to ongoing Global War on Terrorism operations

throughout the world and provided critical financial management contributions to Indian Ocean tsunami and 

Gulf Coast hurricane relief efforts. Indeed, our Air Force financial team was chosen to lead DoD’s accounting

effort for hurricane Katrina. We do all this--and more, while we continue to maintain top-quality financial 

services for our Airmen at home and around the globe.

Financial management plays a key role in fulfilling the Air Force mission. This in turn is made possible by the

implementation of our Air Force Financial Management Strategic Plan. The Plan calls for five goals to bring the

Financial Management Vision into clear focus:

• Become a partner in strategic Air Force decisions.

• Recruit, prepare and retain a well-trained and highly educated professional team for today and tomorrow.

• Make processes efficient and effective to produce accurate and relevant financial information.

• Reduce our cost structure by employing leading-edge technologies that continuously streamline financial 

management processes and increase capabilities.

• Provide our customers with world-class financial services.

Our financial management team members are accomplishing these goals that stress accountability, visibility and

the highest-quality management skills available anywhere. This is our highest priority. We are financing the

world’s finest air and space power.

The FY2005 Air Force Financial Statement reflects the wise investment America has made in our Air Force. 

It includes a Management Discussion and Analysis section that more precisely illuminates Air Force efforts and

contributions. It fulfills the requirements of the Chief Financial Officers Act, documents the expenditures 

devoted to our General Fund and Working Capital Fund, and reviews performance measures established as 

part of the Government Performance and Results Act.

America’s Air Force has the obligation to be good stewards of the national resources entrusted us. Air Force

financial management professionals have met that obligation, and will continue to do so, as we proudly persevere

in “financing the fight!”

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2005 Annual Financial Statement

Air Force in Action

America can be justly proud of the performance of the Air Force in

FY2005. Air Force operations in IRAQI FREEDOM and ENDURING

FREEDOM showed that America’s airpower is capable 24/7 and

worldwide. In continuing the global war on terror, America’s Airmen

continued to successfully fly over 200 sorties per day. Airmen also

contributed on the ground, calling in air support and evacuating the

wounded with bravery and professionalism. 

Also as part of the global war on terror, Airmen continued to defend

the homeland in Operation NOBLE EAGLE. This vigilant force,

requiring readiness and extraordinary aviation response, stands ready

as always to defend the skies of the United States. In FY2005, Airmen

did indeed respond to potential threats. Fortunately, none of these

threats came to fruition, but this effort serves as an example of coordination between all components of the Air Force—Active, Reserve

and Air National Guard—and civilian authorities.

Combat and defensive operations were not the only contribution of

the Air Force. As the Secretary of the Air Force has noted, in the

wake of the tsunami in Southeast Asia, the Air Force responded with

humanitarian aid within hours and delivered hundreds of tons of relief

supplies within days. Thus the great capability America has given our

dedicated Airmen was turned into lifesaving support for others.

Air Force humanitarian operations continued in both preparation for

and in response to the Gulf hurricanes. Search and rescue, recovery,

airlift, and aeromedical evacuation missions were generated from Air

Force bases nationwide, flying in vital supplies. Airmen flew and supported more than 4,000 missions, rescued almost 5,000 victims and

transported more than 3,000 patients in need of care. On the

ground, Airmen not only operated off damaged runways and airfields,

but also erected shelters to house relief personnel. As in Air Force

support to tsunami victims, the Air Force worked as a joint team with

1
other services and federal assets in everything from

elite helicopter-borne pararescue, to airlift, to civil

engineering. 

The Air Force also advanced America’s air and space

capabilities in FY2005. To name but a few examples:

B-2 bomber crews not only supported ongoing

operations, but demonstrated the ability to engage

80 targets in one pass; C-17 crews continued to

show the ability to support operations from remote

bases; in space, increased coordination led to better

surveillance. 

All of this was underpinned

by Air Force financial management professionals.

Guided by the Air Force

Financial Management

Strategic Plan, they have

stressed three themes:

Warfighter Support,

Strategic Resourcing and

Cost Management, and

Information Reliability and

Integration. They have

been extraordinarily successful in fulfilling the needs

of global Air Force operations and America’s

Airmen, and are indeed

“Financing the Fight.”

Air Force Organizations

In FY 2005, Air Force active duty members, the Air

National Guardsmen, the Air Force Reserve, and Air

Force civilians responded to unprecedented challenges with unprecedented performance. Calling

upon the Air Force Core Values of “Integrity First—

Service Before Self—Excellence In All That We Do,”

Air Force personnel proved time and time again that

they comprise the preeminent air and space power

on the planet.

The integrated components of our Air and Space

Expeditionary Force were involved in operations

including major theater war, homeland security, and

humanitarian relief. Air Force personnel and organizations operated with outstanding effectiveness and efficiency, all while constantly preparing to face the challenges of the future.

Major Commands, Direct Reporting Units,

Field Operating Agencies

The Air Force is organizationally aligned into nine

Major Commands (MAJCOMs, including the Air Force

Reserve and Air National Guard), with 13 Field

Operating Agencies (FOAs), and four Direct Reporting

Units (DRUs).

Major Command (MAJCOM)

A MAJCOM is a major subdivision of the Air Force,

directly subordinate to Headquarters US Air Force.

MAJCOM headquarters are management headquarters and thus have the full range of functional staff.

Examples of MAJCOMs are Air Combat Command

(ACC), Air Education and Training Command (AETC),

and Air Force Materiel Command (AFMC).

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2005 Annual Financial Statement

Direct Reporting Unit (DRU)

A DRU is a subdivision of the Air Force, directly subordinate to the Chief of Staff, US Air Force. A DRU

performs a mission that does not fit into any of the

MAJCOMs. A DRU has many of the same administrative and organizational responsibilities as a MAJCOM.

Examples of DRUs are the Air Force Academy

(USAFA), the Air Force Studies and Analysis Agency

(AFSAA), and the Air Force Operational Test and

Evaluation Center (AFOTEC).

Field Operating Agency (FOA)

A FOA is a subdivision of the Air Force, directly subordinate to a Headquarters US Air Force functional

manager. A FOA performs field activities beyond

the scope of any of the major commands. The activities are specialized or associated with an Air Forcewide mission and do not include functions performed in management headquarters, unless specifically directed by a Department of Defense (DoD)

authority. Examples of FOAs are the Air Force

Intelligence Analysis Agency (AFIAA), the Air

Reserve Personnel Center (ARPC), and the Air

Force Services Agency (AFSA).

All of this leads us to proudly present both the

Management Discussion and Analysis and the Air

Force Financial Statement. This includes both the Air

Force General Fund and Working Capital Fund, with

details on Air Force stewardship of taxpayer dollars.

This includes descriptions of the functional areas

these funds support and how they are used to further Air Force capabilities for the nation. This

Statement also satisfies provisions of the Chief

Financial Officer Act.

General Fund

Quality People/Force Shaping

Throughout FY2005, Air Force personnel have

worked to shape our human capital to meet new challenges. After the September 11 attack on our nation,

the Air Force moved to a new post-Cold War plateau

in manning. Following a brief period of maintaining

people on active duty through Stop Loss actions, the

Air Force retention among officers and enlisted members climbed higher than it had during the late 1990s.

At the same time the Air Force was increasing the

pace of deployments under the Air Expeditionary

Force (AEF) construct to meet the daily challenges of

the Global War on Terrorism (GWOT), we also began

a long-term transformation to meet the challenges of

applying air and space power in a post-modern world.

Force shaping has been the most visible aspect of

how the Air Force is reorganizing nearly half a million

people to create the force our nation needs.

The Air Force began the fiscal year with a challenge:

reduce end strength from 376,500 to fewer than

360,000 by the end of FY2005. Due to aggressive

recruiting and retention programs in the late 1990s,

and the uncertainty of the early months of the GWOT,

the Air Force had more people on active duty than

required by law. In addition, we had an imbalance in
skills. Several career fields were over-manned, while

others suffered from shortages. The Air Force used a

number of tools and programs to begin simultaneously

reducing the number of people to meet the endstrength set by Congress and to shift our quality Air

Force people to meet our needs. 

First, the Air Force relied on voluntary separations

through incentives to help reduce the overall number

on active duty. For example, it made it easier for officers and enlisted members to move from active duty

to the Reserve and Air National Guard under the

PALACE CHASE program, and allowed them to move

to the Army under the Blue to Green program. The

Air Force also provided additional incentives to people

eligible to retire, such as reducing from three years to

two years the time in grade required for colonels and

lieutenant colonels to retire. We also instituted a liberal policy to encourage officers and enlisted members

who were not serving in shortage skills to leave if they

wanted to. This was done by announcing a policy to

waive active duty service commitments incurred for

education, recent assignments, and other administrative actions. This allowed Airmen inclined to leave or

retire to do so quickly and easily. 

The Air Force used a few involuntary separations to

meet authorized end-strength. These measures included speeding up the separation of Airmen who had

refused Permanent Change of Station orders or

required training/retraining, those involved in disciplinary action or coming to the end of an enlistment and

those who had declined to re-enlist or extend their

service. The Air Force also instituted a more restrictive policy for dealing with Airmen who were unable

to complete training schools. Those who could

qualify for training and where a genuine Air Force

need existed were allowed to stay, while the rest

were not allowed to remain as excess on active

duty. 

After greatly expanding the voluntary separation and

retirement opportunities, the Air Force began to

reduce the number of Airmen entering active duty.

These reductions began in the previous fiscal year and

became more pronounced during FY2005. Officer

accessions were cut by 335 and enlisted accessions by

16,700. Together, these reductions prevented well

over $1 billion of the Air Force budget from being

spent to maintain excess personnel.

While the end-strength was coming down, the Air

Force was also working to reshape many career

fields to correct imbalances. The Career Job

Reservation (CJR) program helped rebalance the junior enlisted force as they entered their second enlistment. All Airmen were required to obtain a CJR in

one of the 146 Air Force Specialty Codes (AFSCs) in

order to re-enlist. In 27 AFSCs that had significant

overages, CJRs were limited to the number needed

to sustain the career fields at their optimal manning.

Airmen from these AFSCs who did not obtain CJRs

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United States Air Force
5

2005 Annual Financial Statement

had the choice of applying for a CJR in one of the

shortage AFSCs or leaving the Air Force. Using this

tool helped improve by 17 percent the imbalances in

the 27 AFSCs where CJRs constrained the number of

people entering a second enlistment. 

The Air Force was able to continue to reduce the

number of AFSCs receiving Selective Reenlistment

Bonuses (SRBs). SRBs are an additional financial

incentive for enlisted Airmen with between 17

months and 14 years of service to remain on active

duty. The maximum additional payment an Airman

can receive for an enlistment through the SRB program is $60,000, but SRBs are set by AFSC on a sliding scale. The average SRB payment to Airmen in FY

2004 was $10,700. In 2004, the Air Force removed

82 AFSCs from the list of those eligible for SRBs,

leaving 62 AFSCs eligible. In March 2005, that list

was reduced further, leaving only 32 AFSCs with this

additional financial incentive to serve. The reduction

saved the Air Force $102.7 million.

Together these programs and policies helped the Air

Force meet its target end-strength in the summer of

2005 and improve imbalances between many enlisted

AFSCs. Unfortunately, it left the force with an overall

shortage of enlisted personnel and an excess of officers.

The Air Force will continue to devise programs and

tools to correct this imbalance in the next fiscal year. 

Operational Performance 

Air Force Flying Hour Program 

The Air Force Flying Hour Program is designed to

prepare units to support warfighting commanders.

The execution of the President’s Budget (PB) Flying

Hour Program is impacted by contingency operations

support, maintenance issues, fact-of-life impacts, aircraft flight operations suspensions, aircraft delivery

delays, weapons system retirements, and approved

program changes. Though the execution of the Flying

Hour Program does not define unit readiness, it can

be a forward indicator of possible readiness issues.

The Major Commands (MAJCOMs) determine the

reasons for execution deviation and required course of

action. These evaluations provide insight to possible

future year requirements.

As of 31 May 2005, the Air Force executed 67.0 

percent of the PB Flying Hour Program and will fulfill the

authorized amount for FY2005. Flying Hour Program

execution hours include active Air Force Congressionally

funded O&M hours. They do not include incrementally

funded contingency support hours, Transportation

Working Capital Fund hours, foreign nation reimbursable

training hours, Special Operations hours, or Research,

Development, Test, and Evaluation (RDT&E).
Weapon System Performance Metrics

The Air Force uses a variety of metrics to gauge the

performance of its weapon systems and organizations.

They are barometers for measuring the effectiveness

of our organizational structures, our training, manpower and equipment levels, quality of spare parts,

maintenance actions, and a variety of other indicators

of our ability to provide mission-ready weapon systems to the warfighter. Chief among these performance metrics are Mission Capable rates, Non-Mission

Capable rates, Cannibalization rates, and engine and

supply measures. 

Mission Capable Rates

Mission Capable (MC) rates are perhaps the best

known yardstick for measuring the readiness of Air

Force aircraft. MC rates reflect the percentage of aircraft, by fleet, capable of performing at least one of

their assigned missions. The FY2005 aggregate MC

rate as of 30 June 05 is 78.3 percent, an increase from

the FY2004 rate of 77.3 percent, and is based on a

combined MC rate of A/O-10, B-1, B-2, B-52, C-130,

C-141, C-5, C-17, E-3, E-8, F-15, F-15E, F-16, F-117,

HC-130, KC-10, KC-135, HH-60, RC-135, RQ-1, T-1,

T-6, T-37, T-38, and U-2 aircraft. MC rates categorized into Fighter, Bomber, Tanker/Airlift, and Other

are drawn from the aggregate fleet above. 

Non-Mission Capable Rates

Total Non-Mission Capable for Maintenance

(TNMCM) is a measure of a maintenance organization’s ability to fix aircraft quickly and accurately and

Total Non-Mission Capable for Supply (TNMCS)

measures spare parts availability. The FY2005 aggregate fleet TNMCM rate, as of 30 June 05, decreased

from 18.9 percent to 18.2 percent. The FY2005

TNMCS rate as of 30 June 05 decreased from 8.9

percent to 8.2 percent representing the sixth consecutive year of improving supply rates, and the lowest

TNMCS rate since FY1994. 

6

United States Air Force

Mission Capable Rates

79.7

76.1

70.1

76.1 77.0

66.0

82.0

77.3 75.6 78.3

10

20

30

40

50

60

70

80

90

Aggregate Fighter Bomber Tanker Airlift Other

Percent

FY 04

FY 05

Rates as of 30 June 05 
7

2005 Annual Financial Statement

Other Key Metrics

Air Force weapon system performance measures for

FY2005 provide a snap-shot of the tremendous

efforts of the logistics community to provide and support combat-capable forces that are organized,

trained and equipped to provide efficient and effective

combat and combat support efforts across the full

spectrum of military operations. 

Cannibalization (CANN) rates reflect the number of

cannibalization actions that occur per 100 sorties for a

particular weapon system. The FY2005 aggregate

rate of 4.2 CANN’s per 100 sorties, as of 30 June 05,

is a decrease from the FY2004 rate of 4.6, and represents the lowest CANN rate since FY1994.

Engine Non-Mission Capable-Supply (ENMCS) rate

for all Air Force engines improved as the rate

dropped to 5 percent, the lowest rate in the past

seven years. ENMCS for Fighter and Tanker/Airlift

fleets improved over FY2004 rates, while Bomber

fleet ENMCS increased. Engine-time-on-wing

(ETOW) rates declined 1.2 percent for Fighter,

Bomber, and Tanker/Airlift fleets. Investments in

engine modifications, spare parts, and reliability centered maintenance has continued to pay quality dividends for our engine fleet throughout FY2005. 

Aircraft MC rates are but one indicator of enhanced

weapon system readiness. Programmed depot maintenance and fleet modernization activities are critical

to maintaining mission-ready aircraft. The Air Force

strives to make continual improvements in business

practices designed to increase the efficiency and effectiveness of our depot maintenance programs. As of

31 May 05, the total number of aircraft in depot for

FY2005 was 431, continuing the downward trend in

depot-possessed aircraft. 

Financing the Fight

Financial Management Transformation

Air Force Financial Management (FM) envisions an Air

Force operating at peak effectiveness and efficiency

with every dollar striking the correct balance among

supporting the mission, maintaining the infrastructure,

and taking care of our people. We will achieve that

vision by providing Air Force leaders with accurate,

relevant, and timely information to make the right

strategic choices while making existing operations

more effective and efficient. In addition, we see

Airmen resolving pay issues without a trip to the

Finance Office, but retaining access to face-to-face

support when needed. 

In recent years, we created a roadmap that translates

our vision into concrete, actionable, and measurable

steps. It integrates ongoing transformation initiatives

into strategy and communicates priorities, focuses

efforts, and serves as a filter to help determine where

to invest time, people, and resources. 
The strategic goals outlined in the plan are:

1. Become a partner in strategic Air Force decisions.

2. Recruit, prepare, and retain a well-trained and 

highly educated professional team for today and

tomorrow.

3. Make processes efficient and effective to produce

accurate and relevant financial information complemented by sophisticated decision support.

4. Reduce our cost structure by employing leadingedge technologies that continuously streamline

financial management processes and increase 

capabilities.

5. Provide our customers with world-class financial

services.

Translating these goals into strategy led to three distinct strategic themes:

Warfighter Support: We will remain an expeditionary-focused workforce trained and prepared to

support deployed forces.

Strategic Resourcing and Cost Management: We

will link strategy to measurable improvements in effectiveness and efficiency.

Information Reliability and Integration: We will

provide relevant, timely, accurate, and reliable information to support decision-making.

Transformation is our catalyst to achieving the FM

vision. In 2005, through our FM operational framework, we’ve begun enacting our Six Lanes of

Transformation:

• Financial Services Transformation aims to create a shared services organization with a Central

Processing Center (CPC) to handle back-office customer support and a Contact Center to interface

with our customers. The goal is to create a 3-tier

customer service concept to include online services, a contact center, and face-to-face support.

• Financial Advisor Transformation will provide

enhanced decision support and financial advice to

commanders. This includes realigning resources

to provide enhanced budget, cost, and accounting

financial services to the unit and developing a new

position, Enhanced Financial Advisor, to serve as

the commander’s right-hand person on all

resource issues.

• O&M Center of Expertise Transformation

establishes a Center of Expertise that can provide

expert on-demand, specialized decision support and

financial analysis for privatization, activity-based

costing, and economic analysis. It returns an O&M

cost capability to the base.

• Combat Comptroller Transformation enhances

how the 21st century FM community prepares and

deploys to support the warfighter. 

• Education, Training and Development

Transformation builds the right FM training construct for the future and supports all other lanes of

transformation. The team is focused on enduring

competencies needed in a post transformation environment and on time technical training for the

effort’s major phases.

• Re-engineering the Air Force Budget processes

redesigns the current Air Staff O&M budget process

within Air Force Financial Management. 

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2005 Annual Financial Statement

Transformation accomplishments in FY2005 have

included:

• Financial Services team produced the high-level

design of the CPC. The Financial Advisor team

realigned existing Accounting Liaison functions and

personnel with base-level Financial Analysis to set

the stage for the next step in their project, developing the Enhanced Financial Advisor. 

• In October 2005, the O&M Center of Expertise

team stood up the Air Force Center of Expertise

with an initial cadre of experts. 

• Combat Comptroller team has finished initial design

work on the new Combat Comptroller

Contingency Organization, which will consolidate

numerous duties related to how FM meets its

deployment obligations. 

• Education, Training, and Development (Tools) team

is exploring exciting collaborative opportunities to

enhance deployable processes with Contracting

personnel. 

Our transformation efforts haven’t stopped there:

• Financial Services team is currently working to

determine who will deliver financial shared services

(CPC and Contact Center) and how those services

will be delivered in concert with Air Force

Personnel offices. They have already developed a

number of options and are zeroing in on the best. 

• Financial Advisor team is building detailed job

descriptions for Enhanced Financial Advisors. 

• O&M Center of Expertise team will continue to

increase the size and capability of their center during the next few years, reaching full operational

capability in FY2008. 

• Combat Comptroller team is currently examining a

number of innovative initiatives and hardware to

facilitate transformation, such as hand-held equipment to automate the time-consuming paper work

frequently required in deployed environments.

Working Capital Fund

Air Force Materiel Command (AFMC) supports Air

Force warfighters and operations via four major 

business areas that operate as revolving funds (i.e.,

providers charge users for the goods and services provided). AFMC accounts for more than 95 percent of

Working Capital Fund (WCF) revenue and expense

activity (excluding the Transportation Working Capital

Fund, which is managed by the United States

Transportation Command). The WCF consists of

three functions: Supply Management, Depot

Maintenance, and Information Services. These functions, referred to as activity groups, supply singular

goods and services to Air Force and Department of

Defense (DoD) customers. Supply Management provides managers expedited repair, replenishment, and

inventory control for spare parts and associated logistics support services to fulfill Air Force needs during

war and peacetime. Depot Maintenance provides

economical and responsive repair, overhaul, and modification of aircraft, missiles, engines, other major end

items, and their associated components. The

Information Services business area provides for the

maintenance and development of automated information systems for information-related activities of the

Air Force and DoD, along with certain other government agencies.

WCFs allow the Air Force to accomplish the following:

• Ensure readiness through reduced support costs,

stabilized rates, and customer service.
• Ensure flexibility to adjust customer support needs

in response to real-world situations. 

• Focus management attention on net results, 

including costs and performance.

• Identify the total cost of providing support 

products and services.

• Establish strong customer/provider relationships.

Supply Management Activity Group 

The Supply Management Activity Group (SMAG)

provides policy, guidance, and resources to meet Air

Force needs for spare parts. SMAG manages

approximately two million items, including weapon

systems spare parts, medical/dental supplies and

equipment, and items used for non-weapon systems

applications. Materiel procured from vendors held

in inventory is for sale to authorized customers.

SMAG consists of four divisions: the Material Support

Division (MSD), General Support Division (GSD),

Medical/Dental Division, and the United States Air

Force Academy Cadet Issue Division. AFMC manages MSD and GSD. Headquarters United States Air

Force manages the Medical/Dental Division and Air

Force Academy Cadet Issue Division. 

MSD is responsible for Air Force-managed, depotlevel reparable spare parts and some consumable

spares. The principal products of MSD are serviceable spare parts and assemblies unique to Air Force

weapon systems. 

The retail operations of the WCF are comprised of

the General Support, Medical Dental, and United

States Air Force Academy Divisions. Although each

division operates independently, all purchase large

quantities of commodities in order to sell small

quantities directly to the ultimate consumer (supporting the warfighter). Large bulk buys allow the

Air Force to take advantage of the economies of

scale and achieve significant cost savings.

Additionally, each division concentrates its efforts in

a specific area of expertise. 

The GSD items support installation maintenance and

administrative functions, and field and depot maintenance of aircraft and other systems. GSD supports

more than 150 Air Force installations throughout the

world.

The Surgeon General of the Air Force is responsible

for the overall management of the Medical/Dental

Division. This peacetime operating authority provides

the effective support necessary to maintain established

norms in the health care of USAF active military,

retirees, and family members. The war reserve

materiel (WRM) requirement of this division is to provide medical supplies and equipment vital to support

forces in combat and contingency operations.

The United States Air Force Academy Cadet Issue

Division finances the purchase of uniforms, uniform

accessories, and computers for sale to cadets. The

division’s customer base includes more than 4,000

cadets who receive distinctive uniforms procured from

a number of domestic manufacturing contractors.

10

United States Air Force
11

2005 Annual Financial Statement

Customers, Products, and Services

In addition to the management of various inventories,

the SMAG 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.

SMAG provides this support to a variety of customers.

The supply business also provides initial provisioning

support to the Air Force Acquisition Executive. 

SMAG Transformation Initiative

The SMAG is implementing a major redesign of the

spares supply process through a set of initiatives

designed to improve support to the warfighter. These

initiatives will result in a fundamental reshaping of the

internal management processes and data systems used

on a daily basis to buy, repair, and distribute the thousands of different items needed to maintain weapon

systems in a mission-capable (MICAP) status. Four

primary initiatives address key areas of opportunity

within the spares process.

• Purchasing and Supply Chain Management (PSCM)

adapts commercial best practices to integrate purchasing and supply processes into a single, customer-centric, end-to-end process that provides the

right item in the right quantity and quality, on time

and at a reasonable cost.

• Weapon System Supply Chain Management (WS

SCM) is a customer-facing initiative aimed at balancing Air Force and AFMC goals. It addresses process

improvements and savings championed by PSCM

strategies while retaining ultimate focus on the

warfighter through rapid and proactive maneuvers

to deliver weapon system support.

• Logistics Enterprise Architecture (LOGEA) is an initiative to develop a single authoritative strategic

map of future Logistics business practices, systems,

and organizations. It is a single authoritative source

which defines operating and systems models, aligns

business and IT initiatives, and provides a vehicle to

ensure transformation coordination across the Air

Force and outside the Air Force.

• Advanced Planning System (APS) is improving

the process of translating warfighter needs into 

executable logistics system support plans and 

schedules. By emphasizing collaboration with 

customers and suppliers, it seeks to optimize 

activities and resources across the Air Force 

supply chain.

Customer Support Performance Measures

MICAP and Customer Wait Time (CWT) allow managers to assess quality of spares support provided and

plan corrective action when needed. MICAP is defined

as the status of a weapon system as determined by its

ability to accomplish its assigned mission. MICAP

hours are accrued in a given month for items affecting

mission capability that are on backorder to an AFMC

source of supply. For every day during the month the

requisition is unfilled, 24 hours are assigned to the requisition. CWT measures the average time elapsed

between customer order and satisfaction of that order,

including the wait time between the retail supply issue

or backorder from the source of supply, and the delivery to the base customer, expressed in days.

MICAP hours and CWT have improved significantly

since 1999. These improvements continue to have a

direct impact on the warfighter’s ability to meet

worldwide missions.

Financial Performance Measures

SMAG measures financial performance based on the

Net Operating Result (NOR) for MSD and GSD. The

NOR is the difference between revenue and expenses

(i.e., a bottomline profit and loss indicator). The

NOR objective of an activity group is to break even

over a two-year budget cycle. Setting rates that 
effectively offset the prior year net profit or loss

accomplishes this objective. 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 use of resources during an accounting period in

carrying out the DoD’s mission. They occur from

rendering services, delivering or producing goods, or

carrying out other mission related activities. 

Depot Maintenance Activity Group

The Depot Maintenance Activity Group (DMAG)

ensures successful management and execution of comprehensive depot maintenance programs for all Air

Force-managed equipment in accordance with existing

Air Force guidance. In peacetime, DMAG enhances

readiness by efficiently and economically repairing,

overhauling, and modifying aircraft, engines, missiles,

components, and software to meet the warfighter

demands. During wartime or contingencies, the group

shifts to surge repair operations and realigns capacity

to support the warfighter’s immediate needs.

Customers, Products and Services

DMAG provides major overhaul and repair of systems

and spare parts while striving to meet or exceed

required standards for quality, timeliness, and cost.

Both the AFMC depots and contract operations

accomplish these goals. 

The DMAG supports a variety of customers including

the Air Force Major Commands, Air National Guard

(ANG), Air Force Reserve Command (AFRC), SMAG,

Foreign Military Sales, and non-DoD customers.

Additionally, the DMAG provides storage, reclamation, and regeneration for equipment not currently

used by the active forces of all military services. This

work is done at the Aerospace Maintenance and

Regeneration Center at Davis-Monthan AFB, Arizona.

Contract depot maintenance is transitioning from the

Air Force Working Capital Fund (WCF) to be financed

directly by the using commands, the Supply

Management Activity Group, and other customers.

DMAG plans to stop accepting new contract orders

for FY2007 and out. However, DMAG will fulfill all

previous contracts.

The DMAG has two principal objectives. The first

objective is to provide organic depot repair capability

for fielded and emerging weapon systems, so that

warfighters have mission-essential equipment.

Secondly, DMAG’s intent is to ensure the ability to

rapidly respond to those warfighter requirements

driven by contingency operations. To accomplish this,

short- and long-term strategies must be used. The

depot maintenance strategic plan guides the DMAG

to have the right workload capacity and capability to

meet depot maintenance; (a) peacetime support, (b)

surge, and (c) core requirements. To better support

the services that DMAG provides to its customers, an

integrated suite of systems, Depot Maintenance

Accounting and Production Systems (DMAPS), provides improved financial, production, and material

functionality in support of the warfighter’s needs for

quality organic depot maintenance. This includes

improved financial management support/tools and

reporting for organic depot maintenance activities, to

include substantial compliance with legislative requirements, such as the Chief Financial Officers (CFO) Act. 

Transformation Initiatives

The future financial framework being developed

through the Air Force logistics transformation effort

envisions centrally managed provider (AFMC) and customer (MAJCOMs) funds, utilizing the WCF financing

mechanism to enhance cost awareness and provide

flexibility. On the provider side, the Material Support

12

United States Air Force
13

2005 Annual Financial Statement

Division (MSD) and DMAG financial management

operations will be merged, focusing on cost and output. In this simplified structure, MSD and DMAG will

no longer recursively pass costs between each other

prior to establishing a price to the ultimate customer. 

The Depot Maintenance Reengineering and

Transformation (DMRT) initiatives include improvements to the budgeting process. This is to be accomplished in part by using predictive modeling and statistical techniques to develop portions of the budgets.

The model will also consider a reduction of manual

effort currently required to prepare the workload

baseline for the budgets.

Customer Support Performance Measures

Customer Support Performance Measures for DMAG

consist primarily of Production Performance Measures,

which are used to assess cost, schedule and quality of

the DMAG output. These are designed to achieve

accountability at the appropriate depot maintenance

level, the Depot Maintenance Manager. Customer

Support Performance Measures monitor progress

toward DMAG goals. 

The Due Date Performance (ability of the depot to 

produce aircraft according to schedule) improved 

significantly compared to a year ago and reached 99.4

percent (7 percent above goal) in May of 2005. The

depot performance of Air Logistics Centers (ALCs) continues to have a direct impact on the warfighter’s ability

to meet worldwide missions. 

Financial Performance Measures

Financial Performance Indicators assess the financial

performance of the DMAG. These indicators are

designed to achieve accountability at the appropriate

level and also measure compliance with DMAG

budget objectives. The budget objectives are identified in each ALC’s financial performance plan used to

measure results during execution.

Information Services Activity Group

Information Services Activity Group (ISAG) was established to develop and maintain automated information

systems for specific Air Force, DoD, and other government agencies and provides technological support,

from development of leading-edge technologies to the

maintenance and modification of older legacy systems.

Customers, Products, and Services

ISAG provides information products and services via

two business lines—the Information Technology (IT)

solutions line and the commercial information 

technology line.

The IT solutions business line develops, acquires, and

sustains automated information systems in two target

markets: 1) AFMC-level Supply Management and

Depot Maintenance information systems, and 2) Air

Force-wide, standardized support systems. 

The commercial information technology business line

provides computer hardware, software, peripheral

equipment, and related services to the Department of

the Air Force, DoD, and other agencies, and private

parties through its Web-based “Virtual Superstore”

called “AFWay.” 
ISAG Transformation Initiatives

In response to changes in Air Force structure and

operations, technology, and customer needs, and to

take better advantage of industry core competencies,

the ISAG is reshaping itself to meet future information

technology requirements for the warfighter. 

AFMC has initiated an effort to decapitalize the activity

by transferring the function to an appropriated environment in FY2006.

Financial Performance Measures

The current method of measuring ISAG performance

is determined by the Net Operating Result (revenue

minus expenses). 

Revenue is earned through the sale of direct billable

labor hours at the ISAG composite rate; direct reimbursements for pass-through contract efforts and

extraordinary expenses (e.g., mission-unique travel,

equipment, and supplies); and the collection of commercial information technology surcharges.

Cost of operations (expenses) measures the resources

consumed in filling customer orders. These costs include

labor and non-labor expenses, both direct and overhead.

Cash Management

DoD cash management policy recommends maintaining 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 at least seven to ten days of operational

costs as well as cash adequate to meet six months of

capital disbursements. 

Cash management efforts continue to focus on analyzing data and developing tools to identify changes in

cash and forecast future needs for cash. Monthly,

AFMC prepares a statement of sources and uses of

cash, which is used to identify areas of cash increases

and drains, to monitor performance to the recommended policy.

Financing the Future Fight

America’s Airmen performed brilliantly in FY2005,

delivering decisive air supremacy and combat power

as well as much needed humanitarian support. Our

country can count on our Airmen to continue these

and other missions into the future. Our financial management professionals ensure responsible stewardship

of our resources. They will be a vital component to

both on-going operations and any need required.

14

United States Air Force
15

2005 Annual Financial Statement

Fiscal Year 2005

Annual Financial Statements
Limitations to the Financial Statements

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

been prepared from the books and records of the entity, in accordance with the formats prescribed by the Office

of Management and Budget, the statements are in addition to the financial reports used to monitor and control

budgetary resources which are prepared from the same books and records. To the extent possible, the financial

statements have been prepared in accordance with federal accounting standards. At times, the Department is

unable to implement all elements of the standards due to financial management systems limitations. The

Department continues to implement system improvements to address these limitations. There are other

instances when the Department’s application of the accounting standards is different from the auditor’s application of the standards. In those situations, the Department has reviewed the intent of the standard and applied it in

a manner that management believes fulfills that intent. The statements should be read with the realization that

they are for a component of the United States Government, a sovereign entity. One implication of this is that the

liabilities cannot be liquidated without legislation that provides resources to do so. The Federal Accounting

Standards Advisory Board (FASAB) amended the Statement of Federal Financial Accounting Standard No. 6 to

require the capitalization and depreciation of military equipment (formerly known as National Defense Property,

Plant and Equipment) for fiscal years (FY) 2004 and beyond, and encouraged early implementation. Accordingly,

the Department began the process of developing and reporting values for these assets in notes to the Balance

Sheet, beginning in FY 2003.

16

United States Air Force
General Fund

Principal Statements

17

2005 Annual Financial Statement
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18

United States Air Force
19

2005 Annual Financial Statement

Consolidated

2005

Consolidated

2004

1. ASSETS (Note 2)

 A. Intra-governmental:

 1. Fund Balance with Treasury (Note 3)

 a. Entity $ 62,272,967 $ 60,547,709

 b. Non-Entity Seized Iraqi Cash 0 0

 c. Non-Entity-Other 77,275 53,290

 2. Investments (Note 4) 717 711

 3. Accounts Receivable (Note 5) 653,589 689,871

 4. Other Assets (Note 6) 427,989 443,939

 5. Total Intra-governmental Assets $ 63,432,537 $ 61,735,520

 B. Cash and Other Monetary Assets (Note 7) $ 151,844 $ 311,323

 C. Accounts Receivable (Note 5) 1,028,310 978,883

 D. Loans Receivable (Note 8) 0 0

 E. Inventory and Related Property (Note 9) 47,169,013 51,340,248

 F. General Property, Plant and Equipment (Note 10) 123,646,068 117,954,430

 G. Investments (Note 4) 0 0

 H. Other Assets (Note 6) 11,179,041 10,809,588

2. TOTAL ASSETS $ 246,606,813 $ 243,129,992

3. LIABILITIES (Note 11)

 A. Intra-governmental:

 1. Accounts Payable (Note 12) $ 1,651,904 $ 1,900,411

 2. Debt (Note 13) 0 0

 3. Other Liabilities (Note 15 & Note 16) 1,589,867 1,726,480

 4. Total Intra-governmental Liabilities $ 3,241,771 $ 3,626,891

 B. Accounts Payable (Note 12) $ 5,851,184 $ 7,707,163

 C. Military Retirement Benefits and Other Employment-Related 1,147,437 1,163,442

 Actuarial Liabilities (Note 17)

 D. Environmental Liabilities (Note 14) 5,781,322 7,387,187

 E. Loan Guarantee Liability (Note 8) 0 0

 F. Other Liabilities (Note 15 and Note 16) 4,179,504 4,602,505

4. TOTAL LIABILITIES $ 20,201,218 $ 24,487,188

5. NET POSITION

 A. Unexpended Appropriations $ 63,716,637 $ 49,660,670

 B. Cumulative Results of Operations 162,688,958 168,982,134

6. TOTAL NET POSITION $ 226,405,595 $ 218,642,804

7. TOTAL LIABILITIES AND NET POSITION $ 246,606,813 $ 243,129,992

Consolidated Balance Sheet—General Fund

As of September 30, 2005 and 2004 ($ in Thousands)

The accompanying notes are an integral part of the financial statements.
20

United States Air Force

2005

Consolidated

2004

Consolidated

1. Program Costs

 A. Intra-governmental Gross Costs $ 29,845,743 $ 28,909,864

 B. (Less: Intra-governmental Earned Revenue) -4,207,648 -5,002,246

 C. Intra-governmental Net Costs $ 25,638,095 $ 23,907,618

 D. Gross Costs With the Public 99,536,231 96,505,988

 E. (Less: Earned Revenue From the Public) -879,929 -1,724,336

 F. Net Costs With the Public $ 98,656,302 $ 94,781,652

 G. Total Net Cost $ 124,294,397 $ 118,689,270

2. Cost Not Assigned to Programs 0 0

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

4. Net Cost of Operations $ 124,294,397 $ 118,689,270

Consolidated Statement of Net Cost—General Fund

For the years ended September 30, 2005 and 2004 ($ in Thousands)

The accompanying notes are an integral part of the financial statements.
21

2005 Annual Financial Statement

Consolidated Statement of Changes in Net Position—General Fund

For the years ended September 30, 2005 and 2004 ($ in Thousands)

The accompanying notes are an integral part of the financial statements.

2005

Consolidated

2004

Consolidated

CUMULATIVE RESULTS OF OPERATIONS

 1. Beginning Balances $ 168,982,134 $ 161,327,684

 2. Adjustments (+/-)

 2a. Changes in Accounting Principles (+/-) 0 0

 2b. Correction of Errors (+/-) 0 0

3. Beginning Balances, as adjusted 168,982,134 161,327,684

4. Budgetary Financing Sources:

 4a. Appropriations received 0 0

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

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

 4d. Appropriations used 114,969,992 124,686,986

 4e. Nonexchange revenue 920 8,827

 4f. Donations and forfeitures of cash and cash equivalents 1,860 2,171

 4g. Transfers-in/out without reimbursement (+/-) 967,200 671,000

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

5. Other Financing Sources:

 5a. Donations and forfeitures of property 0 0

 5b. Transfers-in/out without reimbursement (+/-) -25,648 311,130

 5c. Imputed financing from costs absorbed by others 742,039 663,607

 5d. Other (+/-) 0 0

6. Total Financing Sources 116,656,363 126,343,721

7. Net Cost of Operations (+/-) 124,294,397 118,689,270

8. Net Change -7,638,034 7,654,451

9. Ending Balance $ 161,344,100 $ 168,982,135

UNEXPENDED APPROPRIATIONS

1. Beginning Balances $ 49,660,670 $ 50,742,317

2. Prior period adjustments (+/-)

 2a. Changes in Accounting Principles (+/-) 0 0

 2b. Correction of Errors (+/-) 0 0

3. Beginning Balances, as adjusted 49,660,670 50,742,317

4. Budgetary Financing Sources:

 4a. Appropriations received 128,888,188 125,480,665

 4b. Appropriations transferred-in/out (+/-) 1,631,239 -454,456

 4c. Other adjustments (rescissions, etc) (+/-) -1,493,468 -1,420,870

 4d. Appropriations used -114,969,992 -124,686,986

 4e. Nonexchange revenue 0 0

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

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

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

5. Other Financing Sources:

 5a. Donations and forfeitures of property 0 0

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

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

 5d. Other (+/-) 0 0

6. Total Financing Sources 14,055,967 -1,081,647

7. Net Cost of Operations (+/-)

8. Net Change 14,055,967 -1,081,647

9. Ending Balance $ 63,716,637 $ 49,660,670
22

United States Air Force

2005

Combined

2004

Combined

BUDGETARY FINANCING ACCOUNTS

Budgetary Resources

1. Budget Authority:

 1a. Appropriations received $ 128,890,968 $ 125,483,786

 1b. Borrowing authority 0 0

 1c. Contract authority 0 0

 1d. Net transfers (+/-) 638,153 -29,394

 1e. Other 0 0

2. Unobligated balance:

 2a. Beginning of period 9,043,364 9,189,946

 2b. Net transfers, actual (+/-) 1,960,286 245,938

 2c. Anticipated Transfers Balances 0 0

3. Spending authority from offsetting collections:

 3a. Earned 0 0

 1. Collected 8,923,532 8,117,605

 2. Receivable from Federal sources 142,948 317,565

 3b. Change in unfilled customer orders 0 0

 1. Advance received 349,671 188,072

 2. Without advance from Federal sources 388,543 -109,981

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

 3d. Previously unavailable 0 0

 3e. Transfers for trust funds 0 0

 3f. Subtotal 9,804,694 8,513,261

4. Recoveries of prior year obligations 1,300,191 1,431,079

5. Temporarily not available pursuant to Public Law 0 0

6. Permanently not available -1,493,468 -1,437,653

7. Total Budgetary Resources $ 150,144,188 $ 143,396,963

STATUS OF BUDGETARY RESOURCES

8. Obligations incurred:

 8a. Direct $ 124,689,424 $ 129,913,273

 8b. Reimbursable 12,448,555 4,447,386

 8c. Subtotal 137,137,979 134,360,659

9. Unobligated balance:

 9a. Apportioned 11,756,881 8,072,566

 9b. Exempt from apportionment 3,218 2,709

 9c. Other available 1 -1

10. Unobligated Balances Not Available 1,246,109 961,030

11. Total, Status of Budgetary Resources $ 150,144,188 $ 143,396,963

Relationship of Obligations to Outlays:

12. Obligated Balance, Net - beginning of period $ 51,504,133 $ 50,541,583

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

14. Obligated Balance, Net - end of period:

 14a. Accounts receivable -1,619,560 -1,476,612

 14b. Unfilled customer order from Federal sources -1,215,937 -827,393

 14c. Undelivered orders 42,643,727 42,309,792

 14d. Accounts payable 9,197,053 11,505,411

15. Outlays:

 15a. Disbursements 137,805,147 131,752,381

 15b. Collections -9,273,203 -8,305,678

 15c. Subtotal 128,531,944 123,446,703

16. Less: Offsetting receipts -123,202 -115,376

17. Net Outlays $ 128,408,742 $ 123,331,327

Combined Statement of Budgetary Resources—General Fund

For the years ended September 30, 2005 and 2004 ($ in Thousands)

The accompanying notes are an integral part of the financial statements.
23

2005 Annual Financial Statement

2005

Consolidated

2004

Consolidated

Resources Used to Finance Activities:

Budgetary Resources Obligated

1. Obligations incurred $ 137,137,979 $ 134,360,658

2. Less: Spending authority from offsetting collections and recoveries (-) -11,104,884 -9,944,341

3. Obligations net of offsetting collections and recoveries 126,033,095 124,416,317

4. Less: Offsetting receipts (-) -123,202 -115,376

5. Net obligations 125,909,893 124,300,941

Other Resources

6. Donations and forfeitures of property 0 0

7. Transfers in/out without reimbursement (+/-) -25,648 311,130

8. Imputed financing from costs absorbed by others 742,039 663,607

9. Other (+/-) 0 0

10. Net other resources used to finance activities 716,391 974,737

11. Total resources used to finance activities 126,626,284 125,275,678

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 (-) -11,681,780 201,266

12b. Unfilled Customer Orders 738,214 78,091

13. Resources that fund expenses recognized in prior periods -606,526 -896,088

14. Budgetary offsetting collections and receipts that 123,202 115,376

 do not affect net cost of operations

15. Resources that finance the acquisition of assets -18,029,608 -16,068,394

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 0 0

 in the Entity's Budget (-)

16b. Other (+/-) 25,648 -311,130

17. Total resources used to finance items not part of the net cost of operations -29,430,850 -16,880,879

18. Total resources used to finance the net cost of operations 97,195,434 108,394,799

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 81,024 137,700

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 the public (-) 0 0

23. Other (+/-) 13,659 53,205

24. Total components of Net Cost of Operations that will require 94,683 190,905

or generate resources in future periods

Components not Requiring or Generating Resources:

25. Depreciation and amortization 11,743,098 9,847,705

26. Revaluation of assets or liabilities (+/-) 787,835 -938,081

27. Other (+/-)

27a. Trust Fund Exchange Revenue 0 0

27b. Cost of Goods Sold 0 0

27c. Operating Material & Supplies Used 2,037,758 3,919,002

27d. Other 12,435,587 -2,725,063

28. Total components of Net Cost of Operations that will not require or generate resources 27,004,278 10,103,563

29. Total components of net cost of operations that 27,098,961 10,294,468

will not require or generate resources in the current period

30. Net Cost of Operations $ $ 124,294,395 118,689,267

Consolidated Statement of Financing—General Fund

For the years ended September 30, 2005 and 2004 ($ in Thousands)

The accompanying notes are an integral part of the financial statements.
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United States Air Force
25

2005 Annual Financial Statement

General Fund

Footnotes to the 

Principal Statements
26

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27

2005 Annual Financial Statement

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

Department of the Air Force, as required by the Chief Financial Officer (CFO) Act of 1990, expanded by the

Government Management Reform Act (GMRA) of 1994, and other appropriate legislation. The financial statements have been prepared from the books and records of the Air Force in accordance with the Department of

Defense (DoD) Financial Management Regulation, the Office of Management and Budget (OMB) Circular A-136,

Financial Reporting Requirements, and, to the extent possible, federal generally accepted accounting principles

(Federal GAAP). The accompanying financial statements account for all resources for which the Air Force is

responsible, although information relative to classified assets, programs, and operations has been either excluded

from the statements or otherwise aggregated and reported in such a manner that it is no longer classified. The

Air Force’s financial statements are in addition to the financial reports prepared by the Air Force pursuant to

OMB directives that are used to monitor and control the Air Force’s use of budgetary resources.

The Air Force is unable to fully implement all elements of Federal GAAP and OMB Circular A-136 due to limitations in its financial and nonfinancial processes and feeder systems. Reported values and information for the Air

Force major asset and liability categories are derived largely from nonfinancial feeder systems, such as inventory

and logistics systems. These systems were designed to support reporting requirements that focused on maintaining accountability over assets and on reporting the status of federal appropriations rather than on preparing

financial statements in accordance with Federal GAAP. As a result, the Air Force currently cannot implement

every aspect of Federal GAAP and OMB Circular A-136. The Air Force is implementing process and system

improvements that address the limitations of its financial and nonfinancial feeder systems.

The Air Force entered a material number of unsupported accounting entries because financial and nonfinancial

feeder systems continue to lack sufficient customer identification information to accurately process eliminations.

This issue was disclosed in the DoD Agency-wide Note 1 and is addressed in the Air Force’s plan to obtain a

favorable opinion.

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

the DoD. The overall mission of the Air Force is to defend the United States through control and exploitation of

air and space.

The Air Force incorporates internal controls, reconciliations, management by exception reports, and other management control information into its accounting systems. When possible, the financial statements are presented

on the accrual basis of accounting, as required by federal accounting standards.

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

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 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 Air Force account numbers

and titles (all accounts are entity accounts unless otherwise noted).
1.C. Appropriations and Funds 

The Air Force's appropriations and funds are used to fund and to report how resources have been used in the

course of executing the Air Force’s missions. The Air Force’s appropriations and funds are divided into the following categories:

• General funds are used for financial transactions arising under congressional appropriations and include personnel, operation and maintenance, research and development, procurement, and construction accounts.

• Working Capital Fund (revolving fund) activities are reported in a separate set of audited financial statements

and related footnotes.

• Trust funds represent the receipt and expenditure of funds held in trust by the Air Force for use in carrying

out specific purposes or programs in accordance with the terms of the donor, trust agreement, or statute.

• Special funds account for Air Force receipts earmarked for specific purposes.

• Deposit funds are generally used to (1) account for unidentified remittances, or (2) hold assets for which the

Air Force is acting as an agent or a custodian or whose distribution is awaiting legal determination.

28

United States Air Force

Air Force Account Number

57 * 0704

57 * 0740

57 * 0745

57 * 0810

57 * 1999

57 * 3010

57 * 3011

57 * 3020

57 * 3080

57 * 3300

57 * 3400

57 * 3500

57 * 3600

57 * 3700

57 * 3730

57 * 3740

57 * 3830

57 * 3840

57 * 3850

57 X 5095

57 X 8418

57 X 8928

57 * 3XXX (Incl Nonentity) 

57 * 6XXX (Nonentity)

57 **** (Nonentity)

Title

Military Family Housing (O&M and Construction), Air Force

Military Family Housing (Construction), Air Force

Military Family Housing (O&M), Air Force

Environmental Restoration, Air Force

Unclassified Receipts and Expenditures, Air Force

Aircraft Procurement, Air Force

Procurement of Ammunition, Air Force

Missile Procurement, Air Force

Other Procurement, Air Force

Military Construction, Air Force

Operation and Maintenance (O&M), Air Force

Military Personnel, Air Force

Research, Development, Testing, and Evaluation (RDT&E), AF

Personnel, Air Force Reserve

Military Construction, Air Force Reserve

Operation and Maintenance (O&M), Air Force Reserve

Military Construction, Air National Guard

Operation and Maintenance (O&M), Air National Guard

Personnel, Air National Guard

Wildlife Conservation, etc., Military Reservations, Air Force

Air Force Cadet Fund

Air Force General Gift Fund

Budget Clearing Accounts

Deposit Fund Accounts

Receipt Accounts
29

2005 Annual Financial Statement

1.D. Basis of Accounting

The Air Force generally records transactions on a budgetary basis and not an accrual accounting basis as is

required by Federal GAAP. For FY 2005, the Air Force’s financial management systems are unable to meet all of

the requirements for full accrual accounting. Many of the Air Force’s financial and nonfinancial feeder systems

and processes were designed and implemented prior to the issuance of Federal GAAP for federal agencies and,

therefore, were not designed to collect and record financial information on the full accrual accounting basis as

required by Federal GAAP. 

The Air Force has undertaken efforts to determine the actions required to bring its financial and nonfinancial

feeder systems and processes into compliance with all elements of Federal GAAP. One such action is the current

revision of the Air Force’s accounting systems to record transactions based on the United States Government

Standard General Ledger (USSGL). 

Until all of the Air Force’s financial and nonfinancial feeder systems and processes are updated to collect and

report financial information as required by Federal GAAP, some of Air Force’s financial data will be based on

budgetary transactions (obligations, disbursements, and collections) and nonfinancial feeder systems and then be

adjusted for known accruals of major items such as payroll expenses, accounts payable, and environmental liabilities. For example, much of the data on the Statement of Net Cost (SoNC) is based on obligations and disbursements and may not represent all accrued costs. However, when possible, the Air Force’s financial statements are

presented on the accrual basis of accounting as required by Federal GAAP.

In addition, the Air Force identifies programs based upon the major appropriation groups provided by Congress.

The Air Force is reviewing available data and attempting to develop a cost reporting methodology that balances

the need for cost information as required by the Statement of Federal Financial Accounting Standard (SFFAS) No.

4, “Managerial Cost Accounting Concepts and Standards for the Federal Government,” with the need to keep the

financial statements from being overly voluminous.

1.E. Revenues and Other Financing Sources

Financing sources for general funds are primarily provided through congressional appropriations received on both

an annual and a multi-year basis. When authorized, these appropriations are supplemented by revenues generated by sales of goods or services through a reimbursable order process. The Air Force recognizes revenue as a

result of costs incurred or services performed on behalf of other federal agencies and the public. Revenue is recognized when earned under the reimbursable order process.

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

security in its list of other financing sources that appears in the Statement of Financing. Agreements between the

U.S. and some foreign countries include both direct and indirect sharing of the costs that each country incurs in

support of the same general purpose. Examples of such countries include those that have a mutual or reciprocal

defense agreement with the U.S. and those where U.S. troops are stationed or the U.S. fleet is serviced. The

DoD is reviewing this type of financing and cost reduction in order to establish accounting policies and procedures to identify which, if any, of these costs are appropriate for disclosure in the DoD and Air Force financial

statements in accordance with Federal GAAP. Recognition of support provided by host nations would affect both

financing sources and recognition of expenses

1.F. Recognition of Expenses

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

in which they were incurred. However, because the Air Force’s financial and nonfinancial feeder systems were
not designed to collect and record financial information on the full accrual accounting basis, accrual adjustments

are made for major items such as payroll expenses, accounts payable, and environmental liabilities. Expenditures

for capital and other long-term assets are not recognized as expenses in the Air Force’s operations until depreciated, in the case of Property, Plant, and Equipment (PP&E), or consumed, in the case of Operating Materials and

Supplies (OM&S). Net increases or decreases in unexpended appropriations are recognized as constituting a

change in the net position. Certain expenses, such as annual and military leave earned but not taken, are financed

in the period in which payment is made.

Operating expenses were adjusted as a result of the elimination of balances between DoD Components. 

1.G. Accounting for Intra-governmental Activities

The Air Force, as an agency of the federal government, interacts with and is dependent upon the financial

activities of the federal government as a whole. Therefore, these financial statements do not reflect the results

of all financial transactions applicable to the Air Force as though the agency were a stand-alone entity.

The Air Force’s proportionate share of public debt and related expenses of the federal government are not

included in the financial statements. Debt issued by the federal government and the related costs are not

apportioned to federal agencies. The Air Force’s financial statements do not report any portion of the public

debt or interest thereon, nor do the statements report the source of public financing, whether from issuance

of debt or tax revenues.

Financing for the construction of DoD facilities is obtained through budget appropriations. To the extent this

financing ultimately may have been obtained through the issuance of public debt, interest costs have not been

capitalized since the Department of the Treasury does not allocate such interest costs to the benefiting agencies.

The Air Force’s civilian employees participate in the Civil Service Retirement System (CSRS) and the Federal

Employees Retirement System (FERS), while military personnel are covered by the Military Retirement System

(MRS). The Air Force funds a portion of the civilian and military pensions. Additionally, employees and personnel covered by FERS and MRS also have varying coverage under Social Security. Reporting civilian pensions

under CSRS and FERS retirement systems is the responsibility of the Office of Personnel Management (OPM).

The Air Force recognizes an imputed expense for the portion of civilian employee pensions and other retirement benefits funded by the OPM in the SoNC and recognizes corresponding imputed revenue from the civilian employee pensions and other retirement benefits in the Statement of Changes in Net Position. 

To prepare reliable financial statements, transactions occurring between components or activities within the Air

Force must be eliminated. However, the Air Force, as well as the rest of the federal government, cannot accurately identify all intra-governmental transactions by customer. The Defense Finance and Accounting Service

(DFAS) is responsible for eliminating transactions between components or activities of the Air Force. Since FY

1999, seller entities within the DoD have provided summary seller-side balances for revenue, accounts receivable, and unearned revenue to the buyer-side internal DoD accounting offices. In most cases, the buyer-side

records have been adjusted to recognize unrecorded costs and accounts payable. Intra-Air Force balances

were then eliminated. 

The Department of the Treasury Financial Management Service (FMS) is responsible for eliminating transactions

between the DoD and other federal agencies. In July 2005, the FMS issued the updated “Federal Intra-governmental Transactions Accounting Policies Guide.” The DoD was not able to fully implement the policies and

procedures in this guide related to reconciling intra-governmental assets, liabilities, revenues, and expenses for

nonfiduciary transactions. The Air Force, however, was able to implement the policies and procedures contained in the “Intra-governmental Fiduciary Transactions Accounting Guide,” as updated by the “Federal Intra30

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31

2005 Annual Financial Statement

governmental Transactions Accounting Policies Guide” (July 1, 2005 updated version, effective for FY 2005

reporting) for reconciling intra-governmental transactions. These transactions include or pertain to investments

in federal securities, borrowings from the U.S. Treasury and the Federal Financing Bank, Federal Employees’

Compensation Act transactions with the Department of Labor, and benefit program transactions with the OPM.

1.H. Transactions with Foreign Governments and International Organizations

Each year, the DoD Components sell defense articles and services to foreign governments and international

organizations, primarily under the provisions of the “Arms Export Control Act of 1976.” Under the provisions of

the Act, the DoD has authority to sell defense articles and services to foreign countries and international organizations, generally at no profit to the U.S. Government. Customers may be required to make payments in

advance.

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

The Air Force’s financial resources are maintained in U.S. Treasury accounts. The majority of cash collections,

disbursements, and adjustments are processed worldwide at the DFAS, Military Services, and the United States

Army Corps of Engineers (USACE) disbursing stations, as well as at the Department of State financial service centers. Each disbursing station prepares monthly reports that provide information to the U.S. Treasury on check

issues, electronic fund transfers, interagency transfers, and deposits.

In addition, the DFAS sites and USACE Finance Center submit reports to the Department of the Treasury, providing information at the appropriation level on interagency transfers, collections received, and disbursements issued.

The Department of the Treasury then records this information to the applicable Fund Balance with Treasury

(FBWT) account maintained in the Treasury’s system. Differences between the Air Force’s recorded balance in

the FBWT accounts and Treasury’s FBWT accounts sometimes result and are subsequently reconciled. Material

disclosures are provided at Note 3. Also disclosed at Note 3 are differences between accounting offices’ detail

level records and Treasury’s FBWT accounts, specifically, differences caused by in-transit disbursements and

unmatched disbursements (where the specific disbursement has not been recorded in the appropriate accounting

offices’ detail level records).

1.J. Foreign Currency

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

account to handle gains and losses from foreign currency transactions for the following five general fund appropriations: O&M, Military Personnel, Military Construction, Family Housing Operation and Maintenance, and Family

Housing Construction. Gains and losses are computed as the variance between the exchange rate current at the

date of payment and a budget rate established at the beginning of each fiscal year. Foreign currency fluctuations

related to other appropriations require adjustment to the original obligation amount at the time of payment.

These currency fluctuations are not identified separately. See Note 7 for material disclosures.

1.K. Accounts Receivable

As presented in the balance sheet statement, accounts receivable include accounts, claims, and refunds receivable

from other federal entities or from the public. Allowances for uncollectible accounts due from the public are

based upon analysis of collection experience by fund type. 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. See Note 5 for material disclosures.
1.L. Loans Receivable

Not applicable

1.M. Inventories and Related Property

The related property portion of the amount reported on the Inventory and Related Property line includes

Operating Materials and Supplies (OM&S). The OM&S are reported at approximate historical cost using Standard

Price (SP). The Air Force uses the SP method because its OM&S systems were designed for material management rather than for accounting. The systems provide accountability and visibility over inventory items. They do

not maintain the historical cost data necessary to comply with Statement of Federal Financial Accounting

Standards (SFFAS) No. 3, “Accounting for Inventory and Related Property.” Neither can they directly produce

financial transactions using the U.S. Standard General Ledger (USSGL), as required by the Federal Financial

Management Improvement Act of 1996 (P.L. 104-208). The DoD is transitioning to the Moving Average Cost

(MAC) methodology of valuing inventory in order to comply with SFFAS No. 3.

SFFAS No. 3 distinguishes between “inventory held for use” and “inventory held in reserve for future use.”

There is no management or valuation difference between the two USSGL accounts. Further, the DoD manages

only military or government-specific material under normal conditions. Items commonly used in and available

from the commercial sector are not managed in DoD material-management activities. Operational cycles are

irregular, and the military risks associated with stock-out positions have no commercial parallel. The DoD holds

material based on military need and support for contingencies. As a result, the Air Force does not attempt to

separately account for items held for current or future use.

Related property includes OM&S and stockpile materials. The OM&S, including munitions not held for use, are valued

at SP. Ammunition and munitions are treated as OM&S. The Air Force uses the consumption method of accounting

for OM&S. Under the consumption method, Air Force expenses material when it is issued to the end user. 

In FY 2002, the DoD implemented a new policy to account for condemned material (only) as Excess, Obsolete, and

Unserviceable. The net value of condemned material is zero because the costs of disposal are greater than the potential scrap value. Material that can be potentially redistributed (presented in previous years as Excess, Obsolete, and

Unserviceable) is included in the Held for Use or Held for Repair categories, according to its condition. 

In addition, past audit results identified uncertainties about the completeness and existence of quantities used to produce the reported values. Material disclosures related to inventory and related property are provided at Note 9.

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

Investments in U.S. Treasury securities are reported at cost, determined as the net of unamortized premiums or discounts. Premiums or discounts are amortized into interest income over the term of the investment, using the effective interest rate method or other method if similar results are obtained. The Air Force’s intent is to hold investments to maturity, unless they are needed to finance claims or otherwise sustain operations. Consequently, provision is not made for unrealized gains or losses on these securities. Related earnings are allocated to appropriate Air

Force activities to be used in accordance with the directions of the donor. See Note 4 for material disclosures.

The Air Force invests in both marketable and nonmarketable securities. Marketable securities are investments

trading on a public market. The two types of nonmarketable securities are par value and market-based intra-governmental securities. The Bureau of Public Debt issues nonmarketable, par value intra-governmental securities.

Nonmarketable, market-based intra-governmental securities mimic marketable securities but are not traded publicly. See Note 4 for material disclosures.

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United States Air Force
33

2005 Annual Financial Statement

1.O. General Property, Plant and Equipment

General PP&E assets are capitalized at historical acquisition cost plus capitalized improvements when an asset has

a useful life of two or more years and when the acquisition cost equals or exceeds the DoD capitalization threshold of $100,000. Also, improvement costs over the DoD capitalization threshold of $100,000 for General PP&E

are required to be capitalized. All General PP&E assets, other than land, are depreciated on a straight-line basis.

Land is not depreciated. 

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

necessary to complete contract work. The Air Force owns or leases this property, or the contractor purchases

the property directly for the government under the terms of the contract. When the value of contractor procured General PP&E exceeds the DoD capitalization threshold, such PP&E must be included in the value of

General PP&E reported on the Air Force’s balance sheet. The DoD is developing new policies and a contractor

reporting process that will provide appropriate General PP&E information for future financial statement purposes.

Accordingly, the Air Force currently reports only government property in the possession of contractors maintained in the Air Force real property systems.

To bring the Air Force into full compliance with federal accounting standards, the DoD has issued new property

accountability and reporting regulations that require DoD Component property systems information on all property furnished to contractors. This and other DoD proposed actions are structured to capture and report the

information necessary for compliance with federal accounting standards.

See Note 10 for material disclosures.

1.P. Advances and Prepayments

Payments in advance of the receipt of goods and services are recorded as advances or prepayments and reported

as an asset on the balance sheet. Advances and prepayments are recognized as expenditures and expenses when

the related goods and services are received.

1.Q. Leases

Generally, lease payments are for the rental of equipment vehicles and operating facilities and are classified as

either capital or operating leases. When a lease essentially is equivalent to an installment purchase of property (a

capital lease), the Air Force records the applicable asset and liability if the value equals or exceeds the current

DoD capitalization threshold. The Air Force records the amounts as the lesser of the following two values: (1)

the present value of the rental and other lease payments during the lease term (excluding portions representing

executory costs paid to the lessor); or (2) the asset’s fair value. The Air Force deems the use of estimates for

these costs as adequate and appropriate due to the relatively low dollar value of capital leases. Imputed interest

is necessary to reduce net minimum lease payments to present value calculated at the incremental borrowing rate

at the inception of the leases. Leases that do not transfer substantially all of the benefits or risks of ownership are

classified as operating leases and are expensed over the period of the lease.

1.R. Other Assets 

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, the Air Force provides financing payments. One type of financing payment for real property is based on

the percentage of completion. In accordance with the SFFAS No. 1, “Accounting for Selected Assets and

Liabilities,” such payments are treated as construction-in-progress and reported on the General PP&E line and in 
Note 10, General PP&E, Net. In addition, based on the Federal Acquisition Regulation, the Air Force makes

financing payments under fixed price contracts not based on percentage of completion. The Air Force reports

these financing payments as advances or prepayments in the Other Assets line item. The Air Force treats these

payments as advances or prepayments because the Air Force becomes liable only after the contractor delivers

the goods. If the contractor does not deliver a satisfactory product, the Air Force is not obligated to reimburse

the contractor, and the contractor is liable to repay the Air Force for the full amount of the advance. 

The DoD has completed a review of the applicable federal accounting standards; public laws on contract financing; Federal Acquisition Regulation Parts 32, 49, and 52; and the OMB guidance in 5 Code of Federal Regulations

Part 1315, “Prompt Payment.” The DoD has concluded that SFFAS No. 1 does not fully address progress payment accounting and is considering what action is appropriate. 

1.S. Contingencies and Other Liabilities 

The SFFAS No. 5, “Accounting for Liabilities of the Federal Government,” defines a contingency as an existing

condition, situation, or set of circumstances that involves an uncertainty as to possible gain or loss to the Air

Force. The uncertainty will be resolved when one or more future events occur or fail to occur. A contingency is

recognized as a liability when a past event or exchange transaction has occurred, a future loss is probable, and the

amount of loss can be reasonably estimated. Financial statement reporting is limited to disclosure when conditions for liability recognition do not exist but where there is at least a reasonable possibility that a loss or additional loss will be incurred. Examples of loss contingencies include the collectibility of receivables, pending or threatened litigation, and possible claims and assessments. The Air Force’s loss contingencies arising as a result of

pending or threatened litigation or claims and assessments occur due to events such as aircraft and vehicle accidents, medical malpractice, property or environmental damages, and contract disputes.

Other liabilities arise as a result of anticipated disposal costs for the Air Force’s assets and are classified as either

environmental or nonenvironmental. The recognition of an anticipated environmental disposal liability commences when the asset is placed into service, consistent with SFFAS No. 6, “Accounting for Property, Plant, and

Equipment.” Based upon the Air Force’s policies and consistent with SFFAS No. 5, “Accounting for Liabilities of

Federal Government,” a nonenvironmental disposal liability is recognized for an asset when management makes a

decision to dispose of the asset. The DoD has agreed to the recognition of the nonenvironmental disposal liability for nuclear-powered assets when the asset is placed in service. Such amounts are developed in conjunction

with and are not easily identifiable separately from environmental disposal costs. Material disclosures are provided at Notes 14 and 15.

1.T. Accrued Leave

Civilian annual leave and military leave balances that have been accrued and not used prior to the balance sheet

date are reported as liabilities. The liability reported at the end of the fiscal year reflects current pay rates.

1.U. Net Position

Net Position consists of unexpended appropriations and cumulative results of operations. Unexpended appropriations represent (1) amounts of authority that are not obligated and that have not been rescinded or withdrawn,

and (2) amounts that are obligated but for which legal liabilities for payments have not been incurred.

Cumulative results of operations represent the difference between expenses and losses and financing sources

(including appropriations, revenue, and gains) since the inception of an activity. 

34

United States Air Force
35

2005 Annual Financial Statement

1.V. Treaties for Use of Foreign Bases 

The DoD Components have the use of land, buildings, and other facilities that are located overseas and that have

been obtained through various international treaties and agreements negotiated by the Department of State. The

DoD purchases overseas capital assets with appropriated funds, but the host country retains title to land and

improvements. Generally, treaty terms allow the DoD Components continued use of these properties until the

treaties expire. These fixed assets are subject to loss in the event treaties are not renewed or other agreements

are not reached that allow for the continued use by the DoD Components. Therefore, if the U.S. can no longer

use foreign bases because treaties or other agreements have been terminated, losses will be recorded for the

value of any nonretrievable capital assets after negotiations between the U.S. and the host country determine the

amount to be paid the U.S. for such capital investments.

1.W. Comparative Data 

The Financial Statements and accompanying Notes to the Financial Statements report the financial position and

results of operations for FY 2005. Financial statement fluctuations greater than 2 percent of total assets on the

Balance Sheet and/or greater than 10 percent between FY 2004 and FY 2005 are explained within the Notes to

the Financial Statements.

1.X. Unexpended Obligations 

The Air Force obligates funds to provide goods and services for outstanding orders not yet delivered. The financial statements do not reflect this liability for payment for goods or services not yet delivered.

1.Y. Undistributed Disbursements and Collections 

Undistributed disbursements and collections represent the difference between disbursements and collections

matched at the transaction level to a specific obligation, payable, or receivable in the activity field records as

opposed to those reported by the U.S. Treasury. These amounts should agree with the undistributed amounts

reported on the departmental accounting reports. In-transit payments are those payments that have been made

to other agencies or entities that have not been recorded in their accounting records. These payments are

applied to the entities’ outstanding accounts payable balance. In-transit collections are those collections from

other agencies or entities that have not been recorded in the accounting records. These collections are also

applied to the entities’ accounts receivable balance. The Department of Defense policy is to allocate supported

undistributed disbursements and collections between federal and nonfederal categories based on the percentage

of Federal and nonfederal accounts payable and accounts receivable. Unsupported undistributed disbursements

are recorded in accounts payable. Unsupported undistributed collections are recorded in other liabilities. The

Air Force follows this procedure.
Note 2. Nonentity Assets

Relevant Information for Comprehension

Nonentity Assets are assets that are held by an entity but that are not available for use in the operations of the

entity. Nonfederal Other Assets classes are advances to contractors and outstanding travel advances. The

Nonentity Fund Balance with Treasury asset class represents amounts in Air Force deposit and two of suspense

accounts that are not available for Air Force use. Nonentity Accounts Receivables, both when collected, go to

the Department of the Treasury as miscellaneous receipts. The Nonentity Nonfederal Accounts Receivable

amount also includes interest receivables on aged debt. Nonentity Cash and Other Monetary Assets represent

disbursing officers’ cash and undeposited collections as reported on the Statement of Accountability. These assets

are held by the Air Force disbursing officers as agents of the Treasury. 

Fluctuations

The Nonentity Fund Balance with Treasury on line 1.A increased $23,986 thousand, or 45 percent due to revised

guidance that clarifies what accounts should be reported as Nonentity Fund Balance with Treasury. This line now

includes balances in deposit fund accounts, receipt accounts, and the Civilian Thrift Saving Plan (TSP) and Military

TSP budget clearing accounts. 

The decrease of Intra-governmental and Nonfederal Accounts Receivable is due to a management initiative in

identifying invalid accounts receivable and subsequently taking the appropriate corrective action. The Air Force

was also successful in collecting on a substantial amount of delinquent debts. The Intra-governmental Accounts

Receivable on line 1.C. decreased $46,330 thousand, or 95 percent, and Non-Federal Assets Accounts

Receivables on line 2.B. decreased $103,056 thousand, or 43 percent. 

Total Cash and Other Monetary Assets decreased $159,479 thousand, or 51 percent, between FY 2004 and FY

2005. Of this decrease, $147,780 thousand can be attributed to changes in the reporting of Advances to

As of September 30

(Amounts in thousands)

1. Intra-governmental Assets

 A. Fund Balance with Treasury $ 77,276 $ 53,290

 B. Investments 0 0

 C. Accounts Receivable 2,354 48,685

 D. Other Assets 0 0

 E. Total Intra-governmental Assets $ 79,630 $ 101,975

2. Non-Federal Assets

 A. Cash and Other Monetary Assets $ 151,844 $ 311,323

 B. Accounts Receivable 128,943 238,159

 C. Loans Receivable 0 0

 D. Inventory & Related Property 0 0

 E. General PP&E 0 0

 F. Investments 0 0

 G. Other Assets 156,872 559

 H. Total Nonfederal Assets $ 437,659 $ 550,041

3. Total Nonentity Assets $ 517,289 $ 652,016

4. Total Entity Assets $ 246,089,524 $ 242,477,977

5. Total Assets $ 246,606,813 $ 243,129,993

2005 2004

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2005 Annual Financial Statement

Contractors under University Pool Agreements. University Pool Agreements are agreements to provide advances

for research and development conducted on behalf of the Air Force at major academic research institutions. In

FY 2004, guidance instructed that these advances be reclassified to Cash and Other Monetary Assets from Other

Assets. The guidance was subsequently rescinded, resulting in their reclassification from Cash and Other

Monetary Assets back to Other Assets on the FY 2005 financial statements. 

In addition, implementation of a new procedure using the International Treasury Service (ITS.gov) to pay foreign

vendors drove a $5,275 thousand decrease in the Foreign Currency asset class. The Centralized Disbursing

Directorate at DFAS-DE now sends U.S. dollars directly to the Bank of America in Germany for conversion to

foreign currencies and for direct disbursement from the bank to foreign vendors. ITS.gov therefore bypasses the

Air Force disbursing officers, whose need for foreign currency is thereby reduced. 

Note 3. Fund Balance with Treasury

Reconciling Amount

Parent Child Allocations that are not included in Air Force balances total $15,893 thousand. Included in these are

allocations from Foreign Military Sales Military Assistance Program and the Department of Agriculture. Included

in Air Force balance and not in Treasury balance is $4,418 thousand for funds allocated to the Department of

Transportation. This balance is reported on the Treasury Trial Balance 6654 for Treasury Index 69. In a

parent/child relationship, the child reports the FBWT amount if the amount is material to the child. Included in

the Treasury’s Balance is a canceling accounts balance of $783,279 thousand and the Receipt accounts balances of

$123,817 thousand that are not included in Air Force Fund Balance due to preclosing. 

Fluctuations

The decrease of trust funds in the current year compared to the prior year is attributable to the completion of

the new expansion wing at the Air Force Museum and fewer donations in the Gift Fund because of the completion. Although donations decreased, disbursements had a greater decrease, resulting in fewer funds within the

gift fund. 

The increase in special funds is due to the proper display of appropriation 5095, Fish and Wildlife, as a special

fund. During FY 2004, these funds were included on line 1.C., Trust Funds. 

As of September 30

(Amounts in thousands)

1. Fund Balances

 A. Appropriated Funds $ 62,293,567 $ 60,559,736

 B. Revolving Funds 0 0

 C. Trust Funds 4,134 9,212

 D. Special Funds 789 0

 E. Other Fund Types 51,752 32,051

 F. Total Fund Balances $ 62,350,242 $ 60,600,999

2. Fund Balances Per Treasury Versus Agency

 A. Fund Balance per Treasury $ 63,268,814 $ 61,497,801

 B. Fund Balance per Air Force 62,350,242 60,600,999

3. Reconciling Amount $ 918,572 $ 896,802

2005 2004
The fluctuation in Other Fund Types is primarily attributed to increases in amounts withheld from Air Force personnel for Servicemen’s Group Life Insurance Funds (SGLI) and proceeds from military airlift revenue traffic.

Amounts in these deposit fund accounts will be disbursed to applicable third parties or in the case of the proceeds from revenue traffic reimbursed to appropriations. 

Air Force Cadet Fund 

The Cadet Fund is a revolving trust fund account maintained for the benefit of the U.S. Air Force Academy

cadets. The Cadet Fund was initially funded by an appropriation and remains self-sufficient through equal collections and disbursements. 

Check Issue Discrepancy

DFAS is in the process of collecting information for all check-issue data that are unsupportable because (1)

records have been lost during deactivation of disbursing offices, (2) transactions past the one year period in which

Treasury provides research assistance, or (3) corrections were processed for transactions that Treasury removed

from the check-comparison report. Transactions that have no supporting documentation due to one of the preceding situations shall be provided to the Department of the Treasury with a request to remove them from the

Treasury Check Comparison Report. The vast majority of the remaining check issue discrepancies result from

timing differences between the Air Force and the Department of the Treasury for processing checks. The DoD

does not require that Treasury remove any amounts from the check-issue comparison report since the checkissue report balance was $0. Further, no empirical evidence has been presented that demonstrates that check

issue discrepancies adversely affect the FBWT.

Note Reference

See Note Disclosure 1.I., Significant Accounting Policies, for additional discussion on financial reporting requirements and DoD policies governing funds with the U.S. Treasury.

Fluctuations

Increase in Unobligated Balance Unavailable is due to less unused reimbursable authority in the Research, Test,

Development & Evaluation (RDT&E) appropriation in FY 2005. 

From FY 2003 to FY 2004, the amount of reimbursable budget authority doubled from $2 billion to $4 billion to

accommodate the amount of future planned reimbursable work performed primarily in the research laboratories

and the classified programs. Although increased use of reimbursable budget authority occurred in FY 2004, a dramatic increase in usage didn't occur until FY 2005. 

As of September 30

(Amounts in thousands)

1. Unobligated Balance

 A. Available $ 11,760,100 $ 8,075,275

 B. Unavailable 1,246,109 961,030

2. Obligated Balance not yet Disbursed $ 51,840,781 $ 53,815,202

3. Non-Budgetary FBWT $ 339,456 $ 53,290

4. Non-FBWT Budgetary Accounts $ -2,836,206 $ -2,304,716

5. Total $ 62,350,240 $ 60,600,081

Status of Fund Balance with Treasury

2005 2004

38

United States Air Force
39

2005 Annual Financial Statement

The difference between the total amount of the Status of Fund Balance with Treasury reflected here and Fund

Balance with Treasury in part one of Note 3 is identified as the Discount on U.S. Treasury Securities issued by the

Bureau of Public Debt. Further analysis is being done on a suggested mapping change that will resolve this reconciling amount.

Relevant Information for Comprehension

Unexpended Obligations reported as a component of Unexpended Appropriations include both Undelivered

Orders-Unpaid and Undelivered Orders-Paid only for direct appropriated funds. This amount is distinct from

Change in Amount of Goods, Services, and Benefits Ordered but Not Yet Received line of the Statement of

Financing, which includes the change during the fiscal year in Unexpended Obligations against Budget Authority

from all sources.

The Air Force continues to make a concerted effort to reduce balances in the suspense and budget clearing

accounts and to establish an accurate and consistent use of these accounts. The information presented indicates

the reductions (with the exceptions noted below) that the Air Force has achieved in the various suspense/budget

clearing accounts.

Suspense account F3882 is utilized to accommodate the Military Thrift Savings Plan (TSP). The National Finance

Center posts amounts into each member’s account, and they are consolidated and posted to the Treasury before

the Air Force can post the amounts in the military accounting system in the following month. The $4,568 thousand increase is the result of increased participation in the TSP.

The increase (absolute value) in account F3885 IPAC is due to the inclusion in limit 007 of $(52,754) thousand and

the remaining variance can be attributed to IPAC transactions received during the last business day of the month.

When IPAC transactions are received, funds are placed in a suspense account until they can be researched and

assigned a valid appropriation, which will fluctuate from one reporting period to another depending upon the

amount processed to the Treasury at that time. 

In the published reports for FY 2004, the balances for FY 2003 and FY 2004 are displayed incorrectly in the

opposite sign in the table. For FY 2005, the table is reflected the same as the published report. FY 2005 column

is reflected correctly.

(Amounts in thousands)

 Account

 F3875 $ -364,737 $ -357,705 $ 336,053 $

 F3880 -2,343 -3,803 691

 F3882 -16,526 -20,956 25,523

 F3885 8,785 14,989 -74,564

 F3886 0 0 0

 Total $ -374,821 $ -367,475 $ 287,703 $

Disclosures Related to Suspense/Budget Clearing Accounts

As of September 30

2003

(Decrease)/

Increase from FY

2004 - 2005

2004 2005

0

655,178

693,758

4,494

46,479

-89,553
Problem disbursements represent disbursements of Air Force funds reported by a disbursing station to the

Department of the Treasury which have not yet been precisely matched against the specific source obligation.

The problem disbursement arises when the various contracting, disbursing, and accounting systems fail to match

the data necessary to properly account for the transaction in all the applicable accounting systems.

The Air Force had a $109,759 thousand increase in problem disbursements and a $288,782 thousand decrease in

In-transit Disbursements. The Defense Finance and Accounting Service has efforts underway to improve the systems, to resolve all previous problem disbursements, and to process all In-transit Disbursements in a timely manner. The amount of Unmatched Disbursements (UMDs) over 180 days is $0.00, of Negative Unliquidated

Disbursements (NULOs) is $0.00 and of In-transits is $17,955,733.29. The amount of UMDs over 120 days old

is $0.00, for NULOs is $0.00, and for In-transits is $20,432,111.93. The current absolute value of In-transit disbursements is $1,029,617,356.16. 

The increase in UMDs can be attributed to database mergers (San Antonio to Limestone in October 2004, and

Omaha to Dayton in May 2005) and difficulties encountered with the merger of the Contract Procurement

Accounting System (CPAS) and the General Accounting and Finance System (GAFS). Also, a substantial amount

of problems were encountered when we implemented new business processes for handling disbursements. ( e.g.,

corrupted data, duplicate data, missing data) All corrections are expected to be accomplished in the first quarter

of FY 2006.

Note 4. Investments and Related Interest

Fluctuations

Accrued Interest for FY 2004 of $7.3 thousand was posted using an incorrect attribute that did not cross-walk to

the Accrued Interest Line. It was incorrectly classified to accounts receivable. 

As of September 30

(Amounts in thousands)

1. Intra-governmental Securities

 A. Non-Marketable, Market-Based $ 710 $ $ $ 711

 B. Accrued Interest 7 0

 C. Total Intra-governmental Securities $ 717 $ $ $ 711

2. Other Investments $0 $ $ $ 0

Amortization 

Method

Investments, 

Net

0 0 N/A

Investments, 

 Net

Market Value 

Disclosure

0 717 $ 712

7 7

0 710 $ 705

2005 2004

Par Value/Cost

Unamortized 

(Premium/

Discount)

(Amounts in thousands)

1. Total Problem Disbursements, Absolute Value

 A. Unmatched Disbursements (UMDS) $ 7,813 $ 161,630 $ 272,972 $

 B. Negative Unliquidated Obligations (NULO) 12,436 $ 9,792 8,209

2. Total In-transit Disbursements, Net $ 1,111,274 $ 1,065,326 $ 776,544 $

111,342

-1,583

-288,782

Increase from 

2004 - 2005

2004 2005

Disclosures Related to Problem Disbursements and In-Transit Disbursements

As of September 30

2003

(Decrease)/

40

United States Air Force
41

2005 Annual Financial Statement

Relevant Information for Comprehension

Air Force Gift Fund cash donations that are not going to be used in the immediate future to fund donor-designated

projects are invested in marketable securities with the Department of the Treasury. Increases and decreases in

the investment cost amount reflect the changes in those investments.

The Air Force Gift Fund was established to control and account for the disbursement and use of monies donated

to the Air Force along with the interest received from the investment of such donations. The related earnings

are allocated to appropriate Air Force activities to be used in accordance with the directions of the donor. These

funds are recorded as Non-Marketable Market Based U.S. Treasury Securities, which are not traded on any security exchange but which mirror the prices of marketable securities with similar terms.

Note Reference

See Note Disclosure 1.N. Investments in U.S. Treasury, for additional Air Force policies governing investments in

U.S. Treasury securities.

Note 5. Accounts Receivable

The total allowance method is determined at the Air Force departmental level. For closed years receivables and

deferred debts in litigation, an allowance rate of 50 percent results in an estimated allowance of $68,966 thousand. Interest allowance of $332 thousand is calculated using an average percent of write offs to outstanding public accounts receivable over a five year period starting with FY 2000 data. In addition, the allowance for Air Force

entity receivables is computed each year based on the average percent of write offs to outstanding public

accounts receivable for the last five years. This results in an estimated allowance of $81,017 thousand. 

Relevant Information for Comprehension

As presented on the Consolidated Balance Sheet, accounts receivable include reimbursements receivable and

refunds receivable such as out of service debts (amounts owed by former service members), contractor debt, and

unused travel tickets. It also includes net interest receivables per Department of Defense (DoD) Financial

Management Regulation (FMR) Vol. 6B guidance. Canceled accounts receivable is reported as nonentity receivables because these amounts are deposited into a Treasury Department miscellaneous receipt account when collected. Reconciliation between Report on Receivables Due from the Public and the balance sheet was accomplished. The differences between the balance sheet (line 1.C.) and Treasury Report on Receivables (TROR) 

2005 2004 As of September 30 

Gross Amount 

Due

Allowance For 

Estimated

Uncollectibles

Accounts Receivable, 

Net

Accounts

Receivable, Net 

(Amounts in thousands) 

1. Intra-governmental 

Receivable s $ 653,589 N/A $ 653,589 $ 689,871 

2. Non-Federal 

Receivables 

(From the Public) $ 1,178,626 $ -150,316 $ 1,028,310 $ 978,883 

3. Total Accounts 

Receivable $ 1,832,215 $ -150,316 $ 1,681,899 $ 1,668,754 
Due from the Public (line 7) include the allowance for estimated uncollectible of $150,316 thousand, unsupported

disbursements in transit in the amount of $1,938 thousand, and undistributed collections of $(9,280) thousand.

Undistributed collections are prorated between public and intra-governmental receivables on the balance sheet

based on the percentages of distributed receivables. This reconciliation is performed to ensure that the financial

statements are in agreement with the public receivables reported to the Department of the Treasury. 

Accounting systems do not capture trading partner data at the transaction level in a manner that facilitates trading

partner aggregations. Therefore, the Air Force was unable to reconcile intra-governmental accounts receivable

balances with its trading partners. Through the ongoing Business Management Modernization Program, the

Department intends to develop long-term systems improvements that will capture the data necessary to perform

reconciliation.

Allocation of Undistributed Collections

The DoD policy is to allocate supported undistributed collections between federal and nonfederal categories

based on the percentage of Federal and Nonfederal Accounts Receivable. Unsupported undistributed collections

should be recorded in the United States Standard General Ledger (USSGL) account 2400, Liability for Deposit

Funds, Clearing Accounts and Undeposited Collections. The Air Force follows this allocation procedure.

Note Reference

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

Note 6. Other Assets

Fluctuations 

Other Assets with the Public, line 2.B., increased $156,036 thousand, or 150 percent, primarily due to the correct reporting of advances to contractors as shown on the SF 1219, Statement of Accountability, as Other Assets

this fiscal year. In FY 2004, guidance instructed the reclassification of these advances from the Other Asset line

on the Balance Sheet to the Cash and Other Monetary Asset line in order to show all SF 1219 data on one line.

The guidance was issued prematurely and was later rescinded, resulting in advances to contractors being reclassified back to Other Assets in FY 2005.

Advances to contractors on the SF 1219 are payments as part of an advance-payment pool agreement with

Massachusetts Institute of Technology and other nonprofit institutions. Advance-payment pool agreements are used for

the financing of cost-type contracts with nonprofit educational or research institutions for experimental or research and

development work when several contracts or a series of contracts require financing by advance payments. 

2005 2004

(Amounts in thousands) 

1. Intra-governmental Other Assets 

 A. Advances and Prepayments $ 427,989 $ 443,939

 B. Total Intra-governmental Other Assets $ 427,989 $ 443,939

2. Non-Federal Other Assets 

 A. Outstanding Contract Financing Payments $ 10,919,137 $ 10,705,720

 B. Other Assets (With the Public) 259,904 103,868 

 C. Total Non-Federal Other Assets $ 11,179,041 $ 10,809,588

3. Total Other Assets $ 11,607,030 $ 11,253,527

As of September 30

42

United States Air Force
43

2005 Annual Financial Statement

Relevant Information for Comprehension

Other Assets

The amount of $259,904 thousand on line 2.B., Other Assets with the Public, is composed of $96,296 thousand

in travel advances, $6,928 thousand in other advances to contractors, and $156,680 thousand in advances to contractors as reported on the SF 1219, Statement of Accountability.

Outstanding Contract Financing Payments

The Air Force reports as advances and prepayment all outstanding financing payments for fixed-price contracts

that are not based on percentage or stage of completion. Under the contract terms, the Air Force becomes

liable only after the contractor delivers the goods in conformance with the contract terms. If the contractor does

not deliver a satisfactory product, the Air Force is not obligated to reimburse the contractor for its cost, and the

contractor is liable to repay the Air Force for the full amount of the outstanding contract finance payments. 

Note Reference

See Note Disclosure 1.R., Significant Accounting Policies, for additional discussion on financial reporting requirements and Department of Defense policies governing other assets.

Note 7. Cash and Other Monetary Assets

Fluctuations

Total Cash, Foreign Currency & Other Monetary Assets decreased $159,479 thousand, or 51 percent, between

FY 2004 and FY 2005, caused by decreases in both the Cash and Foreign Currency asset classes. 

The $154,204 thousand, or 51 percent, decrease in the Cash asset class can be attributed to changes in the reporting of Advances to Contractors under University Pool Agreements of $147,780 thousand. University Pool

Agreements are agreements to provide advances for research and development conducted on behalf of the Air

Force at major academic research institutions. In FY 2004, guidance instructed that these advances be reclassified

to Cash and Other Monetary Assets from Other Assets. The guidance was subsequently rescinded, resulting in their

reclassification from Cash and Other Monetary Assets back to Other Assets in the FY 2005 financial statements. 

The implementation of a new procedure using the International Treasury Service (ITS.gov) to pay foreign vendors

drove the $5,275 thousand decrease in the Foreign Currency asset class. The Centralized Disbursing

Directorate at DFAS-DE now sends U.S. dollars directly to the Bank of America in Germany for conversion to

foreign currencies and for direct disbursement from the bank to foreign vendors. ITS.gov therefore bypasses the

Air Force disbursing officers, whose need for foreign currency is thereby reduced. 

As of September 30 2005 2004 

(Amounts in thousands)

1. Cash $ 148,938 $ 303,142 

2. Foreign Currency (non-purchased) 2,906 8,181 

3. Total Cash, Foreign Currency, & Other Monetary Assets $ 151,844 $ 311,323
44

United States Air Force

Relevant Information for Comprehension

The amounts reported for the Cash and Foreign Currency asset classes consist primarily of cash held by disbursing officers to carry out their paying, collecting, and foreign currency accommodation exchange mission. The primary source of the amounts reported is the SF 1219, Statement of Accountability, reported by the Department of

Defense (DoD) disbursing officers. 

The amount reported for the Foreign Currency asset class is valued using the Department of Treasury Prevailing

Rate of Exchange, the most favorable rate available to the U.S. Government when acquiring foreign currency to

make official disbursements and to provide currency for exchange of U.S. dollars for troops.

Note Reference 

See Note Disclosure 1.J., Significant Accounting Policies, for additional discussion on financial reporting requirements and DoD policies governing foreign currency.

Note 8. Direct Loan and/or Loan Guarantee Programs

Direct Loan and/or Loan Guarantee Programs The entity operates the following direct loan and/or Loan 

guarantee program(s)

• Military Housing Privatization Initiative

• Armament Retooling & Manufacturing Support Initiative

Note 9. Inventory and Related Property

As of September 30 2005 2004

OM&S

Gross Value 

Revaluation

Allowance OM&S, Net OM&S, Net Valuation

Method

(Amounts in thousands)

1. OM&S Categories 

 A. Held for Use $ 36,317,706 $ 0 $ 36,317,706 $ 39,347,759 SP, LAC 

 B. Held for Repair 10,851,307 0 10,851,307 11,992,489 SP, LAC 

 C. Excess, Obsolete,

 and Unserviceable 1,100,179 -1,100,179 0 0 NRV 

 D. Total $ 48,269,192 $ -1,100,179 $ 47,169,013 $ 51,340,248 

Legend for Valuation Methods:

Adjusted LAC = Latest Acquisition Cost, adjusted for holding gains and losses NRV = Net Realizable Value 

SP = Standard Price O = Other

AC = Actual Cost

Operating Materials and Supplies, Net

2005 2004 

(Amounts in thousands) 

1. Inventory, Net $ 0 $ 0 

2. Operating Materials & Supplies, Net 47,169,013 51,340,248 

3. Stockpile Materials, Net 0 0 

4. Total $ 47,169,013 $ 51,340,248 

As of September 30 
45

2005 Annual Financial Statement

Fluctuations 

Held for Repair decreased $1,141,183 thousand, or 10 percent, due to a reduction in Aircraft Engines and

Munitions repairs and a policy change which resulted in Aircraft Electronics POD being reclassified from OM&S to

General PP&E.

Information related to OM&S

General Composition of OM&S

OM&S include weapon systems spare and repair parts, ammunition, tactical missiles, spare centrally managed aircraft engines, and uninstalled cruise and ICBM missile motors. 

Balances

In addition to the account balances shown in Table 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.

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

Managers determine which items are more costly to repair than to replace. Items retained for management purposes which are beyond economic repair are coded “condemned.” The net value of these items is zero and they

are shown as Excess, Obsolete, and Unserviceable.

The category Held for Use includes all issuable materials and is coded within each supply or inventory system as

condition codes A-D. 

The category Excess, Obsolete, and Unserviceable includes all material assigned condition codes H, P, S, or V. 

The Category Held for Repair relates to impaired assets and includes all other condition codes as defined by the

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

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

As stated above, the category Held for Use includes all issuable material, and the category Held for Repair

includes all economically reparable material. Before FY 2002, the Department of Defense (DoD) categorized

potentially redistributable material, regardless of condition, as Excess, Obsolete, and Unserviceable. 

To date, the Air Force has partially implemented three systems to report “moving average cost,” the DoDapproved methodology for reporting historical cost within any of the supply or inventory accounting systems for

OM&S. (In only one system was the beginning balance validated). Most OM&S assets are in systems not yet converted to moving average cost so are still valued at standard price, with an allowance for Excess, Obsolete, and

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

Held for Use). An allowance equal to 100 percent of standard price, however, is made for the category Excess,

Obsolete, and Unserviceable. This allowance results in a net book value of zero, which is considered appropriate

because the items are coded condemned and, therefore, have no intrinsic value to the Air Force. The category

Held for Repair represents suspended, unserviceable (but reparable) items which have a value to the Air Force

but whose value is less than that of the Held for Use items and greater than that of the Excess, Obsolete and

Unserviceable items. To date, the Office of the Secretary of Defense is currently developing guidance for computing an allowance for the Held for Repair category. As a result, Air Force continues to report Held for Repair

at full standard price.
46

United States Air Force

Government-Furnished Material (GFM) and Contractor-Acquired Material (CAM)

Generally, the value of the Air Force’s GFM and CAM in the hands of contractors is not included in the OM&S

values reported above. The DoD is presently reviewing its process for reporting these amounts in an effort to

determine the appropriate accounting treatment and the best method to collect and report required information

quarterly without duplicating information already in other logistics systems. 

Operating Materials and Supplies (OM&S) Value

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

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.” 

Items commonly used in and available from the commercial sector are not managed in the DoD material management activities. Further, unlike the commercial sector, the DoD operational cycles based on national need are

irregular. In addition, the military risks associated with stock-out positions (e.g., weapon systems that are not

mission capable due to lack of supplies) are totally different from a commercial activity’s risk of losing sales.

Therefore, the Department does not attempt to account separately for items held for current or future use.

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

SFFAS No. 3 as material that has not yet been issued to the end user. Once issued, the material 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).

Note Reference

See Note Disclosure 1.M., Significant Accounting Policies, for additional discussion on financial reporting requirements and DoD policies governing inventory and related property.

For a regulatory discussion of OM&S, see DoD Financial Management Regulation, Volume 6B, Chapter 10, paragraph 101107.

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), the Defense Finance and Accounting Service (DFAS) could only report the net change between

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

Although the Air Force OM&S systems, in most cases, capture some trading partner data at the transaction level, no

electronic interfaces exist between the Air Force OM&S feeder systems, the DFAS accounting systems, other DoD

services, and other federal agencies for reporting the data for all items transferred in and out. Consequently, intragovernmental transactions (trading partner data) could not always be reconciled. The Air Force and DFAS are currently developing processes, methodologies and standard electronic interfaces that will allow intra-governmental

transactions to be reported monthly to the General Accounting and Finance System—Rehost.
47

2005 Annual Financial Statement

Note 10. General Property, Plants, and Equipment (PP&E), Net

Fluctuations

The overall increase of $320,779 thousand, or 1,349 percent for Software on line 1.D. is the result of Air Force

providing a more realistic figure for the Audited Financial Statements. The new figure was derived using the

‘best’ budget data available (i.e., FY 2003 and FY 2004) in conjunction with the DoD study “Industry Software

Cost, Quality and Productivity Benchmarks,” which indicated 60 percent of the total software effort was development, 20 percent was preliminary design and 20 percent was post deployment. The FY 2004 and FY 2005

President’s budget identified approximately 68 systems with software development over the $100 thousand capitalization criteria. These systems were analyzed further to identify and categorize them into Air Force General

Fund, Air Force Working Capital Fund, and Other. 

The Construction-in-Progress (CIP) on line 1.H. increased $1,357,102 thousand, or 40 percent because the

Treasury Index 97 funds were incorporated into the Air Force Construction-in-Progress total projects. The

reporting of CIP has long been a problem, not only with Air Force but with all services. TI97 funds allocated to

the Air Force and used on Air Force real property projects that benefit the AF must be reported on the Air Force

financial statements (see DoD FMR Volume 4, Chapter 6, page 6-20).

When a Construction Agent, such as United States Army Corps of Engineers (USACE) or Naval Facilities

Engineering Command (NAVFAC), constructs a building, they use funds from several different Appropriations; some

of these are TI97 funds. In the past, the USACE and NAVFAC did not provide all of the necessary data that would

identify which service should be reporting these CIP values. The DoD Component that is to receive the constructed property shall report CIP amounts on their financial statements, regardless of what type of funds were used to

fund the construction. Without knowing if this was an Air Force construction project, or if the Air Force was going

to be the end user, these TI97 funds were left with the DoD agencies funding the project. DFAS and the services

have been working this issue and have now been able to identify most, if not all projects under construction, and are

now able to identify who should do the reporting. These TI97 funds have now been added to the Air Force CIP as

required. Some issues still have not been resolved. This has been discussed with OSD Policy. 

The Other asset class on line 1.I. decreased by $338 thousand, or 100 percent. The Other category represents

the timing factor inherent in timber harvesting. The timber markets, driven by supply and demand, are volatile

and fluctuate. Timber sale contracts are awarded at irregular intervals, with some contracts held back until the

As of September 30

(Amounts in thousands)

1. Major Asset Classes

 A. Land N/A N/A $ 432,911 N/A $ 432,911 $ 431,608

 B. Buildings, Structures, and Facilities S/L 20 Or 40 44,089,947 $ -25,173,005 18,916,942 18,166,918

 C. Leasehold Improvements S/L lease term 0 0 0 0

 D. Software S/L 2-5 Or 10 484,668 -140,107 344,561 23,782

 E. General Equipment S/L 5 or 10 36,023,812 -29,215,209 6,808,603 6,744,374

 F. Military Equipment S/L Various 313,670,000 -221,400,000 92,270,000 89,060,000

 G. Assets Under Capital Lease S/L lease term 453,481 -301,883 151,598 163,059

 H. Construction-in-Progress N/A N/A 4,721,453 N/A 4,721,453 3,364,351

 I. Other 0 0 0 338

2. Total General PP&E $ 399,876,272 $ -276,230,204 $ 123,646,068 $ 117,954,430

Service Life Prior FY Net 

 BookValue

Net Book

Value

Acquisition

Value

2005 2004

Depreciation/ 

Amortization 

Method

(Accumulated

Depreciation/ 

Amortization)

[1] Note 15 for additional information on Capital Leases

Legend for Valuation Methods:

S/L = Straight Line N/A = Not Applicable
48

United States Air Force

market improves. Similarly, when buyers pay for just the timber they cut, they may hold off when markets are

bad and cut more when markets are good. Weather conditions also influence the flow of timber and revenue.

Relevant Information for Comprehension

The Federal Accounting Standards Advisory Board issued Statement of Federal Financial Accounting Standards

No. 23, “Eliminating the Category National Defense Property, Plant and Equipment,” in May 2003. This standard,

which became effective for accounting periods after September 30, 2002, establishes Generally Accepted

Accounting Principles (GAAP) for valuing and reporting military equipment (e.g., aircraft, satellites, and intercontinental ballistic missiles) in federal financial statements. The standard requires the capitalization and depreciation

of the cost of military equipment, including the cost of modifications and upgrades. The Department of Defense

has determined that it is not practicable at this time to accumulate sufficient information from internal records to

value military equipment in accordance with GAAP. The Department is currently working to revise its accounting

processes and systems to support the informational needs of management and compliance with GAAP. In the

interim, the Department will base the value of military equipment for financial statement presentation purposes

on data provided by the Bureau of Economic Analysis (BEA) at the Department of Commerce.

The value of the Bureau of Economic Analysis (BEA) data provided by the DoD to the Air Force for inclusion in

the financial statements for the 4th Quarter, 2005 amounted to approximately $313,670,000 thousand less accumulated depreciation of $221,400,000 thousand for a net realized book value of $92,270,000 thousand. 

The data provided by the BEA consists of investment and net book value data for 84 groups of equipment such as

aircraft, ships, and combat vehicles. The Department adjusts BEA data to eliminate equipment items (such as

spares, munitions, and inventory items) that are not accounted for as military equipment. Such items are

accounted for and reported as Inventory and Related Property.

Personal property in the Air Force consists of General Equipment, Automated Data Processing (ADP) hardware

and software, Medical Equipment, Special Tools and Test Equipment (ST/STE) and Military Equipment. 

Other Air Force Disclosures

The 2005 hurricane season saw a record number of historic storms causing extensive damage to real property assets

at numerous Department of the Air Force installations. Hurricanes Dennis, Katrina and Rita were especially damaging. Multi-disciplinary Air Force Civil Engineer teams consisting of structural and mechanical engineers, architects,

roofing specialists and construction contract specialists were quickly dispatched to the Gulf Coast region of the United

States to aid mission recovery and assist in assessing the damage caused by these storms. 

Air Force engineers continue to provide support to local base civil engineer teams at damaged installations. Among

the installations recovering from significant damage are Keesler AFB, Columbus AFB, and Gulfport Combined

Readiness Training Center in Mississippi, and Tyndall AFB and Eglin AFB in Florida. The Civil Engineer Damage

Assessment Teams are dealing with three broad categories of buildings, structures, and utilities: (1) facilities that only

have cosmetic/minor damage and therefore small repair costs; (2) facilities that have major damage that it makes

more economic sense to build new rather than repair and therefore new military construction; and (3) structures that

have significant damage, but it makes more economic sense to repair them than to build new and therefore capitalized improvements. Once the assessments are completed and decision on course of action and execution method

are made, the values of the buildings, structures, and utilities on the financial statements will either increase due to

new construction and capital improvements or adjust downward because they were demolished by the hurricanes

and/or require demolition as part of the recovery and restoration effort.

For the 4th Quarter, FY 2005 reports, the Air Force used some FY 2002 ending data for (ST/STE) but did use actual

data for the B2 aircraft. The FY 2002 values were still being used for all other (ST/STE) because the two systems 
49

2005 Annual Financial Statement

previously used to report ST/STE have been turned off and are scheduled to be replaced by Air Force Equipment

Management System (AFEMS) in FY 2005.

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

reported above for the Major Asset Classes of Land and Buildings, Structures, and Facilities. The value of General

PP&E personal property (Major Asset Classes of Software and Equipment) does not include all of the General PP&E

above the DoD capitalization threshold in the possession of contractors. The net book amount of such property is

immaterial in relation to the total General PP&E net book value. General Accounting Office, the Inspector General,

DoD, and the Department are developing new policies and a contractor-reporting process to capture General PP&E

information for future reporting purposes in compliance with GAAP.

Note Reference

See Note Disclosure 1.O., Significant Accounting Policies, for additional discussion on financial reporting requirements and DoD policies governing PP&E.

The Air Force is the lessee in ten capital leases. These leases are for military family housing acquired through

Section 801 Family Housing Program. The leased items are capitalized and reported as an asset when the costs

of the items exceed the capitalization threshold. Leased items not meeting the capitalization threshold are

expensed. All leases originating prior to FY 1992 are funded on a fiscal-year basis. Six of the current military

family housing leases originated before FY 1992. The Air Force has adjusted their records to account for the termination and conveyance of one lease as of October 30, 2004. 

Fluctuations

The increase of $44,941 thousand, or 11 percent in Land and Building and $55,444 thousand, or 23 percent

increase in accumulated amortization is the result of a change in methodology for the use of interest rates that

applies to the individual leases. The Air Force previously used the interest rate provided with each of the ten

capital leases. This interest rate did not accurately provide the cost of money to compute fair market value. The

current interest rate used reflects the appropriate government rate that best reflects the government’s cost of

borrowing, using the historical rates from the Federal Reserve. The new change was coordinated between the

Air Force and OSD.

The $958 thousand Equipment lease reflected on the FY 2004 statements is no longer held by the Air Force.

As of September 30

(Amounts in thousands)

1. Entity as Lessee, Assets Under Capital Lease

 A. Land and Buildings $ 453,481 $ 408,540

 B. Equipment 0 958

 C. Other 0 0

 D. Accumulated Amortization -301,883 -246,439

 E. Total Capital Leases $ 151,598 $ 163,059

2005 2004

Assets Under Capital Lease
50

United States Air Force

Note 11. Liabilities Not Covered by Budgetary Resources

Fluctuations and Abnormalities

The fluctuation in Accounts Payable is due to a concerted effort in FY 2005 to clean up accounts payable in cancelled appropriations; items in the General Accounting and Finance System—Rehost (GAFS-R) system were cleared

that were found not to be supported in the General Accounting and Finance System—Base Level (GAFS-BL) system. 

Information Related to Liabilities Not Covered by Budgetary Resources

Other Liability Disclosures

Other Intra-governmental Liabilities Not Covered by Budgetary Resources consists of $291,104 thousand in

Federal Employees’ Compensation Act (FECA) reimbursement to the Department of Labor, $32,812 thousand in

unemployment compensation, and $167,646 thousand in custodial liabilities.

Other Nonfederal Liabilities Not Covered by Budgetary Resources consists of $222,570 thousand in capital lease

liabilities, $260,566 thousand in contingent liabilities, $2,351,814 thousand in accrued annual leave liabilities for

military and civilians, and $311 thousand in accrued interest liability. 

Note Reference

For Additional Line Item discussion, see:

• Note 12, Accounts Payable

• Note 13, Debt

• Note 14, Environmental Liabilities and Disposal Liabilities

• Note 15, Other Liabilities

• Note 16, Commitments and Contingencies

• Note 17, Military Retirement Benefits and Other Employment Related Actuarial Liabilities

As of September 30 2005 2004

(Amounts in thousands) 

1. Intra-governmental Liabilities 

 A. Accounts Payable $ 0 $ 0 

 B. Debt 0 0 

 C. Other 491,562 682,737 

D. Total Intra-governmental Liabilities $ 491,562 $ 682,737

2. Non-Federal Liabilities 

 A. Accounts Payable $ 232,672 $ 473,152 

 B. Military Retirement Benefits and 

 Other Employment-Related Actuarial Liabilities 1,147,437 1,163,442 

 C. Environmental Liabilities 6,376,345 6,876,461 

 D. Loan Guarantee Liability 0 0 

 E. Other Liabilities 2,835,261 2,721,503 

F. Total Non-Federal Liabilities $ 10,591,715 $ 11,234,558

3. Total Liabilities Not Covered by Budgetary Resources $ 11,083,277 $ 11,917,295

4. Total Liabilities Covered by Budgetary Resources $ 10,462,797 $ 12,569,893 

5. Total Liabilities $ 21,546,074 $ 24,487,188
51

2005 Annual Financial Statement

Note 12. Accounts Payable

The Intra-governmental Payables category consists of amounts owed to other federal agencies for goods or services ordered and received but not yet paid for. Interest, penalties, and administrative fees are not applicable to

intra-governmental payables. As a result of guidance from Treasury, Judgment Fund Liabilities resulting from the

Contract Dispute Act (CDA) and the Notification and Federal Employee Antidiscrimination and Retaliatory Act

(NoFEAR) of 2002 are now included in Intra-governmental Payables. The Non-Federal Payables (to the Public)

category consists of payments to non-federal governmental entities. 

Fluctuations

Accounts Payable—Public decreased by $1,855,979 thousand, or 24 percent. This net decrease can be attributed

to a $1,820,450 thousand increase in Aircraft Procurement - Air Force Materiel Command resulting from production increases for the F/A22, C-130J, Predator and final delivery of the Joint STARS aircraft; a $2,738,699 thousand decrease in classified Other Procurement—Air Force Special Programs; an increase of $41,434 thousand in

classified Missile Procurement—Air Force Special Programs, and a decrease of $859,763 thousand attributable to

an supplemental Elimination Adjusting Entry made in September 2004 whereas additional seller data was received

after the initial Adjusting Entries were made which then made it necessary to effect an additional Elimination

Adjusting Entry to bring into agreement the reported Air Force accounts payable with the accounts receivable

reported by the sellers. There was also a decrease of $389,424 thousand in the Military Personnel—Air Force

program entity due to a posting logic change that was implemented. Accrued Funded Payroll, Employer

Contributions, and Other Post Employment Benefits are now cited (when applicable) instead of Accounts

Payable. The remaining $270,023 thousand increase is shared by a number of other program entities. 

Accounts Payable—Intra-governmental decreased by $248,506 thousand or 13 percent. The variance can be

attributed to a $93,331 thousand decrease in liabilities to the Department of the Treasury; a $97,187 thousand

decrease to the Army General Fund, and a decrease of $67,065 to the Department of Labor. The fluctuation

associated with Intra-governmental accounts payable is impacted by the elimination process that requires the

accrual of accounts payable to agree with Air Force trading partner seller data. Also, the recording of accounts

payable based on actual seller side data provided by the agency or using an estimation technique for those agencies that did not provide actuals contributes to the fluctuation as well. The estimation technique was implemented in the 4th Quarter FY 2004 and continues to be refined.

Judgment Fund liabilities for the 4th Quarter FY 2005 total $14,530 thousand as of September 30, 2005. This is a

result of contractor claims under the Contract Disputes Act in the amount of $13,192 thousand for Air Force contracts that have been adjudicated in favor of the contractor by a court or a board. Initially, Treasury pays the monetary awards to the contractor. The Air Force must subsequently reimburse the Treasury’s Judgment Fund for the

amount that was paid to the contractors. Also included is approximately $1,338 thousand owed for Judgment Fund

liabilities that resulted because of the Notification of reimbursements to Treasury’s Judgment Fund, and because of

As of September 30 2005 2004 

Accounts

Payable

Interest, Penalties, and 

Administrative Fees Total Total 

(Amounts in thousands) 

1. Intra-governmental Payables $ 1,651,904 $ N/A $ 1,651,904 $ 1,900,411 

2. Non-Federal Payables (to the Public) 5,851,184 0 5,851,184 7,707,163 

 

3. Total $ 7,503,088 $ 0 $ 7,503,088 $ 9,607,574 
52

United States Air Force

judgments amounts resulting from the Federal Employee Antidiscrimination and Retaliatory Act of 2002. These

amounts can change daily and can fluctuate substantially due to new billings by the Treasury, and to payments made

to the Treasury by DFAS and the U.S. Army Corps of Engineers on behalf of the Air Force.

Intra-governmental Eliminations

For the majority of intra-agency sales, the Air Force’s feeder systems and the DFAS accounting systems do not

capture trading partner data at the transaction level in a manner that facilitates trading partner aggregations.

Therefore, the Air Force was unable to reconcile intra-governmental accounts payable to the related intra-governmental accounts receivable. The volume of intra-governmental transactions is so large that after-the-fact reconciliation cannot be accomplished with current or foreseeable resources. The DoD summary-level seller

accounts receivables were compared to the Air Force accounts payable. An adjustment was posted to the Air

Force accounts payable based on the comparison with the accounts receivable of the DoD components providing

goods or services to the Air Force. The DoD and Air Force intend to develop long-term systems improvements

that will include sufficient up-front edits and controls to eliminate the need for after-the-fact reconciliations. 

Comparison prior to eliminations:

Sep 2005 Sep 2004 $ Change

Intra-governmental accounts payable $ 811,280 $ 427,882 $ 383,398

Accruals to match seller data 1,615,885 2,034,148 -418,263

2,427,165 2,462,030 -34,865

Less: Intra-Air Force eliminations 775,261 561,620 213,641

Total $ 1,651,904 $ 1,900,410 $ 248,506

(All data in thousands) 

Allocation of Undistributed Disbursements

It is DoD policy to allocate supported undistributed disbursements between federal and nonfederal categories

based on the percentage of federal and non-federal accounts payable. Unsupported undistributed disbursements

should be recorded in the United States Standard General Ledger account 2120, Disbursements in Transit. The

Air Force followed this allocation policy.

Note Reference

See Note Disclosure 1.G., Significant Accounting Policies, for additional discussion on financial reporting requirements and DoD policies governing accounting for Intra-governmental activities.

Note 13. Debt

Not applicable

Note Reference

See Note Disclosure 1. G., Significant Accounting Policies, for additional discussion on financial reporting requirements and DoD policies governing accounting for Intra-governmental Activities, Public Debt.
53

2005 Annual Financial Statement

Note 14. Environmental Liabilities and Disposal Liabilities

Fluctuations

Other Accrued Environmental Costs (Non-DERP funds) Active Installations - Environmental Corrective Action

decreased $44,007 thousand, or 24 percent. RCRA corrective actions are defined by the Environmental

Protection Agency as Solid Waste Management Units (SWMU). SWMUs are not determined in a scientific manner and may arise from any indication of potential pollution. Therefore, there are a high number of SWMUs.

Limited initial investigation generally leads to the conclusion that there is no significant pollution at the SWMU.

The amount of the liability fluctuates greatly from year-to-year as further investigation results in significant

changes in cost estimates. These changes result from the additional information gained in each step of the

cleanup process and the relatively few sites that actually require significant cleanup costs.

Other Accrued Environmental Costs (Non-DERP funds) Active Installations—Environmental Closure

Requirements decreased $60,628 thousand, or 54 percent, due primarily to the fact that the Air Force no longer

recognizes the costs of closure for Underground Storage Tanks (USTs) and Treatment, Storage, and Disposal

Facilities (TSDFs) as environmental liabilities. The Air Force does not plan to abandon these facilities and therefore has no liability to be recognized in the financial statements. RCRA states that the cleanup of a UST facility

takes place only when the tank is abandoned for 12 consecutive months. The only closure liability that meets the

accounting requirements for recognition is that of landfills. As of September 30, 2005, the liability for landfill closure was estimated at $51,655 thousand based on the percentage of the landfill used as of September 30, 2005

with a total liability for landfill closures of $203,800 thousand. The change in the landfill liability represents

increased improvement in direct cost estimates to close and monitor landfills, as well as improved information

concerning the use of the landfills. The size of a landfill is not limited over time and opening a greater capacity

each period may expand the landfill. Therefore, a landfill that was 50 percent full last year may only be 40 percent

full this year. The Air Force plans to develop a methodology to reduce the variability in the capacity used to

amortize the landfill liability.

2005 2004

Current 

Liability

Noncurrent 

Liability Total Total 

(Amounts in thousands) 

1. Environmental Liabilities – Non Federal 

 A. Accrued Environmental Restoration (DERP funded) Costs: 

 1. Active Installations--Environmental Restoration (ER) $ 387,680 $ 3,618,947 $ 4,006,627 $ 4,225,215 

 2. Active Installations--ER for Closed Ranges 15,000 1,329,856 1,344,856 1,344,856 

 3. Formerly Used Defense Sites (FUDS) -- ER 0 0 0 0 

4. FUDS--ER for Transferred Ranges 0 0 0 0

 B. Other Accrued Environmental Costs (Non-DERP funds) 

 1. Active Installations--Environmental Corrective Action 0 138,378 138,378 182,385 

 2. Active Installations--Environmental Closure Requirements 2,354 49,301 51,655 112,283 

 3. Active Installations--Environ. Response at Active Ranges 0 0 0 0 

4. Other 0 0 0 0

C. Base Realignment and Closure (BRAC)

 1. BRAC Installations--Environmental Restoration (ER) 60,688 1,140,756 1,201,444 1,379,647 

 2. BRAC Installations--ER for Transferring Ranges 0 0 0 0 

 3. BRAC Installations--Environmental Corrective Action 7,697 144,679 152,376 142,801 

4. Other 11,660 219,182 230,842 0

 D. Environmental Disposal for Weapons Systems Programs 

1. Nuclear Powered Aircraft Carriers 0 0 0 0

2. Nuclear Powered Submarines 0 0 0 0

3. Other Nuclear Powered Ships 0 0 0 0

 4. Other National Defense Weapons Systems 0 0 0 0 

5. Chemical Weapons Disposal Program 0 0 0 0

6. Other 0 0 0 0

2. Total Environmental Liabilities: $ 485,079 $ 6,641,099 $ 7,126,178 $ 7,387,187

As of September 30 
54

United States Air Force

Base Realignment and Closure (BRAC) Installations—Environmental Restoration decreased $178,203 thousand, or

13 percent. The decrease is due to cleanup work performed, expensed, and paid during the reporting period as

well as revaluations attributed primarily to the adjustment of Chanute Air Force Base’s Last Remedial Action In

Place (LRIP) date from FY 2007 to FY 2009. This adjustment was the result of the Air Force Real Property

Agency’s (AFRPA’s) bottoms-up review and subsequent budget scrubs. In FY 2004, with LRIP projected for FY

2007, Chanute based its environmental assumptions on fast-track cleanup efforts and programmed massive dig

and haul efforts and Engineering Evaluation Cost Analysis (EECA) to meet the September 30, 2007 LRIP date.

With the FY 2009 LRIP, many fast track requirements were eliminated or scopes significantly reduced, which

affected Cost-To-Complete (CTC) projections. In addition to the LRIP date change, Chanute’s current

Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) status—the Remedial

Investigation phase—has produced more accurate data during FY 2005 which in turn has allowed the BRAC

Environmental Coordinator to make better assumptions to more clearly define the environmental requirements

for Chanute. The data supports significantly less remedial action than was previously assumed by operating location. Many of the environmental sites can be recommended in Record of Decision documents for Long-Term

Monitoring with Land Use Control/Institutional Controls cost rather than dig and haul and/or active systems,

which have greatly reduced out-year costs.

Base Realignment and Closure (BRAC)—Other increased $230,842 thousand, or 100 percent. The increase is

due to improved identification of costs resulting in the addition of this line item. The increase includes cost for

manpower services at BRAC installations and headquarters offices for services performed by Global Engineering

Integration and Technical Assistance (GEITA) for $57,711 thousand, or 25 percent of the total. This contractual

support provides program level support for management oversight services at various BRAC installations. This

supports the strategy development and execution for environmental and property transfer programs. This support allows the installations to remain on track working towards the Defense Planning Goals which includes:

property transfer, Remedial Actions In Place (RIP), Last RIP (LRIP), Operating Properly and Successfully (OPS),

Response Complete (RC) and ultimately, Site Closure (SC). Also, the Air Force Center for Environmental

Excellence (AFCEE) comprised $115,421 thousand, or 50 percent, of the total cost. AFCEE provides technical,

management, contract and administrative manpower assistance to manage and execute BRAC projects and other

closure related matters for closure bases. The Program Managers are the heart of program execution and single

point of contact for all activities cradle-to-grave. Programs Managers frequently require technical consultation

from staff members who are experts in toxicology, risk assessment, engineering, chemistry, and hydrogeology.

Contracting personnel provide the necessary contracting expertise to conduct acquisition planning, develop contracting strategies, execute contract awards, and administer those contracts. Administrative personnel are

required to adequately leverage the myriad of technical and project management correspondence, reports, visitors, and callers to relieve staff from clerical duties. 

In addition, various mandated direct costs comprise $57,710 thousand, or 25 percent, of the total. These costs

include the cost for Technical Assistance for Public Participation (TAPP) grants which allow community members

to obtain objective, independent scientific and engineering support concerning the restoration process through

the issuance of government purchase orders to small businesses. Also, included are costs for the Agency for

Toxic Substances and Disease Registry (ATSDR), which is mandated under CERCLA Section 104(i) to evaluate all

federal facilities on or proposed to the Environmental Protection Agency’s (EPA’s) National Priorities List (NPL)

for public health concerns. In addition, under the EPA’s Fast Track Cleanup, an agreement was made between

service components and DoD to provide funds to the Deputy Under Secretary of Defense (Installation and

Environment) in support of the BRAC Fast Track Program. They provide assistance in setting up BRAC

Environmental Coordinator/BRAC Cleanup Teams (BEC/BCT) workshops to develop BRAC environmental policies and issue Defense Planning Guidance and Goals. Also, direct costs are included for the Defense/State
55

2005 Annual Financial Statement

Memorandum of Agreement (DSMOA) program which was established by DoD to enhance state and territorial

involvement in the cleanup of active and closing DoD installations and at Formerly Used Defense Sites (FUDS).

This program provides funds to federal organizations and state regulatory programs that mandate funding in

order to support AFRPA. 

General Disclosures

Accrued Environmental Restoration Costs (DERP-funded) Active Installations - Environmental

Restoration and Other Accrued Environmental Costs (Non-DERP funds) Active Installations -

Environmental Corrective Action:

Environmental cleanup liabilities are incurred in connection with the Comprehensive Environmental Response,

Compensation, and Liability Act (CERCLA) and the Resource Conservation and Recovery Act (RCRA). Cost estimates are performed using the Remedial Action Cost Engineering and Requirements System (RACER) unless

there is a historic comparable project, a specific bid, or an independent government cost estimate for the project.

The liability amount is composed of the sum of several stages of activity and not necessarily contained in a single

estimate or contract.

The change in environmental cleanup liability during a reporting period is comprised of revaluations of the costto-complete cleanup of engineering sites that existed at the beginning of the period plus the cost-to-complete

cleanup for new engineering sites introduced during the reporting period, less amounts expensed in the program

during the reporting period. The beginning environmental cleanup liability plus the cost-to-complete new engineering sites added during the period plus or minus changes in cost-to-complete estimates (revaluations) during

the period is equal to the ending environmental cleanup liability for the period. Because the DERP is accounted

for as a totally self-contained program, all direct and indirect costs of the program are captured and reported.

Non-DERP, non-BRAC environmental cleanup liabilities represent corrective actions generally required under

RCRA law. These environmental cleanup liabilities are estimated in the same manner as DERP environmental

cleanup liabilities. The change in non-DERP, non-BRAC environmental cleanup liabilities during a reporting period

is comprised of revaluations of the cost-to-complete for engineering sites that existed at the beginning of the period plus the cost-to-complete for new engineering sites added during the reporting period less amounts expensed

during the period. Because the non-DERP, non-BRAC environmental cleanup activity is part of general funding

achieved using Air Force Operation and Maintenance appropriated funds, there is no special accounting for the

costs of the cleanup program per se. Therefore, the costs captured for the non-DERP, non-BRAC environmental

cleanup reflect only direct costs. Because this program was not tracked and appropriated specifically, there was

no accounting specific to this program. Expense codes for this program were established in 1999 and implemented in FY 2000. Therefore, the expense portion of the estimate has no significant history. Because of the lack of

expense history for the program, there is no reliable data for estimating the current portion of the non-DERP,

non-BRAC environmental cleanup liability. It is believed that the current portion of the environmental cleanup liability in this area is relatively small and not material in the classification of liabilities. Because the non-DERP, nonBRAC environmental cleanup liabilities are only estimated between 1 July and 1 September of each year, there is

no significant change other than at fiscal yearend for non-DERP, non-BRAC environmental liabilities. On less than

an annual basis the only change to the liability estimate in this area is the amount recorded as expensed during the

reporting period.

Included in the DERP Environmental Restoration Liability for September 30, 2005 are 32 engineering sites that

represent building demolition and debris removal totaling $50,000 thousand. These costs represent joint costs

that entail environmental and non-environmental aspects that cannot be separated for reporting purposes.
56

United States Air Force

The DERP environmental liability represents an addition of $132,200 thousand due to new engineering sites

added during the year, $374,600 thousand in expenses during the year, and $118,600 thousand in revaluations of

engineering sites that existed at the end of fiscal year 2004. Revaluations result as better information is obtained

and cost estimates are revised accordingly.

All environmental liabilities for DERP restoration represent estimates of cleanups covering all time and actual

results may vary significantly from such estimates. The current liability represents a deflated level of expected

activity during fiscal year 2006 and should be accurate although not precise because of variations in the timing of

expense recognition and official estimates for the year’s activity.

Accrued Environmental Restoration Costs (DERP funded) Active Installations - Environmental

Restorations for Closed Ranges:

The environmental cleanup of military ranges is governed by the Military Munitions Rule in 40 CFR 266.201.

Environmental cleanup liabilities on ranges refer only to munitions related activities. Other actions are captured

under the DERP, BRAC, and non-DERP, non-BRAC environmental cleanup categories. Additionally, environmental

cleanup liabilities are reported only for closed ranges. 

Environmental cleanup areas within a closed range are referred to as Munitions Response Areas (MRAs). As studies are done to find munitions-related contamination on closed ranges, the number of sites is expected to rise. As

investigations progress, the number of sites will increase to reflect specific areas of pollution. The Air Force

expects the number of sites reported to increase as pollution is discovered and sites are defined in areas less than

the total boundary of the closed range. For example, one closed range of 100 acres may become three sites: one

of five acres with pollution A, one of 15 acres with pollution B, and the remaining 80 acres with no pollution

found. Thus, one closed range can become three sites, each with its own cost-to-complete cleanup estimate. 

The sum of the sites’ costs-to-complete cleanup becomes the environmental cleanup liability for closed ranges.

The environmental cleanup for closed ranges is in its infancy, and the total liability is expected to increase significantly over the coming years as investigations progress. Current policy is to investigate all closed ranges by the

end of 2007.

Although there are no stated standards for the environmental cleanup of closed ranges, the Air Force has implemented studies to determine the extent of pollution from munitions. It is expected that there will be significant

changes in range cleanup standards that eventually will be applied on a case-by-case basis for munitions-response

requirements.

As investigations progress, it is expected the environmental cleanup liability for closed ranges will increase materially.

The liability for environmental cleanup will reflect direct costs. Also, the lack of expense history for range environmental cleanup makes it impossible to estimate current liabilities reliably for some time. The current liability reflects

the amount contained in the President’s Budget that shows the expected activity for the next fiscal year.

Other Accrued Environmental Costs (Non-DERP funds) Active Installations - Environmental Closure

Requirements:

Environmental closure liabilities are incurred under RCRA with the cost-to-complete closure reported for RCRA

facilities. Cost estimates are prepared under assumptions defined in the RCRA law and estimated using RACER in

the absence of a specific contract cost or bid. The specific facilities reported are RCRA permitted landfills. 

Disposal liabilities are presented as an accrued amount for the life of the landfill, and the total liability is presented

in the year-end narrative. The accounting standard requires full cost be recognized for closure liability. Closure

liabilities recognized by the Air Force cover only direct costs. No cost accounting exists to determine indirect
57

2005 Annual Financial Statement

closure costs. Costs incurred in periods greater than 30 years into the future are considered immaterial. The

present value of such costs would be negligible in recognition of closure liabilities if such recognition were not on

a current cost basis.

There are no material changes in environmental closure liabilities on less than an annual basis because revaluation

and addition of new engineering sites occurs in the last quarter of the year in preparation for the budget process.

Because environmental closure liabilities are estimated in the last quarter of the year, new closure facilities are

recognized in the last quarter of the year and no accounting process to capture environmental closure expenses,

there is no material change in environmental closure liabilities on less than an annual basis. The total amortized

annual portion of the liability estimate is recognized in the fiscal yearend liability; therefore, there is no change in

the amortized liability amount on a quarterly basis. There is no value to the amortization of the estimated liability

more frequently than annually because there is no cash impact for such recognition and there is no funding

requirement in connection with the liability amortization. Because the function does not generate any revenues it

is not essential to match costs against revenues to establish net income.

The environmental closure liability for landfills is based on the proportion of the landfill used as of the reporting

date. This estimate includes the cost of capping the fill, as well as 30 years of monitoring required by federal

regulations.

Reporting of landfill closure liability is not in conformance with the accounting standard. The standard would recognize all future costs regardless of timing. The Air Force recognizes only the initial closure. A landfill cap typically requires replacement every 30 to 40 years. An estimation of current costs based on all future costs, regardless of timing, would result in an infinite liability. This result would be meaningless and not the intent of the standard. Therefore, the Air Force reports only the cost of the initial cap required to close a landfill. The Air Force

believes this reporting is more meaningful. The present value of the future caps (those after the initial cap) would

be negligible.

Base Realignment and Closure (BRAC) Installations - Environmental Restoration, Environmental

Corrective Action, and Other:

The Air Force Real Property Agency (AFRPA) estimates a $1,584,662 thousand total environmental liability as of

September 30, 2005. This amount includes all cleanup requirements to meet applicable laws and regulatory

requirements and to transfer property. However, this amount does not include Land Use Control/Institutional

Control costs beyond system operations associated with property transfer. Cost estimates are assigned to current operating periods using RACER. 

Reporting of Estimates

The Air Force attempts to prepare financial statements in accordance with Federal Generally Accepted

Accounting Principles. These accounting principles require certain estimates, judgments, and assumptions that we

believe are reasonable based upon information available to us at the time of the estimates. These estimates, judgments, and assumptions may affect the reported amounts of environmental liabilities as of the date of the financial

statements.

Our financial statements would be affected to the extent there are material differences between these estimates

and actual results. There are areas in which management judgment in selecting any available alternative could

produce a materially different result. Because the estimated costs are derived from the summation of cost estimates at individual engineering sites the overall liability recognized cannot be attributed to specific causes, such as

technology changes or changes in legal requirements during the period.
58

United States Air Force

Engineering sites represent cost centers established for the purposes of management of the cleanup activities

directly related to the process. The basis for accounting is the accounting site that is the installation. The installation represents the lowest level for which expenses may be determined. However, expenses also are summed

across the Air Force in the determination of the changes in the liability estimates. Because of this rollup activity in

the determination of a financial statement for the entire entity, changes cannot be attributed to specific reasons at

the Air force level. Such attribution would be meaningless and misleading and is not attempted by the Air Force.

Note Reference

For regulatory discussion on environmental liabilities, see DoD FMR, Volume 6B, Chapter 10, Paragraph 1016 and

Volume 4, Chapters 13 and 14. 

Note 15. Other Liabilities 

Intra-government Fluctuations

The $90,637 thousand decrease in Advances from Others on Line 1.A. is due to the timing of the receipt and

execution of orders mainly in the Research, Development, Test and Evaluation (RDT&E) classified program, causing variations.

Balances in Intra-governmental Deposit Funds and Suspense Account Liabilities (Line 1.B, above) increased in FY

2005 by $144,391 thousand or 23 percent. This increase was driven by a change in Treasury guidelines (Treasury

Bulletin No. 2005-06: “Yearend Closing”). In FY 2004, Treasury required that certain suspense account balances

(Amounts in thousands)

1. Intra-governmental

A. Advances from Others $ 573,687 $ 0 $ 573,687 $ 664,325

B. Deposit Funds and Suspense Account Liabilities 167,899 0 167,899 23,508

C. Disbursing Officer Cash 304,148 0 304,148 311,323

D. Judgment Fund Liabilities 0 0 0 101,779

E. FECA Reimbursement to the Department of Labor 129,229 161,875 291,104 304,421

F. Other Liabilities 252,150 879 253,029 321,124

G. Total Intra-governmental Other Liabilities $ 1,427,113 $ 162,754 $ 1,589,867 $ 1,726,480

2. Non-Federal

A. Accrued Funded Payroll and Benefits $ 877,966 $ 0 $ 877,966 $ 1,589,124

B. Advances from Others 67,773 0 67,773 71,763

C. Deferred Credits 0 0 0 0

D. Deposit Funds and Suspense Accounts 171,514 0 171,514 30,199

E. Temporary Early Retirement Authority 414 263 677 1,503

F. Nonenvironmental Disposal Liabilities

(1) Military Equipment (Nonnuclear) 0 0 0 0

(2) Excess/Obsolete Structures 0 0 0 91,980

(3) Conventional Munitions Disposal 0 0 0 0

(4) Other 0 0 0 0

G. Accrued Unfunded Annual Leave 2,351,814 0 2,351,814 2,272,599

H. Capital Lease Liability 165,960 99,583 265,543 235,637

 I. Other Liabilities 183,650 260,567 444,217 309,700

J. Total Non-Federal Other Liabilities $ 3,819,091 $ 360,413 $ 4,179,504 $ 4,602,505

3. Total Other Liabilities $ 5,246,204 $ 523,167 $ 5,769,371 $ 6,328,985

2004

Noncurrent 

Liability Current Liability Total Total

As of September 30 2005
59

2005 Annual Financial Statement

have a zero balance at the end of the fiscal year. Treasury now allows agencies to carry forward a balance into

the upcoming fiscal year in all suspense accounts. 

The decrease in Judgment Fund Liabilities is a result of guidance received from Treasury requiring information to

be included in Accounts Payable, Footnote 12.

The decrease in Other Liabilities is primarily due to a management initiative in identifying invalid accounts receivable and subsequently taking the appropriate corrective action. The offset for closed year receivables is Custodial

Liabilities, which are part of Other Liabilities

Other Liabilities

The amount of $258,436 thousand represents $54,997 thousand in government contributions for employee benefits, $32,812 thousand in unfunded unemployment compensation liabilities, $879 thousand in funded unemployment compensation liabilities, $168,141 thousand in custodial liabilities, and $1,607 thousand in DoD education

benefit liabilities.

Non-Federal Fluctuations

The decrease in Accrued Funded Payroll and Benefits is due to the military payroll. During FY 2004, the military

pay date occurred in October, whereas during FY 05, the pay date occurred in September. 

Nonfederal Deposit Funds and Suspense Accounts (Line 2.D. above) increased in FY 2005 by $141,359 thousand

or 82 percent. See the explanation for Intra-governmental Deposit Fund and Suspense Account Liabilities (Line

1.B.), above.

The Temporary Early Retirement Authority (TERA) liabilities decrease of $826 thousand or 55 percent is due to

the expiration of the authority in FY 2001. The liability will continue to decrease as expenditures are made

because the program was terminated resulting in no new liabilities.

Nonenvironmental Disposal Liabilities – Excess/Obsolete Structures decreased $91,980 thousand or 100 percent

due to the completion of Defense Reform Initiative Directive (DRID) 36. The liability was originally established to

meet reporting requirements for DRID 36 which provided facility demolition goals for the Air Force beginning in

FY 1998. DRID 36 directed that increased funding be used to eliminate these structures by FY 2003. Currently,

there are no established facility demolition goals for the Air Force.

Other Liabilities increases by a total of $134,517 thousand or 44 percent. The major contributor of this is attributed to the win/loss settlement of case(s) and the associated dollar value reported as Contingent Liabilities. In

addition, there was a posting logic change implemented in the Military Personnel program for Air Force active,

reserve and guard. Accrued Funded Payroll, Employer Contribution, and Other Post Employment benefits are

now reported (when applicable) and cross walked to Other Liabilities. 

Other Liabilities

The amount of $440,650 thousand represents legal contingencies of $261,913 thousand and accrued interest liability of $311 thousand and employee benefits in the amount of $178,426 thousand.

The recorded estimated probable liability amount of $12,203 thousand has been included in the accompanying

financial statements for open contractor claims greater than $100,000 and neither under appeal nor in litigation.

In addition to the contractor claims under appeal and the open contractor claims for an amount greater than

$100,000, the Air Force was party to numerous other contractor claims in amounts less than $100,000 per claim.

These claims are a routine part of the contracting business and are typically resolved through mutual agreement
60

United States Air Force

between the contracting officer and the contractor. Because of the routine nature of these claims, no requirement exists for a consolidated tracking mechanism to record the amount of each claim, the number of open

claims, or the probability of the claim being settled in favor of the claimant. The potential liability arising from

these claims in aggregate would not materially affect the operations or financial condition of the Air Force. A reasonably possible liability is estimated at $8,386 thousand and is not included in the reported amount.

The total estimated probable liability for claims and litigation against the Air Force handled by the Civil Law

and Litigation Directorate, as of Sept 30, 2005, was valued at $218,171 thousand and has been included in the

accompanying financial statements. As of Sept 30, 2005, the Air Force was party to 21,733 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. A reasonably possible liability is estimated at $101,756 thousand and is not included in the reported amount. Neither past payments nor the current contingent liability

estimate provides a basis for accurately projecting the results of any individual lawsuit or claim. It is uncertain

that claims will ever accrue to the Air Force. In addition, many claims and lawsuits, even if successful, will not

be paid out of Air Force Funds. 

As of Sept 30, 2005, the Air Force was party to 78 contract appeals before the Armed Services Board of

Contract Appeals (ASBCA). The probable amount of loss from contractor claims of 30,191 thousand has been

included in the financial statements. The contractor claims involve unique circumstances, which are considered

by the ASBCA in formulating decisions on the cases. Such claims are funded primarily from Air Force appropriations. A reasonably possible liability is estimated at $308,076 thousand and is not included in the reported

amount. 

Other Disclosures

Intra-governmental Reconciliation for Fiduciary Transactions with the Department of Labor (DoL) and

the Office of Personnel Management (OPM):

With respect to the major fiduciary balances with the DoL and the OPM, the Air Force was able to reconcile with

the OPM and the DoL. During these reconciliations, immaterial differences were identified.

The Air Force is the lessee in ten capital leases. These leases are for military family housing acquired through the

Section 801 Family Housing Program. All leases originating prior to FY 1992 are funded on a fiscal year basis. 

(Amounts in thousands)

1. Future Payments Due

 A. 2006 $ 42,973 $ 0 $ 0 $ 42,973 $ 45,433

 B. 2007 39,878 0 0 39,878 45,152

 C. 2008 38,594 0 0 38,594 42,056

 D. 2009 38,478 0 0 38,478 38,978

 E. 2010 38,478 0 0 38,478 38,502

 F. After 5 Years 128,881 0 0 128,881 115,278

 G. Total Future Lease Payments Due $ 327,282 $ 0 $ 0 $ 327,282 $ 325,399

 H. Less: Imputed Interest Executory Costs 61,738 0 0 61,738 89,761

 I. Net Capital Lease Liability $ 265,544 $ 0 $ 0 $ 265,544 $ 235,638

$ 42,973 $ 188,413

3. Capital Lease Liabilities Not Covered by Budgetary Resources $ 222,570 $ 47,224

2. Capital Lease Liabilities Covered by Budgetary Resources

Other Total Total

Land and

Buildings Equipment

2005 2004

Asset Category

Capital Lease Liability

As of September 30
61

2005 Annual Financial Statement

Six of the current military family housing leases were awarded before FY 1992. In addition, the Air Force has

adjusted their records to account for the termination and conveyance of one lease as of October 30, 2004. 

Fluctuations

The decrease in Capital Lease Liability in the amount of $29,907 thousand is the result of a change in methodology for the use of interest rates that applies to the individual leases. The Air Force previously used the interest

rate provided with each of the eleven capital leases. This interest rate did not accurately provide the cost of

money to compute fair market value. The current interest rate used reflects the appropriate government rate

that best reflects the governments cost of borrowing, using the historical rates from the Federal Reserve. The

new change was coordinated between the Air Force and OSD.

For FY 2004, the amount in Line 2 and Line 3 are reversed. However, the fluctuation in Capital Lease Liability covered by budgetary and not covered by budgetary resources is due to a more accurate reporting of Capital Leases.

Note 16. Commitments and Contingencies

Relevant Information for Comprehension

The Commitments and Contingencies consist of the following reasonably possible liabilities:

Contractual Actions:

Contractor Claims $ 8,386 Thousand

Appeals before Armed Services Board of Contract Appeals 308,076 Thousand

(ASBCA) $ 316,462 Thousand

Claims and Litigation from Civil Law $ 101,756 Thousand

Total $ 418,218 Thousand

Note Reference

See Note Disclosure 1.S., Significant Accounting Policies, for additional discussion on financial reporting requirements and Department of Defense policies governing Contingencies and Other Liabilities.
62

United States Air Force

Note 17. Military Retirement Benefits and Other Employment Related Actuarial

Liabilities

Actuarial Cost Method Used: 

Assumptions: 

Market Value of Investments in Market-based and Marketable Securities:

Military Retirement Pensions—Assumptions:

The portion of the military retirement benefits actuarial liability applicable to the Department of the Air Force is

reported on the financial statements of the Military Retirement Fund.

Military Retirement Health Benefits—Assumptions:

Health benefits are funded centrally at the Department of Defense (DoD) level. As such, the portion of the

health benefits actuarial liability that is applicable to the Air Force is reported only on the DoD Agency-wide

financial statements.

Federal Employees’ Compensation Act (FECA)—Assumptions and Actuarial Cost Method Used:

The Air Force’s actuarial liability for workers’ compensation benefits is developed by the Department of Labor

and provided to the Air Force at the end of each fiscal year. The liability 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 to

predict the ultimate payments. The projected annual benefit payments are then discounted to the present value

using the Office of Management and Budget’s (OMB’s) economic assumptions for 10-year U.S. Treasury notes and

bonds. 

Interest rate assumptions utilized for discounting were as follows:

2005

4.528% in Year 1

5.020% in Year 2 and thereafter

As of September 30 2005 2004

Actuarial 

Present Value 

of Projected 

Plan Benefits 

Assume

Interest

Rate (%) 

(Less: Assets 

Available to 

Pay Benefits) 

Unfunded

Actuarial 

Liability

Unfunded

Actuarial 

Liability

(Amounts in thousands) 

1. Pension and Health Benefits 

 A. Military Retirement Pensions $ 0 $ 0 $ 0 $ 0 

 B. Military Retirement Health Benefits 0 0 0 0 

 C. Medicare-Eligible Retiree Benefits 0 0 0 0 

 D. Total Pension and Health Benefits $ 0 $ 0 $ 0 $ 0

2. Other 

A. FECA $ 1,147,437 $ 0 $ 1,147,437 $ 1,163,442 

 B. Voluntary Separation Incentive 

Programs 0 0 0 0 

 C. DoD Education Benefits Fund 0 0 0 0 

 D. [Enter Program Name} 0 0 0 0 

E. Total Other $ 1,147,437 $ 0 $ 1,147,437 $ 1,163,442

3. Total Military Retirement Benefits and 

Other Employment Related Actuarial 

Liabilities $ 1,147,437 : $ 0 $ 1,147,437 $ 1,163,442
63

2005 Annual Financial Statement

To provide more specifically for the effects of inflation on the liability for future workers’ compensation benefits,

wage inflation factors (cost of living adjustments or COLAs) and medical inflation factors (consumer price index

medical or CPIMs) were applied to the calculation of projected future benefits. The actual rates for these factors

for the charge back year (CBY) 2005 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

2005 2.20% 4.33%

2006 3.33% 4.09%

2007 2.93% 4.01%

2008 2.40% 4.01%

2009+ 2.40% 4.01%

The model’s resulting projections were analyzed to insure that the estimates were reliable. The analysis was

based on three tests: (1) a comparison of the percentage change in the liability amount by agency to the percentage change in the actual payments; (2) a comparison of the ratio of the estimated liability to the actual payment of

the beginning year calculated for the current projection to the liability-payment ratio calculated for the prior projection; and (3) a comparison of the incremental paid losses (the medical component in particular) in CBY 2005

(by injury cohort) to the average pattern observed during the prior three CBYs.

Note Reference

For regulatory discussion on “Military Retirement Benefits and Other Employment Related Actuarial Liabilities,”

see DoD Financial Management Regulation, Volume 6B, Chapter 10, paragraph 1019.

Note 18. Disclosures Related to the Statement of Net Cost

Statement of Net Cost fluctuations

Intra-governmental Earned Revenue decreased $794,599 thousand, or 16 percent, in FY 2005, driven mainly by

an increase in Intra-Air Force transactions. Intra-Air Force transactions are removed from the revenue generated

by all government sources by matching seller-side transactions to buyer-side transactions and eliminating those

transactions which are between two Air Force entities. Total revenue from all governmental sources increased

$667,523 thousand in FY 2005 over FY 2004. Intra-Air Force transactions for the same time period increased

$1,462,122 thousand, leaving a decrease in revenue generated by Air Force transactions with non-Air Force governmental entities of $794,599 thousand. Driving this decrease were reductions in Air Force receipts for classified projects involving Aircraft Procurement, Research, Development, Test & Evaluation (RDT&E), and

Operations & Maintenance(O&M).

Earned Revenue From the Public decreased $844,406 thousand, or 49 percent, in FY 2005. Earned Revenue

From the Public was overstated in FY 2004 and the first three quarters of FY 2005 due to an Air Force

Equipment Management System (AFEMS) problem that incorrectly posted suspended transactions to Other Gains

when they should have been posted to Other Expenses not Requiring Budgetary Resources. The error was discovered in late FY 2005, and $439,364 thousand in FY 2005 Other Gains were reclassified from Other Gains to

Other Expenses not Requiring Budgetary Resources. Corrections to AFEMS posting logic are in process. System

problems in FY 2005 posted negative accounts receivable to intra-governmental revenue. The error was 
64

United States Air Force

discovered and corrections made, and accounts receivable balances with trading partners were reclassified from

public revenue to intra-governmental revenue in FY 2005, yielding a decrease of $36,806 thousand in public revenue. Additional decreases in public revenue can be attributed to actual decreases in revenue from the public for

personnel costs associated with foreign military sales ($63,714 thousand) and non-medical reimbursements from

consumers ($147,780 thousand). 

Note 19. Disclosures Related to the Statement of Changes in Net Position

Relevant Information for Comprehension

Imputed Financing

The amounts remitted to the Office of Personnel Management (OPM) by and for employees covered by the Civil

Service Retirement System (CSRS), the Federal Employees’ Retirement System (FERS), the Federal Employees

Health Benefits Program (FEHB), and the Federal Employees Group Life Insurance Program (FEGLI) do not fully

cover the U.S. Government’s cost to provide these benefits. An imputed cost is recognized as the difference

between the Government’s cost of providing these benefits to the employees and contributions made by and for

them. The OPM provides the cost factors to Defense Finance and Accounting Service (DFAS) for computation of

imputed financing cost. DFAS provides the costs to the Office of the Under Secretary of Defense (Personnel and

Readiness) (OUSD [P&R]) for validation. Approved imputed costs are provided to the reporting components for

inclusion in their financial statements.

The total Civilian Retirement imputed financing of $236,322 thousand is comprised of $207,471 thousand for the

CSRS and $28,851 thousand for the FERS. 

The imputed revenue is equal to the imputed expense recognized in the Statement of Net Cost.

Note Reference

For regulatory disclosure related to the Statement of Changes in Net Position, see Department of Defense

Financial Management Regulation, Volume 6B, Chapter 10, paragraph 1022.

As of September 30

(Amounts in thousands)

1. Prior Period Adjustments Increases (Decreases) to Net Position

 A. Changes in Accounting Standards $ 0 $ 0 $ 0 $ 0

 B. Errors and Omissions in Prior Year Accounting Reports 0 0 0 0

 C. Other Prior Period Adjustments 0 0 0 0

 D. Total Prior Period Adjustments $ 0 $ 0 $ 0 $ 0

2. Imputed Financing

 A. Civilian CSRS/FERS Retirement $ 236,321 $ 0 $ 244,900 $ 0

 B. Civilian Health 427,569 0 393,519 0

 C. Civilian Life Insurance 1,398 0 1,316 0

 D. Judgment Fund 76,751 0 23,872 0

 E. Intra-Entity 0 00 0

 F. Total Imputed Financing $ 742,039 $ 0 $ 663,607 $ 0

Unexpended

Appropriations

Cumulative

Results of 

Unexpended

Appropriations

Cumulative

Results of 

2005 2005 2004 2004
65

2005 Annual Financial Statement

Note 20. Disclosures Related to the Statement of Budgetary Resources

Other Information Related to the Statement of Budgetary Resources

The amount of direct obligations incurred and apportioned under category A is $70,014,669 thousand, category B is

$54,673,386 thousand, and exempt is $1,370 thousand. For reimbursable obligations incurred and apportioned, category

A is $8,543,615 thousand, category B is $3,904,940 thousand, and exempt is $0.

Unexpended Obligations presented in the SBR includes Unexpended Obligations for both direct and reimbursable

funds. The Department of Defense has not fully implemented the U.S. Standard General Ledger (USSGL) in all

operational accounting systems. The statement does not include any amounts for which the Department of

Treasury is willing to accept corrections to canceled appropriation amounts, in accordance with the Statement of

Federal Financial Accounting Standards No.1. 

Adjustments in funds that are temporarily not available pursuant to public law and those that are permanently not

available (included in the Adjustments line on the SBR) are not included in the Spending Authority from Offsetting

Collections and Adjustments line of the SBR or the Spending Authority for Offsetting Collections and Adjustments

line of the Statement of Financing.

Due to accounting system deficiencies, the proper amount of intra-agency eliminations for this statement cannot

be determined. Accounting systems currently do not provide or capture data needed for obligations incurred and

recoveries of prior year obligations in accordance with the Office of Management and Budget Circular A-11,

“Instructions on Budget Execution,” requirements. Although the Defense Finance and Accounting

Service–Denver (DFAS-DE) developed an alternative methodology to calculate these items, the auditors and

DFAS-DE concur that this methodology also distorts the obligation figures. As a result, the amount of distortion

cannot be reliably determined and may or may not be material.

Note 21. Disclosures Related to the Statement of Financing

The objective of the Statement of Financing is to reconcile the difference between budgetary obligations and the

net cost of operations reported. It is presented as combined or combining statements rather than consolidated

statements due to intra-governmental transactions not being eliminated. Due to limitations in the Department of

the Air Force’s financial system, budgetary data are not in agreement with proprietary expenses and assets capitalized. Differences between budgetary and proprietary data constitute a previously identified deficiency.

Note 1A and Note 1F provide additional detail.

Other Information Related to the Statement of Financing

Components Requiring or Generating Resources in Future Period, Other consists of $13,659 thousand in closed

year liabilities. Components Not Requiring or Generating Resources, Other consists of $171,533 thousand in bad

debt expense, $15,178,363 thousand in Other Expenses not Requiring Budgetary Resources, and $(2,914,308)

thousand in Cost Capitalization Offset. 

As of September 30 2005 2004 

(Amounts in thousands)

1. Net Amount of Budgetary Resources Obligated for 

Undelivered Orders at the End of the Period $ 54,587,501 $ 42,905,248 

2. Available Borrowing and Contract Authority at the End 

of the Period 0 0 
66

United States Air Force

The components and amount of liabilities not covered by budgetary resources are disclosed in Note 11, Liabilities

Not Covered by Budgetary Resources.

Intra-entity transactions have not been eliminated because the statements are presented as combined and combining.

Note 22. Disclosures Related to the Statement of Custodial Activity

Not applicable

Note 23. Other Disclosures 

Fluctuations 

In FY 2005, projections made in FY 2004 for future land and building leases were revised. This led to a $24,885

thousand, or 31%, increase in projected building lease costs for FY 2006. This increase was driven by added

lease costs of $10,700 thousand for new leases (375 additional leased units by U.S. Air Force—Europe and 13

additional leased units for trainers and recruiters at Air Education & Training Command in 2005). Increases in

projections for FY 2007, FY 2008, FY 2009 and FY 2010 are also due to 1325 projected new leases of family

housing units for USAF—Europe.

The bulk of the remaining $14,185 thousand FY 2005 increase was caused by anticipated unfavorable changes in

the exchange rate between the U.S. dollar and European currencies. Foreign exchange rate calculations made by

the Department of Defense, Office of the Secretary of Defense for Acquisition, Technology and Logistics—

Housing Directorate account for the bulk of these changes. Working in conjunction with its military counterparts,

the Directorate revised (for the first time since 1988) factors used to calculate foreign currency exchange per

U.S.C. Title X, Sec. 2828: Domestic and Foreign Leases. The new exchange rates were also used to project FY

2006 through FY 2010 lease expenses for Buildings and Land.

The Air Force has no leases in the Equipment Category and does not anticipate any in the future. 

Other leases consist of vehicle leases. The Air Force leases vehicles in three major geographic regions (stateside, Europe

and Southwest Asia), and from two types of lessors, the General Service Administration (GSA) and commercial lessors. 

Overall lease costs for Other leases in FY 2005 rose $30,400 thousand over FY 2004 costs. Two causes drove

this increase: an increase in the number of new vehicle leases and increased fuel costs charged on both new and

existing leases. 

New vehicle leases increased in every region in FY 2005, contributing $14,600 thousand to the total increase in

Other operating lease expenses. Projections made in FY 2005 for future vehicle lease costs include these new

leases. Increases in FY 2005 contributed to increased projected vehicle lease costs for FY 2006, FY 2007, FY 2008

and FY 2009 of $16,203 thousand, $16,527 thousand, $16,857 thousand and $17,123 thousand, respectively. 

As of September 30 2005

(Amounts in thousands) 

1. ENTITY AS LESSEE-Operating Leases

 

Land and Buildings

Future Payments Due

 Equipment Other Total

 Fiscal Year

2006 $ 80,301 $ 0 $ 133,321 $ 213,622

2007 76,877 0 135,987 212,864

2008 100,960 0 138,716 239,676

2009 116,387 0 141,391 257,778

2010 117,543 0 144,319 261,862

After 5 Years 126,286 0 147,197 273,483

Total Future Lease Payments Due $ 618,354 $ 0 $ 840,931 $ 1,459,285
67

2005 Annual Financial Statement

The General Services Administration (GSA) implemented a fuel surcharge of 1.5 cents per mile traveled on its

leased vehicles in FY 2005; Defense Energy Support Center (DESC) has likewise raised fuel costs per gallon by

approximately 25% worldwide. Increased fuel costs added $1,400 thousand to total Other lease costs in FY

2005. These fuel expense increases are also factored into projected leases costs for subsequent years. 

In addition, factors unique to each geographic region added to actual costs in FY 2005, and to the projected costs

in subsequent years for Other leases. The causes of rising vehicle leases by geographic region are: 

Stateside, the Air Force is moving towards GSA leased vehicles within light, medium and heavy duty class vehicles

at stateside bases. Moving towards GSA leased vehicles enables the Air Force to obtain alternative fuel vehicles

that satisfy petroleum conservation requirements mandated by the Energy Policy and Conservation Act (EPACT)

of 1992/2005 and Executive Order 13149. Air Force is now leasing 1,802 more GSA vehicles over the same

period last year. These additional leases contributed $7,400 thousand to the overall increase in FY 2005.

The number of commercial vehicle leases in Europe has increased as well. New European leases contributed

$3,188 thousand to the overall increase.

The Air Force realized an overall increase of $4,000 thousand in commercial vehicle leases in SWA in FY 2005.

Commercial leases for comparable vehicles can cost as much as 10 times more in SWA than stateside. Vehicle leases

in SWA therefore account for a disproportionate amount (nearly one third) of Air Force Other lease costs worldwide. 

Fluctuations in commercial lease cost data for Other leases also reflect cumbersome data collection at deployment locations in SWA. Late in FY 2005, units at deployed locations began implementing uniform procedures

established by the HQ Air Combat Command and Transportation Division. As a result, Vehicle Maintenance

Managers now receive improved training in leased vehicle procurement, accountability and standardized data

reporting prior to deployment to SWA. This additional training is helping to reduce data reporting errors, and

summary statements are now provided whenever significant fluctuations occur. 
68

United States Air Force

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69

2005 Annual Financial Statement

General Fund

Consolidating and

Combining Statements
70

United States Air Force

Air Force 

Active

Air Force 

Reserve

Air National 

Guard

 ASSETS (Note 2)

 Intra-governmental:

 Fund Balance with Treasury (Note 3)

 Entity $ 59,428,317 $ 1,051,111 $ 1,793,539

 Non-Entity Seized Iraqi Cash 00 0

 Non-Entity-Other 77,275 0 0

 Investments (Note 4) 717 0 0

 Accounts Receivable (Note 5) 1,206,890 47,391 175,650

 Other Assets (Note 6) 31 0 0

 Total Intra-governmental Assets $ 60,713,230 $ 1,098,502 $ 1,969,189

 Cash and Other Monetary Assets (Note 7) $ 151,844 $ 0 $ 0

 Accounts Receivable (Note 5) 998,501 8,718 21,091

 Loans Receivable (Note 8) 00 0

 Inventory and Related Property (Note 9) 44,108,240 442,477 2,618,296

 General Property, Plant and Equipment (Note 10) 119,735,929 958,811 2,951,328

 Investments (Note 4) 00 0

 Other Assets (Note 6) 11,154,741 5,717 18,583

 TOTAL ASSETS $ 236,862,485 $ 2,514,225 $ 7,578,487

 LIABILITIES (Note 11)

 Intra-governmental:

 Accounts Payable (Note 12) $ 703,276 $ 31,505 $ 74,770

 Debt (Note 13) 00 0

 Other Liabilities (Note 15 & Note 16) 2,080,613 2,182 938

 Total Intra-governmental Liabilities $ 2,783,889 $ 33,687 $ 75,708

 Accounts Payable (Note 12) $ 5,620,700 $ 72,861 $ 122,366

 Military Retirement Benefits and Other Employment-Related 823,713 120,179 203,545

 Actuarial Liabilities (Note 17)

 Environmental Liabilities (Note 14) 5,781,322 0 0

 Loan Guarantee Liability (Note 8) 00 0

 Other Liabilities (Note 15 and Note 16) 3,896,185 119,668 163,651

 TOTAL LIABILITIES $ 18,905,809 $ 346,395 $ 565,270

 NET POSITION

 Unexpended Appropriations $ 61,864,263 $ 907,247 $ 1,677,255

 Cumulative Results of Operations 156,092,413 1,260,583 5,335,962

 TOTAL NET POSITION $ 217,956,676 $ 2,167,830 $ 7,013,217

 TOTAL LIABILITIES AND NET POSITION $ 236,862,485 $ 2,514,225 $ 7,578,487

Consolidating Balance Sheet—General Fund

As of September 30, 2005 and 2004 ($ in Thousands)

The accompanying notes are an integral part of the financial statements.
71

2005 Annual Financial Statement

Component 

Level

Combined 

Total Eliminations

2005

Consolidated

2004

Consolidated

$ 0 $ 62,272,967 $ 0 $ 62,272,967 $ 60,547,709

00 0 0 0

0 77,275 0 77,275 53,290

0 717 0 717 711

-776,342 653,589 0 653,589 689,871

427,958 427,989 0 427,989 443,939

$ -348,384 $ 63,432,537 $ 0 $ 63,432,537 $ 61,735,520

$ 0 $ 151,844 $ 0 $ 151,844 $ 311,323

0 1,028,310 0 1,028,310 978,883

00 0 0 0

0 47,169,013 0 47,169,013 51,340,248

0 123,646,068 0 123,646,068 117,954,430

00 0 0 0

0 11,179,041 0 11,179,041 10,809,588

$ -348,384 $ 246,606,813 $ 0 $ 246,606,813 $ 243,129,992

$ 842,353 $ 1,651,904 $ 0 $ 1,651,904 $ 1,900,411

00 0 0 0

-493,866 1,589,867 0 1,589,867 1,726,480

$ 348,487 $ 3,241,771 $ 0 $ 3,241,771 $ 3,626,891

$ 35,257 $ 5,851,184 $ 0 $ 5,851,184 $ 7,707,163

0 1,147,437 0 1,147,437 1,163,442

0 5,781,322 0 5,781,322 7,387,187

00 0 0 0

0 4,179,504 0 4,179,504 4,602,505

$ 383,744 $ 20,201,218 $ 0 $ 20,201,218 $ 24,487,188

$ -732,128 $ 63,716,637 $ 0 $ 63,716,637 $ 49,660,670

0 162,688,958 0 162,688,958 168,982,134

$ -732,128 $ 226,405,595 $ 0 $ 226,405,595 $ 218,642,804

$ -348,384 $ 246,606,813 $ 0 $ 246,606,813 $ 243,129,992
72

United States Air Force

Air Force 

Active

Air Force 

Reserve

Air National 

Guard

Program Costs

A. Military Personnel 0

Intra-governmental Gross Costs $ -2,370 $ 55,752 $ 295,858

(Less: Intra-governmental Earned Revenue) -275,622 -4,927 -18,871

Intra-governmental Net Costs $ -277,992 $ 50,825 $ 276,987

Gross Costs With the Public 26,533,041 1,328,708 2,228,638

(Less: Earned Revenue From the Public) -102,980 12 -9,944

Net Costs With the Public $ 26,430,061 $ 1,328,720 $ 2,218,694

Total Net Cost $ 26,152,069 $ 1,379,545 $ 2,495,681

B. Operation and Maintenance 0

Intra-governmental Gross Costs $ 16,530,530 $ 742,927 $ 1,947,990

(Less: Intra-governmental Earned Revenue) -3,512,031 -296,275 -588,762

Intra-governmental Net Costs $ 13,018,499 $ 446,652 $ 1,359,228

Gross Costs With the Public 23,951,923 2,251,507 5,706,030

(Less: Earned Revenue From the Public) -502,991 -1,800 -77,534

Net Costs With the Public $ 23,448,932 $ 2,249,707 $ 5,628,496

Total Net Cost $ 36,467,431 $ 2,696,359 $ 6,987,724

C. Procurement 0

Intra-governmental Gross Costs $ 17,606,563 $ 0 $ 0

(Less: Intra-governmental Earned Revenue) -316,706 0 0

Intra-governmental Net Costs $ 17,289,857 $ 0 $ 0

Gross Costs With the Public 12,496,105 0 0

(Less: Earned Revenue From the Public) -92,344 0 0

Net Costs With the Public $ 12,403,761 $ 0 $ 0

Total Net Cost $ 29,693,618 $ 0 $ 0

D. Research, Development, Test & Evaluation 0

Intra-governmental Gross Costs $ 9,218,480 $ 0 $ 0

(Less: Intra-governmental Earned Revenue) -3,174,483 0 0

Intra-governmental Net Costs $ 6,043,997 $ 0 $ 0

Gross Costs With the Public 14,262,616 0 0

(Less: Earned Revenue From the Public) -160,712 0 0

Net Costs With the Public $ 14,101,904 $ 0 $ 0

Total Net Cost $ 20,145,901 $ 0 $ 0

E. Military Construction/Family Housing 0

Intra-governmental Gross Costs $ 272,226 $ 163 $ -7,524

(Less: Intra-governmental Earned Revenue) 1,168 0 0

Intra-governmental Net Costs $ 273,394 $ 163 $ -7,524

Gross Costs With the Public -276,055 -10,215 218,070

(Less: Earned Revenue From the Public) 00 0

Net Costs With the Public $ -276,055 $ -10,215 $ 218,070

Total Net Cost $ -2,661 $ -10,052 $ 210,546

F. Other 0

Intra-governmental Gross Costs $ 13,069 $ 0 $ 0

(Less: Intra-governmental Earned Revenue) 00 0

Intra-governmental Net Costs $ 13,069 $ 0 $ 0

Gross Costs With the Public -393,961 0 0

(Less: Earned Revenue From the Public) -12,817 0 0

Net Costs With the Public $ -406,778 $ 0 $ 0

Total Net Cost $ -393,709 $ 0 $ 0

G. Total Program Costs 0

Intra-governmental Gross Costs $ 43,638,498 $ 798,842 $ 2,236,324

(Less: Intra-governmental Earned Revenue) -7,277,674 -301,202 -607,633

Intra-governmental Net Costs $ 36,360,824 $ 497,640 $ 1,628,691

Gross Costs With the Public 76,573,669 3,570,000 8,152,738

(Less: Earned Revenue From the Public) -871,844 -1,788 -87,478

Net Costs With the Public $ 75,701,825 $ 3,568,212 $ 8,065,260

Total Net Cost $ 112,062,649 $ 4,065,852 $ 9,693,951

Cost Not Assigned to Programs 00 0

(Less:Earned Revenue Not Attributable to Programs) 00 0

Net Cost of Operations $ 112,062,649 $ 4,065,852 $ 9,693,951

Consolidating Statement of Net Cost—General Fund

For the years ended September 30, 2005 and 2004 ($ in Thousands)

The accompanying notes are an integral part of the financial statements.
73

2005 Annual Financial Statement

Component

Level

Combined

Total Eliminations

2005

Consolidated

2004

Consolidated

$ 349,240 $ 0 $ 349,240 $ 319,206

-299,420 0 -299,420 -315,349

$ 49,820 $ 0 $ 49,820 $ 3,857

30,090,387 0 30,090,387 29,708,361

-112,912 0 -112,912 -106,551

$ 29,977,475 $ 0 $ 29,977,475 $ 29,601,810

$ 30,027,295 $ 0 $ 30,027,295 $ 29,605,667

$ 19,221,447 $ 0 $ 19,221,447 $ 16,886,951

-4,397,068 0 -4,397,068 -4,385,376

$ 14,824,379 $ 0 $ 14,824,379 $ 12,501,575

31,909,460 0 31,909,460 28,465,443

-582,325 0 -582,325 -644,464

$ 31,327,135 $ 0 $ 31,327,135 $ 27,820,979

$ 46,151,514 $ 0 $ 46,151,514 $ 40,322,554

$ 17,606,563 $ 0 $ 17,606,563 $ 652,495

-316,706 0 -316,706 -265,408

$ 17,289,857 $ 0 $ 17,289,857 $ 387,087

12,496,105 0 12,496,105 27,231,988

-92,344 0 -92,344 -401,470

$ 12,403,761 $ 0 $ 12,403,761 $ 26,830,518

$ 29,693,618 $ 0 $ 29,693,618 $ 27,217,605

$ 9,218,480 $ 0 $ 9,218,480 $ 791,689

-3,174,483 0 -3,174,483 -2,553,633

$ 6,043,997 $ 0 $ 6,043,997 $ -1,761,944

14,262,616 0 14,262,616 20,987,117

-160,712 0 -160,712 -174,458

$ 14,101,904 $ 0 $ 14,101,904 $ 20,812,659

$ 20,145,901 $ 0 $ 20,145,901 $ 19,050,715

$ 264,865 $ 0 $ 264,865 $ 200,852

1,168 0 1,168 781

$ 266,033 $ 0 $ 266,033 $ 201,633

-68,200 0 -68,200 585,403

0000

$ -68,200 $ 0 $ -68,200 $ 585,403

$ 197,833 $ 0 $ 197,833 $ 787,036

$ -16,827,921 $ -16,814,852 $ 0 $ -16,814,852 $ 10,058,671

3,978,861 3,978,861 0 3,978,861 2,516,739

$ -12,849,060 $ -12,835,991 $ 0 $ -12,835,991 $ 12,575,410

11,239,824 10,845,863 0 10,845,863 -10,472,324

81,181 68,364 0 68,364 -397,393

$ 11,321,005 $ 10,914,227 $ 0 $ 10,914,227 $ -10,869,717

$ -1,528,055 $ -1,921,764 $ 0 $ -1,921,764 $ 1,705,693

$ -16,827,921 $ 29,845,743 $ 0 $ 29,845,743 $ 28,909,864

3,978,861 -4,207,648 0 -4,207,648 -5,002,246

$ -12,849,060 $ 25,638,095 $ 0 $ 25,638,095 $ 23,907,618

11,239,824 99,536,231 0 99,536,231 96,505,988

81,181 -879,929 0 -879,929 -1,724,336

$ 11,321,005 $ 98,656,302 $ 0 $ 98,656,302 $ 94,781,652

$ -1,528,055 $ 124,294,397 $ 0 $ 124,294,397 $ 118,689,270

0 0000

0 0000

$ -1,528,055 $ 124,294,397 $ 0 $ 124,294,397 $ 118,689,270

The accompanying notes are an integral part of the financial statements.
74

United States Air Force

Air Force Active Air Force 

Reserve

Air National 

Guard

CUMULATIVE RESULTS OF OPERATIONS

Beginning Balances $ 159,814,485 $ 1,604,932 $ 7,562,717

Adjustments (+/-)

Changes in Accounting Principles (+/-) 0 00

Correction of Errors (+/-) 0 00

Beginning Balances, as adjusted 159,814,485 1,604,932 7,562,717

Budgetary Financing Sources:

Appropriations received 0 00

Appropriations transferred-in/out (+/-) 0 00

Other adjustments (rescissions, etc.) (+/-) 0 00

Appropriations used 105,465,154 3,699,577 7,489,194

Nonexchange revenue 920 0 0

Donations and forfeitures of cash and cash equivalents 1,860 0 0

Transfers-in/out without reimbursement (+/-) 967,200 0 0

Other budgetary financing sources (+/-) 0 00

Other Financing Sources:

Donations and forfeitures of property 0 00

Transfers-in/out without reimbursement (+/-) -181,453 21,925 -21,997

Imputed financing from costs absorbed by others 742,039 0 0

Other (+/-) 0 00

Total Financing Sources 106,995,720 3,721,502 7,467,197

Net Cost of Operations (+/-) 112,062,649 4,065,852 9,693,951

Net Change -5,066,929 -344,350 -2,226,754

Ending Balance $ 154,747,556 $ 1,260,582 $ 5,335,963

UNEXPENDED APPROPRIATIONS

 Beginning Balances $ 49,486,289 $ 803,393 $ 1,787,049

 Prior period adjustments (+/-)

 Changes in Accounting Principles (+/-) 0 00

 Correction of Errors (+/-) 0 00

 Beginning Balances, as adjusted 49,486,289 803,393 1,787,049

 Budgetary Financing Sources:

 Appropriations received 117,808,827 3,821,047 7,258,314

 Appropriations transferred-in/out (+/-) 1,478,871 11,026 141,342

 Other adjustments (rescissions, etc) (+/-) -1,444,570 -28,642 -20,256

 Appropriations used -105,465,154 -3,699,577 -7,489,194

 Nonexchange revenue 0 00

 Donations and forfeitures of cash and cash equivalents 0 00

 Transfers-in/out without reimbursement (+/-) 0 00

 Other budgetary financing sources (+/-) 0 00

 Other Financing Sources:

 Donations and forfeitures of property 0 00

 Transfers-in/out without reimbursement (+/-) 0 00

 Imputed financing from costs absorbed by others 0 00

 Other (+/-) 0 00

 Total Financing Sources 12,377,974 103,854 -109,794

 Net Cost of Operations (+/-)

 Net Change 12,377,974 103,854 -109,794

 Ending Balance $ 61,864,263 $ 907,247 $ 1,677,255

Consolidating Statement of Changes in Net Position—General Fund

For the years ended September 30, 2005 and 2004 ($ in Thousands)

The accompanying notes are an integral part of the financial statements..
75

2005 Annual Financial Statement

Component

Level

Combined

Total Eliminations 2005Consolidated

2004

Consolidated

$ 0 $ 168,982,134 $ 0 $ 168,982,134 $ 161,327,684

00 0 0 0

00 0 0 0

0 168,982,134 0 168,982,134 161,327,684

00 0 0 0

00 0 0 0

00 0 0 0

-1,683,933 114,969,992 0 114,969,992 124,686,986

0 920 0 920 8,827

0 1,860 0 1,860 2,171

0 967,200 0 967,200 671,000

00 0 0 0

00 0 0 0

155,877 -25,648 0 -25,648 311,130

0 742,039 0 742,039 663,607

00 0 0 0

-1,528,056 116,656,363 0 116,656,363 126,343,721

-1,528,055 124,294,397 0 124,294,397 118,689,270

-1 -7,638,034 0 -7,638,034 7,654,451

$ -1 $ 161,344,100 $ 0 $ 161,344,100 $ 168,982,135

$ -2,416,061 $ 49,660,670 $ 0 $ 49,660,670 $ 50,742,317

00 0 0 0

00 0 0 0

-2,416,061 49,660,670 0 49,660,670 50,742,317

0 128,888,188 0 128,888,188 125,480,665

0 1,631,239 0 1,631,239 -454,456

0 -1,493,468 0 -1,493,468 -1,420,870

1,683,933 -114,969,992 0 -114,969,992 -124,686,986

00 0 0 0

00 0 0 0

00 0 0 0

00 0 0 0

00 0 0 0

00 0 0 0

00 0 0 0

00 0 0 0

1,683,933 14,055,967 0 14,055,967 -1,081,647

1,683,933 14,055,967 0 14,055,967 -1,081,647

$ -732,128 $ 63,716,637 $ 0 $ 63,716,637 $ 49,660,670

The accompanying notes are an integral part of the financial statements.
76

United States Air Force

Air Force 

Active

Air Force 

Reserve

BUDGETARY FINANCING ACCOUNTS

BUDGETARY RESOURCES

 Budget Authority:

 Appropriations received $ 117,811,607 $ 3,821,047

 Borrowing authority 0 0

 Contract authority 0 0

 Net transfers (+/-) 409,785 31,026

 Other 0 0

 Unobligated balance:

 Beginning of period 8,586,693 123,021

 Net transfers, actual (+/-) 2,036,286 -20,000

 Anticipated Transfers Balances 0 0

 Spending authority from offsetting collections:

 Earned 0 0

 Collected 7,863,996 367,750

 Receivable from Federal sources 207,029 -64,747

 Change in unfilled customer orders 0 0

 Advance received 349,671 0

 Without advance from Federal sources 386,137 1,881

 Anticipated for the rest of year, without advances 0 0

 Previously unavailable 0 0

 Transfers for trust funds 0 0

 Subtotal 8,806,833 304,884

 Recoveries of prior year obligations 1,029,817 86,331

 Temporarily not available pursuant to Public Law 0 0

 Permanently not available -1,444,570 -28,642

 Total Budgetary Resources $ 137,236,451 $ 4,317,667

STATUS OF BUDGETARY RESOURCES

 Obligations incurred:

 Direct $ 113,497,488 $ 3,787,130

 Reimbursable 11,423,914 306,731

 Subtotal 124,921,402 4,093,861

 Unobligated balance: 4,093,861

 Apportioned 11,526,850 79,393

 Exempt from apportionment 3,218 0

 Other available 1 0

 Unobligated Balances Not Available 784,980 144,413

 Total, Status of Budgetary Resources $ 137,236,451 $ 4,317,667

Relationship of Obligations to Outlays:

 Obligated Balance, Net - beginning of period $ 49,104,743 $ 786,248

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

 Obligated Balance, Net - end of period:

 Accounts receivable -1,379,402 -50,176

 Unfilled customer order from Federal sources -1,213,193 -1,932

 Undelivered orders 42,425,919 679,671

 Accounts payable 7,018,470 199,742

 Outlays:

 Disbursements 125,551,368 4,029,339

 Collections -8,213,667 -367,750

 Subtotal 117,337,701 3,661,589

 Less: Offsetting receipts -123,202 0

 Net Outlays $ 117,214,499 $ 3,661,589

Combining Statement of Budgetary Resources—General Fund

For the years ended September 30, 2005 and 2004 ($ in Thousands)

The accompanying notes are an integral part of the financial statements.
77

2005 Annual Financial Statement

Air National 

Guard

Component 

Level 2005 Combined 2004Combined

$ 7,258,314 $ 0 $ 128,890,968 $ 125,483,786

0 0 00

0 0 00

197,342 0 638,153 -29,394

0 0 00

333,650 0 9,043,364 9,189,946

-56,000 0 1,960,286 245,938

0 0 00

0 0 00

691,786 0 8,923,532 8,117,605

666 0 142,948 317,565

0 0 00

0 0 349,671 188,072

525 0 388,543 -109,981

0 0 00

0 0 00

0 0 00

692,977 0 9,804,694 8,513,261

184,043 0 1,300,191 1,431,079

0 0 00

-20,256 0 -1,493,468 -1,437,653

$ 8,590,070 $ 0 $ 150,144,188 $ 143,396,963

$ 7,404,806 $ 0 $ 124,689,424 $ 129,913,273

717,910 0 12,448,555 4,447,386

8,122,716 0 137,137,979 134,360,659

150,638 0 11,756,881 8,072,566

0 0 3,218 2,709

0 0 1 -1

316,716 0 1,246,109 961,030

$ 8,590,070 $ 0 $ 150,144,188 $ 143,396,963

$ 1,613,142 $ 0 $ 51,504,133 $ 50,541,583

0 0 00

-189,982 0 -1,619,560 -1,476,612

-812 0 -1,215,937 -827,393

1,192,089 -1,653,952 42,643,727 42,309,792

324,889 1,653,952 9,197,053 11,505,411

8,224,440 0 137,805,147 131,752,381

-691,786 0 -9,273,203 -8,305,678

7,532,654 0 128,531,944 123,446,703

0 0 -123,202 -115,376

$ 7,532,654 $ 0 $ 128,408,742 $ 123,331,327

The accompanying notes are an integral part of the financial statements.
78

United States Air Force

Air Force 

Active

Air Force 

Reserve

Resources Used to Finance Activities:

Budgetary Resources Obligated

Obligations incurred $ 124,921,402 $

$ $

4,093,861

Less: Spending authority from offsetting collections -9,836,649 -391,215

and recoveries (-)

Obligations net of offsetting collections and recoveries 115,084,753 3,702,646

Less: Offsetting receipts (-) -123,202 0

Net obligations 114,961,551 3,702,646

Other Resources

Donations and forfeitures of property 0 0

Transfers in/out without reimbursement (+/-) -181,453 21,925

Imputed financing from costs absorbed by others 742,039 0

Other (+/-) 0 0

Net other resources used to finance activities 560,586 21,925

Total resources used to finance activities 115,522,137 3,724,571

Resources Used to Finance Items not Part

of the Net Cost of Operations

Change in budgetary resources obligated for goods,

services and benefits ordered but not yet provided

Undelivered Orders (-) -10,235,882 -4,938

Unfilled Customer Orders 735,808 1,881

Resources that fund expenses recognized in prior periods -594,728 -8,661

Budgetary offsetting collections and receipts that 123,202 0

do not affect net cost of operations

Resources that finance the acquisition of assets -17,776,704 -45,012

Other resources or adjustments to net obligated resources

that do not affect net cost of operations

Less: Trust or Special Fund Receipts Related to Exchange 00

in the Entity's Budget (-)

Other (+/-) 181,453 -21,925

Total resources used to finance items not -27,566,851 -78,655

part of the net cost of operations

Total resources used to finance the net cost of operations 87,955,286 3,645,916

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:

Increase in annual leave liability 80,366 0

Increase in environmental and disposal liability 0 0

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

Increase in exchange revenue receivable from the the public (-) 0 0

Other (+/-) 13,612 29

Total components of Net Cost of Operations that 93,978 29

will require or generate resources in future periods

Components not Requiring or Generating Resources:

Depreciation and amortization 11,442,702 45,136

Revaluation of assets or liabilities (+/-) 621,661 4,631

Other (+/-)

Trust Fund Exchange Revenue 0 0

Cost of Goods Sold 0 0

Operating Material & Supplies Used 1,949,358 9,863

Other 9,999,663 360,276

Total components of Net Cost of Operations that 24,013,384 419,906

will not require or generate resources

Total components of net cost of operations that 24,107,362 419,935

will not require or generate resources in the current period

Net Cost of Operations 112,062,648 4,065,851

Combining Statement of Financing—General Fund

For the years ended September 30, 2005 and 2004 ($ in Thousands)

The accompanying notes are an integral part of the financial statements.
79

2005 Annual Financial Statement

Component

Level

$

$

$ 0

0

0

0

0

0

155,877

0

0

155,877

155,877

-1,683,933

0

0

0

0

0

-155,877

-1,839,810

-1,683,933

0

0

0

0

0

0

0

155,877

0

0

0

0

155,877

155,877

$$ $ -1,528,056

The accompanying notes are an integral part of the financial statements.
80

United States Air Force

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General Fund

Required Supplementary

Stewardship Information

81

2005 Annual Financial Statement
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82

United States Air Force
NATIONAL DEFENSE PROPERTY, PLANT AND EQUIPMENT

The Federal Accounting Standards Advisory Board (FASAB) revised the Statement of Federal Financial

Accounting Standards No. 6 to require the capitalization and Depreciation of military equipment (formerly

National Defense Property, Plant and Equipment/ND PP&E) for fiscal years (FY) 2004 and beyond and encouraged early implementation. 

Narrative Statement:

1. Museums 

The Air Force Museum, located at Wright-Patterson Air Force Base, Ohio, houses the main collection of historical artifacts that are registered as historical property in the USAF Museum System. The other 17 Air Force museums are considered Air Force Field Museums or Heritage Centers, which also contain items of historical interest;

some however, are specific to the general locality. The 19th museum belonging to the Air National Guard, in

good condition with significant architectural characteristic, was erroneously not reported in FY 04. 

All museums and Heritage Centers are reported in acceptable condition. 

2. Monuments and Memorials

The memorials and monuments reported above, except for 28, are all located at the Air Force Academy in the

Air Gardens and Honor Court. Most of these monuments and memorials honor specific individuals or cadet

wings for various accomplishments. The remaining 28 Air Force memorials, all with costs that exceed $100,000,

are located on various Air Force bases throughout the United States. All are reported in acceptable condition.

There are 120 memorials and monuments belonging to the Air National Guard, which were erroneously omitted from the FY04 Report, all in good condition.

The Air Force made an adjustment to the beginning balance of 91 monuments and memorials do to an oversight

of not including the Air National Guard in previous reporting periods.

3. Cemeteries 

The Air Force has administrative and curatorial responsibilities for 39 cemeteries on its Active Duty bases. The

cemeteries are maintained by the bases and are in good condition. 

4. Archeological Sites

As of 30 September 2005, the Air Force has (as reported in the FY04 Annual Report to Congress on Federal

Archaeological Activity, submitted 30 March 05) 1,685 archeological sites listed on or eligible for the National

Measurement As Of As Of

Quantities 10/1/2004 9/30/2005

 Museums Each 19 0 0 19

 Monuments & Memorials Each 244 0 0 244

 Cemeteries Sites 39 0 0 39

 Archeological Sites Sites 1,685 168 168 1,685

 Buildings & Structures Each 5,968 193 8 6,153

 Major Collections Each 4 0 0 4

HERITAGE ASSETS

Additions Deletions

For Fiscal Year Ended September 2005

83

2005 Annual Financial Statement
84

United States Air Force

Register. The Air Force has 9,292 recorded but unevaluated (AKA “potentially eligible”) archeological sites, and

4,327 sites, considered not eligible for the Register. A total of 15,304 archeological sites have been reported so

far from Air Force lands. Eligible site and unevaluated sites (both herein considered heritage assets) are maintained in an acceptable condition.

Changes in site numbers from those reported last year are the result of several factors: (1) Each year the Air

Force performs additional surveys of un-inventoried lands, in accordance with Sections 106 and 110 of the

National Historical Reservation Act. The average number of acres surveyed each year is around 100,000. These

surveys yield about 600 newly reported archaeological sites per year. (2) Relatively few (or sometimes none) of

these newly reported sites are evaluated for eligibility during their discovery year. The Air Force programs evaluations of a significant portion of the backlog of “potentially eligible” sites every year, so the number of unevaluated sites diminishes, and the number of eligible and ineligible sites increase. (3) By coincidence, the number of

sites considered eligible increased by the same amount of eligible sites removed from the Air Force eligible inventory by data recovery, development, re-valuation, and closure of transfer. For that reason, the number of eligible

sites listed in the FY 05 report is the same: 1685. 

5. Buildings and Structures

As of 30 September 2005 (as reported in the FY04 Annual Report to Congress on Federal Archaeological

Activities, submitted 30 March 2005), the Air Force considers 6,153 buildings and structures as heritage assets

(listed, eligible, and potentially eligible buildings/structures). Most are considered Multi-use Heritage Assets, and

as such, are reported as general Property, Plant, and Equipment on the balance sheet. These buildings and structures are maintained by each base civil engineering group and are considered to be in good condition. A discrepancy was discovered in the FY 04 RSSI data reported: Instead of the 4,074 reported buildings and structures last

year, the actual total should have been 5,968. The error was due to a categorical omission of data set. So the

increase in historical buildings and structures between FY 04 and FY 05 is only 193 (with 8 buildings reported as

disposed). Most of the 193 newly counted buildings and structures are those turning 50 years of age in FY 05

that have not yet been fully evaluated, but are considered “potentially eligible” for the national Register. 

6. Major Collections

The Air Force has four significant or major collections consisting of: (a) the Air Force Art Collection, and (b)

three collections, at the Air Force Academy containing historical items and memorabilia as well as distinctive

works of art. The curators for all major collections reported the contents to be in good condition. They further

added that almost all of the materials are protected in an environment suitable for long-term storage. The overall condition of the collections in the museums is good; items are displayed and protected in accordance with the

standards of Air Force Instruction 84-103, USAF Museum System.

(a) (d) (e)

Land Use Deletions As of 9/30/2004

1. Mission 0 7,728

2. Parks & Historic Sites 0 0

Totals 0 7,728

 STEWARDSHIP LAND

 For Fiscal Year Ended September 2005

 (Acres in Thousands)

(c)

Additions

(b)

As of 10/1/2004

7,728 0

7,728 0

0 0
The Air Force has approximately 7,728,000 acres of mission-essential Stewardship land under their administration. Lands purchased by the Air Force with the intent to construct buildings or facilities are considered general

PP&E and are reported on the balance sheet. All stewardship lands, as reported, are in acceptable condition,

based on designated use.

Narrative Statement:

The Air National Guard investments in non-federal 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 Federal Accounting Standards requirements. 

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 practicability of proposed solutions and 

Categories FY 2001 FY 2002 FY 2003 FY 2004 FY 2005

1. Basic Research $207 $205 $220 $209 $287 

2. Applied Research 582 658 735 805 805

3. Development

 Advanced Technology Development 560 559 545 681 966

 Advanced Component Development and Prototypes 5,209 4,640 4,385 1,426 1,897

 System Development and Demonstration 3,358 3,509 4,341 4,390 4,179

 Research, Development, Test and Evaluation

 Management Support 777 824 880 890 824

 Operational Systems Development 6,872 7,103 7,571 10,361 10,083

Totals $17,565 $17,498 $18,677 $18,762 $19,041 

INVESTMENTS IN RESEARCH AND DEVELOPMENT

Yearly Investment in Research and Development

For Fiscal Years 2001 through 2005

($ in Millions)

Categories FY 2001 FY 2002 FY 2003 FY 2004 FY 2005

Funded Assets:

 National Defense Mission Related $20.20 $21.30 $11.31 $18.30 $8.30 

 Total $20.20 $21.30 $11.31 $18.30 $8.30 

NONFEDERAL PHYSICAL PROPERTY

Yearly Investment in State and Local Governments

For Fiscal Years 2001 through 2005

($ in Millions )

85

2005 Annual Financial Statement
86

United States Air Force

determining their parameters. Major outputs are scientific studies, investigations, and research papers, hardware

components, software codes, and limited construction of, or part of, a weapon system to include nonsystem specific development efforts.

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

five stages defined below:

1. Advanced Technology Development is the systematic use of the knowledge or understanding gained from

research directed toward proof of technological feasibility and assessment of operational and producibility

rather than the development of hardware for service use. Employs demonstration activities intended to

prove or test a technology or method.

2. Advanced Component Development and Prototypes evaluates integrated technologies in as realistic an operating environment as possible to assess the performance or cost reduction potential of advanced technology.

Programs in this phase are generally system specific. Major outputs of Advanced Component Development

and Prototypes are hardware and software components, or complete weapon systems, ready for operational

and developmental testing and field use. 

3. System Development and Demonstration concludes the program or project and prepares it for production.

It consists primarily of preproduction efforts, such as logistics and repair studies. Major outputs are weapon

systems finalized for complete operational and developmental testing.

4. RDT&E Management Support is support for installations and operations for general research and development use. This category includes costs associated with test ranges, military construction maintenance support for laboratories, operations and maintenance of test aircraft and ships, and studies and analysis 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—The Air Force supported basic researchers have developed a method to produce gallium

nitride material for use in improved semiconductor devices. This advance could enable improved electronics that

can perform in harsh environments. Possible applications include: remote-sensing platforms; displays and indicators based on light-emitting diodes; laser diodes for optical data storage; and sensor and detector surveillance

systems, such as the solar-blind shield and biological agent detectors.

Air Force supported basic researchers have discovered a new method of improving digital signal processing

through holography. These holographic systems are able to record fast events that occur on the nanosecond

timescale. This advance could lead to significant improvements in our capability to track and identify enemy aircraft and missile threats.

Applied Research—The Air Force’s Applied Research program is developing technologies to support the air

and space force of the future. Development of electronic components and subsystems for use in shallow-depth

phased-array radar antennas for persistent intelligence, surveillance, and reconnaissance and time-sensitive strike

capabilities. Such phased-array antennas, at 1/5 the cost of conventional antennas, could have direct application

to advanced unmanned aerial vehicles and fighter aircraft. Wireless Intrusion Detection System sensors for

information assurance were designed, developed, and field-tested. This program opens door for secure operation of military wireless networks based on this widely available and cost-effective technology. 
Advanced Technology Development—The Air Force’s Advanced Technology Development program demonstrates, in a realistic operational environment, integrated sets of technology to prove military worth and utility.

The first example was the AF and the Defense Advanced Research Projects Agency conducted a successful jettison release of a weapon from a Boeing X-45A Joint Unmanned Combat Air System (J-UCAS) over the Precision

Impact Range Area (PIRA) at Edwards Air Force Base, CA. It is an aviation-first for a UAV to release from an

internal weapons bay. Secondly, AFRL also demonstrated a 330 Gigahertz detector that operates at frequencies

billions of times faster than the blink of an eye. This technology will be used to produce compact solid-state circuits operating at Terahertz frequencies. Likely technology application would be to enable a new generation of

sensors to enhance homeland security. Completed the final transition of the very successful Laser Infrared

Countermeasures Fly-out Experiment demonstration with a final risk reduction live fire missile test at Tonopah

National Test Range, Nevada. This test showed conclusively that Closed Loop Infrared Countermeasures jamming techniques provide a robust capability against a wide variety of infrared missiles, including proliferated Man

Portable Air Defense Systems.

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. 

Demonstration and Validation (Advanced Component Development and Prototypes)—The Air Force’s

Advanced Component Development and Prototypes (ACD&EP) programs are comprised of system specific

advanced technology integration efforts accomplished in an operational environment to help expedite transition

from the effort: In FY04 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, which has been approved for deployment to

Afghanistan through the Air Force's Rapid Response Process, has the potential for extensive use in virtually any

Area of Responsibility, including Homeland Defense.

In FY04, the joint DARPA/Air Force program office awarded Falcon contracts (other transaction agreements

administered by DARPA) for the development and demonstration of key technologies. The small responsive

launch vehicle portion (four contracts) is proceeding toward a FY05 down select (to one or more contractors)

with a launch no later than FY07 while the hypersonic test vehicle portion (one contract) is also working toward

a FY07 launch. The ultimate goal of this technology demonstration program is to demonstrate and validate key

technologies leading to residual capability and follow-on operational systems.

In FY05, the Air Force restructured and refocused the Space Radar (SR) program (formerly Space Base Radar) to

address congressional concerns with technical risk, affordability, and DoD-Intelligence Community (IC) integration. In January 2005, the Secretary of Defense (SECDEF) and the Director of Central intelligence (DCI) singed a

joint memo designating the SR program as the single space radar capability for the nation. The Undersecretary

of the Air Force appointed a two-star general as SR System Program Director (SPD) and Program Executive

Officer (PEO), and moved the SR Integrated Program Office (IPO) from Los Angeles, CA to Chantilly, VA in

order to foster greater synergy with the IC. 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 will provide day/night, all-weather global surface moving target indications (MTI), synthetic aperture radar (SAR) and high-resolution terrain information (HRTI) capabilities from a space-based platform. Initial launch capability is planned for FY 15. 

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2005 Annual Financial Statement
Engineering and Manufacturing Development—The Air Force’s System Demonstration and Engineering

Development (SD&ED) efforts are development projects which have not received approval for full-production.

The F/A-22 Raptor program is closing out Engineering and Manufacturing Development (EMD) and is now in Full

Rate Production (FRP) following a successful Initial Operational Test and Evaluation (IOT&E) and Defense

Acquisition Board (DAB) approval. The F/A-22 Raptor is the key enabler of joint air dominance. The Raptor is a

transformational combat aircraft ready to counter persistent and emerging national security challenges for

decades. Its capabilities create desired effects when, where, and for the duration they are needed. The Raptor is

the best value for the money today, and the only fighter produced today that will defeat the threats of tomorrow.

The air force accepted the 50th F/A-22 on 5 October 05. The Air combat command stationed at Langley AFB,

Virginia, expects to achieve Initial Operational Capability (IOC) during December 05. Significant program accomplishments in fiscal year 2005 include:

• DAB approval to commerce FRP March 2005 

• Delivery of first operational aircraft to the 27th Fighter Wing During May 2005

• Commencement of Follow-on Test and Evaluation (FOT&E) during August 2005

• The exceeding of over 3,400 flight test missions, logging in over 7,500 hours on the EMD aircraft fleet

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/A-22. While the F/A-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 the future battlespace. The F-35 has been in System Development and

Demonstration (SDD) since 2001. In May 2005, the USD(AT&L) formally approved a program restructure to

address design maturity issues. The F-35 is still projected to meet or exceed all Key Performance Parameters.

Significant program accomplishments in fiscal year 2005 include: 

• Assembly and power on of the first CTOL aircraft

• $2.4B contract awarded to General Electric/Rolls Royce Fighter Engine Team for F136 Engine SDD

• Began assembly of first Short Takeoff and Vertical landing (STOVL) aircraft 

The last block of the B-1 Conventional Mission Upgrade Program (CMUP) completed development and entered

full rate production. The B-1 successfully fielded JSOW and JASSM capability, achieving Required Assets Available

(RAS) in October 2004; the user declared Initial Operating Capability (IOC) for JASSM on the B-1 in August 2005;

and the Block E computer deliveries continued under an accelerated schedule, with new computers installed in

54 of the 67 B-1 aircraft as of September 2005. Since production is almost complete, the B-1 CMUP program

was removed from OSD oversight. 

The Multi-Platform – Radar Technology Insertion Program is being developed for the Global Hawk and E-10 programs as an interoperable platform-independent Ground Moving Target indicator (GMTI), Synthetic Aperture

Radar (SAR) imaging, and Air Moving Target Indicator (AMTI) system-of-systems capable of providing dynamic

support to operations. The MP-RTIP development is on cost and on schedule, building upon the FY 04 achievements of a Final Design Review and successful lab demonstration of a Global hawk-size radar. MP-RTIP has begun

developmental fabrication for both the Global Hawk and the E-10 radars. The Global Hawk developmental testing remains on track to begin in 2007 with production deliveries projected for 2010. Additionally, the E-10 MPRTIP variant is on schedule for a first flight demonstration in 2010. The capability that MP-RTIP promises will

enhance the mission areas of air and surface surveillance and tracking with faster revisit rates, increased resolu88

United States Air Force
tion, simultaneous tracking and SAR imaging, as well as, cruise missile defense capability. The program’s continued schedule delivery for the Global Hawk program ensures next generation radar technology on time to the

Warfighter.

The Theater Battle Management Core Systems (TBMCS) develops force-level and wing-level command, control,

and intelligence systems to support the operational functions of the Joint Forces Air Component Commander.

TBMCS has been designated the Joint System of Record for Air Tasking Order/Airspace Control Order generation within the Department of Defense. The system has shown its flexibility by successful employments in support of the Global War on Terror (OIF, OEF, ONE) as well as in support of humanitarian relief efforts (Tsunami

Relief, and Hurricanes Katrina and Rita Relief ). TBMCS generated over 83,000 sorties for OIF/OEF in FY04 and

over 77,000 sorties in FY05. TBMCS Version 1.1.3 successfully passed test and was released to the field, providing numerous system improvements.

In FY04, the Air Force awarded contracts for Transformational Satellite Communications System (TSAT) space

segment development and continued technology development for the next-generation communication satellite.

The TSAT program will develop key technologies such as laser communications, internet-like communications

protocols, and methods of dynamically allocating communications capability among users. The program made

tremendous progress in FY 05. Key TSAT technologies were demonstrated during key risk reduction testing,

and both contractors completed a successful interim Space Segment design review. As a result, sufficient risk has

been retired for four of the seven key technical challenges to advance them to Technology Readiness Level (TRL)

6. A Request For Proposal for the TSAT Network and Mission Operations contract was released and a single

contract is to be awarded in early FY 06. The ultimate goal is a FY 14 first launch of TSAT. 

The Counter Communications Systems first system was delivered in December 2003. Air Force Space

Command declared initial capability on Sept. 24, 2004, after the final two systems were delivered. The Counter

Communications Systems (CCS) is operated by the 76th Space Control Squadron at Peterson AFB, Co., and is a

transportable ground-based system that denies adversary satellite communications through reversible, nondestructive methods.

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 installation or operations required for general research and development use. Included would be test

ranges, military construction, maintenance support of laboratories, operation and maintenance of test aircraft and

ships, and studies and analyses in support of the research and development program. 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 Department of Defense (DoD) test and evaluation missions, and available to others having a requirement for their unique capabilities. The test capabilities and

facilities are operated and maintained by the Air Force for the DoD test and evaluation missions, and are available

to others having a requirement for their unique capabilities. Many efforts are contained within this program, but

two examples are the Propulsion Wind Tunnel Upgrade at Arnold Engineering Development Center. This effort

replaces outdated data acquisition, processing, and control systems and drive motors. A second example is the

Threat Simulator Development program, which supports many of the AF Electronic Warfare Test Processes.

Current projects focus on improved Low Radar Cross Section threat modeling and simulation, and enhanced

infrared and radio frequency countermeasures testing.

Operational Systems Development — The Air Force’s operational system efforts include projects in support

of development acquisition programs or upgrades in System Demonstration and Development (SDD). Examples

of operational systems development are: The AIM-9X Short Range Missile (SRM) completed Milestone III in May

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2005 Annual Financial Statement
2004, and Full-Rate Production was approved with the first full-rate production lot (Lot 5) awarded in first quarter of Fiscal year 2005. Lot 6 will be awarded in First Quarter FY 2006 and platform integration efforts for the F16 and F-18E/F remain on track.

The Phase 3 (AIM-120C-7) effort completed System Demonstration and Development (SDD) in May 2004 and

has begun Operational Test (OT). Production units for this variant began in the fourth quarter FY 2004 and will

complete in the fourth quarter FY 2007. The AIM-120C-7 provides a major upgrade over the AIM-120C-6 guidance section, particularly 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, increasing weapon

effectiveness. In addition, the AIM-120D will have increased range and third party targeting which expands the

HOBS launch envelope. The SDD contract was awarded in December 2003 and initial systems integration testing

of the Proof of Design (POD) missile began in September 2005.

The Joint Direct Attack Munition Program completed the SAASM/Anti-Jam 27 month effort that commenced in

FY 2003. SAASM/AJ capability decreases vulnerability to crypto compromise and spoofing as well as enhanced

anti-jam performance. All JDAMS delivered in Lot 9 (starting in FY 2006) and beyond will be SAASM capable.

The 9,000 JDAMs delivered in Lot 9 will also be AJ capable. Future AJ quantities will be determined by ACC and

AF/XOR. 

The JDAM program also started developing the JDAM supplement to the Universal Armament Interface (UAI)

interface control document (ICD). JDAM’s UAI ICD will be ready for integration on the F-15E’s Suite 6

Operational Flight Program (OFP). UAI will reduce the complexity, schedule and cost of the weapon-aircraft

integration process, decoupling weapon integration from aircraft OFP cycles.

The Small Diameter Bomb I (SDB I) program will increase the number of kills per platform or sortie (x4) while

achieving required effects by improving accuracy and reducing collateral damage over current inventory weapons.

SDB I is an incremental development weapon program that entered a 36-month System Development and

Demonstration (SDD) of its first increment in FY04. The first Increment of SDB I will attack fixed and stationary

targets using anti-jam/SAASM Inertial Navigation System (INS)/Global Positioning Satellite (GPS) aided by a very

wide area differential GPS solution and standoff capability. The program has successfully completed 29 free flight

events and entered the IOT&E phase of Seamless Verification in Oct 2005. The program completed a successful

MS C decision in April 05 with Required Assets Available (RAA) scheduled for September 2006. The SDB will

provide transformational capability to the Air Force by increasing loadout per weapon station on multiple platforms, reducing sorties and minimizing collateral damage.

The predator program successfully completed development and testing of Multiple Aircraft Control (MAC)

Ground Control Stations (GCS). The MAC capability will allow a single pilot to control up to four Predators

simultaneously from a single GSC. The first MAC GCS is scheduled to be available for operations late in CY 05. 

The Air Force Space program achieved four successful launches of military satellites, utilizing Titan, Atlas & Delta

to launch NROL-23, NROL-16, GPS IIR-13, DSP-22 and GPS IIR-14. 

The Air Force continues to develop the Family of Advanced Beyond Line of Sight Terminals (FAB-T) to provide

robust, secure, strategic and tactical global communications for nuclear and conventional forces. This family of

terminals will provide transformational communications via connectivity to Advanced EHF satellites (AEHF),

Wideband Gapfiller Satellites (WGS), and the future Transformational Satellite Communications System (TSAT).

Future increments of this terminal will provide laser communications in conjunction with optical capabilities on

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United States Air Force
TSAT to deliver data in excess of one GB per second, as well as a new multi-band antenna that will enable aircraft to have simultaneous connectivity to multiple satellites via a phased array construct. This capability will allow

the Air Force to reduce the costs of integrating multiple antennas to communicate with different satellite constellations.

In FY04, the Air Force conducted a successful Preliminary Design Review for the Space Based Space Surveillance

(SBSS) pathfinder satellite. The SBSS pathfinder program will design, build, launch and operate this single satellite with a visible sensor payload, as well as build and operate a ground segment to support initial satellite operations. The SBSS Pathfinder will detect and track objects in Earth orbit, contributing to timely space situation

awareness, and is scheduled to launch in late 2009.

In FY05, the Air Force awarded a contract to begin architecture development for the Orbital Deep Space Imager

(ODSI). In FY 05, three concept study contracts were awarded to further define the ODSI system. The ODSI

program will deploy a satellite constellation for characterization of objects in deep space in support of overall

battlespace awareness. The first ODSI launch is scheduled for FY13.

Successfully completed initial operational test and evaluation on the Safety Enhanced Reentry Vehicle (SERV) program. The SERV program allows the Minuteman III system to use the Mk21 reentry vehicle, originally developed

for the recently retired Peacekeeper missile. The Mk21 has the most modern safety features of any such

weapon in the DoD inventory. 

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2005 Annual Financial Statement
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93

2005 Annual Financial Statement

General Fund

Required

Supplementary

Information
94

United States Air Force

Disaggregated Statement of Budgetary Resources—General Fund

For the years ended September 30, 2005 and 2004 ($ in Thousands)

Other

Research, Development, 

Test & Evaluation

Operation and 

Maintenance

1. Budget Authority:

1a. Appropriations received $ 400,148.00 $ 21,029,922.00 $ 40,070,798.00

1b. Borrowing authority 0 00

1c. Contract authority 0 00

1d. Net transfers (+/-) -396,384.00 -316,894.00 657,368.00

1e. Other 0 00

2. Unobligated balance:

2a. Beginning of period 3,224.00 1,998,848.00 1,394,749.00

2b. Net transfers, actual (+/-) 0 51,366.00 1,017,182.00

2c. Anticipated Transfers Balances 0 00

3. Spending authority from

offsetting collections:

3a. Earned 0 0 0

1. Collected 12,799.00 3,251,279.00 4,908,057.00

2. Receivable from Federal sources 18 83,152.00 67,108.00

3b. Change in unfilled customer orders 0 0 0

1. Advance received 0 129,002.00 179,530.00

2. Without advance 0 292,629.00 47,970.00

from Federal sources

3c. Anticipated for the rest of year 0 00

without advances

3d. Transfers from trust funds 0 00

3e. Subtotal 0 0 0

4. Recoveries of prior year obligations 0 101,851.00 747,049.00

5. Temporarily not available

pursuant to Public Law 0 0 0

6. Permanently not available -984 -345,781.00 -455,689.00

7. Total Budgetary Resources $ 18,821.00 $ 26,275,374.00 $ 48,634,122.00

STATUS OF BUDGETARY

RESOURCES

8. Obligations incurred: $

8a. Direct 2,167.00 19,969,969.00 42,232,853.00

8b. Reimbursable 12,817.00 3,563,491.00 5,301,449.00

8c. Subtotal 14,984.00 23,533,460.00 47,534,302.00

9. Unobligated balance:

9a. Apportioned apportionment 619 3,004,781.00 109,810.00

9b. Exempt from 3,218.00 0 0

9c. Other available 0 00

10. Unobligated Balances Not Available 0 -262,869.00 990,008.00

$ 18,821.00 $ 26,275,372.00 $ 48,634,120.00

12. Obligated Balance, Beginning of period $ 7,295.00 $ 7,873,000.00 $ 16,814,207.00

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

14. Obligated Balance, Net -

end of period:

14a. Accounts receivable -21 -306,141.00 -1,233,620.00

14b.

Unfilled customer order from Federal sour

ces 0 -668,570.00 -352,350.00

14c. Undelivered orders -1,653,633.00 6,865,398.00 15,042,094.00

14d. Accounts payable 1,655,446.00 1,017,709.00 2,550,650.00

15. Outlays:

15a. Disbursements 20,469.00 24,020,435.00 47,479,609.00

15b. Collections -12,799.00 -3,380,281.00 -5,087,587.00

15c. Subtotal 7,670.00 20,640,154.00 42,392,022.00

16. Less: Offsetting receipts -123,202.00 0 0

17. Net Outlays $ -115,532.00 $ 20,640,154.00 $ 42,392,022.00

11. Total, Status of

Budgetary Resources

BUDGETARY RESOURCES
95

2005 Annual Financial Statement

Procurement

Military

Personnel

Military Construction/

Family Housing 2005 Combined 2004 Combined

$ 35,420,540.00 $ 29,748,267.00 $ 2,221,293.00 $ 128,890,968.00 $ 125,483,786.00

00 0 0 0

00 0 0 0

79,150.00 595,812.00 19,101.00 638,153.00 -29,394.00

00 0 0 0

4,190,942.00 438,056.00 1,017,546.00 9,043,364.00 9,189,946.00

934,644.00 29,670.00 -72,576.00 1,960,286.00 245,938.00

00 0 0 0

00 0 0 0

348,393.00 404,173.00 -1,168.00 8,923,532.00 8,117,605.00

-15,504.00 8,175.00 0 142,948.00 317,565.00

00 0 0 0

39,970.00 0 1,168.00 349,671.00 188,072.00

47,939.00 5 0 388,543.00 -109,981.00

00 0 0 0

00 0 0 0

00 0 0 0

159,945.00 283,903.00 7,443.00 1,300,191.00 1,431,079.00

00 0 0 0

-524,296.00 -93,554.00 -73,164.00 -1,493,468.00 -1,437,653.00

$ 40,681,723.00 $ 31,414,507.00 $ 3,119,643.00 $ 150,144,188.00 $ 143,396,963.00

33,054,632.00 27,781,820.00 1,647,983.00 124,689,424.00 129,913,273.00

341,456.00 3,229,342.00 0 12,448,555.00 4,447,386.00

33,396,088.00 31,011,162.00 1,647,983.00 137,137,979.00 134,360,659.00

7,108,817.00 69,381.00 1,463,473.00 11,756,881.00 8,072,566.00

0 0 0 3,218.00 2,709.00

0 0 0 1 -1

176,818.00 333,964.00 8,187.00 1,246,109.00 961,030.00

$ 40,681,723.00 $ 31,414,507.00 $ 3,119,643.00 $ 150,144,188.00 $ 143,396,963.00

$ 22,352,881.00 $ 1,806,465.00 $ 2,650,285.00 $ 51,504,133.00 $ 50,541,583.00

00 0 0 0

-40,468.00 -39,309.00 0 -1,619,560.00 -1,476,612.00

-195,009.00 -6 0 -1,215,937.00 -827,393.00

20,097,550.00 36,878.00 2,255,441.00 42,643,727.00 42,309,792.00

3,142,426.00 770,666.00 60,157.00 9,197,053.00 11,505,411.00

32,552,090.00 31,757,316.00 1,975,227.00 137,805,147.00 131,752,381.00

-388,363.00 -404,173.00 0 -9,273,203.00 -8,305,678.00

32,163,727.00 31,353,143.00 1,975,227.00 128,531,944.00 123,446,703.00

0 0 0 -123,202.00 -115,376.00

$ 32,163,727.00 $ 31,353,143.00 $ 1,975,227.00 $ 128,408,742.00 $ 123,331,327.00
General Property, Plant, and Equipment

Real Property Deferred Annual Sustainment and RestorationTables

As of September 30, 2005 ($ in thousands)

Notes: 

1. FY05 O&M Sustainment figures include subsidies and MILPERS contribution (49% of MILPAY).

2. FY05 O&M Sustainment Required is based on Facilities Sustainment Model (FSM 5.1) per business rule direction of OSD (AT&L).

3. FY05 O&M Sustainment Appropriated amount is the FY05 PB plus/minus Congressional marks.

4. FY05 O&M Sustainment Actuals were pulled from the CRIS database. The numbers are not certified DFAS

numbers and are subject to change. Certifed numbers for FY05 obligations are not expected until late Oct/early

Nov 05. 

5. MFH annual sustainment requirements are based upon data reflected in the 2002 Family Housing Master Plan.

These requirements are further refined based upon a combination of historical expenditures for day-to-day maintenance and condition assessment surveys for MFH real property maintenance by contract, and take into account

programmatic changes such as housing privatization initiatives. 

Notes

RDT&E Sustainment funding obligations and expenditures are not available prior to FY04; appropriation/program

element structure did not facilitate an accurate determination of this number. 

Property Type FY 2002 FY 2003 FY 2004 FY 2005

Buildings, Structures, and Utillities 808,628 417,112 550,609 590,579

Annual Deferred Sustainment Trend

Property Type 1. Required 2. Appropriated 3. Executed 4. Difference

Buildings, Structures, and Utilities 2,540,229 2,369,899 1,949,650 $590,579 

Annual Sustainment FY 2005

96

United States Air Force
97

2005 Annual Financial Statement

Military Equipment 

Deferred Maintenance Amounts

As of September 30, 2005 ($ in thousands)

The figures presented are actual deferred maintenance amounts for FY05. The figures include Active Air Force,

Air National Guard and the Air Force Reserve.

Military Equipment 

Deferred Maintenance Amounts 

As of September 30, 2005 (Amounts in Thousands)

(a) (b) 

Major Type

1. Aircraft $70,980 

2. Engines $21,580

3. Missiles $2,400 

4. Software $44,800 

5. Other Major End Items $17,500

6. Non-MSD Exchangeables 

7. Area Base Maintenance 

8. Storage 

Total $157,260
Required Supplemental Information - Part A 

AT57 - Air Force General Fund 

Schedule, Part A DoD Intra-governmental Asset Balances

Treasury Index: Fund Balance 

with Treasury

Accounts 

Receivable

Loans

Receivable Investments Other

Executive Office of the President 11 $2.00

Department of Agriculture 12 $2,219.00

Department of Commerce 13 $553.00 $10,745.00 

Department of the Interior 14 $1,831.00 $124,048.00 

Department of Justice 15 $3,859.00 $780.00 

Department of Labor 16 $12.00

Navy General Fund 17 $43,215.00

United States Postal Service 18 $153.00

Department of State 19 $19,873.00

Department of the Treasury 20 $62,350,242.00 $3,386.00 $717.00 $0.00 

Army General Fund 21 $26,277.00 $2,249.00 

Office of Personnel Management 24 $6.00 $52,822.00 

Social Security Administration 28 $1.00

Library of Congress 3 $4.00

Nuclear Regulatory Commission 31 $7.00

Department of Veterans Affairs 36 $217.00

Government Printing Office 4 $0.00

General Service Administration 47 $888.00 $2,339.00 

National Science Foundation 49 $12,594.00 $1,413.00 

General Accounting Office 5 $2.00

Central Intelligence Agency 56 $202.00

Environmental Protection Agency 68 $82.00 $9,701.00 

Department of Transportation 69 $23,437.00 $1,484.00 

Homeland Security 70 $8,939.00 ($122.00)

Agency for International Development 72 $659.00

Small Business Administration 73 $109.00

Department of Health and Human Services 75 $158.00

National Aeronautics and Space Administration 80 $11,098.00 $45,692.00 

National Archives and Records Administration 88 $25.00

Department of Energy 89 $7,117.00 $4,480.00 

Department of Education 91 $41.00

US Army Corps of Engineers 96 $102.00

Other Defense Organizations General Funds 97 $109,542.00 $91.00 

Other Defense Organizations Working Capital Funds 97-4930 $293,245.00 $38,044.00 

Army Working Capital Fund 97-4930.001 $421.00

Navy Working Capital Fund 97-4930.002 $1,029.00 $3.00 

Air Force Working Capital Fund 97-4930.003 $82,392.00 $134,111.00 

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Required Supplemental Information - Part B 

Schedule, Part B DoD Intra-governmental entity liabilities. Treasury Index: AccountsPayable

Debts/ Borrowings 

From Other 

Agencies

Other

Department of Agriculture 12 $225.00

Department of Commerce 13 $3,491.00 $19.00 

Department of the Interior 14 $3,099.00 $1.00 

Department of Justice 15 $2,523.00 $8,105.00 

Department of Labor 16 $324,795.00

Navy General Fund 17 $25,208.00 $101,858.00 

Department of State 19 $5,626.00

Department of the Treasury 20 $14,530.00 $124.00 

Army General Fund 21 $58,326.00 $15,778.00 

Office of Personnel Management 24 $0.00 $50,083.00 

Federal Communications Commission 27 $140.00

Social Security Administration 28 $2.00

Nuclear Regulatory Commission 31 $66.00

Department of Veterans Affairs 36 $8,928.00

General Service Administration 47 $269,895.00 $24.00 

National Science Foundation 49 $3,085.00

Tennessee Valley Authority 64 $2,475.00

Environmental Protection Agency 68 $12.00

Department of Transportation 69 $42,551.00 $351.00 

Homeland Security 70 $14,526.00

Agency for International Development 72 $11,760.00

Department of Health and Human Services 75 $268.00 $0.00 

National Aeronautics and Space Administration 80 $75,970.00 $8.00 

Department of Energy 89 $27,052.00 $3,110.00 

US Army Corps of Engineers 96 $1,035.00

Other Defense Organizations General Funds 97 $61,219.00 $397,780.00 

Other Defense Organizations Working Capital Funds 97-4930 $586,952.00 $62.00 

Army Working Capital Fund 97-4930.001 $5,609.00

Navy Working Capital Fund 97-4930.002 $15,615.00

Air Force Working Capital Fund 97-4930.003 $411,716.00 $48,076.00 

The General Fund of the Treasury 99 $639,694.00
Required Supplemental Information - Part E

AT57 - Air Force General Fund

($Amounts in Thousands)

Navy General Fund 17 $21.00

Army General Fund 21 $36,234.00

Other Defense Organizations General Funds 97 $145,255.00 $135,630.00 

Other Defense Organizations Working Capital Funds 97-4930 $968,182.00

Treasury Index: Transfers In Transfers Out

Required Supplemental Information - Part C

AT57 - Air Force General Fund 

Schedule, Part C DoD Intra-governmental revenue and related costs.

Treasury Index: Earned Revenue

Executive Office of the President 11 $8,787.00

Department of Agriculture 12 $2,008.00

Department of Commerce 13 $565.00

Department of the Interior 14 $308.00

Department of Justice 15 $13,434.00

Department of Labor 16 $268.00

Navy General Fund 17 $283,057.00

United States Postal Service 18 $580.00

Department of State 19 $29,538.00

Department of the Treasury 20 $41,685.00

Army General Fund 21 $179,263.00

Office of Personnel Management 24 $7.00

Library of Congress 3 $33.00

Nuclear Regulatory Commission 31 $7.00

Department of Veterans Affairs 36 $829.00

Government Printing Office 4 $2.00

General Service Administration 47 $1,991.00

National Science Foundation 49 $61,202.00

General Accounting Office 5 $21.00

Central Intelligence Agency 56 $1,315.00

Environmental Protection Agency 68 $710.00

Department of Transportation 69 $29,372.00

Homeland Security 70 $60,648.00

Agency for International Development 72 $62,130.00

Department of Health and Human Services 75 $254.00

National Aeronautics and Space Administration 80 $72,188.00

National Archives and Records Administration 88 $25.00

Department of Energy 89 $25,459.00

Department of Education 91 $157.00

US Army Corps of Engineers 96 $4,095.00

Other Defense Organizations General Funds 97 $1,486,905.00

Other Defense Organizations Working Capital Funds 97-4930 $1,259,887.00

Army Working Capital Fund 97-4930.001 $1,808.00

Navy Working Capital Fund 97-4930.002 $19,011.00

Air Force Working Capital Fund 97-4930.003 $331,083.00

Military Retirement Fund 97-8097 $0.00

DoD Medicare-Eligible Retiree Health Care Fund $181,752.00

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General Fund

Audit Opinion
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Working Capital Fund

Principal Statements
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2005

Consolidated

2004

Consolidated

1. ASSETS (Note 2)

 A. Intra-governmental:

 1. Fund Balance with Treasury (Note 3)

 a. Entity $ 1,164,223 $ 1,051,110

 b. Non-Entity Seized Iraqi Cash 0 0

 c. Non-Entity-Other 0 0

 2. Investments (Note 4) 0 0

 3. Accounts Receivable (Note 5) 510,560 576,396

 4. Other Assets (Note 6) 48,515 10

 5. Total Intra-governmental Assets $ 1,723,298 $ 1,627,516

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

 C. Accounts Receivable (Note 5) 219,929 103,111

 D. Loans Receivable (Note 8) 0 0

 E. Inventory and Related Property (Note 9) 32,701,689 28,311,805

 F. General Property, Plant and Equipment (Note 10) 1,205,556 1,197,683

 G. Investments (Note 4) 0 0

 H. Other Assets (Note 6) 440,337 788,966

2. TOTAL ASSETS $ 36,290,809 $ 32,029,081

3. LIABILITIES (Note 11)

 A. Intra-governmental:

 1. Accounts Payable (Note 12) $ 199,650 $ 256,763

 2. Debt (Note 13) 0 0

 3. Other Liabilities (Note 15 & Note 16) 146,538 243,131

 4. Total Intra-governmental Liabilities $ 346,188 $ 499,894

 B. Accounts Payable (Note 12) $ 546,739 $ 497,471

 C. Military Retirement Benefits and Other Employment-Related 233,713 238,729

 D. Actuarial Liabilities (Note 17)

 E. Environmental Liabilities (Note 14) 0 0

 F. Loan Guarantee Liability (Note 8) 0 0

 G. Other Liabilities (Note 15 and Note 16) 1,389,331 1,616,321

 TOTAL LIABILITIES $ 2,515,971 $ 2,852,415

4. NET POSITION

 A. Unexpended Appropriations $ 0$ 0

 B. Cumulative Results of Operations 33,774,838 29,176,666

6. TOTAL NET POSITION $ 33,774,838 $ 29,176,666

7. TOTAL LIABILITIES AND NET POSITION $ 36,290,809 $ 32,029,081

Consolidated Balance Sheet—Working Capital Fund

As of September 30, 2005 and 2004 ($ in Thousands)

The accompanying notes are an integral part of the financial statements.
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Consolidated

2004

Consolidated

1. Program Costs

 A. Intra-governmental Gross Costs $ 5,312,719 $ 5,399,793

 B. (Less: Intra-governmental Earned Revenue) -10,643,244 -11,888,462

 C. Intragovernmental Net Costs $ -5,330,525 $ -6,488,669

 D. Gross Costs With the Public 5,201,476 8,674,787

 E. (Less: Earned Revenue From the Public) -771,703 -891,419

 F. Net Costs With the Public $ 4,429,773 $ 7,783,368

 G. Total Net Cost $ -900,752 $ 1,294,699

2. Cost Not Assigned to Programs 0 0

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

4. Net Cost of Operations $ -900,752 $ 1,294,699

Consolidated Statement of Net Cost—Working Capital Fund

For the years ended September 30, 2005 and 2004 ($ in Thousands)

The accompanying notes are an integral part of the financial statements.
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2005 Annual Financial Statement

2005

Consolidated

2004

Consolidated

CUMULATIVE RESULTS OF OPERATIONS

1. Beginning Balances $ 21,890,389 $ 11,537,088

2. Adjustments (+/-)

 2a. Changes in Accounting Principles (+/-) 3,632,598 699,393

 2b. Correction of Errors (+/-) 7,256,576 18,656,733

3. Beginning Balances, as adjusted 32,779,563 30,893,214

4. Budgetary Financing Sources: 0 0

 4a. Appropriations received 0 0

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

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

 4d. Appropriations used 0 0

 4e. Nonexchange revenue 0 0

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

 4g. Transfers-in/out without reimbursement (+/-) -73,911 -580,900

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

5. Other Financing Sources: 0 0

 5a. Donations and forfeitures of property 0 0

 5b. Transfers-in/out without reimbursement (+/-) 0 34

 5c. Imputed financing from costs absorbed by others 168,434 159,017

 5d. Other (+/-) 0 0

6. Total Financing Sources 94,523 -421,849

7. Net Cost of Operations (+/-) -900,752 1,294,699

8. Net Change 995,275 -1,716,548

9. Ending Balance $ 33,774,838 $ 29,176,666

Consolidated Statement of Changes in Net Position—Working Capital Fund

For the years ended September 30, 2005 and 2004 ($ in Thousands)

The accompanying notes are an integral part of the financial statements.
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Combined

2004

Combined

BUDGETARY FINANCING ACCOUNTS

BUDGETARY RESOURCES

1. Budget Authority:

 1a. Appropriations received $ 0$ 0

 1b. Borrowing authority 0 0

 1c. Contract authority 9,744,293 684,378

 1d. Net transfers (+/-) 0 0

 1e. Other 0 0

2. Unobligated balance:

 2a. Beginning of period 134,440 607,130

 2b. Net transfers, actual (+/-) -73,911 -580,900

 2c. Anticipated Transfers Balances 0 0

3. Spending authority from offsetting collections:

 3a. Earned 0 0

 1. Collected 16,559,412 17,824,823

 2. Receivable from Federal sources 50,393 -186,398

 3b. Change in unfilled customer orders 0 0

 1. Advance received -121,421 -173,221

 2. Without advance from Federal sources 692,744 -733,915

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

 3d. Previously unavailable 0 0

 3e. Transfers for trust funds 0 0

 3f. Subtotal 17,181,128 16,731,289

4. Recoveries of prior year obligations 4 3,180

5. Temporarily not available pursuant to Public Law 0 0

6. Permanently not available -10,801,211 -36,669

7. Total Budgetary Resources $ 16,184,743 $ 17,408,408

STATUS OF BUDGETARY RESOURCES

8. Obligations incurred:

 8a. Direct $ 0 $ 2,027

 8b. Reimbursable 15,892,064 17,271,941

 8c. Subtotal 15,892,064 17,273,968

9. Unobligated balance:

 9a. Apportioned 292,678 134,440

 9b. Exempt from apportionment 0 0

 9c. Other available 1 0

10. Unobligated Balances Not Available 0 0

11. Total, Status of Budgetary Resources Relationship of $ 16,184,743 $ 17,408,408

 Obligations to Outlays:

12. Obligated Balance, Net - beginning of period $ 4,755,983 $ 3,317,312

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

14. Obligated Balance, Net - end of period:

 14a. Accounts receivable -1,009,179 -958,783

 14b. Unfilled customer order from Federal sources -3,958,214 -3,265,470

 14c. Undelivered orders 6,461,705 6,610,227

 14d. Accounts payable 2,159,623 2,370,008

15. Outlays:

 15a. Disbursements 16,250,968 16,752,435

 15b. Collections -16,437,991 -17,651,602

 15c. Subtotal -187,023 -899,167

16. Less: Offsetting receipts 0 0

17. Net Outlays $ -187,023 $ -899,167

Combined Statement of Budgetary Resources—Working Capital Fund

For the years ended September 30, 2005 and 2004 ($ in Thousands)

The accompanying notes are an integral part of the financial statements.
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2005 Annual Financial Statement

2005

Consolidated

2004

Consolidated

Resources Used to Finance Activities:

Budgetary Resources Obligated

1. Obligations incurred $ 15,892,064 $ 17,273,968

2. Less: Spending authority from offsetting collections -17,181,132 -16,734,469

 and recoveries (-)

3. Obligations net of offsetting collections and recoveries -1,289,068 539,499

4. Less: Offsetting receipts (-) 0 0

5. Net obligations -1,289,068 539,499

Other Resources

6. Donations and forfeitures of property 0 0

7. Transfers in/out without reimbursement (+/-) 0 34

8. Imputed financing from costs absorbed by others 168,434 159,017

9. Other (+/-) 0 0

10. Net other resources used to finance activities 168,434 159,051

11. Total resources used to finance activities -1,120,634 698,550

 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 (-) 180,293 -951,116

 12b. Unfilled Customer Orders 571,323 -907,137

13. Resources that fund expenses recognized in prior periods -5,775 -36,403

14. Budgetary offsetting collections and receipts that 0 0

 do not affect net cost of operations

15. Resources that finance the acquisition of assets -5,376,780 -2,686,199

16. Other resources or adjustments to net obligated resources

 that do not affect net cost of operations

 16a. Less: Trust or Special Fund Receipts Related to Exchange in the Entity's Budget (-) 0 0

 16b. Other (+/-) 0 -34

17. Total resources used to finance items not part of the net cost of operations -4,630,939 -4,580,889

18. Total resources used to finance the net cost of operations -5,751,573 -3,882,339

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 the public (-) 0 0

23. Other (+/-) 5,961 0

24. Total components of Net Cost of Operations that 5,961 0

 will require or generate resources in future periods

Components not Requiring or Generating Resources:

25. Depreciation and amortization 190,703 259,260

26. Revaluation of assets or liabilities (+/-) 3,193 -5,660,357

27. Other (+/-)

 27a. Trust Fund Exchange Revenue 0 0

 27b. Cost of Goods Sold 5,026,638 5,866,527

 27c. Operating Material & Supplies Used 416,094 325,585

 27d. Other -791,768 4,386,023

28. Total components of Net Cost of Operations that 4,844,860 5,177,038

 will not require or generate resources

29. Total components of net cost of operations that will not 4,850,821 5,177,038

 require or generate resources in the current period -900,752 1,294,699

30. Net Cost of Operations

$ $

Combined Statement of Financing—Working Capital Fund

For the years ended September 30, 2005 and 2004 ($ in Thousands)

The accompanying notes are an integral part of the financial statements.
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Working Capital Fund

Footnotes to the

Principal Statements

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2005 Annual Financial Statement
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

United States Air Force Working Capital Fund (AFWCF), as required by the “Chief Financial Officers (CFO) Act

of 1990,” expanded by the “Government Management Reform Act (GMRA) of 1994,” and other appropriate legislation. The financial statements have been prepared from the books and records of the AFWCF in accordance

with “Department of Defense Financial Management Regulation (DoDFMR),” the Office of Management and

Budget (OMB) Bulletin No. 01-09, “Form and Content of Agency Financial Statements” and, to the extent possible, Federal Generally Accepted Accounting Principles (GAAP). The accompanying financial statements account

for all resources for which the AFWCF is responsible, except that information relative to classified assets, programs, and operations. This information has been excluded from the statements or otherwise aggregated and

reported in such a manner that is no longer considered classified. The AFWCF’s financial statements are in addition to the financial reports that are prepared by the United States Air Force pursuant to OMB directives to monitor and control the Air Force’s use of budgetary resources.

The AFWCF is unable to implement all elements of Federal GAAP and the OMB Bulletin No. 01-09, due to limitations of its financial management processes and systems, including nonfinancial feeder systems and processes.

Reported values and information for the AFWCF's major asset and liability categories are derived largely from

nonfinancial feeder systems, such as inventory systems and logistic systems. These systems were designed to

support reporting requirements focusing on maintaining accountability over assets and reporting the status of federal appropriations, rather than preparing financial statements in accordance with Federal GAAP. The AFWCF

continues to implement process and system improvements addressing the limitations of its financial and nonfinancial feeder systems. A more detailed explanation of these financial statement elements is provided in the applicable footnote.

The AFWCF continues to enter material amounts of unsupported accounting entries. Financial and nonfinancial

feeder systems continue to lack sufficient customer identification necessary to accurately process eliminations.

The issue has been addressed as part of the Air Force plan for obtaining a favorable opinion by FY 2007. This

was also disclosed in the DoD Agency-wide Note 1.

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 the

DoD. The overall mission of the DoD is to organize, train, and equip armed forces to deter aggression and, if

necessary, defeat aggressors of the United States and its allies. The overall mission of the Air Force is to defend

the United States through control and exploitation of air and space.

The stock and industrial revolving fund accounts were created by the National Security Act of 1947, as amended

in 1949 and codified in Title 10, U.S.C., Section 2208. The revolving funds were established as a means to more

effectively control the cost of work performed by the DoD. The DoD began operating under the revolving fund

concept as early as July 1, 1951.

1.C. Appropriations and Funds 

The Air Force’s funds are divided into the general, working capital (revolving funds), trust, special, and deposit

funds. These appropriations and funds are used to fund and report how the resources have been used in the

course of executing the Air Force’s missions.

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Working Capital Funds receive their initial working capital through an appropriation or a transfer of resources

from existing appropriations or funds, and use those capital resources to finance the initial cost of products and

services. Financial resources to replenish the initial working capital and to permit continuing operations are generated by the acceptance of customer orders. The Defense Working Capital Fund (DCWF) operates with financial principles that provide improved cost visibility and accountability to enhance business management and

improve the decision making process. The activities provide goods and services on a reimbursable basis.

Receipts derived from operations generally are available in their entirety for use without further congressional

action.

Air Force systems are not transaction driven for budgetary accounts. Therefore, in some cases proprietary and

statistical accounts are used to develop the Report on Budget Execution (SF133) and Statement of Budgetary

Resources for reporting budgetary data. 

Supply Management

The Air Force Stock Funds were established within the DoD under 10 U.S.C. 2208, as described in DoD

7000.14-R, Financial Management Regulation, to finance inventories of supplies. Most inventories of supplies are

financed by use of a stock fund. Exceptions include an item financed with a procurement appropriation or when

financing by other means has been deemed to be more economical and efficient. A stock fund operates as a

revolving fund acquiring inventories with funds received from prior sales to customers.

There are four active business activities in the Supply Management Activity Group (SMAG). They are Materiel

Support Division (MSD), General Support Division (GSD), Medical-Dental Division, and Academy Division. In FY

2001, the Fuels Division was taken over by the Defense Energy Support Center; therefore, all activity within the

Fuels Division is residual. Troop Support is also a residual activity.

Depot Maintenance

The Air Force Depot Maintenance Activity Group (DMAG) performs manufacturing, development, and test work

as well as aviation maintenance. Primarily supporting Air Force organizations, DMAG also supports other DoD

components, government agencies, and foreign governments. The DMAG environment is rapidly changing.

Weapons systems embodying new material and technologies require new maintenance processes, while improvements in reliability reduce the frequency of maintenance for many items. The net result requires flexibility in

addressing both wartime and peacetime workload changes. The DMAG achieves this flexibility by employing the

unique strengths of organic (in-house) and contractor repair resources.

Transportation

The unique transportation responsibilities of the Air Mobility Command (AMC) include the executive travel mission and operation of other operational support aircraft, the air weather service, AMC training, AMC base operations, tanker operations, and other miscellaneous AMC functions. The Air Force Transportation Defense Business

Operations Fund (DBOF) was established during FY 1993 and discontinued in FY 1995 in accordance with the

DWCF improvement plan. Only residual accounting remains.

Air Force Working Capital Fund Component

The purpose of the Air Force Component Activity is to provide an activity within the AFWCF to record transactions that cannot be identified to a specific business area. The January 21, 1997 memorandum “Policy and

Procedures for Cash Management Working Capital Funds (DWCF)” established the “Component Level

Adjustment” column. 
Additional DFAS-Arlington memorandums provided specific and detailed instructions and procedures to maintain

accountability for fund balances with Treasury. 

Operations of the activities within the AFWCF are based on policies and procedures that include: 

(1) Funding Authority:

Prior to FY 1992, industrial fund activities were not issued funding documents. Activities now receive obligation

authority for customer orders from the Air Force Deputy Assistant Secretary, Budget (SAF/FMB). The total costs

that can be incurred are a function of the cost goals applied to the actual customer funded workload. 

(2) Minor Construction Funding:

Minor construction projects that cost $100,000 or more, but less than $300,000, are funded through a separate

section of the capital budget, and depreciated over a 20-year period.

(3) Software Development Costs:

Policy and procedures have been changed to move the development costs of new software that meets capitalization requirements to the capital budget. Software is to be amortized after release.

(4) Capital Budgeting:

Activity group budgets are segregated into operating and capital budgets. Any investment in equipment, software, minor construction and other management improvements that meet capitalization requirements are funded

through the capital budget and the cost is depreciated or amortized over the relevant life cycle.

(5) Asset Capitalization and Depreciation:

The assets of the industrial and stock funds were transferred to the DBOF and subsequently to the AFWCF.

Capital assets, excluding land, which exceed a unit cost of $100,000 or more are subject to depreciation. In addition, capital assets previously capitalized using the established thresholds for prior years will continue to be depreciated if depreciation was being recorded prior to the increase to the $100,000 threshold.

(6) Rates and Prices:

All Air Force activity groups within the WCF are expected to set their rates and prices based upon full cost

recovery, ensuring that cost reductions made by an activity will be passed on to the customers. Rates and prices

normally will not change during the year of execution, but occasionally change based on certain world situations.

If there is a need for a price change in Depot Maintenance, the authority is requested from HQ Air Force

Material Command. 

The FY 2005, AFWCF operations encompassed three activity groups: Supply Management, Depot Maintenance,

and Information Services. These activity groups use their resources to finance the initial cost of products or services for activities of the United States Government, primarily those of the DoD. Work is generated by the

acceptance of customer orders from ordering activities.

1.D. Basis of Accounting

The AFWCF generally records transactions on an accrual accounting basis as is required by Federal GAAP.

However, some of the Air Force's financial and nonfinancial feeder systems and processes are not designed to collect and record financial information on the full accrual accounting basis. The AFWCF has undertaken efforts to

determine the actions required to bring all of its financial and nonfinancial feeder systems and processes into compliance with all elements of Federal GAAP. One such action is the current revision of its accounting systems to

record transactions based on the United States Government Standard General Ledger (USSGL). Until such time

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that all of the processes are updated to collect and report financial information as required by Federal GAAP,

some of the AFWCF’s financial data will be based on budgetary transactions (obligations, disbursements, and collections) and nonfinancial feeder systems. For example, most of the information presented on the Statement of

Net Cost (SONC) is based on accrued costs; however, some of this information is based on obligations and disbursements.

Under the accrual method revenues are recognized when earned and expenses are recognized when incurred,

without regard to receipt or payment of cash. Budgetary accounting is accomplished through unique general ledger

accounts to facilitate compliance with legal and internal control requirements associated with the use of federal

funds; however, the cash basis of accounting may be followed if the reported activity and amounts are not materially

significant. In addition to the accrual basis of accounting, Depot Maintenance also uses the full absorption accounting

principal. During FY 1996, the Defense Finance and Accounting Service, Denver Center (DFAS-DE), SAF/FMB, and

the Office of the Security of Defense, Financial Management (OSD/FM) jointly agreed on the use of this principal by

Depot Maintenance. This principal requires that overhead costs, such as depreciation and bad debt expenses, are

included in the cost of services sold. The effect of known intrafund transactions is eliminated.

The Air Force uses several service unique general ledger structures plus data converted from the Defense Business

Management System (DBMS). The financial statements depicted are derived from supply, maintenance, and

accounting records, utilizing the Air Force service and DBMS unique general ledger structures. The activity groups’

general ledger accounts are "cross-walked" to the USSGL chart of accounts to produce the financial statements.

In addition, the Air Force identifies programs based upon the major appropriation groups provided by Congress.

The Air Force is in the process of reviewing available data and attempting to develop a cost-reporting methodology that balances the need for cost information required by the SFFAS No. 4, “Managerial Cost Accounting

Concepts and Standards for the Federal Government,” with the need to keep the financial statements readable.

The asset accounts used to prepare the statements are categorized as either entity or nonentity. Entity assets

consist of resources that the agency has the authority to use, or where management is legally obligated to use

funds to meet entity obligations. Nonentity assets are assets that are held by an entity that are not available for

use in the operations of the entity. 

Material disclosures are provided at Note 10.

1.E. Revenues and Other Financing Sources

The Under Secretary of Defense (Comptroller) directed, per memorandum dated January 1992, all of the services

to use the percentage of completion accounting method to recognize revenue and expenses. The DoD 7000.14-R,

Financial Management Regulation, Chapter 11B, January 1995, also prescribes this method of accounting.

Each working capital activity group recognizes revenue in the following manner:

Supply Management

Air Force Supply Management revenue is recognized at the time of sale under constructive delivery terms (normally when an item is released from inventory or delivered to the customer). Foreign Military Sales transactions

also require proof of shipment before revenue is recognized. Generally, Supply Management’s revenue consists

of sales at standard prices less sales returns. Sales of Materiel Support Division items are at exchange price. The

Medical-Dental division and the Air Force Academy Store add surcharges to their billings rather than include a

surcharge in the standard price. Intra-division Supply Management sales have been eliminated. Cash discounts

and interfund retail stock loss allowances are reported as additional revenue.
Depot Maintenance

Revenue recognition for Organic DMAG is the percentage of completion method now that the Depot Maintenance

Accounting and Production System (DMAPS) is fully operational at all three Air Logistic Centers (ALCs). 

Revenue recognition for Contract DMAG is based on the number of units produced times the Unit Sales Price

(USP) and does not recognize Incremental Revenue Recognition (IRR) at this time. 

Information Services

The Information Services Activity Group (ISAG), as a service type organization, recognizes revenue in one of two

ways based on the service level agreement between the customer and the provider. ISAG uses either the completed contract method or the percentage of completion method.

1.F. Recognition of Expenses

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

incurred. However, because the Air Force’s financial and nonfinancial feeder systems were not designed to collect and record financial information on the full accrual accounting basis, accrual adjustments are made for major

items such as payroll expenses, accounts payable, and environmental liabilities. Expenditures for capital and other

long-term assets are not recognized as expenses in the AFWCF’s operations until depreciated in the case of property, plant, and equipment (PP&E) or consumed in the case of operating materials and supplies (OM&S). Certain

expenses, such as annual and military leave earned but not taken, are financed in the period in which payment is

made. Operating expenses were adjusted as a result of the elimination of balances between the DoD

Components. Net increases or decreases in unexpended appropriations are recognized as a change in net position. See Note 18, Intra-governmental Expenses and Revenue, for disclosure of adjustment amounts.

1.G. Accounting for Intra-governmental Activities

The Air Force, as an agency of the federal government, interacts with and is dependent upon the financial activities of the federal government as a whole. Therefore, these financial statements do not reflect the results of all

financial decisions applicable to the Air Force as though the agency was a stand-alone entity.

The Air Force’s proportionate share of public debt and related expenses of the federal government are not included.

Debt issued by the federal government and the related costs are not apportioned to the federal agencies. The Air

Force’s financial statements, therefore, do not report any portion of the public debt or interest thereon, nor do the

statements report the source of public financing whether from issuance of debt or tax revenues.

Financing for the construction of the DoD facilities is obtained through budget appropriations. To the extent this

financing ultimately may have been obtained through the issuance of public debt, interest costs have not been

capitalized since the Department of the Treasury does not allocate such interest costs to the benefiting agencies.

The Air Force’s civilian employees participate in the Civil Service Retirement System (CSRS) and Federal

Employees Retirement System (FERS), while military personnel are covered by the Military Retirement System

(MRS). Additionally, employees and personnel covered by FERS and MRS also have varying coverage under Social

Security. The AFWCF funds a portion of the civilian and military pensions. Reporting civilian pension information

under the CSRS and FERS retirement systems is the responsibility of the Office of Personnel Management (OPM).

The AFWCF recognizes an imputed expense for the portion of civilian employee pensions and other retirement

benefits funded by the OPM in the Statement of Net Cost, and recognizes corresponding imputed revenue in the

Statement of Changes in Net Position.

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To prepare reliable financial statements, transactions occurring between components or activities within the DoD

or between two or more federal agencies must be eliminated. However, the Air Force, as well as the rest of the

federal government, cannot accurately identify all intra-governmental transactions by customer. The DFAS is

responsible for eliminating transactions between the components or activities of the AFWCF. For FY 1999 and

beyond, seller entities within the Department provided summary seller-side balances for revenue, accounts

receivable, and unearned revenue to the buyer-side internal DoD accounting offices. In most cases, the buyerside records have been adjusted to recognize unrecorded costs and accounts payable. Intra-DoD intra-governmental balances were then eliminated.

The Department of the Treasury Financial Management Service (FMS) is responsible for eliminating transactions

between the Department and other federal agencies. In September 2000, the FMS issued the “Federal Intra-governmental Transactions Accounting Policies and Procedures Guide.” The DoD was not able to fully implement

the policies and procedures in this guide related to reconciling intra-governmental assets, liabilities, revenues, and

expenses for nonfiduciary transactions. The Air Force was able to implement the policies and procedures contained in the “Intra-governmental Fiduciary Transactions Accounting Guide,” as updated by the “Federal Intra-governmental Transactions Accounting Policies and Procedures Guide,” for reconciling intra-governmental transactions pertaining to investments in federal securities, borrowings from the United States (U.S.) Treasury and the

Federal Financing Bank, Federal Employees’ Compensation Act transactions with the Department of Labor (DoL),

and benefit program transactions with the OPM.

1.H. Transactions with Foreign Governments and International Organizations

Each year, the DoD Components sell defense articles and services to foreign governments and international

organizations, primarily under the provisions of the “Arms Export Control Act of 1976.” Under the provisions of

the Act, the AFWCF has authority to sell defense articles and services to foreign countries and international

organizations, generally at no profit or loss to the U.S. Government. Customers may be required to make payments in advance.

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

The AFWCF’s financial resources are maintained in U.S. Treasury accounts. The majority of cash collections, disbursements, and adjustments are processed worldwide at the DFAS, Military Services and U.S. Army Corps of

Engineers (USACE) disbursing stations, as well as the Department of State financial service centers. Each disbursing station prepares monthly reports that provide information to the U.S. Treasury on check issues, electronic

funds transfers, interagency transfers, and deposits.

In addition, the DFAS sites and the USACE Finance Center submit reports to the Department of the Treasury, by

appropriation, on interagency transfers, collections received, and disbursements issued. The Department of the

Treasury then records this information to the applicable Fund Balance with Treasury (FBWT) account maintained

in the Treasury’s system. Differences between the AFWCF's recorded balance in the FBWT account and

Treasury’s FBWT sometimes result and are subsequently reconciled.

Fund Balances with Treasury are maintained at the AFWCF corporate business area today. In 1992, when the

Defense Business Operating Fund was established, the FBWT was moved from the Air Force level to the DoD

level. In 1996, the DWCF was established and the FBWT was moved back to the Air Force level. However, allocations of FBWT were at a lower level than the level transferred out. The cash balance had been maintained at

10 days worth of cash, but what was allocated back was 3 days worth of cash. The days are based on the average of cash needed to pay vendors. The fund has been under funded since that time. 

Material disclosures are provided at Note 3. Differences are caused by in-transit disbursements and unmatched

disbursements, which are not recorded in the accounting offices’ detail-level records.
1.J. Foreign Currency

Not applicable.

1.K. Accounts Receivable

As presented on the Balance Sheet, accounts receivable includes accounts receivables, claims receivables, and

refunds receivable from other Federal entities or from nonfederal entities. Allowances for loss on accounts

receivable due from nonfederal entities are based upon analysis of collection experience by fund type. The

AFWCF does not recognize an allowance for loss on accounts receivable amounts from another Federal agency.

Claims against another federal agency are to be resolved between the agencies. If the claim cannot be resolved

by the agencies involved, it should be referred to the Government Accountability Office. Only Supply

Management allows for allowance for loss on accounts receivable based upon analysis of historical data from prior

year accounts receivable balances, write-offs, and collection policy.

Material disclosures are provided at Note 5.

1.L. Loans Receivable

Not applicable.

1.M. Inventories and Related Property

Inventory for the AFWCF is held in SMAG except for work-in-process inventory, which is in the Depot

Management Activity Group. Prior to fiscal year 2004, the majority of the SMAG inventory was reported at

approximate historical cost based on Latest Acquisition Cost (LAC), adjusted for holding gains and losses. During

fiscal years 2004 and 2005, a major portion of the Supply Management Activity Group inventory changed from

the LAC method to the Moving Average Cost (MAC) method of valuation. This allowed SMAG to comply with

the SFFAS No. 3, “Accounting for Inventory and Related Property” for that percentage of the inventory. The conversion to MAC included programming changes for the SMAG accounting system to convert from the Air Force

General Ledger (AFGL) to the USSGL for supply accounting. 

Under the LAC method of inventory valuation, gains and losses resulting from valuation changes for inventory

items were recognized and reported in the Statement of Net Cost and included in the calculation of Cost of

Goods Sold. To calculate the allowances for gain or loss on inventories, DFAS Denver prepared an inventory

worksheet monthly for each fund code within the SMAG. SFFAS No. 3, "Accounting for Inventory and Related

Property," directs that using a historical cost valuation method does not require an allowance for holding gains and

losses account. Additionally, SFFAS No. 3 provides for either the direct or allowance method to be used in valuing

inventory held for repair. Therefore the change to a historical costing method also included the elimination of the

allowance for holding gains and losses, revaluation of all inventories to a historical basis and the creation of an

allowance for repairs. The implementation of Moving Average Cost for SMAG inventories in fiscal year 2004 and

2005 eliminated the need for the gains and losses allowance account for that portion of the inventory and has

been credited against a prior period. Inventory held for repair is now valued at MAC with an allowance for repair

equal to the latest repair cost.

Related property includes operating materials and supplies (OM&S) and stockpile materials. The OM&S, including

munitions not held for sale, are valued at standard purchase price. The department uses the consumption

method of accounting for OM&S for the most part, expensing material when it is issued to the end user. Where

current systems cannot fully support the consumption method, the AFWCF uses the purchase method, expensed

when purchased. 

Material disclosures related to inventory and related property are provided at Note 9.

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

Not applicable.

1.O. General Property, Plant and Equipment

General property, plant, and equipment (PP&E) assets are capitalized at historical acquisition cost plus capitalized

improvements, when an asset has a useful life of two or more years, and when the acquisition cost equals or

exceeds the DoD capitalization threshold of $100,000. Also, improvement costs over the DoD capitalization

threshold of $100,000 for General PP&E are required to be capitalized. All General PP&E, other than land, is

depreciated using the straight-line method. Land is not depreciated.

Prior to FY 1996, General PP&E with an acquisition cost of $15,000, $25,000, and $50,000 for FYs 1993, 1994,

and 1995 respectively, and an estimated useful life of 2 or more years was capitalized. These assets remain capitalized and are reported on WCF financial statements. General PP&E previously capitalized at amounts below

$100,000 were written off General Fund financial statements in FY 1998.

When it is in the best interest of the government, the Air Force provides government property necessary to complete contract work to contractors. Such property is either owned or leased by the Air Force, or purchased

directly by the contractor for the government based on contract terms. When the value of contractor procured

General PP&E exceeds the DoD capitalization threshold, the items should be included in the value of General

PP&E reported on the Air Force's Balance Sheet. The AFWCF recently completed a study that indicates that the

value of General PP&E that meets the capitalization requirement and is in the possession of contractors is not

material to the Department’s financial statements. Regardless, the AFWCF is developing new policies and a contractor reporting process that will provide appropriate General PP&E information for future financial statement

reporting purposes. Accordingly, the Air Force currently reports only the government property in the possession

of contractors that is maintained in the Air Force’s property systems.

For entities operating as business type activities (WCFs), all PP&E used in the performance of their mission is categorized as General PP&E, whether or not it meets the definition of any other PP&E categories. National

Defense PP&E, Heritage Assets and Stewardship Land owned or maintained on a WCF installation are reported

in the Supplemental Stewardship Report of the applicable military department. 

Material disclosures are provided at Note 10.

1.P. Advances and Prepayments

Payments in advance of the receipt of goods and services are recorded as advances or prepayments and reported

as an asset on the Balance Sheet. Advances and prepayments are recognized as expenditures and expenses when

the related goods and services are received.

1.Q. Leases

Not applicable.

1.R. Other Assets 

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 these long-term contracts can cause, the AFWCF provides financing payments. One type of financing payment that the AFWCF

makes is for real property, and is based upon a percentage of completion. In accordance with SFFAS No. 1,

"Accounting for Selected Assets and Liabilities," such payments are treated as construction in process and are
reported on the General PP&E line and in Note 10, General PP&E, Net. In addition, based on the provision of

the Federal Acquisition Regulations, the AFWCF makes financing payments under fixed price contracts. The

AFWCF reports these financing payments in the “Other Assets” line item. Because the AFWCF becomes liable

only after the contractor delivers the goods in conformance with the contract terms. If the contractor does not

deliver a satisfactory product, the AFWCF is not obligated to reimburse the contractor for its costs, and the contractor is liable to repay the AFWCF for the full amount of the advance. 

1.S. Contingencies and Other Liabilities 

The SFFAS No. 5, “Accounting for Liabilities of the Federal Government,” defines a contingency as an existing condition, situation, or set of circumstances that involves an uncertainty as to possible gain or loss to the AFWCF. The

uncertainty will be resolved when one or more future events occur or fail to occur. A contingency is recognized as

a liability when a past event or exchange transaction has occurred, a future loss is probable, and the amount of loss

can be reasonably estimated. Financial statement reporting is limited to disclosure when conditions for liability

recognition do not exist, but there is at least a reasonable possibility that a loss or an additional loss will be

incurred. Examples of loss contingencies include the collectability of receivables, pending or threatened litigation,

possible claims and assessments. The AFWCF’s loss contingencies arising are events such as aircraft, ship and vehicle accidents, medical malpractice, property or environmental damages, and contractual disputes.

1.T. Accrued Leave

Civilian annual leave and military leave that have been accrued and not used as of the balance sheet date are

reported as liabilities. The liability reported at the end of the fiscal year reflects the current pay rates.

1.U. Net Position

Net Position consists of unexpended appropriations and cumulative results of operations. Unexpended appropriations represent amounts of authority, which are unobligated and have not been rescinded or withdrawn, and

amounts obligated but for which legal liabilities for payments have not been incurred.

Cumulative results of operations for the AFWCF represent the excess of revenues over expenses, less refunds to

customers, and returns to the U.S. Treasury since fund inception.

1.V. Treaties for Use of Foreign Bases 

The DoD Components have the use of land, buildings and other facilities that are located overseas and have been

obtained through various international treaties and agreements negotiated by the Department of State. The DoD

capital assets located overseas are purchased with appropriated funds; however, the host country retains the title

to the land and any improvements. Generally, treaty terms allow the DoD Components continued use of these

properties until the treaties expire. These fixed assets are subject to loss in the event treaties are not renewed

or the AFWCF does not reach agreements that allow for the continued use. Therefore, in the event treaties or

other agreements are terminated and the use of foreign bases is not allowed, the losses will be recorded for the

value of any nonretrievable capital assets. Negotiations between the United States and the host country determine the amount to be paid the United States for such capital investments.

1.W. Comparative Data 

The AFWCF presents the current and previous year’s financial data for comparative purposes. This data is presented in the financial statements, as well as in the notes to the principal statements.

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1.X. Unexpended Obligations 

The AFWCF presents the current and previous year’s financial data for comparative purposes. This data is presented in the financial statements, as well as in the notes to the principal statements.

1.Y. Undistributed Disbursements and Collections 

Undistributed disbursements and collections represent the difference between disbursements and collections

matched at the transaction level to a specific obligation, payable, or receivable in the activity field records as

opposed to those reported by the U.S. Treasury. These amounts should agree with the undistributed amounts

reported on the departmental accounting reports. In transit payments are payments that have been made for

other agencies or entities that have not been recorded in their accounting records. These payments are applied

to the entities’ outstanding accounts payable balance. 

The Department of Defense policy is to allocate supported undistributed disbursements and collections between

federal and nonfederal categories based on the percentage of federal and nonfederal accounts payable and

accounts receivable. The majority of the DoD Components reported following this allocation procedure.

Unsupported undistributed disbursements and collections are recorded in other liabilities.

Note 2. Nonentity Assets

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 Air Force is authorized to decide how to use resources in entity

accounts. The Air Force may be legally obligated to use these resources to meet entity obligations. Nonentity

accounts, on the other hand, consist of assets that are held by an entity but are not available for use in the operations of the entity.

The Air Force Working Capital Fund does not have any nonentity assets.

As of September 30

(Amounts in thousands)

1. Intra-governmental Assets

 A. Fund Balance with Treasury $ 0 $ 0

 B. Investments 0 0

 C. Accounts Receivable 0 0

 D. Other Assets 0 0

 E. Total Intra-governmental Assets $ 0 $ 0

2. Nonfederal Assets

 A. Cash and Other Monetary Assets $ 0 $ 0

 B. Accounts Receivable 0 0

 C. Loans Receivable 0 0

 D. Inventory & Related Property 0 0

 E. General PP&E 0 0

 F. Investments 0 0

 G. Other Assets 0 0

 H. Total Nonfederal Assets $ 0 $ 0

3. Total Nonentity Assets $ 0$ 0

4. Total Entity Assets $ 36,290,809 $ 32,029,081

5. Total Assets $ 36,290,809 $ 32,029,081

2005 2004
Note 3. Fund Balance with Treasury

The reconciling amount on line 3 above represents $(125.6) million for the United States Transportation

Command (USTC), which is reported at the Department of the Treasury as part of the Air Force Working Capital

Fund (AFWCF). However, for the purposes of Audited Financial Statements (AFS), USTC is included with the

Other Defense Organizations (ODO) reporting, which is separate from the AFWCF. Therefore, USTC cash is

not included on the AFWCF AFS statements.

Fluctuations and Abnormalities

Fund Balance with Treasury increased $113.1 million (11 percent) in FY 2005. The increase can be attributed to

three primary factors. First, the Information Services Activity Group (ISAG) and the Depot Maintenance Activity

Group (DMAG) both had increases in their respective fund balances from the prior year primarily attributed to

favorable financial performance. Net operation results for ISAG and DMAG before eliminations and mandated

Audited Financial Statement adjustments, which do not impact cash flow, totaled $84.3 million, which is a source

of cash inflow. Secondly, DMAG experienced favorable balance sheet performance. DMAG collected an additional $92.8 million in accounts receivable over the prior year, increased their accounts payable $20.9 million, and

disbursed $55.5 million less under the Capital Purchase Program then planned. Overall, the increases from these

items total $253.5 million, which was offset by a Congressional mandated cash transfer to the Army in the

amount of $155.0 million, resulting in a net increase of $98.5 million. The remaining $14.6 million increase can be

attributed to normal business fluctuations in the remaining business areas.

Note Reference

See Note Disclosure 1.I., Significant Accounting Policies, for additional discussion on financial reporting requirements and Department of Defense policies governing funds with the U.S Treasury.

As of September 30

(Amounts in thousands)

1. Fund Balances

 A. Appropriated Funds $ 0 $ 0

 B. Revolving Funds 1,164,223 1,051,111

 C. Trust Funds 0 0

 D. Special Funds 0 0

 E. Other Fund Types 0 0

 F. Total Fund Balances $ 1,164,223 $ 1,051,111

2. Fund Balances Per Treasury Versus Agency

 A. Fund Balance per Treasury $ 1,038,596 $ 1,703,858

 B. Fund Balance per AFWCF 1,164,223 1,051,111

3. Reconciling Amount $ -125,627 $ 652,747

2005 2004

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The amounts reported in this schedule represent the budgetary resources associated with cash. 

Problem disbursements represent disbursements of AFWCF funds reported by a disbursing station to the

Department of Treasury that have not yet been precisely matched against the specific source obligation. The

problem disbursements arise when the various contracting, disbursing, and accounting systems fail to match the

data necessary to properly account for the transaction in all the applicable accounting systems.

Due to the accelerated reporting requirements the 2004 column represents August 2004 amounts. The 2003

and 2005 columns are both September balances.

The AFWCF has a $55.7 million increase in problem disbursements and a $68.4 million decrease in In-transit disbursements. The amount of Unmatched Disbursements (UMDs) over 180 days old is $0.00, for Negative

Unliquidated Obligations (NULOs) is $0.00, and for In-transit is $3.6 million. The amount of UMDs over 120

days old is $0.00, for NULO is $0.00, and for In-transit is $7.9 million. The current absolute value of In-transit

disbursements is $433.0 million.

The increase in UMDs can be attributed to database mergers (San Antonio to Limestone in October 2004, and

Omaha to Dayton in May 2005) and difficulties encountered with the merger of the Contract Procurement

Accounting System (CPAS) and the General Accounting and Finance System (GAFS). Also, a substantial amount of

problems were encountered when we implemented new business processes for handling disbursements. All corrections are expected to be accomplished by the first quarter of FY 2006. The decrease in NULOS and In-transit

Disbursements is due to a concentrated effort to resolve problems and the corresponding posting of transactions.

Note 4. Investments and Related Interest

Not Applicable. 

(Amounts in thousands)

1. Total Problem Disbursements, Absolute Value

 A. Unmatched Disbursements (UMDS) $ 2,813 $ 4,713 $ 60,443 $

 B. Negative Unliquidated Obligations (NULO) 6,498 4,255 2,405

 2. Total In-transit Disbursements, Net $ 464,049 $ 415,522 $ 347,157 $

Disclosures Related to Problem Disbursements and In-Transit Disbursements

As of September 30

2003

(Decrease)/

Increase from 

2004 - 2005

2004 2005

55,730

-1,850

-68,365

As of September 30

(Amounts in thousands)

1. Unobligated Balance

 A. Available $ 292,679 $ 134,439

 B. Unavailable 0 0

2. Obligated Balance not yet Disbursed $ 8,621,328 $ 8,980,235

3. Non-Budgetary FBWT $ 0$ 0

4. Non-FBWT Budgetary Accounts $ -7,749,784 $ -8,063,563

5. Total $ 1,164,223 $ 1,051,111

Status of Fund Balance with Treasury

2005 2004
Note 5. Accounts Receivable

Fluctuations

Federal receivables decreased $65.8 million (11 percent). The amount consists primarily of a decrease in Depot

Maintenance Activity Group (DMAG). The decrease in DMAG is caused by a decrease in revenues, which would

lead to a subsequent decrease in outstanding invoices. See Note 18 for more information on the cause of the

revenue decrease.

Non-federal receivables increased $116.8 million (113 percent). The amount consists primarily of an increase of

$115.4 million in the Supply Management Activity Group (SMAG). The increase was attributed to a change in classification of receivables from Foreign Military Sales that were previously recorded as other assets. This change

occurred in the 3rd Qtr, FY 2005 reports. 

Information Related to Accounts Receivables

Allowance Method

SMAG uses an allowance method based on historical data for non-federal receivables. The Depot Maintenance

and the Information Services Activity Groups generally use the direct write-off method for uncollectible accounts.

Allocation of Undistributed Collections

The Department of Defense (DoD) policy is to allocate supported undistributed collections between federal and

non-federal categories based on the percentage of federal and non-federal accounts receivable. Unsupported

undistributed collections are recorded in USSGL account 2400, Liability For Deposit Funds, Clearing Accounts,

and Undeposited Collections. The Air Force Working Capital Fund (AFWCF) followed this allocation procedure,

applying $608.7 thousand in undistributed collections to accounts receivable and recording $54.8 million of unsupported undistributed to USSGL account 2400.

Elimination Adjustments

Accounts receivable within the AFWCF have been eliminated for statement presentation purposes. The total

value of the receivables that were eliminated on these financial statements is $332.4 million.

The Air Force accounting systems do not capture trading partner data at the transaction level in a manner that

facilitates trading partner aggregations. Therefore, the Air Force was unable to reconcile intra-governmental

accounts receivable balances with its trading partners. Through the ongoing Business Management Modernization

Program, the Department intends to develop long-term systems improvements that will capture the data necessary to perform reconciliations.

(Amounts in thousands)

2. Non-federal Receivables (From the Public) $ 219,929 $ 0 $ 219,929 $ 103,111

3. Total Accounts Receivable $ 730,489 $ 0 $ 730,489 $ 679,507

As of September 30 2005 2004

Gross Amount 

Due

Allowance For 

Estimated 

Uncollectibles

Accounts

Receivable, Net

Accounts

Receivable, Net

1. Intra-governmental Receivables $ 510,560 N/A 510,560 $ $ 576,396

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Receivables over 180 Days

The Air Force has $4.5 million intra-government receivables and $16.1 million non-federal receivables over 180

days. Processes have been implemented to closely monitor the delinquent receivables and to refer them to the

appropriate entity for resolution. 

Note Reference

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

Note 6. Other Assets

Fluctuations and Abnormalities 

Intra-governmental other assets (Line 1)

The $48.5 million (486,139 percent) increase to intra-governmental other assets is primarily due to an advance to

the Air Force General Funds in the amount of $47.9 million for miscellaneous contractual services to the depots.

The remaining advances are being reported by other defense organizations.

Non-federal other assets (Line 2)

Non-Federal Other Assets decreased $348.6 million (44 percent) and can be attributed to the decrease in the

Supply Management Activity Group (SMAG). SMAG had decreases in both the "Other" and the Advances section

of the Other Asset Line. Additional details of how the variance breaks out can be found in the table below. 

In the assets other than advances section, there was a decrease of $279.3 million, which can be attributed to two

events. First, there was a $163.9 million decrease in the vendors pending credit account in the Materiel Support

Division. Based on the recommendations of a prior audit, a program was developed to identify and systematically

prepare journal vouchers to write off unsupported balances greater than 210 day old. The journal vouchers were

processed in October 2004 and May 2005. The second event can be found in the SMAG assets for foreign military sales, which had a decrease of $115.4 million. As was discussed in Note 5, this account is now being reported as a component of accounts receivable.

In the advances section, there was a decrease of $63.8 million which can also be attributed to two events. First,

the "Inventory Intransit from Vendor" account in the Material Support Division (MSD) decreased $35.3 million.

This decrease was the result of a journal voucher (JV) processed in FY05 to correct the balance in this account.

For several months, a program that removes the Wholesale Intransit Inventory as it is received was not run, thus,

As of September 30

(Amounts in thousands)

1. Intra-governmental Other Assets

 A. Advances and Prepayments $ 48,515 $ 10

 B. Total Intragovernmental Other Assets $ 48,515 $ 10

2. Non-federal Other Assets

 A. Outstanding Contract Financing Payments $ 0$ 0

 B. Other Assets (With the Public) 440,337 788,966

 C. Total Nonfederal Other Assets $ 440,337 $ 788,966

3. Total Other Assets $ 488,852 $ 788,976

2005 2004
causing the account to be overstated at the end of FY 2004. Once the issue was identified, a journal voucher was

processed to correct for this error. The program continues to run each month to ensure the proper entries are

made and the account balance is accurate. Second, the "Inventory Intransit from Vendor" account in the General

Support Division (GSD) decreased $8.8 million and is currently in an abnormal balance. This decrease was the

result of a systemic issue within the Financial Inventory Accounting and Billing System (FIABS). Erroneous

amounts were used to reduce the account when the monthly systemic programs were executed. The cause of

the glitch has not yet been identified; however, the issue is currently being worked by the appropriate DFAS personnel for resolution. The remaining decrease in the account is the normal business fluctuation in advances in the

remaining categories of advance accounts. 

Note Reference

See Note Disclosure 1.R., Significant Accounting Policies, for additional discussion on financial reporting requirements and DoD policies governing other assets.

Non-Federal Other Assets (in Thousands)

Types of Asset 2005 2004

Advances

SMAG - Advances and Prepayments to Contractors $317,655 $374,443

DMAG - Advances and Prepayments to Contractors 0 7,044

Total Advances $317,655 $381,487

Other Assets 

SMAG - Air Force assets—other DoD foreign military sales (depot) 0 115,434

SMAG - Other assets returns to vendors pending credit 122,167 286,109

DMAG - Unallocated labor and materials 515 5,937

Total Other Assets 122,682 407,480

Total Non-Federal Other Assets $440,337 $788,966

Note 7. Cash and Other Monetary Assets

Definitions

Cash—The total of cash resources under the control of the Working Capital Fund, including coin, paper currency, purchased foreign currency, negotiable instruments, and amounts on deposit in banks and other financial institutions. Cash available for agency use should include petty cash funds and cash held in revolving funds that will

not be transferred into the U.S Government General Fund.

Foreign Currency—The total U.S. dollar equivalent of non-purchased foreign currencies held in foreign currency fund accounts. Non-purchased foreign currency is limited to the Treasury Index 97X7000 fund account (formerly called FT accounts).

Other Monetary Assets—included gold, special drawing rights, and U.S Reserve in the International Monetary

Fund. This category is principally for use by the Department of Treasury.

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Note 8. Direct Loan and/or Loan Guarantee Programs

Direct Loan and/or Loan Guarantee Programs The entity operates the following direct loan and/or Loan

guarantee program(s)

• Military Housing Privatization Initiative

• Armament Retooling & Manufacturing Support Initiative

Not applicable.

Note 9. Inventory and Related Property

There are no restrictions on the use, sale, or disposition of inventory except in the following situations: 

1) Distributions without reimbursement are made when authorized by Department of Defense (DoD) 

directives.

2) War Reserve Material includes fuels and subsistence items that are considered restricted.

3) Inventory, with the exception of safety stocks, may be sold to foreign, state and local governments, private

parties, and contractors in accordance with current policies and guidance or at the direction of the President.

As of September 30

(Amounts in thousands)

1. Inventory Categories

LAC,MAC

 B. Held for Repair 13,445,847 9,372,433 9,330,509 LAC,MAC

NRV

 D. Raw Materials 0 0 0

 E. Work in Process 244,416 244,416 470,012

$

Gross Value

Revaluation

Allowance

Inventory, Net

2005 2004

Inventory, Inventory, Net Valuation 

Method Inventory, Net

 A. Available and Purchased for Resale $ 22,717,224 $ -15,016 $ 22,702,208 $ 17,978,646

-4,073,414

 C. Excess, Obsolete, and Unserviceable 775,072 -775,072 0 0

0

0

 F. Total $ 37,182,559 $ -4,863,502 32,319,057 $ 27,779,167

Legend for Valuation Methods:

Legend for Valuation Methods:

Adjusted LAC = Latest Acquisition Cost, adjusted for holding gains and losses NRV = Net Realizable Value

SP = Standard Price O = Other

AC = Actual Cost MAC = Moving Average Cost

MAC,SP,LAC

AC

As of September 30

(Amounts in thousands)

1. Inventory, Net $ 32,319,057 $ 27,779,167

2. Operating Materials & Supplies, Net 382,632 532,638

3. Stockpile Materials, Net 0 0

4. Total $ 32,701,689 $ 28,311,805

2005 2004
Definitions

Inventory available and purchased for resale includes consumable spare and repair parts as well as repairable

items owned and managed by the Department. Material available and purchased for resale includes material held

due to a managerial determination that it should be retained to support military or national contingencies. 

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 the Department often relies

on weapon systems and machinery no longer in production, the Department 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 scrap materials or items that cannot be economically

repaired and are awaiting disposal. Potentially reusable material, presented in previous years as excess, obsolete,

and unserviceable, is included in the held for use or held for repair categories, according to its condition.

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. The work in process designation may

also be used to accumulate the amount paid to a contractor under cost-reimbursable contracts, including the

amount withheld from payment to ensure performance and the amount paid to other government plants for

accrued costs of end-items of material ordered but not delivered.

Fluctuations

Inventory increased $4.5 billion (16 percent) due to the following factors. 

Inventory Available and Purchased for Resale values for the Supply Management Activity Group (SMAG) had an

increase of $4.7 billion. The increase is a result of an inventory valuation change from Latest Acquisition Cost

to Moving Average Cost. In FY 2005, the allowance account of $11.3 billion was removed for the Material

Support Division. For comparative statement purposes, the Inventory Available and Purchased for Resale balance for FY 2004 was restated by $7.2 billion, which represents the portion of the prior period adjustment

related to errors. The remaining $4.1billion, which represents the portion of the prior period adjustment

related to a standard change in accounting procedure, was not restated. Therefore the inventory balance in FY

2004 is less than FY 2005. 

Work in Process (WIP) had a decrease of $225.6 million in the Depot Maintenance Activity Group (DMAG). This

decrease can be attributed to two events. The first event is the continuing phase out of Contract Depot

Maintenance Activity Group (CDMAG) operations from the Working Capital Fund. This phase-out caused the

$168.2 million WIP decrease in CDMAG. The second event, a $57.4 million decrease in Organic WIP, was due to

less work being inducted into the WIP then what had been completed, coupled with the clean-up effort of some

of the old customer orders that still had open WIP balances.

General Composition of Inventory

Inventory includes spare and repair parts, clothing and textiles, fuels, and ammunition. Inventory is tangible personal property that is (1) held for sale or held for repair for eventual sale, (2) in the process of production for

sale, or (3) to be consumed in the production of goods for sale or in the provision of services for a fee. 

The category inventory held for repair consists of damaged material that requires repair to make it usable.

Excess inventory is condemned material that must be retained for management purposes. The category held for

134

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2005 Annual Financial Statement

sale includes all issuable material. The category held for repair includes all economically reparable material. Work

in process includes depot maintenance work with its associated labor, applied overhead, and supplies used in the

delivery of maintenance services. The U.S. Standard General Ledger does not include a separate work in process

account unrelated to sales. Inventory is assigned to categories based on guidance in the DoD Financial

Management Regulation, Volume 11B.

Note Reference

See Note Disclosure 1.M., Significant Accounting Policies, for additional discussion on financial reporting requirements and DoD policies governing Inventory and related property.

Fluctuations

The $150.0 million decrease (28 percent) in the OM&S category held for use (Line 1A) can be attributed to two

events. A $76.9 million decrease resulted from the continuing phase out of Contract DMAG operations. In addition, a $51.0 million decrease occurred in Organic DMAG operations, which is attributed to the clean-up effort of

on hand supplies, coupled with a credit return of shop materials returned to the supplier by the Warner Robins

Air Logistic Center. 

General Composition of Operating Materials and Supplies

OM&S include spare and repair parts. The OM&S data reported on the financial statements are derived from

logistics systems designed for material management purposes, i.e. accountability and visibility. The reported balances from these systems are not recorded at historical cost, in conformance with the valuation requirements in

the Statement of Federal Financial Accounting Standard (SFFAS) No. 3, “Accounting for Inventory and Related

Property.” Instead, the Air Force uses standard price to value OM&S without computing unrealized holding gains

or losses. Furthermore, past audit results have led to uncertainties pertaining to the completeness and existence

of the OM&S quantities used to derive the balances reported in the financial statements.

For the most part, DMAG uses the consumption method of accounting for OM&S, since OM&S is defined in the

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

As stated above, current financial and logistics systems cannot fully support the consumption method. 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). The DoD, in consultation with its auditors, is (1) developing specific criteria for determining when OM&S amounts are not significant for the purpose of using the consumption method, (2) developing functional requirements for feeder systems

As of September 30

(Amounts in thousands)

1. OM&S Categories

 A. Held for Use $ 382,632 $ $ 382,632 $ 532,638 SP, LAC

 B. Held for Repair 0 0 0 SP, LAC

 C. Excess, Obsolete, and Unserviceable 0 0 0 NRV

 D. Total $ 382,632 $ $ 382,632 $ 532,638

Operating Materials and Supplies, Net

2005 2004

OM&S

Gross Value

Revaluation

Allowance OM&S, Net OM&S, Net ValuationMethod

0

0

0

0

Legend for Valuation Methods:

Adjusted LAC = Latest Acquisition Cost, adjusted for holding gains and losses NRV = Net Realizable Value

SP = Standard Price O = Other

AC = Actual Cost
to support the consumption method, (3) identifying feeder systems that are used to manage OM&S items, and (4)

developing plans to revise those systems to support the consumption method. The department reported significant amounts using the purchase method either because the systems could not support the consumption method

or because management deems that the item is in the hands of the end user.

Note Reference

See Note Disclosure 1.M., Significant Accounting Policies, for additional discussion on financial reporting requirements and DoD policies governing Inventory and related property.

Stockpile Materials, Net

Not Applicable.

Note 10. General PP&E, Net

Information Related to General PP&E, Net

Real property reported by the Automated Civil Engineering System (ACES) and personal property reported by

the Air Force Equipment Management System (AFEMS) and the Information Processing Management System

(IPMS) has not been validated and reconciled to reported figures received by Defense Finance and Accounting

Service (DFAS) from the field activities. However, the Depot Maintenance Air Logistic Centers (ALC) and

Aerospace Maintenance and Regeneration Center (AMARC) use the ACES to capture the costs of real property

based on preponderance of use for each building. They use the straight-line method for recording depreciation

maintained on spreadsheets in place of the ACES schedule. The accounting entries are recorded directly into the

field-level trial balances. 

Any Working Capital Fund Special Tools and Special Test equipment in the possession and control of the Air Force

are reported in the Air Force General Funds financial statements.

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

reported above for the Major Asset Classes of Land and Buildings, Structures, and Facilities. The value of General

PP&E personal property (Major Asset Classes of Software and Equipment) does not include all of the General

PP&E in the possession of contractors that is above the Department of Defense (DoD) capitalization threshold.

(Amounts in thousands)

1. Major Asset Classes

 A. Land N/A N/A $ 0 N/A $ 0 $ 0

 B. Buildings, Structures, and Facilities S/L 20 Or 40 905,184 $ -591,229 313,955 249,229

 C. Leasehold Improvements S/L lease term 0 0 0 0

 D. Software S/L 2-5 Or 10 1,025,075 -683,000 342,075 369,465

 E. General Equipment S/L 5 or 10 2,053,877 -1,542,561 511,316 551,426

 F. Military Equipment S/L Various 0 0 0 0

 G. Assets Under Capital Lease S/L lease term 0 0 0 0

 I. Other 0 00 0

2. Total General PP&E $ 4,022,346 $ -2,816,790 $ 1,205,556 $ 1,197,683

[1] Note 15 for additional information on Capital 

Legend for Valuation Methods:

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

Depreciation/ 

Amortization 

Method

(Accumulated 

Depreciation/ 

Amortization)

27,563

Prior FY Net 

Book Value

 H. Construction-in-Progress N/A 38,210

Service

Life

Acquisition

Value

Net Book 

Value

N/A N/A 38,210

136

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2005 Annual Financial Statement

The net book amount of such property is immaterial in relation to the total General PP&E net book value. In

accordance with a strategy approved by the Office of Management and Budget, the Government Accountability

Office, and the Inspector General, DoD, the Department is developing new policies and a contractor-reporting

process to capture General PP&E information for future reporting purposes in compliance with generally accepted accounting practices.

Past audit results have identified uncertainties as to whether all General PP&E assets in the possession or control

(existence) of the Department are properly and accurately recorded in the system (completeness).

Note Reference

See Note Disclosure 1. N., Significant Accounting Policies, for additional discussion on financial reporting requirements and DoD policies governing General PP&E.

Assets Under Capital Lease

Not Applicable.

Note 11. Liabilities Not Covered by Budgetary Resources

Definitions

Liabilities Not Covered and Covered by Budgetary Resources – These are liabilities that are not considered covered by realized budgetary resources as of the balance sheet date. Budgetary resources include the following:

• New budget authority

• Spending authority from offsetting collections (credited to an appropriation or fund account)

• Recoveries of unexpired budget authority through downward adjustments of prior-year obligations

As of September 30

1. Intra-governmental Liabilities

 A. Accounts Payable $ 0$ 0

 B. Debt 0 0

 C. Other 0 0

 D. Total Intra-governmental Liabilities $ 0$ 0

2. Non-Federal Liabilities

 A. Accounts Payable $ 0$ 0

 B. Military Retirement Benefits and

 Other Employment-Related Actuarial Liabilities 

 C. Environmental Liabilities 0 0

 D. Loan Guarantee Liability 0 0

 E. Other Liabilities 0 0

 F. Total Non-Federal Liabilities $ 233,713 $ 238,729

3. Total Liabilities Not Covered by Budgetary Resources $ 233,713 $ 238,729

4. Total Liabilities Covered by Budgetary Resources $ 2,282,258 $ 2,613,686

5. Total Liabilities $ 2,515,971 $ 2,852,415

233,713 238,729

2005 2004

(Amounts in thousands)
• Unobligated balances of budgetary resources at the beginning of the year or net transfers of prior-year balances during the year

• Borrowing authority or permanent indefinite appropriations that have been enacted and signed into law as of

the balance sheet date, provided that the Office of Management and Budget (OMB) can apportion the

resources without first meeting a contingency or without additional action by the Congress. 

Liabilities Covered by Budgetary Resources –These are resources the reporting entity incurred that are covered

by realized budget resources as of the balance sheet date. Budgetary resources encompass not only new budget

authority but also other resources available to cover liabilities for specified purposes in a given year. Available

budgetary resources include the following:

• New budget authority

• Spending authority from offsetting collections (credited to an appropriation or fund account)

• Recoveries of unexpired budget authority through downward adjustments of prior-year obligations

• Unobligated balances of budgetary resources at the beginning of the year or net transfers of prior-year balances during the year

• Borrowing authority or permanent indefinite appropriations that have been enacted and signed into law as of

the balance sheet date, provided that the OMB can apportion the resources without first meeting a contingency or without additional action by the Congress.

Note Reference

For additional line item discussion, see:

Note 8, Direct Loans and/or Loan Guarantee Programs

Note 12, Accounts Payable

Note 13, Liabilities Not Covered and Covered by Budgetary Resources

Note 14, Environmental Restoration Liabilities and Environmental Disposal Liabilities

Note 15, Other Liabilities

Note 16, Commitments and Contingencies

Note 17, Military Retirement Benefits and Other Employment Related

Note 12. Accounts Payable

As of September 30

(Amounts in thousands)

1. Intra-governmental Payables $ 199,650 $ N/A $ 199,650 $ 256,763

2. Non-Federal Payables (to the Public) 546,739 0 546,739 497,471

3. Total $ 746,389 $ 0 $ 746,389 $ 754,234

2005 2004

Accounts Payable

Interest, Penalties, 

and Administrative 

Fees

Total Total

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2005 Annual Financial Statement

Definition

Intra-governmental payables consist of amounts owed to other federal agencies for goods or services ordered

and received but not yet paid for. Interest, penalties, and administrative fees are not applicable to intra-governmental payables. Non-federal payables (to the public) are payments to non-federal entities. 

Fluctuations and Abnormalities

Intra-governmental payables decreased by $57.1 million (22 percent). The primary cause was a decrease of

$60.6 million in the General Support Division (GSD). In FY 2004 unpaid bills for Defense Logistics Agency

increased at the end of the year causing an increase in accounts payable as well. The unpaid bills were paid in the

first month of FY 2005. The account balance has returned to a normal balance and maintained a normal balance

throughout the remainder of FY 2005. 

Non-Federal payables increased $49.2 million (10 percent). The primary cause was an increase in unmatched disbursements caused by difficulties encountered with the merger of the Contract Procurement Accounting System

(CPAS) and the General Accounting and Finance System (GAFS). Information regarding unmatched disbursements is discussed in Note 3. 

Undistributed Disbursements

Undistributed disbursements consist of the difference between (1) disbursements/collections recorded at the

transaction level to a specific obligation, payable, or receivable in the activity field records, and (2) those disbursements/collections reported by the U.S. Treasury via the reconciled DD1329 and DD1400. The total undistributed

disbursement amounts displayed in this note should agree with the undistributed amounts reported on accounting

reports (SF 133/(M) 1002/(M) 1307). In-transit payments are payments that have been made for other agencies

or entities that have not been recorded in their accounting records. These payments are applied to each entity’s

outstanding accounts payable balance at year-end. Accounts payable were adjusted downward in the amount of

$408.3 million for these payments. 

Allocation of Undistributed Disbursements

The Department of Defense (DoD) policy is to allocate supported undistributed disbursements between intragovernmental and non-federal categories based on the percentage of intra-governmental and non-federal

accounts payable. Unsupported undistributed disbursements should be recorded in U.S. Standard General

Ledger account (USSGLA) 2120, Disbursements in Transit. The AFWCF followed this allocation policy reporting

$184.6 million in USSGLA 2120. 

Intra-governmental Eliminations

For the majority of intra-agency sales, the AFWCF accounting systems do not capture trading partner data at the

transaction level in a manner that facilitates trading partner aggregations. Therefore, the AFWCF was unable to

reconcile intra-governmental accounts payable to the related intra-governmental accounts receivable that generated the payable. Elimination adjustments are made at the consolidated business activity level instead of at the

fund-code level, resulting in less distortion of the actual payable amounts.

The DoD intends to develop long-term systems improvements that will include sufficient up-front edits and controls to eliminate the need for after-the-fact reconciliations. The volume of intra-governmental transactions is so

large that after-the-fact reconciliations cannot be accomplished with the existing or foreseeable resources.
Note Reference

See Note Disclosure 1.G., Significant Accounting Policies, for additional discussion on financial reporting requirements and DoD policies governing accounting for intra-governmental activities.

Note 13. Debt

Not applicable.

Note 14. Environmental Liabilities and Disposal Liabilities

Not applicable.

Note 15. Other Liabilities

Fluctuations and Abnormalities

Line 1.A – The Intra-governmental advances from others decreased $98.3M (42 percent) due to the decrease in

the Depot Maintenance Activity Group (DMAG) Contract progress billings. Contract DMAG is phasing out of the

Working Capital Fund (WCF).

Line 1.F – The Intra-governmental other liabilities increase of $1.7M (20 percent) represents employee benefits

that are payable to the Office of Personnel Management (OPM). Liabilities fluctuate based on staffing levels and

participation in benefit programs by employees. Health insurance premiums and contribution limits for employees to the Thrift Savings Plan both increased, which is reflected in the overall increase in employee benefit liabilities.

(Amounts in thousands)

1. Intra-governmental

 A. Advances from Others $ 136,241 $ 0 $ 136,241 $ 234,529

 B. Deposit Funds and Suspense Account Liabilities 0 0 0 0

 C. Disbursing Officer Cash 0 0 0 0

 D. Judgment Fund Liabilities 0 0 0 0

 E. FECA Reimbursement to the Department of Labor 0 0 0 0

 F. Other Liabilities 10,297 0 10,297 8,602

 G. Total Intra-governmental Other Liabilities $ 146,538 $ 0 $ 146,538 $ 243,131

2. Non-Federal

 A. Accrued Funded Payroll and Benefits $ 129,479 $ 0 $ 129,479 $ 135,633

 B. Advances from Others 8,570 0 8,570 15,256

 C. Deferred Credits 0 0 0 0

 D. Deposit Funds and Suspense Accounts 54,771 0 54,771 18,913

 E. Temporary Early Retirement Authority 0 0 0 0

 F. Nonenvironmental Disposal Liabilities

 (1) Military Equipment (Nonnuclear) 0 0 0 0

 (2) Excess/Obsolete Structures 0 0 0 0

 (3) Conventional Munitions Disposal 0 0 0 0

 (4) Other 0 0 0 0

 G. Accrued Unfunded Annual Leave 0 0 0 0

 H. Capital Lease Liability 0 0 0 0

 I. Other Liabilities 1,196,511 0 1,196,511 1,446,519

 J. Total Non-Federal Other Liabilities $ 1,389,331 $ 0 $ 1,389,331 $ 1,616,321

3. Total Other Liabilities $ 1,535,869 $ 0 $ 1,535,869 $ 1,859,452

2004

Current

Liability

Noncurrent 

Liability Total Total

As of September 30 2005

140

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141

2005 Annual Financial Statement

Line 2.B – The decrease of advances from others of $6.7M (44 percent) was in the DMAG business area. This

decrease is largely due to the resolution of the problem with the billing of public workload that resulted in FY04

with the implementation of the Defense Industrial Fund Financial Management System (DIFMS). DIFMS was not

designed to bill private party billings at a fixed price, thus resulting in an increase in the advances account throughout all of FY 2004. A release was installed to correct the report during the first quarter of FY 2005 and current

private party bills can now be processed. The release, however, did not provide functionality to process the

older contracts and a backlog continued to exist in the account throughout the first two quarters of FY 2005.

This backlog has been steadily worked off and the account is now at a normal balance.

Line 2.D – The increase of $35.9M (190 percent) was due to an amount of unsupported undistributed for AF

component in FY 2005 that was classified as supported in FY 2004.

Information Related to Other Liabilities (Line 2.I) 

DMAG work in process accrued expenses continue to decrease as a result of the removal Contract DMAG from

the Working Capital Funds, which has resulted in a decline in material, labor, and overhead cost accruals. 

Supply Management Activity Group (SMAG) future purchase – foreign military sales consist of money that various

countries have deposited with the SMAG as a buy-in on future purchases they plan to make under the foreign

military sales program. These funds are considered a liability as the funds are returned if the countries do not

make future purchases. Revenue is not recognized on these transactions until the purchase takes place. The

decrease in this account is caused by some foreign governments canceling agreements.

The Component other liability is related to an abnormal non-federal accounts receivable amount. The amount

was abnormal because of Unsupported Undistributed Collections that were moved to Component as part of the

undistributed stabilization effort. In FY2005, the amount was reported on Line 2.D with total unsupported collections.

Note Reference

See Note Disclosure 1.S., Significant Accounting Policies, for additional discussion on financial reporting requirements and Department of Defense policies governing contingencies and other liabilities.

Note 16. Commitments and Contingencies

Not applicable.

(In thousands) FY2005

Misc Liabilities 500 0

DMAG – WIP Accrued Expenses 1,161,308 1,377,793

SMAG – Future Purchase - Foreign Military Sales 28,377 29,049

SMAG – Other Accrued Liabilities 6,326 4,140

Component – Reclass of Abnormal Non-Federal Accounts Receivable $ 0 $ 35,537

Total $ 1,196,511 $ 1,446,519

FY 2004
Note 17. Military Retirement Benefits and Other Employment Related Actuarial

Liabilities

Actuarial Cost Method Used:

Assumptions:

Market Value of Investments in Market-based and Marketable Securities: 

Military Retirements Pensions

Not applicable

Military Retirement Health Benefits

Not applicable

Federal Employees Compensation Act (FECA)

The Air Force Working Capital Fund’s (AFWCF) actuarial liability for workers’ compensation benefits is developed by the Department of Labor and provided to the AFWCF at the end of each fiscal year. The FECA is not

related to and should not be misinterpreted to represent the Federal Unemployment Compensation Act. The

liability includes the expected liability for death, disability, medical, and miscellaneous costs for approved compensation cases. The 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 the present value using

the Office of Management and Budget’s (OMB’s) economic assumptions for 10-year U.S. Treasury notes and

bonds. Cost-of-living adjustments and medical inflation factors are also applied to the calculation of projected

future benefits. 

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 ultimate payments related to that period. Consistent with past

practice, these projected annual benefit payments have been discounted to present value using the OMB’s economic assumptions for 10-year Treasury notes and bonds. 

As of September 30

Assume

Interest Rate 

(%)

(Amounts in thousands)

1. Pension and Health Benefits

 A. Military Retirement Pensions $ 0 $ 0 $ 0 $ 0

 B. Military Retirement Health Benefits 0 0 0 0

 C. Medicare-Eligible Retiree Benefits 0 0 0 0

 D. Total Pension and Health Benefits $ 0 $ 0 $ 0 $ 0

2. Other

 A. FECA $ 233,713 $ 0 $ 233,713 $ 238,729

 B. Voluntary Separation Incentive Programs 0 0 0 0

 C. DoD Education Benefits Fund 0 0 0 0

 D. [Enter Program Name} 0 0 0 0

 E. Total Other $ 233,713 $ 0 $ 233,713 $ 238,729

2005 2004

Actuarial Present 

Value of Projected 

Plan Benefits

(Less: Assets 

Available to Pay 

Benefits)

Unfunded

Actuarial Liability

Unfunded

Actuarial Liability

3. Total Military Retirement Benefits and Other

FFEmployment Related Actuarial Liabilities: $ 233,713 $ 238,729 $ 0 $ 233,713

142

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2005 Annual Financial Statement

Interest rate assumptions utilized for discounting were as follows:

2001 2002 2003 2004 2005

5.21% in year 1 5.20% in year 1 3.84% in year 1 4.883% in year 1 4.528% in year 1

5.21% in year 2 5.20% in year 2 4.35% in year 2 5.235% in year 2 5.020% in year 2

And thereafter And thereafter And thereafter And thereafter And thereafter

To provide more specifically for the effects of inflation on the liability for future workers’ compensation benefits,

wage inflation factors (cost of living adjustments or COLAs) and medical inflation factors (consumer price index

medical or CPIMs) were applied to the calculation of projected future benefits. The actual rates for these factors

for the charge back year (CBY) 2005 were also used to adjust the methodology’s historical payments to currentyear constant dollars. 

The compensation COLAs and CPIMs used in the projections for various charge back years (CBY) were as follows:

CBY COLA CPIM

2005 2.20% 4.33%

2006 3.33% 4.09%

2007 2.93% 4.01%

2008 2.40% 4.01%

2009+ 2.40% 4.01%

The model’s resulting projections were analyzed to ensure that the estimates were reliable. The analysis was

based on two tests: (1) a comparison of the percentage change in the liability amount by agency to the percentage change in the actual payments, and (2) a comparison of the ratio of the estimated liability to the actual payment of the beginning year calculated for the current projection to the liability-payment ratio calculated for the

prior projection.

Note Reference

For regulatory discussion on “Military Retirement Benefits and Other Employment Related Actuarial Liabilities,”

see Department of Defense Financial Management Regulation, Volume 6B, Chapter 10, paragraph 1019.

Note 18. Disclosures Related to the Statement of Net Cost

Fluctuations and Abnormalities

Intra-governmental Earned Revenue

Intra-governmental earned revenue had a decrease of $1.2 billion (10 percent). The majority of the decrease was

in the Supply Management Activity Group (SMAG), which had a decrease of $968.8 million. Two events caused

the SMAG decrease. The Material Support Division (MSD) had a decrease of $507.7 million which was caused by

backorders of spare engines. In FY 2004 there was a significant quantity of backordered spare engines and the

Air Force focused on filling these backorders, which resulted in a reduction of most of the backlog by the end

of FY 2004. This reduction in backlog resulted in a one time spike in net sales. With only a minimal level of

backorders existing, FY 2005 net sales for spare engines have returned to normal recurring demands. For the

General Support Division (GSD), a decrease of $105.1 million is attributed to a reduction in current program

requirement levels which are lower than the prior year. Budget estimates have been updated to reflect this
trend. The remaining decrease of $356.0 million (represents three percent of the total AFWCF revenue) is a

result of normal operations. The Depot Maintenance Activity Group (DMAG) had a decrease of $313.3 million

which can be attributed to two events. The first event was a planned budget decrease in FY 2005. The FY 2005

revenue budget was over $200 million less then the actual revenue earned in FY 2004. FY 2005 actual revenue

was within 1% of the budget. The second event was due to more accurate classification of revenues between

intra-governmental and nonfederal. In FY 2004, allocated information was used to classify revenues and in FY

2005, allocation was not used as actual data was reported. 

Earned Revenue from the Public

Nonfederal earned revenue had a decrease of $119.7 million (13 percent), which was primarily caused by the

decrease of $236.8 million in SMAG, offset by the $117.2 million increase in DMAG. Two events caused the

SMAG decrease. First, MSD had a decrease of $163.3 million which was caused by the non reimbursement of

the Readiness Spares Packages (RSP) in FY 2005. RSP kits are parts packages that are purchased in order to

ensure that parts are available when needed. MSD was reimbursed for their RSP purchases and the reimbursement was booked as revenues in FY 2004; however, MSD was not reimbursed for their RSP kits in FY 2005. In

addition upon researching the decrease it was discovered that these revenues were incorrectly reported as public

in FY 2004. For FY 2005 these amounts were zero therefore the error did not impact the FY 2005 financial

statements. The second event was the $65.4 million decrease in GSD revenue. The GSD decrease is attributed

to a return to current program requirement levels which are lower than the prior year. Budget estimates have

been updated to reflect this trend. The DMAG increase of $117.2 million can be attributed to more accurate

classification of revenues between intra-governmental and nonfederal. In FY 2004, allocated information was

used to classify revenues and in FY 2005, allocation was not used as actual data was reported. 

Gross Costs with the Public

Gross cost with the public had a decrease of $3.5 billion (40 percent). The primary cause of this decrease was a

change in accounting procedures which required a prior period adjustment to inventory values as discussed in

Note 9. A portion of the prior period adjustment relating to standard price changes was not restated, totaling

$3.6 billion. If this amount had been recorded in accordance with current procedures, prior year expenses would

be decreased by the amount. Further disclosures of the prior period adjustments are disclosed in Note 19.

Information Related to the Statement of Net Cost (SoNC)

The Consolidated SoNC in the federal government is unique because its principles are based on understanding

the net cost and/or organizations that the federal government supports through appropriations or other means.

This statement provides gross and net cost information that can be related to the amount of output or outcome

for a given program and/or organization administered by a responsible reporting entity.

Working Capital Funds

While the Air Force Working Capital Fund (AFWCF) generally records transactions on an accrual basis as is

required by generally accepted accounting principles, the systems do not always capture actual costs. Information

presented on the SoNC is primarily based on budgetary obligations, disbursements, or collection transactions, as

well as information from nonfinancial feeder systems.

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Intra-governmental Operating Expenses

The AFWCF’s operating expenses were adjusted based on a comparison between the AFWCF’s accounts payable

and the DoD summary-level seller accounts receivables. An adjustment was posted to accounts payable and

operating expenses to reflect unrecognized accounts payable and operating expenses. The operating expenses of

the AFWCF were adjusted upward in the amount of $168.2 million

Note 19. Disclosures Related to the Statement of Changes in Net Position

Information Related to the Statement of Changes in Net Position

Prior Period Adjustments

The Material Support Division (MSD) inventory valued at Latest Acquisition Cost (LAC) in Standard Base Supply

System (SBSS) was converted to Moving Average Cost historical cost basis valuation on October 1, 2004.

Historical cost does not require an allowance for gains and losses. The conversion created a prior period adjustment in fiscal year 2005 of approximately $10.8 billion for the elimination of the allowance for gains and losses,

the establishment of an allowance for repairs and the revaluation of inventory. Of this amount, $3.6 billion represents standard price changes, which is classified as a change in standard and not restated, $7.3 billion was attributed to correction of errors and restated in prior year, and $29.7 million was attributed to a correction of error

that was not restated. The table below provides detail by USSGL of the prior period adjustment.

As of September 30

(Amounts in thousands)

1. Prior Period Adjustments Increases (Decreases) to Net Position

 A. Changes in Accounting Standards $ 3,632,598 $ 0 $ 699,393 $ 0

 B. Errors and Omissions in Prior Year 

 Accounting Reports 

 C. Other Prior Period Adjustments 00 00

 D. Total Prior Period Adjustments $ 10,889,174 $ 0 $ 19,356,125 $ 0

2. Imputed Financing

 A. Civilian CSRS/FERS Retirement $ 62,192 $ 0 $ 63,443 $ 0

 B. Civilian Health 105,973 0 95,320 0

 C. Civilian Life Insurance 269 0 255 0

 D. Judgment Fund 00 00

 E. Intra-Entity 00 00

 F. Total Imputed Financing $ 168,434 $ 0 $ 159,018 $ 0

7,256,576 0 18,656,732 0

Unexpended

Appropriations

Cumulative

Results of 

Operations

Unexpended

Appropriations

Cumulative Results 

of Operations

2005 2005 2004 2004
In FY 2004, three prior adjustments were processed for MSD and GSD inventory valued at LAC. The $699.4

million on Line 1.A. represents standard prices changes related to the conversion of GSD inventory. The correction of errors amount on Line 1.B. equates to $10.9 billion for MSD and $465.3 million for GSD. In addition, the

FY 2004 amount reflects the restatement of $7.3 billion for the FY 2005 restated amount.

Imputed Financing

The amounts remitted to the Office of Personnel Management (OPM) by and for employees covered by the Civil

Service Retirement System, Federal Employee Retirement System, Federal Employees Health Benefits program,

and the Federal Employee Group Life Insurance program do not fully cover the Government’s cost to provide

these benefits. An imputed cost is recognized as the difference between the Government’s cost of providing

these benefits to the employees and contributions made by and for them. The OPM provides the cost factors to

the Defense Finance and Accounting Service (DFAS) for computation of imputed financing cost. Then DFAS provides the costs to the OUSD (Personnel and Readiness) for validation. Approved imputed costs are provided to

the reporting components for inclusion in their financial statements.

Note 20. Disclosures Related to the Statement of Budgetary Resources

As of September 30

(Amounts in thousands)

1. Net Amount of Budgetary Resources Obligated

 for Undelivered Orders at the End of the Period $ 6,937,550 $ 7,117,842

2. Available Borrowing and Contract Authority at the End of the Period 2,782,392 3,839,310

2005 2004

Description Debit Credit

Inventory - Allowance Available and Purchased for Resale $4,019,352,856.89 

Prior Period Adjustment – Not Restated – Changes $4,019,352,856.89 

Losses on Disposition of Assets $442,693,990.47 

Prior Period Adjustment – Not Restated – Changes $442,693,990.47 

Prior Period Adjustment – Not Restated – Changes $829,448,586.05 

Other Losses $829,448,586.05

Prior Period Adjustment – Not Restated – Changes Total $3,632,598,261.31 

Prior Period Adjustment – Not Restated – Errors $29,700,432.94 

Other Expenses Not Requiring Budgetary Resources $29,700,432.94 

Prior Period Adjustment – Not Restated – Errors Total $29,700,432.94 

Inventory - Allowance Available and Purchased for Resale $1,554,025,803.22 

Prior Period Adjustment – Restated – Errors $1,554,025,803.22 

1529 $5,732,250,672.69

7401 $5,732,250,672.69

7401 $7,286,276,475.91

Eliminate Allowance related to price gains and losses

Restate prior year inventory balance upon changing from LAC to MAC 

and eliminating the allowance account

Eliminate value of initial decrease in inventory from LAC to MAC

Eliminate the value of the initial establishment of the allowance for repair

Value of Realization from Inventory Worksheet

Eliminate value of initial increase in inventory from LAC to MAC

Prior Period Adjustment – Restated – Errors

Prior Period Adjustment – Restated-Errors Total

7401

Inventory - Allowance Available and Purchased for Resale

7400

1529

7400

6790

7400

7400

7290

7210

7400

USSGL

1529

7400

146

United States Air Force
147

2005 Annual Financial Statement

Information Related to the Statement of Budgetary Resources

Intra-entity Transactions

The Statement of Budgetary Resources (SBR) does not include intra-entity transactions because the statements

are presented as combined and combining.

Apportionment Categories

Office of Management and Budget Bulletin No. 01-09, section 9.27, specifically requires disclosure of the amount of

direct and reimbursable obligations incurred against amounts apportioned under categories A, B, and exempt from

apportionment. This disclosure should agree with the aggregate of the related information as included in each reporting entity’s SF 133 and lines 8A and 8B in the SBR. There are no Category A direct or reimbursable obligations.

Category B reimbursable obligations total $15.9 billion. There are no category B direct or exempt obligations.

Undelivered Orders

Undelivered orders presented in the SBR includes undelivered orders-unpaid for both direct and reimbursable funds.

Spending Authority from Offsetting Collections

Adjustments in funds that are temporarily not available pursuant to Public Law, and those that are permanently

not available (included in the “Adjustments” line on the SBR), are not included in the “Spending Authority from

Offsetting Collections and Adjustments” line on the SBR or the “Spending Authority for Offsetting Collections and

Adjustments” line on the Statement of Financing.

Note 21. Disclosures Related to the Statement of Financing

The objective of the Statement of Financing is to reconcile the difference between budgetary obligations and the

net cost of operations reported. It is presented as combined or combining statements rather than consolidated

statements due to intra-governmental transactions not being eliminated. Due to limitations in the Department of

the Air Force’s financial system, budgetary data is not in agreement with proprietary expenses and assets capitalized. Differences between budgetary and proprietary data constitutes a previously identified deficiency.

Note 1.A. and Note 1.F. provide additional detail.

Other Information Related to the Statement of Financing

Budgetary data is not in agreement with Proprietary Expenses and Assets Capitalized. This causes a difference in

Net Cost between the Statement of Net Cost (SoNC) and the Statement of Financing. Line 15 on the Statement

of Financing, “Resources that finance the acquisition of assets,” is adjusted in order to align the amount of net cost

on the Statement of Financing with the amount reported on the (SoNC). Line 15 was adjusted by an absolute

value of $862.2 million to balance the report. The adjustment will be researched to determine the cause of the

increase over prior reporting periods.

Note 22. Disclosures Related to the Statement of Custodial Activity

Not applicable.

Note 23. Other Disclosures 

Not applicable.
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148

United States Air Force
Working Capital Fund

Consolidating and 

Combining Statements

149

2005 Annual Financial Statement
150

United States Air Force

Depot Supply Information 

Maintenance Management Services

1. ASSETS (Note 2)

 A. Intra-governmental:

 1. Fund Balance with Treasury (Note 3)

 a. Entity $ 623,824 $ 476,882 $ 38,195

 b. Non-Entity Seized Iraqi Cash 000

 c. Non-Entity-Other 000

 2. Investments (Note 4) 000

 3. Accounts Receivable (Note 5) 308,008 422,459 77,137

 4. Other Assets (Note 6) 47,936 98,600 16

 5. Total Intra-governmental Assets $ 979,768 $ 997,941 $ 115,348

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

 C. Accounts Receivable (Note 5) 36,093 183,551 8

 D. Loans Receivable (Note 8) 000

 E. Inventory and Related Property (Note 9) 627,048 32,074,641 0

 F. General Property, Plant and Equipment (Note 10) 1,053,914 122,299 29,336

 G. Investments (Note 4) 000

 H. Other Assets (Note 6) 516 439,821 0

2. TOTAL ASSETS $ 2,697,339 $ 33,818,253 $ 144,692

3. LIABILITIES (Note 11)

 A. Intra-governmental:

 1. Accounts Payable (Note 12) $ 260,118 $ 235,695 $ 881

 2. Debt (Note 13) 000

 3. Other Liabilities (Note 15 & Note 16) 243,164 1,000 411

 4. Total Intra-governmental Liabilities $ 503,282 $ 236,695 $ 1,292

 B. Accounts Payable (Note 12) $ 1,158 $ 498,481 $ 156,739

 C. Military Retirement Benefits and Other Employment-Related 202,565 23,216 7,932

 Actuarial Liabilities (Note 17)

 D. Environmental Liabilities (Note 14) 000

 E. Loan Guarantee Liability (Note 8) 000

 F. Other Liabilities (Note 15 and Note 16) 1,283,805 59,936 10,335

4. TOTAL LIABILITIES $ 1,990,810 $ 818,328 $ 176,298

5. NET POSITION 0 0 0

 A. Unexpended Appropriations $ 0$ 0$ 0

 B. Cumulative Results of Operations 706,529 32,999,925 -31,606

6. TOTAL NET POSITION $ 706,529 $ 32,999,925 $ -31,606

7. TOTAL LIABILITIES AND NET POSITION $ 2,697,339 $ 33,818,253 $ 144,692

Consolidating Balance Sheet—Working Capital Fund

As of September 30, 2005 and 2004 ($ in Thousands)

The accompanying notes are an integral part of the financial statements.
151

2005 Annual Financial Statement

Component Combined 2005 2004

Transportation Level Total Eliminations Consolidated Consolidated

$ 10,137 $ 15,185 $ 1,164,223 $ 0 $ 1,164,223 $ 1,051,110

000000

000000

000000

0 0 807,604 297,044 510,560 576,396

0 0 146,552 98,037 48,515 10

$ 10,137 $ 15,185 $ 2,118,379 $ 395,081 $ 1,723,298 $ 1,627,516

$ 0$ 0$ 0$ 0$ 0$ 0

277 0 219,929 0 219,929 103,111

000000

0 0 32,701,689 0 32,701,689 28,311,805

7 0 1,205,556 0 1,205,556 1,197,683

000000

0 0 440,337 0 440,337 788,966

$ 10,421 $ 15,185 $ 36,685,890 $ 395,081 $ 36,290,809 $ 32,029,081

$ 0 $ 0 $ 496,694 $ 297,044 $ 199,650 $ 256,763

000000

0 0 244,575 98,037 146,538 243,131

$ 0 $ 0 $ 741,269 $ 395,081 $ 346,188 $ 499,894

$ 1,685 $ -111,324 $ 546,739 $ 0 $ 546,739 $ 497,471

0 0 233,713 0 233,713 238,729

000000

000000

-340 35,595 1,389,331 0 1,389,331 1,616,321

$ 1,345 $ -75,729 $ 2,911,052 $ 395,081 $ 2,515,971 $ 2,852,415

000000

$ 0$ 0$ 0$ 0$ 0$ 0

9,076 90,914 33,774,838 0 33,774,838 29,176,666

$ 9,076 $ 90,914 $ 33,774,838 $ 0 $ 33,774,838 $ 29,176,666

$ 10,421 $ 15,185 $ 36,685,890 $ 395,081 $ 36,290,809 $ 32,029,081

The accompanying notes are an integral part of the financial statements.
152

United States Air Force

Combined 2005 2004

Total Eliminations Consolidated Consolidated

Program Costs

B. Component Level

 Intra-governmental Gross Costs $ 0 $ 0 $ 0 $ 10,166

 (Less: Intra-governmental Earned Revenue) 0 00 0

 Intra-governmental Net Costs $ 0 $ 0 $ 0 $ 10,166

 Gross Costs With the Public -10,166 0 -10,166 0

 (Less: Earned Revenue From the Public) 0 00 0

 Net Costs With the Public $ -10,166 $ 0 $ -10,166 $ 0

 Total Net Cost $ -10,166 $ 0 $ -10,166 $ 10,166

C. Depot Maintenance

 Intra-governmental Gross Costs $ 3,586,771 $ 2,423,153 $ 1,163,618 $ 615,753

 (Less: Intra-governmental Earned Revenue) -6,187,933 -2,640,520 -3,547,413 -3,860,743

 Intra-governmental Net Costs $ -2,601,162 $ -217,367 $ -2,383,795 $ -3,244,990

 Gross Costs With the Public 2,883,343 0 2,883,343 3,940,937

 (Less: Earned Revenue From the Public) -285,280 0 -285,280 -168,063

 Net Costs With the Public $ 2,598,063 $ 0 $ 2,598,063 $ 3,772,874

 Total Net Cost $ -3,099 $ -217,367 $ 214,268 $ 527,884

D. Information Services

 Intra-governmental Gross Costs $ 58,243 $ 12 $ 58,231 $ 59,444

 (Less: Intra-governmental Earned Revenue) -733,469 -128,620 -604,849 -567,884

 Intra-governmental Net Costs $ -675,226 $ -128,608 $ -546,618 $ -508,440

 Gross Costs With the Public 667,961 0 667,961 670,818

 (Less: Earned Revenue From the Public) -3,339 0 -3,339 -2,865

 Net Costs With the Public $ 664,622 $ 0 $ 664,622 $ 667,953

 Total Net Cost $ -10,604 $ -128,608 $ 118,004 $ 159,513

E. Supply Management

 Intra-governmental Gross Costs $ 6,850,471 $ 2,759,601 $ 4,090,870 $ 4,714,430

 (Less: Intra-governmental Earned Revenue) -8,904,608 -2,413,626 -6,490,982 -7,459,835

 Intra-governmental Net Costs $ -2,054,137 $ 345,975 $ -2,400,112 $ -2,745,405

 Gross Costs With the Public 1,660,261 0 1,660,261 4,063,032

 (Less: Earned Revenue From the Public) -483,084 0 -483,084 -719,910

 Net Costs With the Public $ 1,177,177 $ 0 $ 1,177,177 $ 3,343,122

 Total Net Cost $ -876,960 $ 345,975 $ -1,222,935 $ 597,717

F. Transportation

 Intra-governmental Gross Costs $ 0 $ 0$ 0 $ 0

 (Less: Intra-governmental Earned Revenue) 0 00 0

 Intra-governmental Net Costs $ 0 $ 0$ 0 $ 0

 Gross Costs With the Public 77 0 77 0

 (Less: Earned Revenue From the Public) 0 0 0 -581

 Net Costs With the Public $ 77 $ 0 $ 77 $ -581

 Total Net Cost $ 77 $ 0 $ 77 $ -581

G. Total Program Costs

 Intra-governmental Gross Costs $ 10,495,485 $ 5,182,766 $ 5,312,719 $ 5,399,793

 (Less: Intra-governmental Earned Revenue) -15,826,010 -5,182,766 -10,643,244 -11,888,462

 Intra-governmental Net Costs $ -5,330,525 $ 0 $ -5,330,525 $ -6,488,669

 Gross Costs With the Public 5,201,476 0 5,201,476 8,674,787

 (Less: Earned Revenue From the Public) -771,703 0 -771,703 -891,419

 Net Costs With the Public $ 4,429,773 $ 0 $ 4,429,773 $ 7,783,368

 Total Net Cost $ -900,752 $ 0 $ -900,752 $ 1,294,699

Cost Not Assigned to Programs 0 00 0

(Less:Earned Revenue Not Attributable to Programs) 0 00 0

Net Cost of Operations $ -900,752 $ 0 $ -900,752 $ 1,294,699

Consolidating Statement of Net Cost—Working Capital Fund

For the years ended September 30, 2005 and 2004 ($ in Thousands)

The accompanying notes are an integral part of the financial statements.
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153

2005 Annual Financial Statement
154

United States Air Force

Depot Supply Information 

Maintenance Management Services

CUMULATIVE RESULTS OF OPERATIONS

 1. Beginning Balances $ 716,058 $ 21,134,398 $ -49,968

 2. Adjustments (+/-) 0 0 0

 2a. Changes in Accounting Principles (+/-) 0 3,632,598 0

 2b. Correction of Errors (+/-) 0 7,256,576 0

3. Beginning Balances, as adjusted 716,058 32,023,572 -49,968

4. Budgetary Financing Sources:

 4a. Appropriations received 000

 4b. Appropriations transferred-in/out (+/-) 000

 4c. Other adjustments (rescissions, etc) (+/-) 000

 4d. Appropriations used 000

 4e. Nonexchange revenue 000

 4f. Donations and forfeitures of cash and cash equivalents 000

 4g. Transfers-in/out without reimbursement (+/-) -155,000 81,089 0

 4h. Other budgetary financing sources (+/-) 000

5. Other Financing Sources:

 5a. Donations and forfeitures of property 000

 5b. Transfers-in/out without reimbursement (+/-) 000

 5c. Imputed financing from costs absorbed by others 142,373 18,303 7,758

 5d. Other (+/-) 000

6. Total Financing Sources -12,627 99,392 7,758

7. Net Cost of Operations (+/-) -3,099 -876,960 -10,604

8. Net Change -9,528 976,352 18,362

9. Ending Balance $ 706,530 $ 32,999,924 $ -31,606

UNEXPENDED APPROPRIATIONS

1. Beginning Balances $ 0$ 0$ 0

2. Prior period adjustments (+/-)

 2a. Changes in Accounting Principles (+/-) 000

 2b. Correction of Errors (+/-) 000

3. Beginning Balances, as adjusted 000

4. Budgetary Financing Sources:

 4a. Appropriations received 000

 4b. Appropriations transferred-in/out (+/-) 000

 4c. Other adjustments (rescissions, etc) (+/-) 000

 4d. Appropriations used 000

 4e. Nonexchange revenue 000

 4f. Donations and forfeitures of cash and cash equivalents 000

 4g. Transfers-in/out without reimbursement (+/-) 000

 4h. Other budgetary financing sources (+/-) 000

5. Other Financing Sources:

 5a. Donations and forfeitures of property 000

 5b. Transfers-in/out without reimbursement (+/-) 000

 5c. Imputed financing from costs absorbed by others 000

 5d. Other (+/-) 000

6. Total Financing Sources 000

7. Net Cost of Operations (+/-)

8. Net Change 000

9. Ending Balance $ 0$ 0$ 0

Consolidating Statement of Changes in Net Position—Working Capital Fund

For the years ended September 30, 2005 and 2004 ($ in Thousands)

The accompanying notes are an integral part of the financial statements.
155

2005 Annual Financial Statement

Component Combined 2005 2004

Transportation Level Total Eliminations Consolidated Consolidated

$ 9,153 $ 80,748 $ 21,890,389 $ 0 $ 21,890,389 $ 11,537,088

000000

0 0 3,632,598 0 3,632,598 699,393

0 0 7,256,576 0 7,256,576 18,656,733

9,153 80,748 32,779,563 0 32,779,563 30,893,214

000000

000000

000000

000000

000000

000000

0 0 -73,911 0 -73,911 -580,900

000000

000000

0 0 0 0 0 34

0 0 168,434 0 168,434 159,017

000000

0 0 94,523 0 94,523 -421,849

77 -10,166 -900,752 0 -900,752 1,294,699

-77 10,166 995,275 0 995,275 -1,716,548

$ 9,076 $ 90,914 $ 33,774,838 $ 0 $ 33,774,838 $ 29,176,666

$ 0$ 0$ 0$ 0$ 0$ 0

000000

000000

000000

000000

000000

000000

000000

000000

000000

000000

000000

000000

000000

000000

000000

000000

000000

$ 0$ 0$ 0$ 0$ 0$ 0

The accompanying notes are an integral part of the financial statements.
156

United States Air Force

Depot Supply Information

Maintenance Management Services

BUDGETARY FINANCING ACCOUNTS

BUDGETARY RESOURCES

1. Budget Authority:

 1a. Appropriations received $ 0$ 0$ 0

 1b. Borrowing authority 000

 1c. Contract authority 71,246 9,671,556 1,491

 1d. Net transfers (+/-) 000

 1e. Other 000

2. Unobligated balance:

 2a. Beginning of period 87,989 -57,606 3,997

 2b. Net transfers, actual (+/-) -155,000 81,089 0

 2c. Anticipated Transfers Balances 000

3. Spending authority from offsetting collections:

 3a. Earned 000

 1. Collected 6,473,199 9,365,795 720,359

 2. Receivable from Federal sources -84,665 114,626 20,491

 3b. Change in unfilled customer orders 000

 1. Advance received -121,421 0 0

 2. Without advance from Federal sources -75,839 786,229 -17,646

 3c. Anticipated for the rest of year, without advances 000

 3d. Previously unavailable 000

 3e. Transfers for trust funds 000

 3f. Subtotal 6,191,274 10,266,650 723,204

4. Recoveries of prior year obligations 040

5. Temporarily not available pursuant to Public Law 000

6. Permanently not available -434,683 -10,348,877 -17,651

7. Total Budgetary Resources $ 5,760,826 $ 9,612,816 $ 711,041

STATUS OF BUDGETARY RESOURCES

8. Obligations incurred:

 8a. Direct $ 0$ 0$ 0

 8b. Reimbursable 5,448,028 9,674,370 769,589

 8c. Subtotal 5,448,028 9,674,370 769,589

9. Unobligated balance:

 9a. Apportioned 312,798 -61,554 -58,548

 9b. Exempt from apportionment 000

 9c. Other available 000

10. Unobligated Balances Not Available 000

11. Total, Status of Budgetary Resources $ 5,760,826 $ 9,612,816 $ 711,041

Relationship of Obligations to Outlays:

12. Obligated Balance, Net - beginning of period $ 603,274 $ 4,203,791 $ 32,221

13. Obligated Balance transferred, net (+/-) 000

14. Obligated Balance, Net - end of period:

 14a. Accounts receivable -380,677 -586,336 -77,144

 14b. Unfilled customer order from Federal sources -1,988,813 -1,720,404 -248,997

 14c. Undelivered orders 889,591 5,327,888 244,226

 14d. Accounts payable 1,581,220 519,676 168,366

15. Outlays:

 15a. Disbursements 6,110,484 9,436,477 712,514

 15b. Collections -6,351,778 -9,365,795 -720,359

 15c. Subtotal -241,294 70,682 -7,845

16. Less: Offsetting receipts 000

17. Net Outlays $ -241,294 $ 70,682 $ -7,845

Combining Statement of Budgetary Resources—Working Capital Fund

For the years ended September 30, 2005 and 2004 ($ in Thousands)

The accompanying notes are an integral part of the financial statements.
157

2005 Annual Financial Statement

Component 2005 2004

Transportation Level Combined Combined

$ 0$ 0$ 0$ 0

0000

0 0 9,744,293 684,378

0000

0000

9,146 90,914 134,440 607,130

0 0 -73,911 -580,900

0000

0000

0 59 16,559,412 17,824,823

0 -59 50,393 -186,398

0000

0 0 -121,421 -173,221

0 0 692,744 -733,915

0000

0000

0000

0 0 17,181,128 16,731,289

0 0 4 3,180

0000

0 0 -10,801,211 -36,669

$ 9,146 $ 90,914 $ 16,184,743 $ 17,408,408

$ 0 $ 0 $ 0 $ 2,027

77 0 15,892,064 17,271,941

77 0 15,892,064 17,273,968

9,068 90,914 292,678 134,440

0000

1010

0000

$ 9,146 $ 90,914 $ 16,184,743 $ 17,408,408

$ 1,077 $ -84,380 $ 4,755,983 $ 3,317,312

0000

-617 35,595 -1,009,179 -958,783

0 0 -3,958,214 -3,265,470

0 0 6,461,705 6,610,227

1,685 -111,324 2,159,623 2,370,008

86 -8,593 16,250,968 16,752,435

0 -59 -16,437,991 -17,651,602

86 -8,652 -187,023 -899,167

0000

$ 86 $ -8,652 $ -187,023 $ -899,167

The accompanying notes are an integral part of the financial statements.
158

United States Air Force

Depot Supply Information 

Maintenance Management Services

Resources Used to Finance Activities:

Budgetary Resources Obligated

1. Obligations incurred $ 5,448,028 $ 9,674,370 $ 769,589

2. Less: Spending authority from offsetting collections -6,191,274 -10,266,654 -723,204

 and recoveries (-)

3. Obligations net of offsetting collections and recoveries -743,246 -592,284 46,385

4. Less: Offsetting receipts (-) 000

5. Net obligations -743,246 -592,284 46,385

Other Resources

6. Donations and forfeitures of property 000

7. Transfers in/out without reimbursement (+/-) 000

8. Imputed financing from costs absorbed by others 142,373 18,303 7,758

9. Other (+/-) 000

10. Net other resources used to finance activities 142,373 18,303 7,758

11. Total resources used to finance activities Resources Used to -600,873 -573,981 54,143

 Finance Items not Part of the Net Cost of Operations

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 (-) 435,035 -208,236 -46,506

 12b. Unfilled Customer Orders -197,260 786,229 -17,646

13. Resources that fund expenses recognized in prior periods -4,098 0 -1,677

14. Budgetary offsetting collections and receipts that 000

 do not affect net cost of operations

15. Resources that finance the acquisition of assets -253,098 -5,108,841 -4,675

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 000

 Entity's Budget (-)

 16b. Other (+/-) 000

17. Total resources used to finance items not part of the net -19,421 -4,530,848 -70,504

 net cost of operations

18. Total resources used to finance the net cost of operations -620,294 -5,104,829 -16,361

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 0

20. Increase in environmental and disposal liability 000

21. Upward/Downward reestimates of credit subsidy expense (+/-) 000

22. Increase in exchange revenue receivable from the the public (-) 000

23. Other (+/-) 0 5,961 0

24. Total components of Net Cost of Operations that 0 5,961 0

 will require or generate resources in future periods

Components not Requiring or Generating Resources:

25. Depreciation and amortization 134,880 50,066 5,757

26. Revaluation of assets or liabilities (+/-) 3,216 -23 0

27. Other (+/-) 0 0 0

 27a. Trust Fund Exchange Revenue 000

 27b. Cost of Goods Sold 5,026,640 0 0

 27c. Operating Material & Supplies Used 416,094 0 0

 27d. Other -4,963,634 4,171,866 0

28. Total components of Net Cost of Operations that 617,196 4,221,909 5,757

 will not require or generate resources

29. Total components of net cost of operations that will not 617,196 4,227,870 5,757

 require or generate resources in the current period

30. Net Cost of Operations $ $$ -3,098 -876,959 -10,604

Consolidating Statement of Financing—Working Capital Fund

For the years ended September 30, 2005 and 2004 ($ in Thousands)

The accompanying notes are an integral part of the financial statements.
159

2005 Annual Financial Statement

Component 2005 2004

Transportation Level Combined Combined

$ 77 $ 0 $ 15,892,064 $ 17,273,968

0 0 -17,181,132 -16,734,469

77 0 -1,289,068 539,499

0000

77 0 -1,289,068 539,499

0000

0 0 0 34

0 0 168,434 159,017

0000

0 0 168,434 159,051

77 0 -1,120,634 698,550

0 0 180,293 -951,116

0 0 571,323 -907,137

0 0 -5,775 -36,403

0000

0 -10,166 -5,376,780 -2,686,199

0000

0 0 0 -34

0 -10,166 -4,630,939 -4,580,889

77 -10,166 -5,751,573 -3,882,339

0000

0000

0000

0000

0 0 5,961 0

0 0 5,961 0

0 0 190,703 259,260

0 0 3,193 -5,660,357

0000

0000

0 -2 5,026,638 5,866,527

0 0 416,094 325,585

0 0 -791,768 4,386,023

0 -2 4,844,860 5,177,038

0 -2 4,850,821 5,177,038

$$$$ 77 -10,168 -900,752 1,294,699

The accompanying notes are an integral part of the financial statements.
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160

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Working Capital Fund

Required Supplementary

Information

161

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162

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163

2005 Annual Financial Statement

Disaggregated Statement of Budgetary Resources—Working Capital Fund

For the years ended September 30, 2005 and 2004 ($ in Thousands)

Working Capital 2005 2004

Funds Combined Combined

BUDGETARY RESOURCES

1. Budget Authority:

 1a. Appropriations received $ 0$ 0$ 0

 1b. Borrowing authority 000

 1c. Contract authority 9,744,293 9,744,293 684,378

 1d. Net transfers (+/-) 000

 1e. Other 000

2. Unobligated balance:

 2a. Beginning of period 134,439 134,440 607,130

 2b. Net transfers, actual (+/-) -73,911 -73,911 -580,900

 2c. Anticipated Transfers Balances 000

3. Spending authority from offsetting collections:

 3a. Earned 000

 1. Collected 16,559,411 16,559,412 17,824,823

 2. Receivable from Federal sources 50,394 50,393 -186,398

 3b. Change in unfilled customer orders 000

 1. Advance received -121,421 -121,421 -173,221

 2. Without advance from Federal sources 692,744 692,744 -733,915

 3c. Anticipated for the rest of year, without advances 000

 3d. Transfers from trust funds 000

 3e. Subtotal 000

4. Recoveries of prior year obligations 4 4 3,180

5. Temporarily not available pursuant to Public Law 000

6. Permanently not available -10,801,211 -10,801,211 -36,669

7. Total Budgetary Resources $ 16,184,742 $ 16,184,743 $ 17,408,408

STATUS OF BUDGETARY RESOURCES

8. Obligations incurred: $

 8a. Direct 0 0 2,027

 8b. Reimbursable 15,892,064 15,892,064 17,271,941

 8c. Subtotal 15,892,064 15,892,064 17,273,968

9. Unobligated balance:

 9a. Apportioned 292,679 292,678 134,440

 9b. Exempt from apportionment 000

 9c. Other available 010

10. Unobligated Balances Not Available 000

11. Total, Status of Budgetary Resources $ 16,184,743 $ 16,184,743 $ 17,408,408

Relationship of Obligations to Outlays:

12. Obligated Balance, Net - beginning of period $ 4,755,982 $ 4,755,983 $ 3,317,312

13. Obligated Balance transferred, net (+/-) 000

14. Obligated Balance, Net - end of period:

 14a. Accounts receivable -1,009,178 -1,009,179 -958,783

 14b. Unfilled customer order from Federal sources -3,958,214 -3,958,214 -3,265,470

 14c. Undelivered orders 6,461,706 6,461,705 6,610,227

 14d. Accounts payable 2,159,621 2,159,623 2,370,008

15. Outlays:

 15a. Disbursements 16,250,968 16,250,968 16,752,435

 15b. Collections -16,437,991 -16,437,991 -17,651,602

 15c. Subtotal -187,023 -187,023 -899,167

16. Less: Offsetting receipts 000

17. Net Outlays $ -187,023 $ -187,023 $ -899,167
Required Supplemental Information - Part B

AT97 - Air Force Working Capital Fund

Schedule, Part B DoD Intra-governmental entity liabilities.

Navy General Fund 17 $634.00 $1,572.00 

Army General Fund 21 $1,220.00

Office of Personnel Management 24 $10,297.00

Air Force General Fund 57 $82,392.00 $134,111.00 

Homeland Security 70 $408.00

Other Defense Organizations General Funds 97 $122.00

Other Defense Organizations Working Capital Funds 97-4930 $110,118.00 $149.00 

Army Working Capital Fund 97-4930.001 $2,884.00

Navy Working Capital Fund 97-4930.002 $2,279.00

Treasury Index: Accounts Payable Debts/Borrowings 

From Other Agencies Other

Required Supplemental Information - Part A

AT97 - Air Force Working Capital Fund

Schedule, Part A DoD Intra-governmental Asset Balances

Department of Agriculture 12 $8.00

Department of the Interior 14 $4.00

Department of Justice 15 $476.00

Navy General Fund 17 $3,941.00

Department of State 19 $16.00

Department of the Treasury 20 $1,164,223.00

Army General Fund 21 $1,347.00

General Service Administration 47 $2,634.00

General Accounting Office 5 $13.00

Air Force General Fund 57 $411,716.00 $48,076.00 

Homeland Security 70 $2,107.00

National Aeronautics and Space Administration 80 $1,205.00

Department of Energy 89 $120.00

US Army Corps of Engineers 96 $34.00

Other Defense Organizations General Funds 97 $39,672.00

Other Defense Organizations Working Capital Funds 97-4930 $39,802.00 $439.00 

Army Working Capital Fund 97-4930.001 $3,059.00

Navy Working Capital Fund 97-4930.002 $4,405.00

Treasury Index: Fund Balance 

with Treasury

Accounts

Receivable Investments Other Loans

Receivable

164

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Required Supplemental Information - Part E

AT97 - Air Force Working Capital Fund

($Amounts in Thousands)

Army General Fund 21 $155,000.00

Other Defense Organizations Working Capital Funds 97-4930 $81,089.00

Treasury Index: Transfers In Transfers Out

Required Supplemental Information - Part C

AT97 - Air Force Working Capital Fund

Schedule, Part C DoD Intra-governmental revenue and related costs

Department of Agriculture 12 $15.00

Department of Commerce 13 $0.00

Department of the Interior 14 $75.00

Department of Justice 15 $3,139.00

Navy General Fund 17 $71,663.00

Department of State 19 $171.00

Department of the Treasury 20 $15.00

Army General Fund 21 $28,995.00

General Service Administration 47 $51.00

National Science Foundation 49 $6.00

General Accounting Office 5 $7.00

Air Force General Fund 57 $8,620,533.00

Department of Transportation 69 $57.00

Homeland Security 70 $8,462.00

Small Business Administration 73 $0.00

National Aeronautics and Space Administration 80 $2,341.00

Department of Energy 89 $6.00

US Army Corps of Engineers 96 $79.00

Other Defense Organizations General Funds 97 $1,227,126.00

Other Defense Organizations Working Capital Funds 97-4930 $473,044.00

Army Working Capital Fund 97-4930.001 $21,271.00

Navy Working Capital Fund 97-4930.002 $177,449.00

Treasury Index: Earned 

Revenue
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Audit Opinion

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